My weekly newspaper column!

As I write against the deadline Friday Morning Nov 14, oil is down and probably headed for $50.  It may over run that to forty something for a short time.

And that is precisely what happened. Oil dropped over three dollars December 4, basis January  futures, to close at $43.67.  Our best estimate is that it in fact will find support at or around the $40 level. We can cite some statistics as reasons for this level.   Forty Dollars was a significant  top in several times since 1990.  The US Dollar is looking toppy.   The currencies of Australia and Canada, both commodity producers, look like they are bottoming.   The Goldman Sachs Commodity Index GSCI on the CNBC ticker, is near its previous high at 4,000. But there are more important longer term issues at hand.

We gave considerable warning of all this last summer at $145 oil.  While no doubt there is much consternation in West Texas at the moment, consider the much longer term implications. Opportunities to enter an important market at the dead low are rare, take the opportunity to position yourself at this long term commodity price bottom.  Meanwhile, the US government is literally throwing money from airplanes, cranking up the Dollar printing presses, and issuing lots and lots of debt.  The short term results are surprising. There is more demand for the US Dollar as a lot of debt is denominated in dollars. Money has rushed headlong into US debt as a ‘safe haven.’ And so interest rates on the ten year note are the lowest since 1955.  Yet the money supply has never increased faster in less time than it has lately.

But like $1.59 gasoline, this will not last.  The FED will continue to flood the economy with money in an attempt to stem deflation. Deflation would be the collapse in commodity and housing prices.  Eventually prices will stop going down, as noted, we should be near a low in oil.   At some point however, as the US asks the world to buy a never ending fountain of debt, some will suspect the US will be repaying with very inflated dollars. At that point, the value of the dollar will begin  falling  very rapidly. Values of things denominated in dollars will rise very, very fast. Indeed, I suspect the rise above $100 in oil this past year was based on the belief that the US would simply not defend its own currency. The current rise in the dollar is not due to any intent to defend the dollar, indeed it is the inadvertent result of printing even more dollars.

But I digress. At some future point, we suspect there will literally be a run, as in away from, the US Dollar. At the end of World War II, the Arabs demanded gold bullion in payment for their oil.  We may well be headed that way again. At that point owning oil or coffee or gold or silver may be very preferable to owning a depreciating dollar.  It may well be that moving to another currency will be a superior strategy to staying in US dollars once the peak in the Dollar occurs. Such events have occurred in Germany and Argentina and seem alien to Americans.  But that day is coming.  I suspect that event (a Dollar peak signaling the start of decline) is no more than two to three years away. Prepare now, the day of dollar reckoning should occur before the New President’s first term is over.

Bally Fitness filed for Chapter 11 Bankruptcy today.  this is another sign of

the credit crunch

consumers deciding they can do without some things

I was a member since my workout stuff is in Dallas. Nice facility but obviously a lot of overhead. hard to cut those leases and fixed overhead in a crunch, but the article is worth a read as how a company tries to cope.

Ford owns Volvo and GM owns Saab.  The US Congress is certainly not going to bail out Sweden. These brands are not huge, Each sells way less than say Audi. Now the reality of globalization in reverse. Ford acquired volvo along with Aston Martin and Jaguar when it went on a buying spree 15 yerars ago. Now its Premium Group has hit the auction block with Aston and Jag already sold. Story is that volvo would already be sold, if there were a buyer. will the socialist Swedish government step up, these brands are a huge part of their employment and exports, especially for a small country like Sweden.

Globalization works both ways, look at the stock markets in China and Russia.

Here is yet another plan for reviving GM, not bad, will Barack do it?

The iconic Apple iPod is everywhere and being solid state, they work great. And that is the problem, does anyone need a new one, or even another one?  I suspect that product is now already in mature phase, in these markets and with over one hundred million sold, it does not take long.

I suspect we have across the board an issue of just too much stuff, as George Carlin used to say.  As I write an auto dealer on CNBC  is suggesting the government send everyone a check that buys a car.  Govt  used to give you  an investment tax credit as a business for buying a vehicle, same thing, the existing inventory of cars and trucks on lots for sale is just too much.

We now have mini warehouses just to store 'stuff'' for which we have no immediate use. If annual car sales have fallen to 10 M from 16M, we probably have way too much excess capacity in cars as well as airlines by the way. Cars last a lot longer than they used to, I have 110 K miles on my Escape and have never had an actual repair, maintenance of course but no actual repairs. I do not need a new car, I fully expect to get 200 K miles before I consider a replacement.

I suspect over the next year lots of folks will decide they do not need as much stuff, iPods, cars, airline tickets, or big homes. As I say the government had various tax incentives when the Dems ran congres to sell pickukps, we may see a return to such incentives again. Of course a tax credit is only of value if one owes taxes……that would require making a profit to being with.

Birmingham AL may be facing the biggest municipal bankruptcy in history.  Housing then casinos have collapsed, no doubt taking the economy of Las Vegas and Nevada with it.  I suspect the next disaster is municipal debt and the inabiltiy to pay it.  The numicipal bond market is melting, it is difficult to get a bid on even a well rated (A) bond.  This foresees real problems. Coupled with falling housing prices, it will be more and more difficult for municipalities to raise much less keep appraised values where they are.  Arnold S. is already declaring various states of emergency for CA, looks like CA is right back to where it was when Arnold became Governor.  He was going to change things and then started going along with spending programs and more taxes to get re elected, does this sound familiar?

Okay, all the ideas we have so far to 'stimulate' the economy consist of the government sending all of us a check. Here is a different line of thinking. How about a two month Federal Tax Holiday, the government does not collect any payroll or income tax for two months?  Well unless we lower income tax rates that would leave all of  us short at income tax payment time but….

Here is the idea and from a Texas Congressman no less.

Over the weekend, Newt Gingrich sent me information on a plan to stimulate our economy.  The plan is from Texas Rep. Louie Gohmert.  Yes, he's an Aggie.  But this plan is so brilliantly simple that I have yet to have anyone give me one real reason why it wouldn't work.  I've had callers suggest reasons why it would be politically unpopular … but that's different from not being workable.

Here's the deal.  Gohmert proposes a two-month tax holiday where the federal government would not collect any taxes from individual Americans.  No income taxes.  No payroll taxes.  You would keep all the money that you earn for two months.

Now this is a statistic that should shock you … Americans pay over $101 billion in income taxes and $66 billion in FICA taxes every single month.  That means that if Gohmert's plan went into effect, there would be over $330 billion in American pockets.  That is money that you have earned and money that you can decide where it is spent or saved.  You pick the economic winners and losers with your money – the government doesn't get to do the choosing for you.  The government can't use it to pay executive salaries for failing companies or subsidize failing UAW contracts.  The government won't spend $50 million just to send every American a letter saying that their pithy "stimulus" check is on the way.  That's it … you just stop all federal taxes for two months.

Will it cost us anything?  Well, no more than has already been pledged in the bailout bill.  There's $350 billion left there … this would eat up most of it. 

Gohmert says that this will create a surge in the economy because more people will have the money to buy cars, build homes, pay their mortgages, pay off their credit card bills.  It would even help the states that are currently lined up at the federal government bailout trough.

Naturally there are people who think this idea is absurd .. "Give ME the power to spend the money that I earn where I'd like?  That's outrageous!"  Here's an email I got from someone who thought it would be cute to use a fake name .. but here's the line of thinking:

Neal is the most stupid talk show host ever lived. How so? His idea of giving Americans a 2-month tax break shows how stupid he is. While he's probably saving $2000, Bill Gates saves $2 million. That's like giving the rich a raise. If you let idiot like that to run the country, it will be run to the ground like George W did it.

First of all, this isn't MY idea.  It came from Rep. Louie Gohmert.  And secondly, how envious and mindless can one person be "That's like giving the rich a raise."  Yeah .. the evil rich.  The source of all that is bad in America.

You'll hear more about this on the show and here in the Nuze.  One thing for sure.  Politicians won't like it because this would allow the people to clearly understand just how much money the federal government is seizing from their paychecks every week.  After the two month holiday, when withholding kicks in again, there might even be something akin to a tax revolt!  The only way this would work is if came from the ground up .. that means the voters up.  Let your congressman know how you feel.

Yes I waded off into political policy, but accountants who are famous for figuring tax returns rarely participate in the tax policy debate. Income tax witholding did not exist until World War II.  it was adopted to help 'finance' the war. Congress realized of course just how much money this let them have, wihtout taxpaers realizing it. That would be because the taxpayer never had the money nor wrote a check for it, bingo outta sight outta pocketbook. So Congress quietly let the witholding law stand as the War ended. bingo Congress still gets your money first.

As Boortz says (this is extracted from the Neal Boortz website) the idea will probably not get any traction. Once everyone realized just how much they are paying the Fed Govt (and for what pray tell) there would be little chance to start up witholding again. I doubt this idea will come up for a vote on the floor of Congress.

 

Texas Secretary of State Hope Andrade (second from left first row) visited the San Antonio A & M Campus tuesday November 25, 2008. Her assistant is seated at her left.

 

Dr. Carolyn Green explains programs as Director Ferrier looks on, nice touch with the laptop I thought!

 

Meanwhile the same day, the transition IT team was here from A & M College Station. Joe Uribes is visible mid pack on the second row.  shane donley is at left, both fomr A & M SA.

George Will reviews the mistakes of the first depression. Gee the remedy sounds the same this time around, will it last fourteen years like it did then?

As you study tax 'law' you will learn that the continual tinkering with the system sends conflicting messages to business decision makers. Finally they get to the point of not knowing what to do, what will the government do or subsidize or stimulate next, who knows. One can already see this happening, as Will says, save Bear Stearns, let Lehman collapse, help autos, nationalize banks, jolt the economy, what next? If you had any money would  you invest it in anything at the moment?  I suspect most of us would simply reply no thanks I want to see what the govt dreams up next. Will I be bailed out or will I be taxed on my success, good question, as usual a great George Will column.

I spotted this URL in front a  recently built home

http://www.ushomeauction.com/

THese folks got their start in the aftermath of the savings and loan meltdown in the 1980s, not surprisingly business is most brisk in FL and CA

These writers suggest that the Big 3 need to simply sell their assets to someone else. That makes sense. As a former bankruptcy trustee, most of these cases end in an auction to the highest bidder.

It would make much more sense for these factories to become part of successful American operations of well financed companies like Toyota than for the three to continue to struggle basically making pickups and suvs and that is about it.