A New Jersey SWAT Team was disbanded after ‘racy’ photos them with Hooters waitresses, along with the handcuffs and guns,  were ‘discovered. ‘ Did these guys think this would get them a promotion?

Now employers are routinely checking web sites, you tube, etc for any of you extra curricluar activites that you might have neglected to mention on the resume. Keep your private life private, not on the net.

In the Intermed I class this week I asked why gold was $800 and oil is about $100.  The answer is the low level of the US Dollar. This topic was proposed at the OPEC Meeting. No friends of the US, Iran and Venezuela, suggested that OPEC would do much better by diversifying out of the dollar, the low level is causing OPEC to lose money. Yet many Mid East economies are tied to American trade.  Sadam Hussein was threatening the same thing shortly before the US invasion of his country.

A move to the Euro would collapse demand for dollars, running the buck down even more. You will study currency transaction accounting in Advanced ACCT when companies bring earnings home from overseas.

JCP stock price has fallen 05% in the last few months.  Earnings not only affect stock prices but bond ratings as well. As you will read JCP debt has gone from junk to marginal investment grade status.  I will  be checking prices on their debt this next week. This is another good example of how earnings drive expectations. As I mentioned in class it is not looking good for retailers this season.

Daniel Henninger takes a look at 1968.  I don’t think any of my students were around then but as he says, it was quite a year. By the end of February, a scant three months off, the two major candidates will have been chosen.  With Iraq off the front pages of the papers, things must be getting better there.  But the actual election is a full year off, a long time.

Things can change a great deal in one year, stay tuned.

In Intermed Acct Class this Wed I asked why gold was $800+. The answer is the falling dollar. In this article

Pat Buchanan provides some historical perspective on what has been going on with the US Buck.  Whle Buchanan is hard to pin down, he seems better when writing as an outsider. We have dsicussed the housing and banking disaster at length on this blog.   I would agree that the FED needs to tighten to get the US Buck on its feet and bring down the price of gold but Bernake may not be able to do anything.   Loosening drives the dollar further down and politicians will be terrified of slowing the economy further with rate hikes.

Warren Buffett is known for making a lot of money over a long period of time.  He is also known for avoiding taxes whenever possible.  I find it odd that he is a liberal, in favor of more government interference in our lives.  He claims the estate tax is a good thing.  The idea is to break up ruling families, ala the French Revolution.  Yet the testimony of the rancher and farmer in the same article reflects the reality.  One can only escape the death tax by giving away the estate or buying a LOT of life insurance. The reality is that one must pay a substantial sum to acocutants and lawyers to find a way around all this. I don’t see that the death tax has slowed the Kennedys or the Rockefellers, let’s let that tax die a deserved death.  This is not  a way to break up wealth but a blockade to family businesses growing decaded after decade.

Frank Ryan CPA replies to Mr. Buffet in this very well written article from Investor Business Daily.  As a former tax practicting CPA I quite agree with Mr. Ryan.

Kelly Clark notice this article in CFO about the IRS.    It seems the GAO found quite a few internal control failures in IRS procedures.  The IRS has fixed a few of them but only about half.  The IRS is Congress dirty little secret, inadequately funded for accomplishing its objective and not attracting the best talent.  Instead of Charlie Rangel’s plan to try to fix something broken, why not start all over with something else?

Gold just hit $800 + and backed off.   This writer attempts to discuss what that means now and historically. I agree with his historic analysis about abandoning the gold standard. What that really did was let politicians expand the money supply at will without any thing behind the money.  You see, before Nixon abandoned the gold standard, one could redeem actual US Greenbacks in gold or silver, dollar bills bore the title, Silver Certificate.  This assured everyone that the money really counted for something. But if you are a poiltician, always promising everything to everyone, the requirement that money be backed by gold limits how fast the money supply can expand.  The productivity of the economy limits the expansion to just that.  Without the gold backed requirement, governments can print money as fast as they want, expand government programs, and as long as everyone accepts the fiat, or value by decree, money, everything is hunky dorey.

This expansion of money supply helps explain how the US buck has dropped from 120 to the EU to 75 in the last few years. Your dollar now buys a lot less on that European vacation.  But the argument goes, that makes our goods cheaper overseas.  And that increases exports. Yes but the dollar as a store of value is going down, at least if you want to leave the US. 

The result has been an explosion of the prices of tangible things.  Why?  Because to keep a constant purchasing price or value the prices of oil, aluminum, real estate, silver, go up when the dollar goes down.  This is also true of the US Stock Market.  Again, and this is the point the writer of the article missed in talking with Wanninski.  Gold has been a ‘store of value’ for the eternity of man’s existence for one simple reason.

The supply of gold is limited. Politicians can print money made from trees all day long.  They cannot do that with money backed by gold. Hence gold is the historical standard of value, the ultimate money.  As for this nonsense that there is no inflation, well, what is it costing you to attend college?  It cost me $50-200 a semester from 1966-70.

Robert Samuelson ponders the impact of $100 oil.  He outlines how the past policy of energy availablity is in disarray. 

While the press loves to excoriate oil companies during high price for high profits, actually this makes negotiating for leases and drilling rights very difficult. Why?  Okay, remember that as recently as 1998, oil was $12 a barrel.  Now it is eight times that.  If you are going to run a DCF discounted cash flow model for acuiring an oil lease, what price of oil will you use?  Fifty dollars, eighty dollars, who knows?  That makes buying and selling leases nigh impossible because buyer and seller cannot come to an agreement on price. And this makes negotiating for off shore deep water leases which may be new sources of oil, very difficult as costs soar on leasing offshore rigs.  Take a look at the Transocean site.

We noted the $39 B loss at GM in a recent post. Now analysts say operations are worse not better. 
Note the use of the term continuing operations. We emphasize long term trendsin our presentations, that is what is failing to improve at GM. 

Will an Indiana Jones type event emerge to save GM and Ford or are we simply slip sliding away?