Now please.

Thank you.

Q:

So, maybe some of you MBA, stockbroker, and investment banker types can explain this to me. How come my good stuff ain’t any good any more?

A:

…ALL demand has been shut down in this Country, even much of the World, and I can’t find much in the way of reasons beyond politics and market manipulations.

You answered your own question, no MBA required!

I’m grouchy and cynical enough, but since I’m nice and have other disqualifying equipment, I’ll just have to send you old farts some cookies.

The most prominent force driving the end of demand for capital has been a quick revesal on the risk people were willing to take – to basically none. I think most of it is financial shell shock as much as anything else (though the underlying economic recession isn’t helping) and that it will just as suddenly reverse itself and launch the next unsustainable upswing… followed by a more traditional downswing… etc.

Simply put, “things”…

Now what I don’t get is that my house is the same house it was in August. My boat is the same boat it was in August. My cars are the same cars they were in August. My commercial property down South is the same property it was in August.

…are not “fundamentals.” Value has nothing to do with physicality, but with the minds that supply and demand those “things.”

All the things I own cost me some money every month, some, so far, make me a little more, but NONE of them are worth anything anymore. I have a net worth of less than zero from being pretty close to being free and clear in August.

Oh yeah, he quit voluntarily to follow the girlfriend. She’s drop-dead gorgeous so at that age, I’d have probably followed her anywhere too – still might! I actually think she was overdosing on reality and decided to escape for a while longer by going to grad school.

What he’s found though is that SEA is just one big hiring freeze and he doesn’t have the courage of his parent’s connections down there – although I did finally break down and make some calls to some Alaskan ex-pats

It is alot of things – deeply incompetent, stupid, squishy, lacking in leaders.

But we always — ALWAYS — take our corrupt people out and shoot them. The current Democrat crop may be the most corrupt who have ever existed in the united States, so do NOT feed me this.

1. The national debt has been growing faster in percentage and absolute terms than the GDP that is taxed to pay the national debt. If you make a ratio of debt over income large enough, you will be unable to pay off principal on the debt. At that point the road to bankruptcy is short. People with sense see that coming and are acting to protect themselves from it.

2. The Fed didn’t allow the economy to go into recession after the dot-com bubble broke and 9/11. It pumped cheap money into the system. This led to inflated prices on things that the bankers, who were at the spigot where the Fed’s cheap money came out, wanted to invest in: real estate; luxury vehicles; gold; silver; jewelry; other luxury goods. It also led to those bankers and politicians who fed at the government trough wanting to spend more of their cheap money on dubious “investments,” such as the Kyoto protocol, solar powered street lights, bridges to nowhere in Alaska, and creating a Potemkin environmentalist movement where all manufacturing and energy production was moved away from the USA to developing countries that could get as polluted as they liked. We’d keep the USA pristine, for the knowledge workers and financial types who live in it. When the inflated values of these asset classes became too high for normal people to pay for them, then their prices started dropping. Best guess is that by 2001 the market value of housing, for example, was 10% over its fair, affordable value because of the bubble. By the end of 2006 housing was 20% or more over fair value. This caused financial statements based on the value of those items to drop. Other assets are similarly overpriced and will cause more pain when they correct, not only to those who own them but to manufacturers who have invested to produce them, and to their employees.

3. Sarbanes-Oxley, while well intentioned, has driven IPOs out of the US market. Public companies have had their profit cut in half by SARBOX compliance costs. This has kept earnings down, while price-earnings ratios in the stock market went above 20:1, contrary to common sense. In addition, the mark-to-market rule in SARBOX has forced companies holding mortgage-based-securities who have a default on one mortgage to mark them all at zero value.

4. Thanks to Democrats like Barney Frank, Chris Dodd, Barack Obama and Maxine Waters, CRA and Fannie Mae/Freddie Mac were forcing banks to lend money to people without job, money, or income. This got the banks to issue a lot of bad debt at abusive terms to people who were not expected to pay it off through income, but through appreciation of the property.

5. To protect themselves from all these bad loans, the banks that made them figured out they could bundle them into mortgage-based-securities, rank them by risk, and then by buying insurance against defaults, turn them all into AAA-rated investments. Investors bought in big time. These securities got overvalued as well, just like other assets. Problem is, the insurers priced the insurance too low. When the defaults started, the insurers went bankrupt. Hello, AIG! Then the whole house of cards fell.

6. Banks lend out more money than they have in assets to back up those loans. The Fed provides the loans and credit to let this bank-created credit and debt travel with the lendees around the economy. Traditionally, banks have been held to loaning no more than 12 dollars for every 1 dollar they have in the vault. This is called a leverage ratio. Hank Paulson of Goldman Sachs convinced the SEC to let banks use any leverage value they wanted. Leverage values of 30:1 or higher became common. The result is when loans went bad and there was a small run on the bank, the bank quickly became insolvent and declared bankruptcy, called in all the callable loans, and created general chaos.

7. The Democrats and the big media, but I repeat myself, have spent the 8 years of Bush’s presidency talking about how Bush had created the worst economy since the Depression. This trash talking about the economy, coupled with the their promise to repeal Bush’s tax cuts and raise new taxes was noticed. As the time of these tax increases comes nearer people are changing their investments and the way they use money in order to protect themselves from the taxman. This has taken good money out of capital investments and sent it overseas or into assets that store value. This is another reason that assets have risen in price. When Obama got elected, this accelerated.

8. Oil prices went wild. This didn’t help the USA, which used to be an oil producer but became an oil consumer.

Just like it took some time for individual successes to work ourselves out of the everybody’s down tech bubble burst after investors made bad bets in the late 90s, it’ll take some time for individual successes to work ourselves out of the everybody’s capital is down housing and credit bubble crash.

But I fear we will do so with the yoke of socialist policies on our backs, which will inevitably end the era of American leadership.

Things are tough all over, but I can’t help but feel that in great measure the economy 1) anticipates a rough time for capital because of the new president; 2) has been talked down by the new administration because if you take over the reins at the absolute nadir there’s no place to go but up (two-thirds of the economy is consumer spending, so when consumers sit on their hands, everything grinds to a halt); and 3) just needs time to work off the impact of some really bad, really big hedge fund bets on commodities.

I’ve elected so far not to bore everybody here with a “Where’s My Bailout” diary — suffice it to say that Hurricane Ike did a double whammy on business. Most all of my company’s production has been shut in since early September — that means the cash register’s not ringing — while we have been spending money right along due to prior commitments & storm repair. Now that we’re back producing, product prices are half what they were pre-storm. Our company will survive, but many others are badly hurt.

Be that as it may, I firmly believe it is mistake to credit the new administration with too much power over our lives. We have survived adversity before, and we will again.

BTW, achance, I look forward to someday calling a special meeting of the RedState Curmudgeon Committee — I nominate you, me, mbecker & joliphant (if he’s still with us) as founding members — over a frosty glass of an adult beverage. I identify with the cynicism you passionately express in your posts here, and firmly believe that cynicism is one of the perquisites that goes along with gray hair. The younger crowd just doesn’t seem to get it.

But this is a recession, and we should cycle out of it eventually ( though Obama and his confederates in Congress may prolong it through some very stupid policy choices).

If there are openings for precinct committeemen, get appointed as one. Walk your precinct. Get people registered to vote and be there to help them with local government issues. Find other people who are willing to volunteer to help at the local level. If the precinct committeeman slots are filled, contact your committeeman and volunteer to help.

If there is a need for other local level officials, get on the ballot. Get on the school board. Get on the township board. Get on the city council or county board, etc. Then make sure that the Republican brand you represent is made to look good in the offfice you fill.

We as a party have to become known LOCALLY as the right party to vote for in order to win local elections EVERYWHERE and then we can win state and national slots.

Think small to become big again….

“All the things I own cost me some money every month, some, so far, make me a little more, but NONE of them are worth anything anymore. I have a net worth of less than zero from being pretty close to being free and clear in August.”

“Part of me thinks that the traders and hedge funders and the people holding a lot of dollars who hate America had a lot to do with this.

“Never attribute to malice what can be explained by incompetence.” — (some say) Napoleon

Yes, the financial community (including the two largest defacto hedge funds Fannie Mae and Freddie Mac) are to blame. But attributing the main mindset of the last few years to a politically motivated drive to fail is quite a stretch. Keep in mind that when forced to choose, Democrats will go for greed over a genuine agenda every time.

The financial community has been making the bet that the housing market would continue to rise for many years. And until 2007, it paid off spectacularly for those taking the risks using other peoples money. But beginning in 2007, institutions that had borrowed $97 for every $3 dollars of its own **cough**Freddie Mac**cough cough**, saw their own and more importantly their creditor’s fortunes reverse.

Not a bad risk/reward ratio if you think about it.

Heads, I become a multi-millionaire. Tails, yes I lose my money and have to look for another job, but my creditors lose a whole lot more. Suckers!

Unfortunately, these financial community bets all went bad at the same time. And so now their is very little supply of capital to make the loans that Main Street needs to operate or to invest in itself. And hence the cycle: Lack of credit damages Main Street, which further reduces willingness to lend, which further damages Main Street…