Monday, August 1, 2011

Lead, Follow Or Do What!!!!!

We will take a break from the “investing” series for some random Economic/Political thoughts....

Lee Iacocca used to say “Lead, Follow, or Get Out of the Way”. Who would have thought that during this important debt ceiling crisis the President of the United States would choose number three? Okay maybe Jimmy Carter, but who else? A new phrase should be: “Lead, Follow, or Make Another Eloquent Speech”.

Say What?

The speech was delivered brilliantly as always, but there were a few missteps. After the President explained that the government was spending too much money during good economic times, he then said the recession came and we had less money coming in so we had to spend more. Of the millions of Americans who lost their jobs during the recession, I don’t think anybody increased their personal spending. So the government spends too much when times are good and it spends too much when times are bad. And now politicians are surprised and alarmed that people believe government spending is out of control. Spend less. Spend less. Spend less.

He also said that our budget surplus was depleted because of tax cuts. The budget surplus was depleted because of out-of-control spending. But you can’t cut taxes and increase spending at the same time. Is anybody in either party a math major?

No Sugar in the Tea

The Tea Party movement started as a reaction to big government getting bigger. Bigger government means bigger spending, which means bigger taxes. You don’t need to be a math major to figure that one out. Under this principle people from any political party (including independents) could be a supporter. And any politician embracing that principle would be viewed positively. The Tea Party went off course when it added other issues to the agenda and became too partisan. Still, are Tea Party members “crazy” (maybe terrorists?) or just the people who are the most informed?

One Out of Three is Bad

We are fighting three wars and only having significant success in one. In Afghanistan you either declare victory because you achieved your main objectives or you declare a tie. I know in this case a tie is like kissing a camel, but either way it’s time to go home. We have seriously done all we can in Iraq, now it up to the Iraqis. And we are fighting a war in Libya. Were you fooled when we announced that we were turning the war over to NATO? Hey, guess what? We are still paying 75% of the costs. And it is a “war”. If you are dropping bombs from the sky to kill people, that’s a war. Recently Libya was described as a huge stalemate. You know what they say: If you have a stalemate, it’s time to get a new spouse. It’s time for us to get a new strategy. Oh but we never had a strategy, that’s right.

You can’t count the savings from ending these wars in any budget plans because that would assume that you will not be involved in any other wars for the next ten years. By the way, North Korea and Iran both like that budget gimmick.

Please Don’t Scare Granny

It was disgusting, unethical, and cruel to frighten older people during the debt ceiling debate. If you have to resort to this tactic, how strong is your argument? If you are the primary caregiver to an elderly person, you know how damaging this can be. Senior citizens are easily frightened and can worry constantly about things that impact their simpler life. I will have no respect for any politician or group that uses this tactic.

The Free Market Wins Again

Home foreclosures are down 29% from last year. While some experts are claiming this is due to paperwork delays, a new trend is emerging. Banks are realizing it is best to help troubled homeowners work through their problems rather than to foreclose. There are already too many distressed homes on the market and the banks will not benefit from adding more. Underwater homeowners are realizing that they still need a place to live and that defaulting will have future credit and legal implications, so they are more willing to work with the banks.

This is a significant trend. All the dire housing projections were based on larger foreclosure percentages and more foreclosed homes flooding the market. If this continues, the housing market, including housing prices, could recover stronger and faster than expected. This is another example of the free market being able to accomplish what the costly government mortgage relief program failed miserably to do. The free market is superior to government programs almost every time.

Move That Freight!

The freight market is back baby! The American Trucking Association Freight Index is up in June. The Diesel Fuel Freight Index is up in June. FTR (Freight Transportation Research) is expecting continued moderate truck freight growth the rest of the year. Rail Freight and port freight are improving. That’s why my panel of economic experts is forecasting Q3 and Q4 GDP of 3.0%. However, the preliminary July indicators are coming in weak due to the uncertainty caused by the debt ceiling debacle. Thank you Washington D.C.! The Model T is still predicting good things in 2012. No need for all this panic just yet!

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