Thursday, August 26, 2010

BBI - Bernanke BELIEVABILITY INDEX - the MOST important Economic Indicator at upcoming Jackson Hole Speech

Supplanting capabilities, new policies, programs or arcane authorities - the essential problem is not well founded worries about the markets or concerns about the economy, or even the large stuffed bear outside the Jackson Hole conference room (true) - rather it's - BBI - the Bernanke Believability Index; the ONE common thread running through everyone's concerns and anxieties. Yet no one has stated the obvious and put their finger on it until now!

The BBI (I just made it up) is trending lower, and is near an all time low and for good reason, much the same reasons as at any organization facing a crisis. Think of the recent Toyota recall (sudden unintended acceleration) or one of the first, 1980's Johnson & Johnson (botched Tylenol recall). Poor PR fundamentals, poor communications.

  1. Admit the truth - THE WHOLE UNVARNISHED TRUTH!
  2. Tell us what YOU know, when you knew it or should have known it - all of it!
  3. Name names.
  4. Explain how it happened - including your own shortcomings - UNVARNISHED!
  5. TELL US what you tried that failed and why.
  6. Tell us how your Princeton text book admonishes students to become "Economic Naturalists," to observe and question all around but appears slipped by and STILL evading YOUR attention.
  7. Tell us what we can do to understand and help do our part.
  8. Keep us timely and properly, not selectively informed.
  9. We now know (and or should have known) that you're not a magician; but we do expect and DESERVE NOTHING LESS THAN THE WHOLE TRUTH.
  10. Last - fiduciaries serve voluntarily; at any time you can and should choose to resign - it's OK- we're adults, we can accept it - we'll be that much further along the road of the truth, then Recovery.

Bernanke action / inactions a potential BFD; breach of fiduciary duty.

Bernanke owes a fiduciary duty to the US taxpayer; period. What Bernanke can learn from OLDCAR; the acronym that describes basic fiduciary duty Bernanke OWES to the US Taxpayer, all American citizens' current and future generations.

  • O = Obedience to the Fed Charter, stable prices, stable asset prices (not housing bubbles), full employment. NOT using the Fed's Balance Sheet as a vessel to hold "toxic er excuse me AAA rated assets" YOU gladly exchanged for CASH to certain Banks.
  • L = Loyalty, see below.
  • D = Disclosure, see below
  • C = Confidentiality; to keep client's affairs private, secure but does not apply here.
  • A = Accounting, show us what's ON the Fed's trebled-in-2 years $2T balance sheet and valuations thereon in contrast to the FDIC's recent SSGN 1, 2, 3 (~0.50 cents on the dollar) implied valuations.
  • R = Reasonable Care. Reasonable does not apply here Bernanke is EXPERT. That means EXPERT level Care. Care is defined below.
Meet your basic fiduciary duty to the US Taxpayers and global creditors. In sum, as ultimate, SUPER Trustee of the US Dollar, Currency, Economy and Markets (how's that for a stew of potential conflicts of interest!) this includes:

  1. Disclosure - that means full disclosure; no hiding whatsoever' it's 2010 not 1910! or even 2000!
  2. Skill - use the ALL the skills you have; that includes telling the truth.
  3. Loyalty - the interests of US taxpayers come FIRST; not your agenda, NOT a narrow certain group like the Federal Reserve Bank District east of the Hudson!
  4. Care - Investigate BEFORE taking action or inaction, then continue to perform your "due diligence"
  5. Impartiality - NOT favoring one class of beneficiary over another; in other words not favoring the current generation at the expense of the future.
Unfortunately, due to the Fed's decisions (or the lack thereof) in 2006, 2007, 2008, 2009 and 2010 - we now realize BBI was and IS the MOST important economic indicator.

Helping to address the siesta on the US taxpayers dime - one easy to read blog at a time.

Tuesday, August 24, 2010

Banks' bond holders a different class of creditor - make that a guaranteed creditor - unless a Basel Comm "Bail In" proposal passes

A recent Bloomberg News story reports that GOING FORWARD any capital instruments sold by banks to meet regulatory requirements should be loss absorbent - before any taxpayer funds bail out the institution; the proposal has been called a "Bail IN".

Contrast to banks own commercial lending practices:
Hmmmm let's take a look - when banks lend money to a small business and that business falls on hard times whether voluntary or involuntary - the bank stands in line with all other general and secured creditors attempting to recoup as many pennies on the dollar as possible.

Losses become REALITY in step fashion:
upon the bank marking down it's loan portfolio
then booking loss reserves
then reversing the reserve when the actual loss is determined
and taking (recognizing) a REALIZED loss.

Yet somehow - when - banks' bond holders a/k/a parties which have LOANED money to the Bank are involved the Banking industry lobby cries and moans - boo hoo - our capital costs are going up - BECAUSE OUR BONDHOLDERS ARE - IN THE FUTURE - GOING TO BE ON THE HOOK IF WE SCREW UP - WOW - WELCOME TO YOUR OWN REALITY.

The BFD continues to occur - trying to end the siesta on the US taxpayers dime one easy to read blog at a time.

Thursday, August 19, 2010

Ground Zero Muslim Center is a near lock...for security from another AQ attack

Update #1 (September 10, 2010) related to the story of more anti - Muslim attitudes, a religious man, it seems for now, has backed down on his plans to burn the holy book Koran / Qur'an tomorrow, 9/11. There is much (healthy) debate - however, a consideration that appears to have gotten zero press thus far is this...what is the threshold of a person's First Amendment rights to freedom of expression versus IRS code (since 1954) prohibition against political acts, statements by tax exempt, non profit section 501 (c) (3) organizations and employees of whom the pastor seems one? See guidelines published by the Pew Forum on Religious and Public Life here

The litmus test questions:
  1. Is the book buring a permissable act for anyone to do? Answer - of course. And practically speaking, as long as it is safe to do i.e. not close to flammable materials like nearby a gas station.
  2. Is book burning by a person employed by and representative of a 501 (c) (3) tax exempt organization permissable under applicable IRS code? Answer - perhaps not.
Original post August 19, 2010:
New Yorkers are known for many things - one is a profound, stop-you-dead-in-your-tracks-practicality; expressed sometimes as "tell me something I don't already know" So I'm amazed NO ONE has pointed out the OBVIOUS benefit of a proposed Muslim center nearby GROUND ZERO.

The benefit - among many others - is that due to the presence of a mosque - Al Quaeda - will NOT attack a mosque; hence that area from a national security standpoint will likely be one of the safest places to be. I'm not a Muslim scholar - but it seems obvious enough to me; it's not as two dimensional an issue as the media tends to want to frame yet another incessant news cycle.

NYC Mayor Bloomberg weighed in with support citing the values America stands for

And last - we have - EYES on the front of our heads to do what? LOOK FORWARD to the future; not fear, dwell or wallow in the PAST.

More recent and better coverage appears here

with a range of reactions from 9/11 victims' families from tolerance to intolerance. Two are noted here - "It's a place where a terrible tragedy took place, but I don't see what makes it sacred," said the Brooklyn resident. "Nine years later, that now belongs to the public. And my brother and his death are private and belong to me." And as another said "It's like putting a Japanese cultural center at Pearl harbor".

News Alert: New Yorkers react to Muslim center debate
09:23 PM EDT Thursday, August 19, 2010
The national debate over the center near Ground Zero bears little resemblance to the reality on the ground in New York, where the local political establishment, from opponent Rep. Peter King (R) to supporter Rep. Jerrold Nadler (D), all agree that it would be better if the national, non-New York critics knew what was happening, both politically and spatially.

Wednesday, August 11, 2010

"Don't Fight the FED" once the beast of investment maxims - looks like ED

ED = Economic Dysfunction.

[And today August 12, 2010 the NY Times reports on Mr Bernanke's gambit (failing to spot THE housing BUBBLE from 2006/7 and todays Fed use of quantitative easing) here ]

The age-old, penultimate stock investors' maxim - to go ALL in and get fully invested in the stock market - when the Fed is accommodating monetary policy - has been scarily - absent.

It seems to me investors are rightfully wary of:
WHY the Fed has some wares in its balance sheet
WHAT the Fed may have on its balance sheet
HOW much of the above is on the Fed's balance sheet - a rumored, never-been-seen $2T of stuff
WHEN the Fed may - make that must - liquidate same - in order to keep its reputation sufficiently above the swipes and desires of the hard asset crowd

Unlike the disappearing condo's of 1980's Houston the Fed simply can't bulldoze the stuff into oblivion. In contrast to the undeniable fact that the Fed has no need for Cash - whenever it needs cash - nowadays it just turns on the printing presses.

Perhaps the real culprit for investors is NOT the Fed - but the printing presses.

The solution to our current EG problemo is VERY simple:

  1. Cut taxes on employment income (not dividends)
  2. Gummint (Federal, state and local) must - like all commercial enterprises - do more with less
  3. Taxpayers continue to be wary of Gummint fix-the-economy programs - by giving the money back directly to taxpayers - they will like consumers of OLD - likely spend that windfall.
  4. And cut capital gains tax rates for NEW Real estate investments - as penned here fall of 2008.
  5. Bailing out homeowners - many of whom are in negative equity - only tells investors - that transient, steroidal policies will, like all such regimens - wear off - then where will values gravitate? Exactly - back to earth.
Anyone else got a simpler better or rapidly achievable solution - hit me back, lets talk.

Bloomberg reported a few days on 8/24 later "The end of the Greenspan put, now essentially a fruitless Fed" story

Ending the siesta on the US taxpayers dime - one easy to read blog at a time.

Sunday, August 8, 2010

Are your full SS benefits secure (for the rest of your life?) - why we might need and should consider ENCOURAGING Immigration

Immigration = part of the solution to endangered or shrinking SS benefits.

Agreed - Controversial, Provocative - but when the Gummint, which already taxes certain taxpayers' Social Security benefits, INEVITABLY takes more and more out of your Social Security check it begins to have some merit - so not as far fetched as may first appear.

How so?
More and more workers WILL be - NOT may be - required to contribute to the Social Security Trust fund - from THEIR future earnings in order to meet projected SS benefit transfer payments (our SS benefits). For years the SSA has published studies of future demographic responsibility and the overwhelming group winner is Latinos. Relieving much upward pressure on the FICA tax - a benefit to current workers and employers, which are required to match employee's contribution - see SSA Trust fund tax link here

And you suggest WE pay immigrants to come INTO the US?
And that we should offer these immigrants access to the best health care, education and special home ownership tax incentives! What are you crazy? Not yet - hear me out.

It's simple - if we, as both current and future recipients of SS benefits want secure benefits it will be well worth the current investment in raising the best, the most educated, affording the USA the greatest possible, most productive, innovative, WELL paid workforce OF THE FUTURE. A vast, diversified, well paid cadre of future entrepreneurs and workers IS AMONG THE BEST SOLUTIONS FOR THE FUTURE far surpassing the mostly political resistance thereto.

After all the Native American Indians possess the ONLY authentic birthright claim of citizenship; but ironically also the group to suffer the most from immigration.

A Current and future BFD by the Trustee's of the Social Security TRUST fund?
Or should the TRUSTEES of the SS Trust fund, in the UNDENIABLY clear face of a benefit payment shortfall fund, sue the Federal Government so as to insure the continued prudent funding ability of the trust?

A Decades-old BFD?
Have the SS Trustee's already breached their fiduciary duty to plan participants by NOT suing the Federal Government for draining cash in return for special bookkeeping entries aka sometimes known as US Treasury securities?
Have the Trustee's been forced or made a choice and committed a BFD by allowing SSTF Assets to be "invested in" undiversfied, low yielding US Treasury securities?
Of course not - the SSTF requires by instrument such investment but otherwise a considerable BFD.