Table On-Topic Summary - 01-Oct-2002
A compilation of this board's financial/economic posts From 42982 to 43053

Post  42982  by  Decomposed       OT: Table ON TOPIC SUMMARY Sep 30, 2002

Post  42983  by  jeffbas       Reply
jcl, I believe that NOWHERE would Roach be right if he compared a trend line in rents with one in hypothetical 100% financing monthly payments on house sale prices, which would be better statistics to compare. (The latter could be derived from Fannie Mae or Freddie Mac data, I expect, by taking the house sale price data and adjusting by factors reflecting the average mortgage term and average interest rates in different time periods.)

The reason for my view is twofold. A mortgage payment is the functional equivalent to rent and, in fact, precisely what a renter looks at in considering buying a house as an alternative to renting (not the house price). Lastly, house prices have not risen that much faster than interest rates have dropped (if at all), leaving in my opinion a negligible trend in mortgage payments on house sale prices.

Beware of folks misusing statistics to advance some hypothesis.

Post  42984  by  clo       Reply
Warning! Krugman ahead...
You know how many told us that in 2002 we would see the recovery start? Now these same folks are suggesting 03?

I suggest they still don't know, however most of us don't even listen to them anymore...

It's my opinion that the leadership hasn't helped at all!
I'll start with GWB & the "over the hill gang" along with the Senate & the SEC and the CEO's & CFO's & analysts and so forth...

If ever We needed leadership, it is NOW!
I think we are like a dysfunctional Country without stable parents to lead the way... clo

Dealing With W

TOKYO — I got obsessed with the Japanese economy after it was fashionable.

Americans paid a lot of attention to Japan in the 1980's, when Japanese manufacturers were conquering the world. Remember when airport bookstores were filled with management tomes bearing samurai warriors on their covers? Then Japan's bubble burst, and most Americans concluded that we had nothing to learn from Japan — except how a country can stumble when it lacks adequate business and political leadership. And we, of course, don't have that problem.

Or do we? Jack Welch's gut is starting to look as overrated as those business samurai. And our political leadership doesn't exactly inspire confidence. In fact, lately I've started to have a truly depressing thought: Bad as Japan's policy has been, it's possible that the United States will do even worse.

It's hard to say anything good about how Japan has handled its post-bubble economy. But I've worried for years about how other countries would deal with similar problems. Sure enough, as America tries to cope with its own burst bubble, it's a lot easier to see how bad economic decisions get made.

It's true that Alan Greenspan and his colleagues made a much better start than their counterparts in Japan. They knew that the Bank of Japan cut interest rates too slowly, and that by the time it realized the seriousness of the country's problems it was too late: even a zero interest rate wasn't enough to spark a recovery. So the Fed cut rates early and often; those 11 interest rate cuts in 2001 fueled a boom both in housing purchases and in mortgage refinancing, both of which helped keep the economy from experiencing a much more severe recession.

But it's starting to look as if the interest rate cuts weren't enough. I don't need to tell you about the stock market. Economic indicators strongly suggest that the economy is either sliding into a double-dip, "W-shaped" recession — bet you thought I was talking about the guy in the White House — or close enough as makes no difference. Bond markets are clearly predicting that the Fed will have to cut interest rates again. What if the Fed, like the Bank of Japan, goes all the way to zero and finds that it still hasn't turned the economy around?

Not many people realize that in some ways Japanese economic policy responded quite effectively to a sustained slump. It's easy to make fun of the country's enormous spending on public works — all those bridges to nowhere in particular, highways with no traffic, and so on. Without question enormous sums have been wasted. But it's also clear that all that spending pumped money into the economy, preventing what might otherwise have been a full-fledged depression.

So what will be the U.S. equivalent? Right now we are in effect following the reverse policy: slashing domestic spending in the face of an economic slump. Some of this is taking place at the federal level; the Bush administration is nickel-and-diming public spending wherever it can, shaving a billion here, a billion there off everything from veterans' benefits and homeland security to Medicare payments. More important, the federal government is doing nothing to help as state and local governments, their revenues savaged by recession, make deep cuts in spending on everything that isn't urgently necessary, and many things that are.

It's true that we haven't yet confronted head on the possibility that Uncle Alan may not be able to save us single-handedly. But last fall's debate over economic stimulus suggested that our political leadership cannot make a rational response to economic problems. Where economists saw danger, the White House and its Congressional allies saw opportunity — an opportunity to ram through more tax cuts for corporations and the affluent, measures that suited their political agenda but had almost no relevance to the economy's problems. Remember the proposal to give retroactive tax breaks to ChevronTexaco and Enron?

In the end, the need for stimulus was less urgent than it seemed at the time, but there is no reason to think that we'll do better if, as now seems all too likely, the recovery stumbles.

Of course, the worst thing of all would be if our leadership decides that economics is not its thing, if it simply tries to distract the public from rising unemployment and plunging stocks by going off and invading someone. But we don't have to worry about that, do we?

Post  42985  by  ribit       Reply
...another gun free home!

Boy, elderly man stabbed to death at home in southwest Atlanta

Atlanta Journal-Constitution Staff Writer

• Atlanta/South Metro community page

A 12-year-old boy and his 83-year-old grandfather were stabbed to death early today at a home in southwest Atlanta, and police were looking for the boyfriend of the boy's mother.

The boy's mother and 77-year-old grandmother were also stabbed in the attacks on Spreading Oak Drive, but survived.

Atlanta police Sgt. Bob Creasy said police were called to the large brick home about 3:15 a.m., and found the four victims.

The boy was dead at the scene, and the grandfather was pronounced dead at Grady Memorial Hospital.

The grandmother was in critical condition in surgery just before daybreak, while the boy's mother was in stable condition.

"There were obvious signs of a struggle throughout the house," Creasy said.

Creasy said police were looking for Dekelvin Martin, the boyfriend of the dead boy's mother. The couple had a 2-year-old son together, but the toddler was found uninjured in the house.

Investigators did not know what prompted the stabbings, Creasy said.

"He [Martin] just went crazy," Creasy said, adding that the suspect used a knife from the kitchen to stab the victims.

Martin, who goes by the nickname "Kebo" and is in his late 20s, "is familiar with officers in the zone and is familiar to me," Creasy said. "We've locked him up in the past."

Creasy did not elaborate on Martin's past arrests.

The stabbings occurred in a neighborhood off Lynhurst Drive near Cascade Road, just inside I-285.

Post  42986  by  ribit       Reply
apologies extended....wrong board!

Post  42987  by  pmcw       OT: clo

Post  42988  by  gjwigginto       Reply
Hi maniati:

I tried to convey that I think the Austrians have come closest to an explanation of how the real world works. Just for example, their credit cycle theories seem to be in the process of being ratified and slowly amalgamated into mainstream thought, late in my view. I don't know that.

By contrast, I can't see where the mathematical modelers have fared well. Samuelson's last text praising the Soviet ability to provide consumer goods was copyrighted concurrent with the fall of Communism. That was not early in his career, and in my mind opens to question the thrust and validity of that train of thought. Unlike Heilbroner, his introductor, he has not made any general, if grudging, concessions. Still, in response to an Austrian critic he did say something about being slow to slough earlier skins from his eyes. Slight progress?

I hope I inferred no evil in better minds evaluating ideas and reaching conclusions different than mine. That's how the world works.

Paraphrasing someone I admire: Only a minute percentage of the population at any given time is seriously interested in matters philosophic or economic, or has the ability to effectively assimilate and compare the accumulated knowledge. This tiny group will resurrect, re-combine, and re-vitalize old ideas, occasionally inject a new insight. Then they fight like hell, scream, and call each other names. In spans measured in decades, the surviving thought-chains will reach what Hayek called "the second hand dealers in ideas". These might include technical writers, academics, ministers, etc.; those who mold popular opinion. Slowly, these ideas trickle down to the popular media, incubate, and eventually co-mingle with the good and the bad of what is sometimes considered common wisdom. These ideas are discussed and criticized more or less intelligently initially, by those who more or less know what they are talking about. By the time they have reached the later stages they are simply "reinforced dogmas", not subject to proof or disproof.

My guess is that my lineage will fare better if tomorrow's reinforced dogmas are more influenced by Austrian philosophy than the existing alternatives.

Is that religious fervor?



Post  42989  by  jeffbas       OT: pmcw, I suspect that some of the folks in NJ f

Post  42990  by  jeffbas       Reply
gjwigginto, I liked that paraphrased section a lot. However, I would extend it to every aspect of life - where only a "tiny group will resurrect, re-combine, and re-vitalize old ideas, occasionally inject a new insight."

That is because in most cases the status quo is so comfortable (as in maintaining a belief/value system), or because change would alter existing power structures, or financial/prestige rewards. School vouchers is an example of both power and money issues. Anyone selling textbooks is an example of financial/prestige issues. The Puritans coming from England to America is an example of belief/value system and power issues.

Post  42991  by  Decomposed       ot: Clo,

Post  42992  by  Decomposed       Reply
HLIT is getting killed this morning. Off about 20% right now.

Post  42993  by  Decomposed       Reply
re: HLIT

And now 27%...

Post  42994  by  allbright       ot: He also inherited a surplus. eom.

Post  42995  by  pmcw       Reply
Decomp, HLIT:

I posted their pre-release of Q3 last evening along with some comments:

Clearly an unexpected event. One thing I forgot to mention was that that the level of business in September did pick up dramatically, but not enough to overcome the very slack July and August. This leaves me with mixed emotions. First, I'm ticked off that they didn't adjust expectations in late August. Second, I'm pleased that business was on track in September and I'm very optimistic that their international successes along with the forecasted increase in satellite spending will provide 2003 numbers at or above forecasted levels.

My reaction was to adjust my buying strategy down by roughly $0.30. Rather than my next buy points starting at about $1.50 they now start at $1.20. Regards, pmcw

Post  42996  by  clo       OT: Decomposed,

Post  42997  by  pmcw       Reply
A surplus????? That is one of the great myths. Please provide one ounce of proof that the total public debt was reduced during any year of the Clinton adiministration. I know you won't because you can't.

The reason there was a CASH FLOW surplus was because they were borrowing more money from Social Security and Medicare (plus about a hundred other government trust funds) than they could spend. The surplus was only "real" if one was to ignore the pile of debt they shoveled into these trust funds. This is exactly like you going to an ATM and borrowing against your Mastercard, paying off your bills, having $10 left over and then saying you have a surplus.

Post  42998  by  nvrgivup       Reply
pmcw: The situation you just described with regard to the artificial "surplus" will eventually lead to a weaker dollar and higher gold prices. Have you bought any gold stocks?
Regards, nvr

Post  42999  by  pmcw       Reply
nvr, I traded KRY for a quick 10% profit, but I don't currently own nor do I plan to "invest" in gold mines. When it went down after what appeared to be good news I felt it would recover, if on nothing else, emotions.

I bought some gold immediately after it was legal to own gold in the 1970's (can't even remember the year). I also bought some Krugerands when they were first issued (as much as a collector piece as a gold investment) and then I bought a little bit more in 1999. However, I've always classified my gold holdings as just enough to buy food and ammunition if things ever get really bad.

Gold mines are clearly an investment (or a trading vehicle), but gold is only a hedge. It just sits there and moves in price relative to other things. Obviously, I would be much better off today had I listened to roof and gone 100% gold or gold mines at the first of the year. However remember, they've moved not so much on fundamentals as they have on fear. That aside, roof was easily the first here to proclaim the strategy as the best for the times.

From where we sit today, I'm comfortable with my strategy of carefully moving into a few select equities and sitting on a pile of cash waiting for bargains. In my local paper there was an article last Sunday already saying my local real estate market had shifted from one favoring sellers to one where buyers have the leverage. I'm hoping opportunities will arise there for me to find substantial returns for my fixed income portfolio. Remember, for gold to hit the levels some forecast we'll have to have inflation and, if we do, real estate will follow suit. And, even if I'm wrong, real estate provides cash flow and bullion does not.

Regards, pmcw

Post  43000  by  Vladtheinvestor       OT: Blame Bush..

Post  43001  by  Czechsinthemail       Reply

HLIT management definitely should have provided some guidance in August, especially since they were seeing weak July and August sales. A pickup in September is encouraging, but the revenue miss was substantial. Unfortunately, their choice not to provide a heads up during their earlier conference appearances doesn't do wonders to inspire investor confidence that they are providing an accurate picture of the business. It is one thing to be going through a slow sales period and another to continue fostering the illusion of prior guidance.

The good news is that they seem to have reduced expenses and increased margins to the point where their cash burn for the quarter was very modest, even with the sales shortfall.

It looks like they are trying to pile all the bad news into the 3Q report with significant noncash charges. This, along with another windfall from sales of inventory that they had previously written off (perhaps some of their international sales?), suggests HLIT management may be positioning the company for dramatically better comparisons down the road.

One positive item from their conference call was their reiteration that they have seen customer purchases delayed but not cancelled. They pointed to satellite as the main area of weakness -- something that should improve as the DISH/ECHO merger situation gets resolved. Meanwhile, they received a larger percentage of revenues from telco and broadcasting sales -- giving a glimmer of hope that these may grow into even larger revenue sources for the company.

HLIT's ability to reduce expenses during the down time has allowed them to conserve cash while continuing new product development. It suggests that the company is well positioned to wait out a return of customer orders and to make a lot of money when sales pick up. Though that may not materialize until sometime in 2003, they left the door open for positive surprises in the Dec quarter. Meanwhile, the stock is cheap enough and the cash situation stable enough that there should be a big payoff for those willing to buy and hold.

Post  43002  by  wondery2       Reply
A classic (pun intended)..........

looks/sounds like BABS just stepped in it !!! (again:)

Post  43003  by  allbright       OT: It says surplus.

Post  43004  by  Warstud       Reply
Ford Motor price target cut to $7 at UBS (F) 9.80: UBS Warburg cuts their price target to $7.00 from $9.50 and sees no end to considerable operational problems that F is facing today; with bond spreads having widened, Ford Credit (only significantly profitable biz for F at present) is now effectively shut out of the unsecured mkts, with little alternative but to shrink its balance sheet and thereby reduce its earnings power; also, firm believes a far more significant restructuring/resizing of the motor biz than currently envisaged is inevitable, and that the co's large cash hoard serves just to delay this; firm advises investors to stay clear.

Post  43005  by  clo       OT: The winner of the slip(s) of the tongue?
Post  43006  by  clo       OT: and out of this world daydreaming:

Post  43007  by  uponroof       Reply
RBA General Comments...
good stuff here on the FED, Japan, Germany, Bank Credit Analyst Report, and Fannie Mae

General Comments

The 2 year US treasury yield, 1.68% yesterday, was 7 basis points below the FED funds target rate of 1.75%. When this situation occurs, and it is rare, it has always been a precursor to a FED funds rate cut.

The futures contracts are currently priced for a 100% chance of a 25 basis point FED rate cut by November 6 and about a 25% chance of another before year end.

The problem this time around is that the Dr. Greenspan and most of the other members of the FED along with Mr O'Neill have been insisting that everything is fine and that no rate cuts are needed.

The FED will cut.

Here's what the Bank Credit Analyst had to say:

The Fed Is Behind the Curve
Wed Sep 25 07:51:00 2002 EDT

The Fed made a mistake by not cutting rates yesterday. Markets will force the Fed to move before year-end.

The plunge in equity prices and in Treasury yields, weakness in key economic indicators, and a spike in our Financial Stress Index, all scream that the Fed is falling behind the curve. The Fed has downgraded its economic views, but it still seems to believe that policy is easy enough to support growth. However, the gloomy news coming out of corporate boardrooms signals that economic conditions are deteriorating. The Fed will respond at the next FOMC meeting with a 50 basis point rate cut. Even that may not be enough to turn confidence around, implying there will be further easing next year.

Japan : A Crash Course (no pun intended)
Currency Risk - Yen May Strengthen Against US Dollar Under Gov Plan To Help Banks

The headline above sums up what appears to be the institutional read on the direction the YEN will go in should the country begin to write off the bad bank loans. Excerpt from the article and the URL are below my comments.

I think they are wrong.

Although the YEN may appreciate on CYCLICAL basis I do not think it possible on a SECULAR basis. Even a cyclical appreciation of the YEN against the dollar would be a dangerous bet for currency traders and would be a symptom both of a myopic view of the magnitude of the problems in Japan as well as a misunderstanding of them.

The bank bad loans at between 500 billion dollars and 3 trillion dollars is one problem. The fix being proposed is for the government to absorb the bad debts with tax payer money.

The problem is that the government doesn't have the tax payer money to do so. Which means they would have to borrow it, steal it or manipulate the value of cash reserve equivalents.

Borrow It

They borrow it by issuing new government bonds and then taking the money raised through the bond issue to reliquify the banks.

The problem is that they don't have the ability to do this and this is what most seem to be missing. The government issued sovereign debt in Japan at 3 trillion dollars is equal to the countries annual GDP and much larger than any industrial economy has ever been able to service without collapsing.

We know that bond buyers, i.e. lenders, are aware of this problem as they didn't buy the 10 year treasury issue Japan tried to float last week.

There is no way the government can raise enough money through borrowing to reliquify the banks. Nobody is willing to lend them that much money.

So borrowing is out of the question.

Manipulate It

They could buy stock from the banks and thereby manipulate the price of the stock up to create the illusion of reserve requirements being met at the banks. They have announced intentions to do this as well.

The problem with this scenario is that they would also be required to sell the stock back to the market within 10 years thereby depressing the return potentials over that period of time and reducing the number of stock buyers because of this.

The advocates say this worked in Hong Kong when the government their stepped in to buy stock during the 1997 Asian financial crisis. This comparison is ridiculous to a level it is not even worth discussing. Japan is on a completely different scale as the second largest economy in the world.

Steal It

There are 3 ways the government can steal the money: Taxes, Nationalizing private assets, and Print Money.


Taxing a failing economy will only make the economy fail even faster so forget that. If you wish to consider this along the lines of an FDR new deal system just remember that Japan has been attempting this way out for 12 years and it has failed. It is important to note here tha Japan chose the absurd "New Deal" fiscally liberal, spend your way out of the problem answer at the strong urging of the the Clinton Adminstration and all of its associated parties, Rob Rubin, Tom Daschle, and John Corzine, even before he was elected.

Now, Japan didn't have to listen to the Clinton Administration but they did and that is their fault.

What is important for those of you wondering whether or not the US will follow the Japanese path of the1990's is that these guys are still in control here and insisting that if the US use these same faulty fixes for the US economy.

Pretty scary isn't it? If it's not you are brain dead.

Nationalizing Private Assets

There is about 10 trillion dollars in savings in Japan. More than enough to reliquify the banks. But how does the government access this cash is the question. Typically it would be done by issuing bonds but we already know that nobody is willing to VOLUNTARILY buy them.

So the government can simply take the cash and either replace it with a government bond by force or replace it with nothing.

The most accessible money to do this with is the 2 trillion dollars in individual depositor accounts through the Postal Saving System.

In my opinion this is too easy a target to pass up for the debt strapped country. I believe they will "borrow" this cash out by force and replace it with government "iou's" of some sort. That sort would probably be a non-publicly traded off balance sheet government bond.

Something similar to the way the US government recognizes a portion of Social Security assets now.

Print Money

The BOJ can also reliquify the banks by printing money and depreciating the YEN in the process. This is very common although at the level necessary would result in a world wide currency shock and economic crisis if this was the only way they addressed the problem. Still, I believe it will be a necessary part of the plan and a YEN / Dollar rate of 300 - 400 YEN within the next couple of years is probable. It is currently at 120 but was in excess of 300 when I was living in Japan in the mid 1980's. This is also what Germany did after WW1 in order to pay war reparations.

If this were the sole answer it would collapse the Japanese and world economies, including the US, in the process.

The Japanese are the largest foreign holders of US treasuries at about 335 billion dollars. Which means this is how much money they have lent to the US government from their savings. If they begin to put these loans back to us, which means sell these bonds on the open market, in order to raise the assets to repay their debts the supply demand imbalance caused by it would drive long term interest rates in the US up dramatically.

So, we don't want Japan to do this.

The reality is that Japan is going to have to do a little of each of the above items, with the exception of raising taxes, in order to get their debts paid, reliquify the banks, and set the stage for renewed growth.

And no matter what mix of the above options they use the result for the YEN can only be in one direction ad that is down.

Be careful about getting optimistic about the YEN prospects for appreciation from here. It is much easier to build a scenario for it to depreciate against the dollar, euro and gold even though it may right now be taking a short and again in my opinion, irrational bounce up.

Currency Risk - Yen May Strengthen Against US Dollar Under Gov Plan To Help Banks

The yen may strengthen for a second week against the dollar and euro on speculation Japan's government will present plans to help banks get out from under a mountain of bad loans that are choking the country's economy.
Japanese officials including Finance Minister Masajuro Shiokawa have hinted in recent days that the government may use public funds to bail out banks from some of the 52.4 trillion yen ($426 billion) in loans that won't be repaid. The loans hamper the ability of lenders to extend new credit, curbing growth and investment in the world's second-largest economy, investors said. When investors see confirmation that ``Japan's going to address its problems, investors may buy yen to put money to work in Japan's equity market,'' said Grant Wilson, a senior currency trader at Mellon Financial Corp. in Pittsburgh. As Japanese authorities ``take the steps internationally perceived as needed, the outcome is a stronger yen.''

Bank Credit Analyst

Roger's comments:

The following are 3 more briefs from the Bank Credit Analyst. What is most surprising about them is their almost abrasive candor. This is out of character for the usual gentile way in which they have discussed the markets in the past and should be noted by all. Earlier this year I attached several articles from the BCA in our DO's with the caveat that I believed they were overly optimistic about the prospects for the US and world economies and markets this year but that they were a well regarded institutional firm without ties to investments banks and should be read because of this. That is also what makes their aggressive change in attitude that much more notable. For whatever reason they have now turned very negative, although I believe, much more realistic in their cyclical and secular expectations for the world. Converts are the greatest zealots as the saying goes. Others will follow their lead.

The Deflation Risk
Fri Sep 27 08:31:00 2002 EDT

Markets are heading for a washout because U.S. and European authorities don’t want to acknowledge the risks of deflation.

The Fed continues to forecast a gradual upturn while leading indicators show that the economy is losing momentum. Moreover, there is no pricing power in the foreseeable future even if the Fed’s forecast of mediocre growth turns out to be accurate. Economic growth needs to accelerate to above-trend in order to reverse current downward pressure on inflation. The model beside forecasts G7 consumer price inflation based on the trend in interest rates and stocks. Markets are warning that inflation could be negative in year. Modern economies can’t handle falling prices because they are built on a foundation of credit, which becomes a major problem when prices fall.

U.S. Earnings Expectations: Undermined By Corporate Price Deflation
Mon Sep 30 08:25:00 2002 EDT

U.S. equities are not likely to receive any good news on the profit front this autumn

A sustained equity market rally needs conditions that allow investors to extrapolate earnings growth into the future. This condition is missing in the U.S. today: forward earnings expectations have rolled over after a sub-par bounce in the first half of this year. The slippage in pricing power, and uncertainties over final demand and the war on terrorism, have prevented businesses from providing positive earnings guidance, which is critical to propelling stock prices higher. Unfortunately, the Fed is ignoring the message from the markets because current economic data are not overly weak and it targets CPI not corporate sector prices, and the latter have fallen into deflation territory!

Germany: Is Europe’s Sick Man Terminally Ill?
Tue Oct 01 08:17:00 2002 EDT

Germany is at risk of debt deflation/depression.

The German economy is going from bad to worse. Unemployment is high and rising. Business confidence measures are deteriorating. Equities are melting and house prices are flirting with deflation. Domestic demand is contracting as a result of these headwinds. Part of this poor performance stems from Germany’s position as the high-cost producer in a common-currency zone. Capital is leaving, along with the jobs. What is grim is that there are no policy levers to offset the weakness. Monetary policy is in the hands of the ECB and fiscal policy is frozen by Maastricht. To make matters worse, Germans have reelected Chancellor Schroeder who’s first policy initiative appears to be a tax hike.

Fannie Mae Says Duration Gap at Minus 10 Months
By Vivianne Rodrigues and Robert Burgess

Washington, Oct. 1 (Bloomberg) -- Fannie Mae, the biggest buyer of U.S. mortgages, said its duration gap, which measures interest-rate risk, narrowed to minus 10 months as of yesterday.

The smaller gap means the company's mortgage assets will be repaid and replaced at a lower interest rate 10 months sooner, on average, than its debt. Last month, the gap was minus 14 months.

Fannie Mae released the figure early in response to ``heightened interest in this number,'' the company said in a faxed press release. Though narrowed, the duration gap fell outside the company's desired range of plus or minus six months for a third month.

Additional measures of monthly performance, including the portfolio's net interest income at risk, will be released along with the company's third-quarter results this month, said Timothy Howard, Fannie Mae's executive vice president and chief financial officer said in the release.

A smaller duration gap is important because Fannie Mae makes most of its money on the difference between the return on its mortgage assets and the cost of its liabilities.

Fannie Mae shares rose $2.46, or 4.1 percent, to $62 on Instinet trading of 22,000 shares at 7:45 a.m. in New York.

Post  43008  by  tinljhtkh       Reply
There was, however,

a disinflation in the growth of debt for a time! It is sad to have to use those terms in regard to debt but there they are none-the-less! We have a conflicted understanding, I think, in the definition of a lot of terms, ideas, and concepts these days! And Websters or the medical dictionary may not be able to help us out with them! Dictionaries can only define what has already occurred and try to help us gain understanding and recognize it's presence among us again as we go forward.

It is interesting to look at government these days! I don't know who has the most debt, over-leveraged corporations who can declare bankruptcy and start over, or an over obligated government who can print money and, in turn, be asked to facilitate the means for the private sector to plunge into further debt facilities of its own! We now face a situation where the private sector lobbied for the breakup of the telecommunications sector, further lobbied for more breakups, and again lobbied to create, by the Telecommunications Act of 1996, competition for them in essential services. Now, faced with the reality of broke Competitive Local Exchange Carriers (CLEC's) using the bankruptcy laws to reorganize and come at them again debt free, this government created private sector again lobbies to prevent, by reregulation, this normal part of the business cycle from happening to them, begging the government to again bail out its four baby bells before they also go bankrupt!

At the same time, the airlines, who used to be monopolies because of a protected route structure that existed some years ago now come before the same Congress that deregulated them to beg for subsidies to continue on! Their claim is based, in part, on the fact that the costs of increased security measures made necessary from their failure to stop terrorism on September 11th, 2001 are not something that they can economically handle. On top of that, we now begin to see bankruptcies of some of the few remaining over-the-road long haul trucking companies, themselves the object of the lobbying that resulted in deregulation, beginning to occur! And we constantly discuss the Postal Service and Amtrak while we watch Federal Express and United Parcel Service duke it out for market share!

I look back to the GE-Honeywell merger, the last act of the Jack Welch era at General Electric, and see government at work again. This time, in the defense sector, the European Union stopped that merger where American regulators would not! Here, we had the reverse competition argument at work! GE successfully lobbied American regulators with the idea that, in order to be more efficient and able to compete in the world marketplace, they needed to combine! The Europeans, looking to protect their own defense industry in a globalized world marketplace, rejected the offer!

How do we apply the various economic measurements of government cost to a government that is being itself regulated from beyond its own geographic boundaries as its dependence on foreign trade clashes with the boundaries of its own conflicted views of which sectors will control its own security and competition?

Then we have another look at government at work! America's mostly bankrupt steel industry successfully lobbied the Bush White House to impose tariffs in order to protect it from foreign competition! Looking toward the fall 2002 Congressional elections, the Bushies then, at a later date, revealed that they needed to impose these tariffs in order to win the crucial votes necessary to win fast track negotiating power in that same Congress! Now, a flood of counter tactics by foreign governments and competitors is beginning to make those who lobbied in the first place wonder why they ever did it at all!

In the meantime, the World Trade Organization (WTO) has put in place new rules that the European Union is threatening to use to impose up to 4 billion in protective tariffs against hundreds of potential American products if the United States does not change tax breaks (subsidies) that American corporations have been getting for years! If you look at the situation at Boeing, the only American commercial aircraft manufacturer left after its combination with McDonald-Douglas a few years ago, you really have to wonder what the ramifications of the clash of economies and their relationship to governments that we are really dealing with here! The Europeans have Airbus, which has often, if not always been subsided, competing with an American monopoly (Boeing) created by the lack of regulation and the argument for more efficiency! Now we see Boeings unions beginning to recognize the potential of what has happened by refusing their leaderships advice to strike! Contrast this to the situation at United Airlines, where the machinist union, for a time anyway, lobbied for more efficiency in the structure of a company that they are part of a majority employee ownership arrangement that threatens to unravel around them!

Then, we have the West Coast dock workers who are willing to back up the entire American economy in its crucial fourth quarter over a labor dispute. Governments’ probable reaction--a 60 day cooling off period imposed on those who refuse to extend a contract and are thereby locked out after a work slowdown! There are questions about whether you can cool off those who have been locked out! If these people do go back to work will they continue to unload foreign manufactured goods from Japan and China made more efficiently due to cheaper labor costs? And, is that the real threat to the American economy as a whole?

Will there come a time when terrorism is defined, in an economic sense, as throwing instruments of commercial warfare (cheap goods) at the towers of our standard of living with the resulting untold number of economic deaths that will result from those actions? Are the realizations of NAFTA finally coming true just as we begin to negotiate more free trade agreements with the rest of the world? It is interesting to remember how Ronald Reagan, in 1981, began to curtail the power of unions when he defeated the Air Traffic Controllers Association when they staged a walkout! Now, Mr. Bush asks for the power to eventually dismiss them under new laws that he wants enacted to help combat terrorism? Their reply was that he should have been ashamed of himself since they had helped to land his aircraft along with all of the others on that fateful September day! Is the Boeing union leadership right in wanting job guarantees is the face of this coming economic terrorism? Or does their rank and file simply see the handwriting on the wall as they work to buy more time? With their union gone, do the air traffic controllers have any standing at all as they face a government again asked to monopolize telephone companies?

I suppose that my basic question at the end of this long and complicated ramble is simply to ask what government is going to end up resembling as it tries to be all things to all people when there is so much social and economic conflict? When I think of the Forest Service employees who set those fires out west this summer, burning up hundreds of thousands of acres, I really wonder where the next wave of terrorists is coming from! And, I think again of that once popular term "creative destruction" and I don't like the visions that I am beginning to see dance in my head!

Maybe I’m just suffering from Seasonally Adjusted Disorder (SAD) as the days grow shorter and the shock of government lobbied for and enacted Daylight Savings Time approaches at the end of this month? Or maybe we can get John Ashcroft to pray and move the sun back north again!




PS--Your post stimulated this piece from me and you are not required or expected to offer any reply of any kind unless you wish to do so!

Post  43009  by  firered1       Reply
pmcw, They all borrow from the trust fund - even good ole George....

Budget Scramble
Social Security, Medicare Surpluses Are Key Prize as Federal Ledger Returns to Red
By Walt Duka
April 2002

A year ago political leaders of all persuasions, including President Bush, vowed that the Social Security surplus would be used only to pay benefits or to reduce the national debt.

Today the so-called lockbox that was supposed to protect this surplus lies shattered. As red ink has once again begun to flow over the federal budget, part of the trust fund reserves has already been borrowed for other purposes. And budget officials expect borrowing to continue for at least eight more years.

Borrowing from the trust funds "does not affect Social Security's ability to pay benefits."
The turnaround has set off a budget scramble in which the Social Security and Medicare surpluses—now at $1.3 trillion and the only surpluses left—are the key prize. And how this money is used, and what the impact will be, have become major concerns for many Americans.

The Social Security surplus results from the trust fund taking in more in payroll taxes than it pays out in benefits—a deliberate buildup to help prepare for the coming upsurge of baby-boomer retirements.

"The first thing people should be clear about is that this borrowing does not affect Social Security's ability to pay benefits," says John Rother, AARP director of policy. "The trust fund is intact and still collecting interest on its Treasury bonds."

The main effect of continued borrowing, he says, will be on the economy. If the trust fund surplus is not used to reduce the national debt, as it was for four recent years, that debt will not be paid off and interest payments will be higher.

Trust Funds: A Healthy Picture

Although "trust fund" is the term generally used, there are actually four trust funds—two for Social Security and two for Medicare. At the last accounting, they held assets totaling almost $1.3 trillion. The Congressional Budget Office projects they will grow by $2.5 trillion over the next decade. Their holdings consist of U.S. securities currently earning 6.9 percent.

Rother says it is AARP's position that as trust funds continue to be tapped, this money should be used as it was intended. "The Social Security and Medicare trust funds were created to ensure the health and retirement security of our aging population," he says, "and their surpluses should be used for Social Security and Medicare before anything else."

Others think differently. Bush, in his 2003 budget, proposes big increases in defense and national security spending—increases that, for the most part, Congress is likely to approve. But while he earmarks $190 billion over the next decade for a prescription drug program, the president would also make last year's tax cuts permanent and add new tax cuts—a move many oppose.

The nonpartisan Congressional Budget Office (CBO) says the current budget squeeze grows out of the economic recession and recent laws, especially last year's $1.35 trillion package of tax cuts and emergency spending related to Sept. 11. These factors combined to lop off an astounding $4 trillion from the decade of surpluses forecast just a year ago.

Almost all that loss stems from the drying up of expected surpluses from the non-Social Security side of the federal ledger. In contrast, the CBO says Social Security will continue to pile up hefty surpluses over the next decade.

Borrowing from the trust fund resumed last year, when $33 billion was diverted to other uses. This year $152 billion more is expected to be borrowed, and the CBO sees the trend continuing each year through 2009.

Economists almost all agree that short-term deficit spending is acceptable, even desirable, during a recession. They say it can help put the economy in gear and pump up government revenues. But they warn that large, long-term deficits could force harsh cutbacks and tax increases down the road.

The multitrillion-dollar question therefore is, How long will deficits last?

Bush says that if Congress follows his plan, balance could be restored to the overall (or "unified") budget in 2005. His approach involves making significant cuts in certain programs and borrowing from the Social Security surplus.

But others, like Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, believe the president paints too rosy a picture. "We now face a decade of red ink," Conrad said at a recent hearing. And "the biggest reason," he continued, "is because of the tax cut."

Economists say two factors will largely determine whether or not deficits become a serious problem: how fast the nation recovers from recession and whether government spending is kept at reasonable levels.

Like most economists, Robert D. Reischauer, president of the Urban Institute, a Washington think tank, believes the recession may be behind us but that recovery may be slow. He's concerned, however, that "it's going to be real difficult to impose fiscal discipline" on Congress.

"The easy [budget] areas on which to impose discipline have been used up," he says, and divided government and the narrow balance of political power "create pressures to spend more and cut taxes more."

Larry Sabato, a political scientist at the University of Virginia, shares that concern. "Once you go into deficit," he says, "the restraints are gone for all practical purposes." He believes this will especially be the case as the parties jockey for public favor before the November elections.

Analysts foresee a series of running battles in coming months as Congress debates how much to spend on domestic programs. They also expect a rough-and-tumble war of words to take place over tax cuts, since some Democrats favor freezing cuts that have already been approved but not yet implemented—a position directly opposed to the president's.

Daniel Mitchell, a senior fellow at the Heritage Foundation, a conservative Washington think tank, backs most of the president's proposal. He says speeding up the tax cuts is necessary to boost the economy.

"A tax cut delayed," he says, "is an economic benefit deferred."

Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, takes an opposite tack. "Seventy-one percent of the tax cut," he says, "went for people in the top one-fifth of the income spectrum." As a result, he favors "not locking into place portions of the tax cut that haven't yet occurred."

Although the tax debates are expected to raise political tempers on Capitol Hill, most experts believe that neither a speeding up nor slowing down of the tax cuts will take place.

Reischauer says the nation is coming off several years of surplus and is therefore much better off than it was when deficits soared in the 1980s and early 1990s.

"Compared to our expectations [of huge surpluses] of a year or two ago the situation has deteriorated significantly," he says. "But we shouldn't pretend it's worse than in fact it is."

Congress can still control the situation. "If we slip back into serious budget difficulties," Reischauer says, "it will be because of decisions yet to be made."

Still, the University of Virginia's Sabato adds a note of caution. "People should be concerned about the budget situation," he says, "because if you look back on the history of budget deficits, they tend to build on one another

Post  43010  by  Czechsinthemail       Reply
Good article on the economics and politics of broadband:

Here's a snippet:

Verizon Communications and other telecom incumbents bristle at the suggestion that they haven't been bullish about bringing broadband to the business community. Verizon points to a steady rise in corporate DSL customers and says it has a marked focus on DSL, enlisting a team of employees to pitch it to businesses and adding service guarantees.

But some critics charge incumbent carriers are moving slowly out of fear of cannibalizing their lucrative, decades-old T1 businesses, which can bring in at least double the revenue per subscriber of DSL.

Verizon's T1 packages start at $700 a month and can run into the tens of thousands of dollars, depending on a customer's needs. In contrast, DSL business services range from $50 to $350 a month.

"Verizon is not going to look to sell DSL just because it's cheaper for the end user," says Erik Keith, an analyst for broadband infrastructure at Current Analysis in Sterling. "That cuts their profit margins."

Post  43011  by  maniati       OT: Yeah, what we need is to have Streisand in Con

Post  43012  by  pmcw       Reply
all, I think we've gone through this before. Evidently you don't understand that one must count all debt against all receipts before a unilateral surplus is declared. The debts owed to over 100 government trust funds are not included in the numbers you posted. I tried to explain this to you in a very simple Mastercard example. Do you think I was just trying to lie?

Here, from the Treasury department, is a listing of the entire public debt for the last 15 or so years. Please point out the year in which the entire public debt decreased. If there was a real surplus, one where cash receipts were greater than expenses plus debt, the public debt would reflect a decrease.

09/28/2001 $5,807,463,412,200.06
09/29/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43
09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32
09/30/1993 $4,411,488,883,139.38
09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
09/29/1989 $2,857,430,960,187.32
09/30/1988 $2,602,337,712,041.16
09/30/1987 $2,350,276,890,953.00

Now, if you want to talk about certain months when public debt decreased you can look at nearly every April - even April 2002. However, a month doesn't make a year or a trend.

Post  43013  by  clo       OT: Oh Tin! you are incredible!

Post  43014  by  pmcw       Reply
fired, They have no legal choice but to borrow from the trust funds. There is no legal way for the government to save or invest trust fund surpluses. Therefore, their only choices are to spend the money on general revenue issues and issue an IOU or reduce taxes. Any other alternative requires a change of Federal law. This is exactly why some favor partial voluntary privatization of Social Security. This would be one way to take the money out of the government and actually save Social Security dollars. As it stands today, there are ZERO dollars saved for Social Security or Medicare or any of the other trust funds. Regards, pmcw

Post  43015  by  clo       OT: Oh maniati! If Reagan could learn, why can't B
Post  43016  by  allbright       Ot: Pm. Forgive me. You invited me to produce a re
Post  43017  by  tinljhtkh       OT: Clo!

Post  43018  by  jeffbas       Reply
pmcw, let's assume the general budget was in balance and the SS trust fund had a surplus of $100B. Are you saying the government would issue IOU's for $100B and could NOT take the money and retire $100B of general debt, but would have to spend it on programs or cut taxes? Or does "spend the money on general revenue issues" include debt reduction?

Post  43019  by  maniati       OT: clo: Oh, yeah, suuuure. Just what do I look li

Post  43020  by  pmcw       Reply
jeff, That includes the reduction of public debt (marketable or not).

If there were no debts other than Social Security and the government received $100B extra in cash flow from Social Security they would either have to change a law so that they could invest the money in the private sector, change a law so that Americans could direct the investment into the private sector, spend it, or privide a tax rebate. Hmmm, maybe they could buy gold............there's an option I've not considered, but I think they might have to change a law even to do something like that.

Regards, pmcw

Post  43021  by  Czechsinthemail       Reply
12:27 ET Economy, Productivity, Profits : : There's a double dip recession, the new era is already over or never was, and corporate profits are dwindling. Such is the sorry state of affairs, at least if you are a subscriber to the Conventional Wisdom. There is another side to this story.

When the first Q3 GDP report is released on Halloween, the year/year pace of GDP growth will probably jump to roughly 3%...not bad for a double dip, right? Though some of this growth is tied to the inventory rebuild after the recession, even the pace of final sales growth is likely to exceed 2% for the prior four quarters.

Part of the reason for the gap between perception and reality is that GDP growth is not being accomplished through job gains, but instead through productivity gains. Productivity growth for the year through Q2 was an incredible 4.8%. Though the market misjudged the new era's ability to generate corporate profits for tech companies, the impact on productivity growth has been very real indeed.

The fact that growth has been achieved through productivity rather than job gains does not bode well for the job market and consumer confidence, both of which have struggled even as the economy recovers. But it does bode well for corporate profits. Analyst expectations for the profit recovery have not surprisingly been too optimistic, but profits are nevertheless recovering. As measured in the national income accounts, profits have risen sequentially in each of the first two quarters of 2002, averaging just shy of 2% growth.

That profits are growing does not necessarily mean that the market must go up - there is still a reckoning taking place between profit growth potential and valuations. But we would be facing a far greater problem if we had to contend with both overvaluation and falling profits - buying into such a market would certainly bring to mind the "catching a falling knife" analogy. The reality is not nearly so grim. - Greg Jones,

Post  43022  by  maniati       Reply
Czech: I think there's one problem with that reasoning: it's not so surprising to see productivity increases when people are being laid off, as the remaining employees are asked to do more. It's not quite as good a sign as that article makes it sound. If one wants to point to productivity gains, it would be a lot more telling to see productivity increases during a time when employment is constant or growing. But, it's not so unusual given the present circumstances.

Post  43023  by  clo       Reply
Oh maniati! you asked for this!!! heehee

I see I'm foiled, again...
Yes, it's true I've started the campaign for Barbra.

My first fund raiser is a cookie bakeoff.

Some of the special recipes are:
Hillarys' "Lady sings the "blues" sugar cookies."
Martha's "If I only had a heart scones."

Wait till you see the choreography for this show!
I just love dancing to "My Guy" and "You can't hurry Love"

But as for your note;

"And don't forget, Reagan used to be a Democrat, but he switched before he decided to take his act on the road."

Could this have been the first sign of his mind failing him?I mean NO disrespect. I couldn't let that one go by.

Okay, eeeenuff of my fun & frolic... but the weather is grand and my CD's are playing & I'm happy! ;)) clo

Post  43024  by  pmcw       Reply
Random thoughts and the odds:

The Republicans take both houses of Congress (100% House / 51% Senate)
Daschle is replaced by Lott and we are still unhappy (51% / 100% if the Republicans take the Senate)
Greenspan drops rates in November (90% a quarter point / 25% a half point)
We see a substantial rally (<12% for all major indexes) in November after the elections (75%)
Many stocks see their low for the foreseeable future before the next scheduled FOMC statement in November (50%)
The market melts down to NASDAQ >700 (10%) >1,000 (50%) by the end of Q1 2003
Whether this happens or not, the NASDAQ hits over 1,500 in 2003 (90%)
The SOX trades for over 400 in 2003 (90%) over 500 (50%)
Semi sales will < $160B in 2003 (75%)
Everything melts down and we go into a world wide depression (10%)
We recover from our currently directionless malaise and enter a bull market (10%)
We sputter along without definite direction (like manaiti said) seeing huge index swings (80%)
VZ, SBC and/or BLS buy a LD company (T, FON, WCOME) during the next twelve months (one buy 90% / two buys 30%)
Broadband deregulation gets ugly and there's greater pressure to either get it done or regulate converged cable (99%)
Since WCOME is all but dead (or owned by another) Lott finally lets broadband deregulation through (75%)
HLIT, ISIL and XICO double from their current level before the close of 2003 (90%)

Regards, pmcw

Post  43025  by  maniati       Reply
U.S. October tax loss stock sales seen lower

(Follow-up to an earlier discussion.)

Reuters Market News
U.S. October tax loss stock sales seen lower
Tuesday October 1, 2:06 pm ET

By Nick Olivari

NEW YORK, Oct 1 (Reuters) - It may be small comfort for long-suffering stock investors, but October will have one less bear to maul the market - tax-loss selling by mutual funds will be lower than previous years, according to money managers.

Mutual funds are taxed on a fiscal year ending Oct. 31, and investors aren't typically pleased to pay those bills, particularly when a fund's performance is down for the year.

So fund managers will sell their biggest decliners, offsetting the resulting losses against taxable capital gains before they are passed on to investors.

But in 2002, after two other years of losses, there may not be much point to selling stocks that are huge losers, since there are too few gains to offset.

"Because the market is down so significantly between this October and the last, which is the tax year for all mutual funds, we don't think tax loss selling will have a big impact," said Diane Garnick, global investment strategist at Boston-based State Street Global Advisors with $775 billion under management.

The Dow Jones industrial average (CBOT:^DJI - News) is down 23.6 percent for the calendar year year, the Standard & Poor's 500 index (^GSPC - News), has slumped 28.7 percent, and the Nasdaq Composite (NasdaqSC:^IXIC - News) almost 40 percent.

Indeed, some investors told Reuters that some of the most recent carnage was due to managers beginning tax-loss selling earlier than other years. The S&P 500 and Dow industrials have just had their worst quarter since the last quarter of 1987, according to

"It's been happening for a while," said Michelle Clayman, chief investment officer with New Amsterdam Partners which oversees $1.2 billion. "We've had some customers doing it for the last three months."


But there are still many candidates for tax loss selling to choose from and some say there could be some further downside.

As Clayman notes "people are sitting on plenty of ugly losses."

Some 399, or almost 80 percent, of the stocks in the Standard & Poor's 500 index (^GSPC - News) are down for the year, according to Reuters analytics.

Among the biggest decliners year to date: energy trader Dynegy Inc. (NYSE:DYN - News), down 96 percent, wireless telephone company Sprint PCS Group (NYSE:PCS - News) down 92.3 percent, and once high-flying telecom equipment company Lucent Technologies Inc. (NYSE:LU - News) down 88 percent.

Even industry leaders like Internet networking equipment company Cisco Systems Inc. (NasdaqNM:CSCO - News). and General Electric Co. (NYSE:GE - News), maker of jet engines, light bulbs and appliances, are down almost 40 percent in 2002.

No. 1 supermarket chain Kroger Co. (NYSE:KR - News), generally considered a defensive play in times of economic uncertainty as people must still buy food, is down 32 percent.

Mutual funds hold significant amounts of all the named stocks, according to Reuters and Lipper Inc. data.

Some 24 percent of Cisco stock is held by mutual funds, and 16 percent of General Electric stock is in the hands of mutual fund managers, while some 32 percent of Kroger is held by money managers.

Money managers also hold large chunks of even the big laggards in the S&P 500, according to Reuters analytics. Mutual funds hold 29 percent of Dynegy, 16 percent of Lucent, and 30.6 percent of Sprint PCS.

The risk of mutual fund managers offloading more losers only adds to the uncertainty surrounding the economic recovery and military action against Iraq, some money managers say, and increases the potential for more rocky days ahead for the stock market.

Tax loss selling "definitely weighs on the market with some artificial selling," said Andrew Rich, a portfolio manager with Driehaus Capital Management, which oversees $3 billion. "We are still just now entering October, so there is another month yet."

Post  43026  by  wondery2       Reply

Remember, Barbra isn't the leader of the free world...!

duh !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Post  43027  by  pmcw       Reply
We might see the reverse this year with investors (not funds) selling winners late in Q4 so they have something to offset losses. Regards, pmcw

Post  43028  by  nacl01       Reply
DJIA up 347

The Dow is up nearly 347 points, today.
In fact, of the 20 or so stocks I own or track, all but four were up today. Here are the four:

KRY -0.04 -1.75%
HLIT -0.47 -26.86%
ISIL -0.09 -0.69%
XICO -0.19 -5.26%

That includes:

JPM +0.75 +3.95%

Some days are just like that.
I guess they are still on sale.


Post  43029  by  pmcw       Reply
all, I agree, Decomp's analogy was a thing of beauty - easy for virtually anyone to understand. Thank you for comparing my simple Mastercard story to his much more colorful story.

What it appears you fail to understand amounts to the value of learning to read a cash flow statement. At the bottom of a cash flow statement is the area dedicated to cash flow that is related to debt and stock transactions (buying or selling of the company stock). The top of the sheet goes into cash flow from operations.

During the late 1990's when the mainstream press (the really good writers took the time to explain the situation correctly and shunned the cheap headlines) was trumpeting "surplus" they were referencing a cash flow surplus. However, since most of these talking heads probably can't balance a checkbook, they had no clue that the positive cash flow was derived from excess Social Security contributions.

The US Government is essentially divided into two operating groups. One is funded through general revenue collections (income tax, inheritance tax and duties) and the other is funded through money collected by trust funds. These include Social Security (actually called OASDI which stands for Old Age, Survivors and Disability Insurance), Medicare, Military Retirement, Highway Department, Airports, etc. Virtually every one of these trust funds was collecting far more money than they were spending. Since none is allowed to "save" money they, by law, turn over all surplus funds to the Treasury Department and receive a Special Treasury IOU in return. These IOU's are not marketable, but they represent debt as valid as a T-Bill (at least in theory).

These excess funds are then spent mostly on general revenue issues and, in some rare cases, small portions were used to retire marketable debt. However, for every dollar that is spent or used to retire marketable debt there is another dollar of new debt created in the form of the IOU's issued to the trust funds.

Since OASDI (remember this is Social Security) will run at a surplus cash flow for quite a few years many think the best way to insure its solvency is to create a legal mechanism whereby the excess cash can actually be saved. I personally believe it is most prudent to use it to pay down marketable debt to somewhere around $2T, but then feel we must look for other alternatives. This means we are left with a choice of either letting the Government make direct investments in the private sector or allowing young workers the option to invest a small percentage of their OASDI in the private sector.

I feel there are many reasons to keep government out of the private sector as an investor - candidly, they are already in the private sector way too much as it stands today. Many people agree with this and therefore the numbers supporting partial privatization of OASDI are growing. Those I respect most suggest that the choices for individual investors be limited and only include the broadest indexes of a few sectors. IMO, the equity selection should only be the Wilshire 5000 index (operational costs would be less than 0.15%). Since I'm far from an expert in bonds, I'll withhold a specific suggestion there, but I'm sure there are some similar choices available.

The Bush doctrine, if you will, is clearly to provide more benefits via opportunity at less cost when measured as a percentage of GDP. He sees the value of breeding the geese that lay golden eggs versus the other camp that thinks it would be more effective to restrict the food intake and then squeeze the eggs out.

Hopefully this explanation has helped you understand the fundamentals and how they are distorted to deceive the average person. Please don't feel that I agree with Bush on everything, I don't. Please also feel welcome to critique any aspect of economics, politics or life you like. However, if when doing this you post something that simply isn't true, please don't expect me to let you perpetuate myths without adding my $0.02 or maybe even more.

Regards, pmcw

Post  43030  by  jcl22192       Reply
Briguy: Duration gap
I see Fannie Mae rose on their news. The following gleaned from another board suggests you are still on the right track
(especially since a drop in rates seems in the cards)

The duration gap of a financial company is equal to the duration of assets minus the duration of liabilities. For Fannie Mae to have a duration gap of -14 months means that the duration of liabilities exceeds the duration of their assets by 14 months. This is because Fannie Mae makes mortgage loans, and as interest rates have declined, more and more individuals have refinanced or shortened their borrowing horizons. So these mortgages (assets of Fannie Mae) are now substantially shorter in duration than Fannie's liabilities. Since -14 months is -1.17 years, this means that a 1% drop in interest rates would cause Fannie Mae's loan portfolio to lose about 1.17% in value. Now, that doesn't sound like a lot. Until you realize that Fannie Mae has leveraged its equity 40-to-1 (the highest leverage ratio in its history), and that its annual return on this portfolio is just 0.65%.

In short, a further drop in interest rates of even 0.50% here would cause an overall portfolio loss equal to about (1.17 x .50 x a leverage factor of 40 =) 23% of Fannie Mae's book value, or equivalently, about (1.17 x .50 / .65 = ) 90% of Fannie Mae's annual earnings. Accordingly, Fannie Mae appears to be scrambling to buy long-term Treasury bonds (thereby lengthening the duration of its assets) in an attempt to shore up its duration gap. This is no small problem, and is behind the substantial plunge in long-term Treasury interest rates we've seen in recent weeks.

Post  43031  by  Czechsinthemail       Reply
maniati, I agree completely. I believe there has been an increase in unemployment of about 1 million people this year. Obviously, these people are not likely to be more active as consumers when they lose their jobs. But the productivity increases do improve margins for companies who effectively get more work out of their employees without having to pay for it.

My take is that it might be appropriate to look at reforms that would provide some relief to the workers or those laid off. Higher minimum wage, tax credits for worker contributions to Social Security, or other reforms that would benefit most those who have been hurt most by the recession.

Post  43032  by  allbright       OT: pm: So, then, one of the things you disagree w
Post  43033  by  Czechsinthemail       OT:

Post  43034  by  Decomposed       Reply
Really think it will last, nacl01? This rally was caused by Iraq reaching an agreement with U.N. inspectors. But do you REALLY think it's legit? Please! Fool me once, shame on you. Fool me twice...

As soon as inspectors try to inspect something "interesting," Iraq will lock 'em out. Just you wait.

I'm really surprised the market is reacting to anything Saddam Hussein says. The guy is a liar.

Post  43035  by  jeffbas       Reply
Higher minimum wage???? That would only get more people laid off! A minimum wage is paid to people who don't merit a higher wage by virtue of the supply of such workers exceeding the demand. If an employer has to pay more of "something for nothing", he will just do with less of such workers. (We already have tax credits for the working poor - which do not help the unemployed much.)

I would suggest extending unemployment benefits, other ideas like pmcw has talked about from time to time to interest businesses in investing, eliminating the capital gains tax (what gains), increasing the capital loss deduction to $10,000, eliminating double taxation of dividends, etc. It is NOT a lack of money around in cash or available to be borrowed for investment but a lack of interest in investing in anything but houses that is killing the economy. A positive investing environment would improve psychology and the spending environment, and put these folks back to work, just as the reverse has happened since 3/00.

Post  43036  by  Decomposed       ot: Iraq
Post  43037  by  Decomposed       ot: Correction.

Post  43038  by  clo       Reply
Decomposed, FWIW: most on CNBC thought the rally was window dressing, that was expected for about 80+ points.

When the market went higher shorts did "some" covering, to be on the safe side.
Many were NOT impressed with the volume...
Of course if a war could be avoided that would save lives & money and help ease the everyday uncertainty.
As you know We can go to war at any time. clo

Post  43039  by  nacl01       Reply
Of course this rally won't last.

I am thinking of buying more puts in this rally.

I was just making the point that, on a big rally day, several of the stocks discussed on this board went in the opposite direction.

Obviously, this is short term. Most of us here invest for the long(er) term.


Post  43040  by  Czechsinthemail       Reply

The U.S. is already pretty much out of the United Nations, but getting into the world community would be a change.

Actually, that's a bit unfair since the U.S. is now trying to buy its way back into the U.N. But talk about a rogue nation. It's increasingly hard to distinguish the news from cheap comedy or episodes of the Twilight Zone.

House OKs paying U.N. dues

By Ken Guggenheim
Associated Press
Sept. 26, 2002 12:09 AM

WASHINGTON - With the United States seeking support for possible military action against Iraq, the House voted Wednesday to make the final payment on back dues to the United Nations.

The dues payment is part of an $8.6 billion bill authorizing State Department programs for next year. An additional $5.2 billion was authorized for counterterrorism and military aid to U.S. allies. The bill was approved by voice vote.

The bill authorizes payment of $244 million to the United Nations, the final part of the $926 million in back dues the United States agreed to pay in 1999. In exchange, the United Nations agreed to reform its bureaucracy and reduce the United States' financial obligations.

Last year, the House voted to withhold the $244 million payment after the United States lost its seat on the U.N. Human Rights Commission. It recovered the seat this year.

In addition to the back dues, the House bill included $78 million in new obligations.

"Our bill takes a huge step toward normalizing our relationship with the United Nations," said Rep. Tom Lantos, D-Calif., the top Democrat on the House International Relations Committee.

"It offers a vote of confidence in the United Nations," he said. "It is now time for the United Nations to prove itself worthy of such confidence by defending its principles and enforcing its resolutions (on Iraq)."

With the House vote, Congress is poised to approve its first State Department authorization bill since 1994. The bill, which offers funding guidelines for dozens of foreign relations programs, hasn't been scheduled for a Senate vote but faces little resistance there. The actual spending will be determined in a separate appropriations bill.

Traditionally, Congress approves an authorization bill every two years. But in recent years, Congress had been unable to work out a bill, partly because of differences over whether U.S. aid could be used for overseas family planning agencies that use their own money to discuss abortion with clients. Congress has had to waive the authorization requirement or include it in the appropriations bill.

This year's bill offered few points of contention. House-Senate negotiators were able work out a final bill on Monday that didn't address the abortion debate. In one area of disagreement, negotiators were unable to agree on the funding and scope of public diplomacy programs to boost the U.S. image abroad. They will try to resolve those differences in a separate bill, congressional aides said.

One of the few objections to the bill was raised by Rep. Mark Souder, R-Ind., who criticized what he saw as a weakening of the annual process of certifying which nations are cooperating in the fight against drugs. Those that aren't cooperating could lose U.S. aid.

Changes in the bill appear to give the Bush administration more flexibility in setting the criteria for judging nations. Because the administration has criticized the certification program, some lawmakers believe weaker standards will prevail.

Post  43041  by  pmcw       Reply
all, You're not reading very carefully. There is a huge difference between cash flow and total net worth. Bush knew there was no way to deal with a CASH surplus beyond spending it, refunding it or partially privatizing SS. Even Greenspan said we can't retire too much of the marketable debt.

What lead to the surplus was the reform of SS back when Reagan was president.

Lack of regulation had nothing to do with the current private sector scandles. Lack of courage to enforce laws on the books is exactly what lead to our current problems today. Voice your complaints to the the state of NY and Janet Reno. When she was raiding Waco Wall Street was raiding the 401(k)'s of the common worker.

Do you have any other questions?

Post  43042  by  pmcw       Reply
Decomp, I think the market reacted to the fact that there is a reasonable hope the Republicans will take over the Senate. Regards, pmcw

Post  43043  by  pacemakernj       OT: Czech, just the numbers please. The Bush Tax c
Post  43044  by  pacemakernj       OT: Decomp, btw, the Palaces are off limits. Pace.

Post  43045  by  tinljhtkh       Reply
Yesterdays decline

was narrow based and affected by declines in several large cap stocks such as GE and WMT who were subjects of various downgrades. There has been enough of this going on that this rally was simply bargain hunting and the natural bounceback of news beaten down stocks. It is already apparant that the optimism over the agreement to allow inspectors back into Iraq is going to be short-lived because Saddam's "bedrooms" are not going to be covered by the search warrants. If what I heard is true, his various palaces cover something like twelve square miles of land. For this inspection process to be viable, they will have to be searched--it is as simple as that!

President Bush's administration did pressure the Israeli's to pull back from the siege at Arafat's headquarters in Palestine last week because it was blocking the United Nation from getting a resolution through that is to their satisfaction, so U, N. action is somewhat important to them!

Dell announced a good quarter and good fundamentals in areas such as servers that they have begun to emphasis as they expand into other areas using their economies of scale so that may help the markets tomorrow! However, it needs to be remembered that Dell is taking market share from other providers and there is little proof that there is any real expansion going on! Looking at GM and Ford over in the auto sector reveals a much more clear picture. It is taking much more effort and resources now to achieve less profit than they have been used to getting in the past. The 0 percent reality is here and the profits from financing are gone for the forseeable future!

Everything from cigarettes to food is now locked in a battle for market share and promotion costs are rising across the board as many companies fight for their very survival against the intrusions of Wal-Mart and a host of other deeply discounted operations, many operating outside of the United States, who are taking advantage of the price of the dollar and cheap oversees labor costs!

To be very frank about it, at least in my opinion, Saddam is masking all of these problems and many others with his duel in the sun with the Bush administration! As much as everybody hates him, Saddam is a more traditional kind of enemy from the last century! When he is gone and something else goes wrong who will we blame? All of the problems will still be here and we had just as well get ready to realize that fact and deal with it because the morning after will probably very soon come. I, for one, am not ready for anymore nightmares for a while but they always seem to show up anyway! We can never go back to the world that existed before September 11th, 2001, and Saddam existed there anyway! If he won't allow total inspections, he has to go! But he won't be taking all of the world's problems with him when he leaves, and might even create a few more with his absence than he did by being here!




Post  43046  by  Czechsinthemail       Reply
Economic Stimulus Program:

How not to stimulate the economy
Bush proposal fails tests any successful stimulus package should pass

by Christian Weller and Laura Singleton

Eighteen months after the National Bureau of Economic Research officially declared recession, economists and policy makers continue to debate how the federal government should kick-start an economy still stuck in neutral. The economy’s condition is far from good: fixed investment has been down for the past seven quarters, GDP grew at an annualized pace of only 1.3% in the second quarter, consumer confidence dropped sharply in September and is now at its lowest level since last November, and unemployment is mired at 5.7%. Most economists agree that some kind of jolt is needed and that only the federal government is in a position to deliver it.

What is not agreed is how much and what kind of stimulus is needed. Some ideas suggested by the Bush Administration have yet to be fleshed out; but it is already clear they will not deliver what the economy needs. They will neither stimulate the economy nor reduce unemployment. Worse yet, some of the measures proposed, such as raising the contribution limits on 401(k)s, would likely trigger a further slowdown.

There are three tests a stimulus package must pass. First, the increase in economic activity that it achieves must occur quickly. Second, a successful package must help stimulate demand for goods and services. Third, the overall package must be large enough to boost growth by one to two percentage points over the next year. That level of growth, given that the size of the U.S. economy is now greater than $10 trillion, will require a stimulus of at least $100 billion, assuming that each dollar of new spending adds about one and a half dollars to GDP (as a result of the “multiplier” effect).1

The package proposed by the Bush Administration cannot possibly bring about a recovery because it fails all three tests.

Wrong time, wrong place, wrong size
Instead of a quick infusion of cash to energize the economy, the Bush Administration offers some proposals that would take years to become effective and some that would actually harm overall demand.

The President’s most costly “stimulus” proposal is to make last year’s tax cuts permanent after 2012. But in order to end the slowdown and prevent another recession, government stimulus is needed immediately, not 10 years from now.

Likewise, a major element of the Bush plan rests on the fast-track “trade promotion authority” that he recently obtained from Congress. But major trade agreements take years to negotiate. Such agreements as the proposed Free Trade Agreement of the Americas, even if eventually achieved, cannot possibly provide the near-term stimulus that the economy needs now.

Moreover, trade deals negotiated in the 1990s, such as the 1994 North American Free Trade Agreement, actually hurt the economy. The trade deficit has exploded since 1994 and shows no signs of abating. As a result, the United States has lost more than 3 million high-paying jobs, mostly in manufacturing industries like aircraft, electronics, steel, and textiles. And the deficit growth has required increasing amounts of capital inflows, turning the United States into the world’s largest debtor and putting its economic stability at risk.

As for the increase in contribution limits for 401(k) plans, proposed recently by President Bush at his economic forum in Waco, Texas: even if successful, this measure would not stimulate demand but rather would increase savings and drive down consumption. Consumer spending is the only part of the private economy that has contributed to growth over the past two years. A decline in consumption could push the United States back into recession.

The economy needs another boost
GDP growth has been sluggish so far in 2002, following a decline in output and the onset of recession during the first three quarters of 2001.2 While the economy has experienced three consecutive quarters of growth, it is important to note that this growth has been below 3% per year, the rate needed to keep unemployment from rising.

Any robust economic recovery to growth rates above 3% will require an additional economic stimulus in the form of more government spending. The only factor that kept the recession from deepening in the past year was the increase in federal government spending and tax rebates. Indeed, government spending is the most viable way to stimulate demand quickly.3 Without substantial short-run stimulus, the economy is likely to remain fundamentally weak well into 2003.

Recently, much ado has been made about supposedly strong economic fundamentals. But a closer look reveals that fundamentals—such as consumption, investment, and trade—are weak at best and, at worst, are contracting. For example, while consumption is the largest component of GDP and an important contributor to GDP growth, consumption growth slowed from 3.1% in the first quarter to 1.8% in the second.

Another major source of future weakness is the growing share of consumption that has been financed out of debt. Consumer debt has remained at very high levels—more than 14% of disposable personal income—through the first quarter of 2002. Default rates reached record highs in the first quarter of 2002 as they jumped from 3.3% to 4.1% for all consumer loans and from 6.3% to 9.2% for credit cards. The growth in borrowing and default rates will make it harder for consumers to finance continued consumption with credit cards or other kinds of debt.

Fixed investment meanwhile has been in decline for almost two years, due to slow consumption growth and excess capacity. With consumption growth slowing, a recovery in investment in the near future is highly unlikely, especially since there is no real incentive for businesses to invest more when their capacity is already sufficient to handle demand. In July 2002, manufacturing capacity was still underutilized, at a utilization rate of 74.4%, a full 7.6 percentage points below its low-run average of 81% (Pearlstein 2002). In other words, firms can still expand their production for a while before they have to start investing in new plants and equipment.

Some investors have begun to shun manufacturing in recent years. At the same time, in other sectors, surplus capacity has been accumulating rapidly. For example, office vacancy rates have been increasing for 18 months and are now reaching 18% in San Francisco, 24% in Raleigh-Durham, N.C., and 25% in Dallas (Pearlstein 2002). Overcapacity is also taking its toll in service industries, ranging from airlines and hotels to professional organizations, such as law firms, advertising agencies, consulting companies, and architectural firms (Pearlstein 2002). Airlines have already slashed 120,000 jobs and could shed an equal number next year. Many analysts estimate only 5-10% of new telecommunications capacity is being used. This sector has already lost nearly 500,000 jobs since its peak in 2000, and layoffs continue. It could take years for such excess capacity to be eliminated and for investment (other than replacement equipment) to pick up again.

Meanwhile, the growing U.S. trade deficit has been slowing the economy since the early 1990s. Though the deficit declined slightly in 2001 as output fell, it has begun to increase again in 2002 and is likely to keep growing for at least the next 12 to 18 months, further reducing overall growth.4

Finally, growth in spending by federal, state, and local governments so far has been the economy’s main salvation. However, state and local governments, which collectively spend almost twice as much as the federal government on consumption and investment (excluding transfer payments), are reeling from the budget impact of the recession. Fiscal crises at the state and local level are already exacerbating the recession by leading to spending cuts and raised taxes. These ongoing state and local fiscal crises will further dampen growth in 2003.

The economy needs a new stimulus of at least $100 billion
In the face of such a dim outlook for economic growth, the government must quickly provide a temporary demand stimulus that is large enough to be effective. The best way to do this is to rapidly increase spending on a wide variety of established programs with well-defined distribution networks and significant backlogs of unmet or unfunded needs.5 At least $100 billion in new federal spending should be put in these existing pipelines immediately. Instead, the Bush Administration’s proposals, even if they actually had a stimulus effect, would offer only $23 billion in new money in 2003 (Weismann 2002).

The wrong target
Not only is the Bush plan too small, it targets the wrong people. None of the proposed policies would help those hardest hit by this recession, particularly low-wage workers, recently hired and fired welfare recipients, and the long-term unemployed. In fact, many of the president’s proposals, such as increasing the tax exempt contribution levels for 401(k) and IRA accounts, will only help the most affluent Americans, as currently less than 5% of individuals with 401(k)s—mainly high-income individuals—contribute the maximum amount allowed.

Also, many of the president’s proposals, such as making the 2001 tax cut permanent in 2012, obviously will not have an immediate impact on the economy. And none of Bush’s measures are large enough to spur a robust economic recovery.

In this quintessential supply-side stimulus strategy, President Bush is proposing six massive tax cuts for the wealthiest Americans.6 First, as noted above, Bush wants the 10-year, $1.35 trillion tax cuts enacted in 2001 to be made permanent. Second, he wants a permanent repeal of estate taxes. Third, he proposes an increase in the deductible amount allowed for investment losses. GOP officials estimate the deduction limit will be increased from $3,000 to at least $9,000. Charles Schwab, chairman and co-CEO of the Charles Schwab Corporation, advocates an even larger deduction limit of $20,000. Fourth, President Bush proposed ending the “double taxation” on stock dividends, either by eliminating investor or corporate dividend taxes. Fifth, Bush indicated to reporters that he is considering increasing limits on tax-free contributions to 401(k) and IRA accounts. Finally, he proposes to eliminate new access taxes on broadband communication technology.

Not only does the President’s plan provide massive tax cuts for the wealthiest Americans, but it will not significantly increase spending, since wealthy taxpayers tend to save a larger share of such windfalls. Corporations would also receive some goodies under the President’s plan, but with dubious effect on the economy. For example, Bush wants to provide free terrorism insurance to bail out insurance companies that have been hurt by the collapse in the stock market. The administration’s claims that the result would be $8 billion worth of commercial construction projects are ludicrous in the face of massive and widespread excess capacity in commercial real estate.

Lastly, new corporate governance legislation passed by Congress, originally opposed by the Bush Administration but now embraced, is suddenly supposed to restore investor confidence. A recovery in consumer spending and business investment, however, would do much more for the economy; confidence alone will not lead to rising wages and profits.

A different stimulus is needed
The U.S. economy’s slump could last for many more months, or even years, unless quick action is taken by Congress and the administration. At best, the economy will continue to grow at rates well below 3% for the rest of this year and into 2003 without more stimulus. This is not enough growth to reduce unemployment or stimulate investment.

While President Bush has acknowledged the need for some form of economic stimulus, his proposals primarily would benefit wealthy taxpayers with tax cuts that will have their biggest effect five to 10 years from now, long after the current downturn has ended. Indeed, he proposes a classic supply-side economic plan designed to increase economic capacity in an economy drowning in excess buildings, plants, and equipment, and to give benefits (many years from now) to an already well-off few.

Supply-side economics failed in the 1980s and it will fail again today. What the economy needs is a quick burst of new spending to minimize the chances of a double-dip recession like the one the U.S. experienced in the early 1980s. Among other things, this jump-start could be accomplished with state revenue sharing, with increases in unemployment insurance, with funding for school repairs, and with prescription drug benefits for the elderly.

These existing programs could easily be used to inject $100 billion or more into the economy in 2003. The states, most of which are constitutionally required to maintain balanced budgets each year, face a shortfall of at least $45 billion next year (National Governors Association 2002). With long-term unemployment growing, the states could easily channel another $8 to $10 billion to unemployed workers by extending benefits for an additional 13 weeks in 2003. And there is a massive backlog of at least $20 to $30 billion in new, desperately needed school repairs across the nation. In fact, the federal programs are already in place that can direct these resources to the most needy schools and districts for items such as rodent control, emergency plumbing repairs, leaking roofs and walls, and repair of damaged and dangerous electrical systems.

There is also a tremendous need for prescription drug insurance for the elderly, a new program that could be administered through the existing Medicare system (although this would not be a short-run program). This system could easily absorb $30 to $50 billion per year in spending for new benefits, and it could start immediately with small changes in the legislation that is now awaiting final passage in the Senate. There is no better time than a downturn to put a costly new program like prescription drug insurance in place, when new spending is desperately needed to stimulate the economy and reduce state fiscal shortages as well.

Together, these four programs could easily absorb $100 billion or more in fiscal year 2003, providing the immediate boost of spending needed to restart the economy, end the recession, and begin to reduce unemployment to pre-recession levels.


1. Popper (2002) also calls for a new stimulus of at least $100 billion.

2. The National Bureau of Economic Research, which is responsible for dating recessions, determined that a recession began in March 2001 ( The rate of growth was 5.0% in the first quarter of 2002, but more than half of this growth (2.6 percentage points) was due to a slowdown in the rate of inventory shrinkage, and growth in the second quarter was 1.1% (U.S. Department of Commerce 2002).

3. We assume that productivity will grow at its long-run trend growth rate of 2% per year, and that the labor force will expand at least 1% per year. Hence, the economy must grow at least 3% to keep unemployment from rising. To reduce unemployment, Okun’s law (Bernstein et al. 2002) states that output must increase by two percentage points per year above the long-run rate of growth in potential output for one year in order to reduce unemployment by one one percentage point. Thus, to eliminate the two percentage point increase in unemployment in the past two years, the economy will need to grow 5% per year for two years.

4. An increase in the trade deficit reduces the demand for domestic goods and services. Some of the domestic demand for goods is leaking to goods and services produced abroad when the deficit is growing.

5. Tax cuts, even if they are targeted toward lower-income households, are less effective than spending increases since there will always be some leakage in the form of increased savings, instead of more consumption.

6. An alternative demand-side tax cut is a tax rebate, such as the one that was enacted in 2001. Low and moderate-income households, who are more likely to spend than to save the money, benefited substantially from this tax cut. Also, it was a temporary measure that was enacted quickly and thus helped to boost the economy.


Bernstein, J., L. Mishel, and T. Tiffany. 2002. It Ain’t Over Till it’s Really Over. Washington, D.C.: Economic Policy Institute.

Blue Chip Economic Indicators. 2002. Blue Chip Economic Indicators. Vol. 27, No. 8.

Citizens for Tax Justice (CTJ). 2002. Year-by-Year Analysis of the Bush Tax Cuts Shows Growing Tilt to the Very Rich. Washington, D.C.: CTJ.

National Governors Association. 2002. “Boosting State Economies, Prescription Drug Costs and Medicaid at the Top of NGA Annual Meeting Agenda.” Press release, July 13.

Pearlstein, S. 2002. “Too Much Supply, Too Little Demand Businesses Have Few Incentives to Expand or Hire, Economists Say.” The Washington Post, Sunday, August 25, p. A01.

Popper, Margaret. 2002. “Commentary: The Smart Fiscal Policy That’s Needed Now. It’s Not Time to Worry About the Deficit. Now is the Time for Decisive Stimulus — $100 Billion or More.” Business Week, September 2.

U.S. Department of Commerce, Bureau of Economic Analysis. 2002. “National Accounts Data: GDP News Release of July 31, 2002.”

Weismann, Jonathan. 2002. “U.S. Deficit Ballooning, But Not as a Hot Issue.” The Washington Post, August 23, p. A04.

Post  43047  by  pmcw       Reply
Czech, That's an interesting, however, inaccurate recount of history. I think you need to take a look at HR3090 as it was passed by the House (with bipartisan support) before Daschle blocked the Title IX subsidies from even seeing a vote on the Senate floor. More likely than not, his own party would have passed the bill in tact. This little monster makes Newt look like an All American nice guy.

If you think the income tax cut wasn't warranted you're not paying attention to historic fiscal policy. Our tax rates, at a percent of GDP, are larger than at any time since WWII. Please, let's debate reality rather than partisan politics. If Bush and Greenspan hadn't put money in the consumer's pocket we would be living an economic 1932 not 2002. Regards, pmcw

Post  43048  by  pmcw       OT: tin, I'm very happy to hear you are regaining

Post  43049  by  jbennett53       Reply
Decomposed, You said "I'm really surprised the market is reacting to anything Saddam Hussein says. The guy is a liar." So is George "The Clown" Bush. I hope some of your family is directly exposed to this insanity. A body bag with a loved one inside is what you need to appreciate the pure folly of the War policies of this government over the last 50 years. We have sold our national treasure on the altar of death and now we are facing total economic collapse. Guns, ammo and food may be the only investments of value in the next few years. Enjoy your hate.

Post  43050  by  wilful10       Reply
Decomp - The sickness and hatred displayed

in post 43049 is best left alone - to fester internally, until it rots into oblivion on its own.

This type is not worthy of a response.


Post  43051  by  maldinero       Reply
Something to chew on…

Post  43052  by  nacl01       Reply
Listed Options and Bollinger Bands

pmcw suggested I take an option series and try my idea of using Bollinger Bands to indicate implied volatility. My first results are not very encouraging.

I decided to use the QQQ options because there were more expiration dates available than for most other options. Since the QQQs closed at 21.98, I used the 22 strike price.

The CBOE options calculator (thanks, pmcw) showed that the implied volatility dropped slowly with later expiration dates. Calls went from 49.22 to 41.55. Puts went from 48.99 to 38.84. (I used the average of Bid and Ask for the option value.)

To get the Bollinger Band data, I used The BBs showed increasing standard deviation with increasing time. This makes sense as the QQQs have been dropping, recently. The farther back you go, the bigger the drop.

I also found out that StockCharts only gives BB data for the last 300 days, so selecting the QQQs for later expirations didn't do much good.

I might try following a specific option over time to see if there might be any hope for my theory, but this, clearly, will take some time.

I am open for any other suggestions, too.


Post  43053  by  pmcw       Reply
Decomp, wil said it well. Let jb fester. Regards, pmcw