13% Ain’t So Bad

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So Gallup says that Congress' approval rating is at 13%, tied for an all-time low.  You might be tempted to think that this bodes ill for the current members of Congress, but I'd like to point out a few things that may help explain why low approval ratings probably won't translate into a lot of carnage for Congressional incumbents on Election Day 2012:

  • I bet if you did a separate poll for each member of Congress that asked his or her constituents how they were doing you'd get numbers showing a much higher approval rating.
  • I bet most of us think we do a fine job selecting our own Congresscritters, but the idiots in other parts of the country are TERRIBLE at selecting theirs.
  • The vast majority of incumbents will be facing off against people who are no great shakes themselves, and who are likely to be running poorly funded campaigns.  We tend to vote for the folks who spend the most to buy our love, so this doesn't bode well for challengers.

Sadly I don't have much hope for getting an improved Congress because I don't have a lot of confidence in the rest of us demanding one.

 

 

The Whining 1%

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Paul Krugman's piece, Panic of the Plutocrats, highlights one distinction that I think many people have forgotten – there's a difference between business in the "Main Street" sense and business in the "Wall Street" sense:

What’s going on here? The answer, surely, is that Wall Street’s Masters of the Universe realize, deep down, how morally indefensible their position is. They’re not John Galt; they’re not even Steve Jobs. They’re people who got rich by peddling complex financial schemes that, far from delivering clear benefits to the American people, helped push us into a crisis whose aftereffects continue to blight the lives of tens of millions of their fellow citizens.

Yet they have paid no price. Their institutions were bailed out by taxpayers, with few strings attached. They continue to benefit from explicit and implicit federal guarantees — basically, they’re still in a game of heads they win, tails taxpayers lose. And they benefit from tax loopholes that in many cases have people with multimillion-dollar incomes paying lower rates than middle-class families.

Listen, I get it that we need finance. We need people who can provide capital to the Main Street businesses, and I think there are plenty of fine people working in the financial sector, but just like there are crooks and scam artists working on Main Street there are also crooks and scam artists working on Wall Street. Even if we didn't already have plenty of stories showing that the Wall Street scammers filled their personal vaults while barbequing our Golden Goose, I think the incessant screeching like that currently emanating from halls of power would cause us to say, "The lady (aka the Whining 1%) doth protest too much."

I’d Have Gone With Triniteen

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Anyone else seen this?

I thought it was an Onion piece when I came across it, but from what I can tell it's real. I really don't think they could have come up with a worse name for their movement(?) if they tried.

Related thought: I seem to remember someone in high school (I went to a Lutheran HS from 10th to 12th grade) proposing to go trick-or-treating as the Holy Ghost, but it's been so many years it's just as likely a figment of my increasingly-faulty memory.

NC Senator Co-Sponsoring “Repatriation Holiday” Bill

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If you had to guess which North Carolina Senator, Republican Richard Burr or Democrat Kay Hagan, was co-sponsoring a bill with former Republican Presidential candidate John McCain that would provide a "tax holiday" for multinational firms which would you guess?  Of course it wouldn't be blog-worthy if it was Sen. Burr, so you'd be right if you guessed Sen. Hagan.  Over at Tax.com Christopher Bergin isn't too happy about it:

Why am I worked up? Because tomorrow two Senators, Democrat Kay Hagan and Republican John McCain plan to introduce a bill they will call the Foreign Earnings Reinvestment Act to provide a repatriation holiday. They should really call it the Outrageous Grab Under False Pretenses Act…

Why? In part because the U.S. economy stinks and they see an opening, neatly laid out in WIN America's mission statement: "We have an opportunity right now to make a significant investment in our struggling economy, boost U.S. businesses, and help put people back to work." They urge that "Congress should pass legislation to offer an immediate reduction of taxation on income earned overseas by innovative American businesses to allow that money to be brought home and invested in the United States." 

Trust me, there's nothing innovative or new here. The Heritage report correctly points out that this proposed “sequel to a similar 2004 holiday would, like its predecessor, have a minuscule effect on domestic investment and thus have a minuscule effect on the U.S. economy and job creation." So, the idea is that you line the pockets of large corporations at a time when regular taxpayers are struggling to hold onto their jobs, their houses and their way of life.

Will I Ever Outgrow the Wonder?

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I've been an enthusiastic online traveler for about 15 years, maybe a little longer, and I've always wondered when the wonder of it would wear off.  As long as I keep stumbling across things like this blog post about triangular letters used by Soviet soldiers to send news back home from the front in World War II I doubt it ever will. An excerpt:

Folding had one more advantage: that the content of the letter was easy to check. Therefore, it was forbidden to seal them in any way. The censors working at the front did not primarily search for letters reviling the system – according to the analysis of the surviving front letters, almost none of them includes any political reference or Stalin’s name –, but whether they include any indication from which military movements and plans could be deduced. These were erased with black ink, but the mail was still transmitted.

Sovietletter

A Modern Day, Budweiser-Drinking Karl Marx

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If I were to paraphrase what PIMCO's Bill Gross wrote in his investment letter it would be, "Financiers of the world your ride on the backs of laborers is coming to an end. If you want to keep living in luxury you better find a way to make sure they feel justly rewarded and not like you're bending them over the rail…so to speak." Here's an excerpt of what he wrote:

Ultimately, however, both labor and capital suffer as a deleveraging household sector in the throes of a jobless recovery refuses – if only through fear and consumptive exhaustion – to play their historic role in the capitalistic system. This “labor trap” phenomenon – in which consumers stop spending out of fear of unemployment or perhaps negative real wages, shrinking home prices or an overall loss of faith in the American Dream – is what markets or “capital” should now begin to recognize. Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. Washington, London, Berlin and yes, even Beijing must accept this commonsensical reality alongside several other structural initiatives that seek to rebalance the global economy. The United States in particular requires an enhanced safety net of benefits for the unemployed unless and until it can produce enough jobs to return to our prior economic model which suggested opportunity for all who were willing to grab for the brass ring – a ring that is now tarnished if not unavailable for the grasping. Policies promoting “Buy American” goods and services – which in turn would employ more Americans – should also be reintroduced. China and Brazil do it. Why not us?
If structural solutions are not put in place, a six-pac market observer should look at both stocks and bonds as rather flabby knock-offs of their former selves; no resemblance at all to Jack LaLanne but more to a 55-year-old terminator grown fat and rendered out of shape by years of neglect and perhaps greed for short-term profits as opposed to long-term balance. There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero percent interest rates and a developed world growth rate closer to 0 than the 3 – 4% historical norms. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. A modern day, Budweiser-drinking Karl Marx might have put it this way: “Laborers of the world, unite – you have only your six-packs to lose.” He might also have added, “Investors/policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs.”

H/T to Ed for the link.

A Crisis of Confidence

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This article in the Wall Street Journal caught my eye.  Why?  Here's a taste:

Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.

Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.

"Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt," says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. "Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to." 

Indeed, $100,000 was roughly the average amount by which foreclosure sales fell short of loan balances in hundreds of foreclosures in seven states reviewed by The Wall Street Journal. And 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.

Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a "strategic defaulter" who chose to stop paying because the property lost so much value. 

For years and years and years owning a home has been seen not only as the American dream but also as a potentially lucrative investment.  There were certainly plenty of personal finance experts who warned against viewing your house that way, who pointed out the inherent risk of homeownership, but given the meteoric rise in real estate values from them mid-90s to the mid-00s it's hard to blame people for viewing their homes as investment vehicles.  Now, of course, it's become all too clear that your house can actually become a financial albatross, decreasing in value to the point that you can't afford to move even if it means getting a job in another city after being laid off. Worse, as the article points out, your home can become a debt grenade that blows apart your entire financial existence.

In my opinion there's a kicker here that not a lot of people are talking about.  Many of the people being decimated by the housing crisis have children who are watching this and who are going to come of age believing that homeownership is a risky endeavor.  They'll have experienced the housing crisis viscerally, in much the same way my grandparents experienced the Depression, and I think their behavior will be affected accordingly.  Let's put it this way – my grandparents never gave up their frugal habits.  They reused everything, they saved all leftovers (you learned real fast that my Granny had no expiration dates on the food in her freezer and you ate at your own risk), and pinched every penny within an inch of its life 40+ years after the depression ended and they were living a very comfortable middle class life in Winston-Salem.  You just don't forget those experiences and I think the number of kids who will have seen the flip side of the American Dream will always view homeownership with a great deal more skepticism than those of us who came of age having only seen the positive side of homeownership.

Note: I need to point out that these opinions are mine and don't reflect an official position by my employer or anyone I work with.  

A Job Well Done

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As someone who has served on the Lewisville Board of Adjustment in the past I read this post by attorney Tom Terrell with more than a passing interest. Basically he lauds the Harnett County Board of Adjustment for their hard work on a landfill case that took 33 hours spread over six nights to conclude. Most people have no clue what boards of adjustment do, and quite frankly the people who volunteer their time to serve on most municipal boards like BOAs don't get enough credit for their efforts, so it's nice to see when someone who deals with them on a professional level takes the time to give them their due.  Here's a bit of what he wrote:

After six nights and 33 hours of testimony and deliberation, the Harnett County Board of Adjustment reached a decision this week regarding a Conditional Use Permit for a regional landfill.  It was a marathon.  I know, because I was there…

The hearing demonstrated why we desperately need quasi-judicial proceedings and, despite what I consider to be demonstrable legal flaws in the decision itself, provided a showcase example of how a BOA should operate.

Quasi-judicial proceedings establish evidentiary frameworks for unpopular but necessary land uses.  Without them, the alternative is a decision based purely on emotion and, sometimes, hysteria.  Or bad math.  (Let’s just count the number of people in the room for and against and let it be “democratic” despite what our comprehensive plan says, despite what our zoning ordinance says, despite what our staff says, and despite what our planning board says)…

But my other point is that this BOA was among the best I’ve ever seen in how it handled the hearing itself.  Each night board members systematically disclosed calls from the media and emails from neighbors and how they handled them. They disclosed civic and personal connections with witnesses.

The board chair did a better job ruling on objections by attorneys than most judges I’ve been in front of, and he gave some leeway to members of the public to stray from true evidence (in one case, a speech on “the purpose of man”) and to relate blatant hearsay conversations while instructing and reminding board members what can and cannot be considered as evidence.

He also praised the Harnett County staff members and I think he's absolutely spot on when he says that "I’ve learned never to underestimate the importance of working with good staff." I've been lucky enough to work with many of the staff members in Lewisville and I can say that it has always been an enjoyable and rewarding experience.  

Governments Don’t Rule the World, Goldman Sachs Rules the World

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I have no idea if the guy in the video below is legit or if he's just a blowhard who happened to score a BBC interview, but his comments raise some interesting questions.  Comments like "The governments don't rule the world, Goldman Sachs rules the world" and "For most traders we don't really care that much how they're going to fix the whole situation. Our job is to make money from it" beg the questions, "How do the Goldman Sachs rule the world without a stable society provided by governments" and "At what point do traders and the rest of the players in the financial market put aside their short term (profit) interests and do what's best for society at large?"  For that last question I'll ask those who are more educated in the ways of the economy – is it possible, or even advisable, to ask financiers to forego short term gains for the greater good or is it always in our best interest for them to always pursue what's in their best interest?