Monday, January 21, 2008

Brace For A Possible Bumpy Ride!

No stellar promises and expectations ushered in 2008. It just came. With a dull thud, that now promises to escalate to a resounding boom that will not augur well for the entire country. I may not have noticed much because I was too busy warding off our own little calamitous familial situation.

But there appears to be no uplifting exultation to report about US politics and the overall economy. The entire din created by both politicians and media have only contributed to the cacophony of sounds and fury that could only result in confusion in and mixed messages among the general populace. This definitely signals the kind of unwanted onslaught we will all be harangued with until the presidential elections in November 2008. So brace yourself for a possible bumpy ride.

And the economy? Earlier, we wrote about the general housing slump which shows no discernible signs of any abatement or improvement. Signs point to its getting worst before it gets better. And which cellar does worst reside? Who knows, but hope springs eternal.

The start of the year also did not presage well for Wall Street, with stocks staggering to the finish line. And now they continue to grope around the dark, dragged by a couple of dire economic indicators.

The unemployment figure shook a bit and ended at a higher 5%, one of many foreboding signs to suggest an oncoming recession.

The dollar continues to belittle itself in the international arena, continuing its downward slip vis-à-vis such worthy equivalent as the euro, and an unlikely partner in a duo, the Philippine peso which has been surprisingly soaring for so many months.

While the watchful economists and vigilant government bureaucrats are on top of all these early signs, divisive and contentious disagreements continue to muddy the waters. Semantic discussions as to distinction between a diminishing GDP growth vs. a diminished GDP growth enter in to add uneasiness. Many micromanagers are refusing to accept traditional criteria on determining what a recession is. Is it when two successive quarters show negative growth or what? Others have more refined ways of determining recession.

But everybody is talking about the forthcoming stimulus package emanating from the WH and to be discussed and decided in detail by the legislative body. But again sides have been drawn creating a formidable wall between them. Even the statements of the Fed chief with regard to the issue get interpreted in different ways. Does he or does not favor it? But all agree that that eventual package better be a fast and straight shooter, because the looming recession waits for no one.

And to make the situation dicier, we read how the rest of the world, though not gloating at seeing the vulnerabilities of this vaunted behemoth, are at best quite nonchalant about the distressful stirrings in the US economy. Which makes for a sad and unexplainable commentary given that if the US suffers, the rest of the world gets dragged in the morass, too.

What about the public confidence in the economy? With many politicians and detractors of the current administration fomenting the gospel of economic doomsday and quite vocal about it, it is a wonder that the entire electorate has not latched on to that ominous message. Though many of your typical "man on the street" types have easily been bent toward that direction, believing in the worst for the country. Do these particular politicians and vociferous detractors honestly believe in their gloomy doctrinal views on the economy? One is slightly favored to believe that these are all propagated for coarse political ends. Because in spite of the many challenges, many figures, statistics, and indicators of the economy collectively find it still quite healthy and vibrant, especially comparatively speaking taking the rest of the world as a measure.

One could bet safety that the illegal immigration with its many negative ramifications contributes to the current malady, jointly with concerns about the seemingly illogical escalation of the prices of oil. And the budget deficits, though tamed somewhat but still necessitated by continuing gargantuan expenditures on security, the wars, and what have you, can be reasonably added in the unlikely mix.

Oh, so many factors to blame, but none to suit all purposes of all contending parties. Thus, the problems tied with illegal immigration as a contributor, definitely not in the minds first of the illegals and definitely in those posturing for open borders, or even those employers who blatantly encourage illegal immigration by continuing to hire them for less than market wages.

But still so many contributory factors to blame but no magical package to fit our collective size.

Solution? Resolution?

No doubt it will come. We can say that we have gone through all this, and worse. And maybe though expecting to come out scathed, still none the worse for renewed rebirth.

So let’s brace for a possible bumpy ride, and let’s get our collective noses to the grind to tackle these pesky challenges. Remember after this, there are still a few wild horses to tame – social security and public debt which cumulates with increases in budget deficits. And while in this inspired mode, let’s plan heuristic strategies for doing something about current account deficits, too.

Whew! There is no rest for the evil, err, working man.

Graphics: Refrigerator magnets, anyone?

Saturday, January 12, 2008

Big Brother Is Coming!

This government-proposed plan has hit the proverbial fan and sent cold shivers down to the biosphere of the Internet and talk radio. Heard it on the radio this morning and Drudge Report featured this story today. Now we learn that talk radio king, Rush Limbaugh, had earlier also created considerable buzz about this aimed at his millions of listeners.

As the International Herald Tribune headline declares, California wants to control home thermostats.

“Next year in California, state regulators are likely to have the emergency power to control individual thermostats, sending temperatures up or down through a radio-controlled device that will be required in new or substantially modified houses and buildings to manage electricity shortages.”
But as early as the start of last summer, those of us in the Central Valley (CA) had received an invitation from our electricity and gas provider, Pacific Gas and Electric Company, to join in their SmartAC Program.

The program is designed to work this way:
1. When high energy use drains California’s power systems, PG&E sends a signal to activate SmartAC technology installed in homes across the state.
2. The SmartAC technology then reduces your air conditioner’s energy use by cycling it on and off for brief periods or slightly raising the temperature on your thermostat.
3. Your AC fan continues to circulate air in your home during this period, helping to keep you comfortable.
4. SmartAC is only activated when it’s needed. At any time, however, you may call PG&E or go online to return your air conditioner to normal operation.
Additionally, one had the choice of installing either a SmartAC thermostat, which is installed in your home and will allow you to program both your heater and air conditioner, or the SmartAC switch which is installed close to your air conditioning unit. And an added bonus, when you are away you can log in and program your thermostat from the Internet. Now, talk about convenience.

Now, one may ask about the cost. Nada. Not a penny. As a matter of fact, we each got an appreciation check of $25 to have installed either a thermostat or switch. Thank you.

Of course, this is different because this is a private company doing it, but the proposed plan will be government initiated.

And so the resonant stir created has brought out to the fore once again George Orwell and his work, 1984, and mention of all-intrusive Big Brother.

Personally, I do not mind this little bit of intrusion into privacy and the shedding away of a bit of control on how cool or hot the interior of “castle as my home” should be. Better that than total breakdown or blackout, which we have had in the past. Or have people forgotten that, too?









The SmartAC switch was installed in the air-con unit which is located outside of the house.

Thursday, January 10, 2008

US Homeowners vs. Current Housing Slump (Continued)

It just doesn’t seem right if we leave this issue without delving with some seriousness into the all too human factors that helped this all along, which are the human proclivity or predisposition for greed, and maybe, fraud. Yes, because SEC and state-initiated investigations are still ongoing as we speak. Which by the way made this not only a grave domestic issue, but eventually reverberated globally in summer, when a world-wide nail-biter of a credit crunch gripped the global economy necessitating gargantuan infusion of capital funds from various sources to bail out the strapped players involved. Even world's largest bank Citigroup as I recall had to sell away a good chunk of itself to a group in Dubai.

And for some basic understanding we have to dive into the shadowy world of “derivatives”, particularly sub-prime derivatives which a group of Wall Street bankers made available to investors in 2005.

Now these particular derivatives consisted of sub-prime mortgages, which became very prevalent during the peak of the housing boom. Mortgages almost indiscriminately granted to risks that normally would not merit credit-worthiness. Thus we had mortgages where the tests for income and capacity and ability to pay were summarily dismissed and set aside. Mortgages where normally necessary documentations and processes were shunted aside, and even where no or only very minimal down payments were required in granting the loans. And remember this was during the frenzied peak of the housing boom when house values soared high and fast.

So these derivatives were packaged by security firms and marketed as collateralized debt obligations, cleverly hidden and mixed with investment-grade securities as to merit appropriate ratings. But in reality were not only more risky, but their real values could not easily be ascertained.

With very lucratively high rates of return, they easily got lapped up not only domestically but across the globe by investors only too eager to make extra money, counting our now glum friends from Norway as mentioned in the first blog entry. Inventoried by a large numbers of big and renowned banks across the breadth of the economic universe. Even school districts and hospital management companies based in the US went for shares of the large rich pie. Old father greed made sure those interested got their rightful shares.

But poor sub-prime borrower, written of as bad by any logical standard right from the get-go, suddenly started defaulting, unable to pay higher than teaser rate monthly mortgage amortizations. Does he walk away from his precious and newly-acquired palace? With no other viable option available, and realizing too late that the re-finance window had never really been open to his not credit-worthy record to start with, he walked away.

With no other recourse for themselves, security firms who sold those mortgages started plugging the leaks incurring great losses, and understandably they started getting jittery. And the careening ball went for the investors from near and afar who had pocketed those nice and neat investment packages with contented thoughts of great returns.

In due time, by July about 14% of sub-prime mortgages ceased paying. Now that represented only about 5% of total US borrowers.

But it was enough to freeze the world’s credit markets. Suddenly, sub-prime mortgages were toxic to all to them and their marketability fell to zero.

But 2008 finds us in a somewhat appeased mode, with the financial institutions writing off their losses and licking their wounds; and as a result, easing the credit crunch somewhat. And those awash with capital, maybe like surplus-rich China or those wallowing in escalating petro-dollars, go into bail-out mode where needed.

And it may be ironic to mention that there is an unheralded group that actually made the right choices and thus minimized losses. Those who bet against the mortgage market, those who predicted that the mortgage market would go into a tailspin and invested correspondingly.

Wednesday, January 09, 2008

World Wants America!

New Year came not only as a good commencement for a fresh global outlook but as proper timing to start thinking what the 2008 US presidential election will bring in US leadership.

But apart from what Americans look forward to for the coming year, it might be good to listen to those from outside looking in.

In an article boldly titled, World Still Hungers for United States, Mr. Moises Naim, editor in chief of Foreign Policy, tersely lays out his optimistic thesis about America’s place in the world stage, though some harsh sniping was not spared.

Though possessed of an MSc and Ph.D degrees from MIT, Mr. Naim is Venezuelan and once served as department minister in his home country; and as reported, is well respected and serves in some prestigious Latin American organizations.

It most probably would serve us well to listen to how Mr. Naim proceeded to present his case. Here are excerpts from his insightful piece:

1. “For the next several years, world politics will be reshaped by a strong yearning for American leadership.”

2. “Of course, the America that the world wants back is not the one that preemptively invades potential enemies, bullies allies or disdains international law.”

3. “Naturally, the world also wants a superpower willing to foot the bill with a largess that no other nation can match.”

4. “Appearing too closely allied with the United States is a risky political position for elected politicians everywhere. Still, some have shown a surprising readiness to stand with America.”

5. “Many foreign leaders will therefore be willing to pay the price that comes with American leadership. They ask only that the price not include subservience to the whims of a giant with more power than brains and whose legitimacy is undermined by regular displays of incompetence, recklessness and ignorance.”
I suppose many, including here in the US, will generally like and be gracious about the complimentary statements that Mr. Naim has brought out in the open. But a more than cursory review may reveal for us a more balanced insight into how things really are.

First, has the world ever lost not only its yearning but presumption that the US ought to lead in any global concern, most especially if it involves large financial outlays and the use of military power with no possible hope of any visible recompense? I doubt it. Even in these difficult times, the US grudgingly continues its solitary role as default sheriff, deep-pockets financier, and solicitous father, to the rest of the world, whether in providing assistance of material goods and services during calamities of any nature, or using its fearsome military presence to keep the rest of the world from imploding or turning upon each other. What could possibly be the paramount self-serving logic for keeping substantial military forces in Europe, Korea, Japan, etc, if not to keep the entire world engaged and tied together, even if the result is only an uneasy and precarious peace? Granted that the resultant peace and security also bodes well for the US and its interests.

Thus, I do not see any “reshaping” of world politics but simply, more business as usual, as always, except maybe that this time some countries may be honest enough to accept their self-serving motives for allying with the US. But I doubt even that.

The second statement gives one an implied sense that the US must be perceived as some kind of recalcitrant bully disdainful of law and order, while the rest of the world is a herded flock of obeisant sheep, stubborn adherents to law and order, and avidly desirous to live in peace and harmony with each other. Do we simply push under the rug the many iniquities and unfairness that the US has had to bear from the rest of the world, at times resignedly, unloaded on it simply because it is the US, the lone superpower? Even the illegal immigrants within its borders are bold enough not only to fly the flags of their countries of origin, or openly seek public services, but even demand rights proper only to citizens. Or many radical groups or hostile countries can proclaim open season for destroying American lives and interests in any part of the globe, but be it damned if it should initiate aggressive precautionary or defensive measures to protect itself because that would be bullying. Or what is now the more PC thing to say, any retaliation would easily be labeled as asymmetric response.

If the last three statements be how to aptly describe the rest of the world, then it speaks poorly of its own leadership, with regard to its own integrity and the nobility of its actions.

Yes, we want your leadership, which translated means your material and military assistance, but we cannot really be identified with you because nobody likes you. And also, should you provide assistance to us, do not expect anything in return whatsoever. Do not expect us to do our rightful share, or tell us what we should do, or to even care what happens to you and your country. We just need your help, period. Just take care of our needs. And by the way, since half of us want to go and live in your country, no territorial borders or laws on migration should obstruct entry of those wanting to.

Now doesn’t one get the feeling that this global leadership thing is one wide one-way street? Wide and easy access for everybody else but.

Kind of reminds one a bit about Shylock’s lament (in Merchant of Venice)

I am a Jew. Hath not a Jew eyes? hath not a Jew hands, organs, dimensions, senses, affections, passions? fed with the same food, hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and cooled by the same winter and summer, as a Christian is? If you prick us, do we not bleed? if you tickle us, do we not laugh? if you poison us, do we not die? and if you wrong us, shall we not revenge?
Might not the US be wise to ask to renegotiate the “terms” under this informal, and not mutually agreed upon, global leadership thing, and plead for equal and fair treatment?

To which august body does it turn to?

Image Credit: Downloaded from Library of Congress

Sunday, January 06, 2008

A Special Tribute: US Major Andrew Olmsted, R.I.P.

Major Olmsted was one among three of the first casualties in Iraq for the New Year. He was also an active blogger in his own blog, for other blogs and the Rocky Mountain News.

Olmsted, 38 years of age, died from small-arms fire when his unit was ambushed.

Why the special tribute?

Before dying, Major Olmsted starting writing his last blog post, with instructions to a friend to post after his death. Read it here. While the posthumous act itself was quite unusual, more awe-inspiring were the ideas that he committed to words for that last post.

But more significant for me were the words that came from somebody else:
“…it was important to know that Olmsted died doing what he loved to do — not just being a soldier, but posting his blogs for The Rocky and other sites.”
Now, isn’t that what life is all about? Doing what one loves to do. Regardless of the amount of time involved. Maj. Olmsted was 38.

Aside from what was mentioned in the quote above, Maj. Olmsted loved seeing his favorite baseball team win the World Series twice. And he was mighty proud of his extensive 80’s songs library, downloaded and ready to be listened to.

About the moustache? Was he going for the macho look? No, he just thought that Iraqis did not look too kindly on those without facial hair.

This fine soldier died in a war-torn country so the rest of us in the comfort of our homes and in the fullness of time can give pause and ponder on the wantonness of this soldier’s early demise.

This fine soldier died so the meek and gentle can gather thoughts and ask why with the utter uselessness of wars they are still breaking out in the world, with regularity and almost with necessity.

This fine soldier died so the rest of us can think and express ourselves in whatever way we desire, with freedom and without fear.

This fine soldier even died for those who may find dread or be squeamish about the brutally violent nature of a soldier’s job.

But as always things still fall neatly in place, since to each life there is a season.

What Is Art, again?

Maybe the above question is something we ought to ask often if only to highlight the attendant difficulties and uneasy confusion people encounter when trying to define what art is. The oft-quoted cliché that beauty is in the eye of the beholder could apply also in judging what art is, whether serious, pop, or whatever.

This untended difficulty reared its head during the last entry on my poster collection of Norman P. Rockwell works. Many critics had panned Rockwell’s works by denying him the honor of considering his work as serious art; instead that he was simply an illustrator however gifted he was as such.

And I always have a problem with such restrictive delineation because my mind has not really been able to grasp the exact parameters of what serious art really is. Should one rely strictly on the judgments of the art critics? But don’t they disagree amongst themselves? And many would go further and decry the lack of objectivity or relevance in many admired critics.

Anyway, I am not making this orphaned confusion my personal problem, because I simply follow my gut feelings and try to work up inspiring vibes about the works that appeal to what I could consider my sense of what is beautiful, tasteful, or extraordinary.

Click to read more.