Tuesday Mar 2 2010

It seems that Americans are not receiving more govt benefits than they are paying collectively in taxes, will that work?

The problems of course are concentrated in a few big states, read about that at Forbes.

I am sure that all my talk about the deteriorating economy has students perplexed. After all, Texas is one of the five best states economically, which is why I expect Perry to trounce Kay today at the polls. But students please understand that those five states expect us in the five good states to pay for their failing to save for the proverbial rainy day. And that is the real problem. And those states have huge populations including CA NY IL.  A Kentucky Senator just yesterday blocked an attempt to extend unemployment benefits, now going on what, 99 weeks in some states. Well how long do we pay people not to work?

Frankly I cannot think of a much better spot to endure what is ahead than San Antonio, TX, a sunny city with a very well diversified economy, spread out over a large area that make the traffic at least navigable, now if only I 35 did not run down East Loop 410…..

Monday March 1 2010

Several sites are noting the difficulty of the FED's zero interest rate policy. The real result is that there is simply no safe way to make any return on funds. This is impacting pensions and other sinking funds charged with returning value. And, how does one afford to run a money fund with millions of shareholders if in fact there is no money provided from interest on which to base a service charge? 

We might also add this only benefits the bad decisions of bankers who now pay nothing for their money. 

I make this point in that we will be studying cash flow statements at the end of intermed II. The future of income statements will have them looking much more like cash flow statements. And cash flow will determine who survives the next few years, both in business and in government. 

Japan created the same problems with their life insurers with zero interest rate policies, the companies could not make any money to pay shareholders. Are we Japan?  We provide the chart below with Japan in the middle and the US at the top. Remember in 1989 that Japan was the world juggernaut. Japan and the US have made no net progress since 1999, both markets saw lower lows in the 2008 sell offs. 

Monday March 1 2010

I recently added a link to Mark Steyn on the sidebar. His article on Greece is a good example of why one should be reading Mark. 

As the saying goes, demography is destiny. Greece is simply not replacing its population. Its birth rate has now fallen below the point that the civilization will continue to exist. If one does not replace a population with 2.1 births per couple, the population declines. If the birth rate is low enough the acceleration to the downside increases. This is particularly important if various social welfare programs depend on new generations of workers to fund them. Once the population declines, and the retirees burden the systme by actually living longer, the pension formulas simply will not work. We have labored to make that point in numerous hyperlinks on this site but Mark sums it up well. 

Sunday Feb 28 2010

Wave of the Future

Her:
Facebook is the Wave of the Future

Prof
Elam: Are you sure it’s not the Wave of the Present?

Her:
Absolutely!

I
usually ascribe considerable doubt to certainty, especially the more widespread
it becomes. We teachers are told that students get everything (learn?) from
social media now. Considering that most social media spots area aout 140 clicks
long, that is not hard to believe. What are we looking for in a report after
all?  Oh, knowledge perhaps, the
proposition of a new idea, insight maybe?

Facebook
is Fast Company’s Number One
Innovative Company. It strikes me as the ultimate embrace of the ‘me’
generation as it is indeed all about 
that person.   But
there is little to no real information value in that, and it is hardly a
platform that supports intellectual rigor. And so I ponder, as many have, the
Fall of Rome in writing this column. The 
Pay Pal founder Peter Thiel is wondering the same thing.  The internet will not save us from the
Dark Ages, he muses to Wired
magazine.

My point here is that bull markets are inclusionary, we are interested in others, Bear markets are exclusionary, we worry about ourselves. And so the portable IPod iPhone has brought us the ultimate self indulgence. Yep, Facebook and Twitter are all about us. I get invitations from people I hardly knew back when I knew them, much less now. But the economy has everyone more worried than they want to admit about their own personal future. Their focus has turned into themselves. 

All this twittering and facebooking of course, like Las Vegas, produces nothing. No wonder we are in a period of economic stagnation. The relatively good economy has thus far allowed such self indulgence. I doubt that will continue to be the case. When will it stop?  It will stop when the economy is hard enough that everyone has to go back to work instead of indulging their own minute to minute fantasies.