Tuesday, September 30, 2008

Reality Check

I'm not buying gold. I'm not hoarding canned goods. And I'm not stocking up on ammunition for the coming implosion of the entire US economy.

Don't get me wrong--yesterday's stock market drop of 777 points was serious. And my retirement fund is down a net 14% this quarter. That stinks. But those 777 points on the Dow were in a market at 11,000. Back in 1987, the 500-point drop came on a market at 2500. THAT was really bad. And by 1989, I was making 29% a year in mutual funds. I have great faith in capitalism, and the law of averages.

Sure, there need to be some fixes. I personally would repeal mark-to-market accounting rules, for instance. I'd definitely increase the limits of FDIC insurance on bank deposits. And there may need to be some government intervention in terms of insuring or even holding some of the bad debt that is clogging the credit markets. But it's pretty clear that "we the people" didn't want the $700 billion plan that was proposed.

I don't blame those congressmen. Their constituents told them in no uncertain terms to vote "no." And they did. That's what is supposed to happen in our system. Either you believe in "we the people," or you don't. I do.

Finally, and this is the most important thing: neither economics nor politics is my religion. Even more than I believe in the USA, capitalism, or conservatism, I believe in God. And He is sovereign over all. That's what is real.

Monday, September 29, 2008

Here come the 1970s again!

Well, the bailout bill failed in the house. Plenty of blame to go around; only 65 Republicans voted for it. 95 Dems voted against (pelosi and co. could have lost 82 and still passed it). What a mess!

Not only does this mess up the economy, at least in the short run, it certainly hurts John McCain. He made a play last week to get this thing passed, and it didn't work. No matter how you spin it, it doesn't help.

If Obama loses this election, he ought to teach classes in how to snatch defeat from the jaws of victory. I'll be very, very surprised if he's not the president. Anybody want to guess when is the last time we had a democrat president and both houses of congress at the same time? I'll give you a hint... the economy was bad, then, too. And gas was expensive. And America got weaker around the world. And Islamic radicals in Iran embarassed us. If you said, "the Carter adminsitration," you win the prize!

I'm cool with that. Lived through the last time, and the eventual reaction (the Reagan Revolution and the 1980s in general) was very much to my liking. I just hope disco and really bad polyester clothes don't make a comeback!

Seriously, I hope that Obama doesn't preside over Carter II. I'd rather be wrong and the country be OK than have the chance to say "I told you so" at the expense of so many folks who would suffer. But I wonder if 2008 might go down as one of those times (like 1928 and 1976) where winning puts you in an impossible situation.

Here's an interesting thought (not original... I read it somewhere last week. Would link, but long since forgot where). George Washington was elected in 1788. Exactly 68 years later, we elected James Buchanan. Not particularly a success (he's my pick for worst-ever). Hello, Civil War. Only 68 years from the end of his term, we elected Herbert Hoover. Hello, depression. From the end of his term, count 68 years, We get George W. Bush. Now this. But here's the good news: following Buchanan, we get Lincoln. Following Hoover, we get FDR. So, by extension, Barack Obama will be on the currency as the next great president!

(OK--if you do the math, you have to count from the beginning of Washngton's term and the end of the other two, and you have to forget that Bush won twice. But it's still fun!)

Saturday, September 27, 2008

Debate Reaction

Having now offered the disclaimer as to why debates are worthless, let me give my post-debate reax (nothing like a little hypocrisy in the political silly season). It's amusing to watch the spin room after the debatesand see both sides claiming victory. I think both sides have a point--each overcame the possible worst-case scenario, and there were no serious sound bites ("Well, there you go again...") that seem destined for viral youtube. Obviously, I heard more I agreed with from my guy, etc. But if I were grading this as an undecided and uninformed voter, I'd have to give the nod to Obama. This election is about change, and about him. If he can clear the hurdle of minimal acceptability, he's supposed to win. He did that, and more. He seemed just as "presidential" up there as McCain, and he seemed thoughtful, even moderate. Even when selling ideas that I would characterize as from the left, he struck a tone of centrism. So did McCain, of course, but everybody knows McCain is a moderate. The only folks who think otherwise are voting for Obama anyway. So I think Obama helped his cause more.

Now, whether I BELIEVE that Obama is really as moderate as he sounds... that's another story. But as I mentioned before, my vote is not even in play, so that point is moot.

Friday, September 26, 2008

The Problem With Debates

Please note--this is written BEFORE the first Obama-McCain debate (in about half an hour). And I will, of course, be watching. But WHY? It's not going to change anything. At least not for me. Let's pretend Obama just rocks, and McCain royally steps on his crank (can I say that on a Christian blog??) So what? It's not like I'm suddenly going to become a pro-choice liberal. No more than if the reverse happens that my lib buddies are going to say, "heck, yeah. Let's cut those top tax rates!" Those of us who have strong principles on the issues are going to vote those principles, period.

But that's not who the debates are for. The US electorate is divided into basically three parts. About 40% are liberal. About 40% are conservative. And then there are the 20% in the middle. (Which is why even the biggest landslides in this country are 60-40.) Many of those 20% are a combination of the ignorant and those without clear principles. We hold these beauty contests for their all-important votes. But, in my worst moments (shades of Alexander Hamilton), I kinda wish those folks who can't be bothered to decide what they think would stay the heck away from voting booths. It's the same thing with the Supreme Court. You wind your way through the federal courts and finally get a writ to appear before the Supremes. You get there, and 4 of the judges are strict constructionists. Scalia and his cronies are going to rule like the founders wrote the text in stone. And 4 are definitely not--John Paul Stevens and three others are going to act like it was written in sidewalk chalk on a rainy day. So you get this far, and your entore legal case falls on whatever "moderate" Anthony Kennedy had for breakfast that day. And why is he the swing vote? Because he has the most muddled, unclear, jumbled grasp of any of them when it comes to a clear legal philosophy. Ginsberg, Souter... I can disagree with. Vehemently. But at least there is a perverse consistency there.

It's always been this way. 48 years ago tonight, Nixon met JFK in the first-ever televised presidential debate. Those who heard it on the radio thought that tricky Dick won. But on TV, JFK just plain looked better. He won the beauty contest, and he won the election. Don't get me wrong--knowing what we know now, we're all happy that JFK won the election. But that's just a heck of a way to pick the leader of the free world.

Oh, well. Gotta go. Wouldn't want to miss the debates. Tomorrow, everyone will be talking about who won and who lost. It won't have any effect on who's right.

Obviously not smart enough to be VP

Sorry, haven't seen Palin's interview with Katie Couric from this week. I've heard she didn't exactly cover herself with glory. But unless she claimed that in 1929 president Roosevelt went on TV to address the depression (for those keeping score, Biden said that... and in 1929, Hoover was president and TV was science-fiction), she is not guilty of the dumbest thing said by a veep candidate this week.

And there are others--a claim that president Bush sent a negotiator to Tehran (he didn't), that his helicopter was "forced down" in Afghanistan (it was... by snow), and even that Biden's family was killed by a drunk driver (he was sober). But Joe makes so many gaffes, he doesn't get called dumb. If Palin (or Bush, or Dan Quayle) said the same stuff, they'd be crucified. If McCain did, he'd be called senile.

Look--nobody who supports Palin (including me) doesn't wish she had been governor for 10 years instead of two. And nobody should pretend that she has foreign policy experience. Neither did Reagan, or Clinton, or any other governor. And I don't recall anybody saying that Howard Dean (governor of Vermont, smaller than Alaska) was unqualified. Nor John Edwards, who actually got nominated for VP (but he did have excellent hair). All I know if that if there's going to be inexperience on the ticket, I want it in the veep slot, not the top slot. Obama has never run anything but his mouth.

Obviously, if a president McCain dies, she'll be president. But if he dies after even two years, she will have had two years as VP, with all that entails. And if she, God forbid, were to succeed to the presidency even earlier, she could always go out and get an old, wise, foreign-policy thinker as her VP. That's what we'll get if Obama wins, a rookie in the oval office with the experienced guy at the bottom of the ticket. Only I'll bet whoever she would pick is not the goofball Joe Biden is.

All that said, I still like Joe. And I still don't know why.

Trying to Unravel the Financial Mess

Everybody is talking about the big mess right now in the financial services sector, and how we need (or don't need) a $700 billion bailout to keep the entire US economy from slipping into a major catastrophe. But, as I have mentioned before about my no-doubt brilliant colleagues, we're all ignorant, just on different subjects. And the vast majority of us (including me, by the way) are not experts in big corporate finance--far from it! Therefore, we get lots of heat and very little light from all the talk.

If I may, let me share an article I came across that explains the current situation in very simple (indeed, overly-simple) terms. Don't let the fact that it comes from National Review trick you into thinking it's political in nature. It's a pretty fair breakdown of what's going on.

If you've digested that, let's add in a couple of other facts. First, the biggest root cause of this entire mess is the changes in the way home loans have been made for at least the last 15 years. Before that, the old joke was that a bank is a place that will give you a loan... if you can prove to them you don't need it. 20% down on a home loan was standard, and the rule was your payment couldn't be more than 28% of your gross pay, nor could your total indebtedness exceed 36% of gross pay. Getting turned down was common. But as far back as 1993, there was a move afoot to brand banks as racist or otherwise evil if they turned down too many applicants who were either minorities or lived in "redline" neighborhoods. It got harder and harder to turn people down for loans, even if they really didn't make much money or have much cash.

Then, to make matters more interesting, a great boom in housing prices began. I bought my first house under more-or-less the "old" rules (I had to pay a heft PMI premium to allow me to put down only 5%, but the ratios were the old ones). Over the next nine years, that house doubled in value, as did most real estate. Any worries about lending were swept away... after all, the loans were secured by rapidly-appreciating assets. If a loan went south, the bank could still foreclose, drop the price, and still recoup even a 100% note. At the top of this cycle, I sold a house after two years and made $70,000. Shows like "flip this house" began to go on the air. People began taking out no-money-down, interest-only, adjustable-rate loans. Any monkey could make money in real estate.

Meanwhile, the banks that had made these loans were selling them to the likes of Fannie Mae, who bundled them into mortgage-backed securities, what looked like a sweet deal. And then the housing bubble burst.

To make matters worse, after the bankruptcy of Enron a few years ago (and their criminal cooking of the books), congress wrote seemingly-sensible new rules that required assets to be "marked to market," or regularly re-evaluated based on current selling prices... even if they had no intention of selling and incurring an actual loss. Suddenly banks had big liabilities (these bad mortgages), secured by shrinking assets (the falling home values). Their balance sheets were out of balance, and otherwise "good" companies, like Bear Stearns, Lehman Brothers, even Merrill Lynch, were in trouble.

As tempting as it is to blame the "fat cats" on Wall Street (and we all love to engage in a little schadenfreude when those guys get theirs), more blame belongs on those who didn't mind the store at Freddie and Fannie. That's government, particularly congress. It didn't help anything that the senate banking committee (which bottled up attempted reform 2 years ago)is chaired by Chris Dodd, the largest recipient of campaign contributions from Fannie Mae. But blame also belongs with all of us who thought we could get something for nothing.

A really wise fellow named Solomon wrote about 3000 years ago not to hurry after get-rich-quick schemes. He also had some words to say (not positive, btw) about guaranteeing bad loans (the Old Testament called that "surety"), and about borrowing money: "The borrower is slave to the lender." (Proverbs 22:7)

Now we're told that unless we give these same goofballs three-quarters of a trillion dollars, the wheels are going to come off. I don't find that very reassuring. And, of course, politics is never far behind. For example, right now, there are plenty of votes to pass exactly the bill that the President, his Treasury Secretary, and the Democrats in congress want. But they won't do it unless they can get the conservatives (folks like me) to give them cover, so they won't own the whole kit and kaboodle when it blows up.

Meanwhile, I'm just happy that I have little use for credit. When it all shakes out, those of us who followed the good old biblical model will be the best off. (Or least screwed!)

Saturday, September 20, 2008

A backlog of random thoughts

Hello, blog world. Sorry I haven't had much to say in a while. I've thought of blogging a great deal, but never have seemed to find the time. Over the last 3 weeks, I've had numerous thoughts: some about the events of the day (Palin, Fannie, Freddie, AIG), some about my own life (faith, running, priorities, family). Some have been amusing, others probably intemperate. Here's a random taste, just so I can say I'm back online.
  • My wife ran her first road race (2 miles) this morning. I'm really, really proud of her. Not so much for the race, but for transforming herself into an athlete.
  • Along those same lines, I just want everybody to know, I married VERY well. I've been reminded several times recently that I have pretty much the best wife and family imaginable. I pray that I can live in such a way as to deserve them.
  • A little politics, on Palin. Wow--the feeding frenzy against her has been amazing. I just don't get why she has to be demonized so. I suppose that the very things I like most about her (that she's conservative, religious, pro-life, and, well, normal) are things that cannot be tolerated. If I can say, "Obama's a liberal, I'm a conservative, and that's why I'm not voting for him" without devolving into hatred, why can't the other side do the same, in reverse?
  • Speaking of Obama, I'm beginning to have misgivings about him based on race. No, not his race. That would, of course, be wrong. But it's his and/or his supporters' use of race that spooks me. This morning this article ran on my home page, about how if Obama loses, it'll be because he's black. It just got me thinking--would he even have gotten this far were it NOT for his race? Would a one-term senator be seen as so attractive and transformational if he were a white dude? I don't know. But I have two nagging fears: first, that if he loses, it's "proof" that we're too racist to elect a black man. Or, second, that he wins, and we spend the next 4 to 8 years seeing every principled opposition to his policies as prima facie evidence of racism. I sure hope not.
  • Maybe I'm getting mellow in my old age. I just can't argue politics like I used to. I'm still passionate, but I have a hard time working up the level of rage so many of my colleagues do. I was at lunch yesterday, and found myself the only one at the table who wouldn't join in on Bush-McCain-Palin bashing. They knew I was the token conservative, and I think I let them down by not rising to the bait. The juice just isn't worth the squeeze.
  • Speaking of my colleagues, I become more and more convinced every day of the Will Rogers truism, "We're all ignorant, just on different subjects." I am surrounded by highly educated, brilliant people. And most of them couldn't run a lemonade stand.
  • It finally happened: an irate parent complained about political bias in my history lectures last week. But it's funny--he thought I was LIBERAL. I guess I was a little too successful at being fair and evenhanded. I told my principal (a good-natured lefty), and he said, "Who called you liberal? Hitler or Attila the Hun?"
  • My own running has been great this week. Last week I wussed out and only ran once, even though I had plenty of opportunity. This week, I have gotten back on track, and it feels GREAT to be in control of my life, at least a little.
  • The mess in financial services right now is very complicated. It's amazing how little most people understand anything about it. Maybe I'll blog about that sometime... but the level of ignorant discourse on the topic is distressing.
  • This is NOT the worst economy since the Great Depression. It's not even nearly as bad as the 1970s, or 1981. But saying that won't sell papers.
  • My cross-country team is ranked in the top 25 state-wide, in all classifications. We're the smallest school ranked that high. Cool!
  • Joe Biden says paying higher taxes is patriotism. Charlie Rangel, head of the house ways and means committee, cheats on his taxes. I guess that means Charlie's not a patriot.
  • Oh, yeah. Speaking of Joe Biden (who I can't help liking on a gut level, but for the life of me I don't know why), his tax returns show that he only gives about $300 to charity a year. So it's OK to take somebody else's money and give it away to the poor as refundable tax credits, but not necessary to give more than 0.1% of your own income voluntarily?

That's all I've got. Brain now empty. Think I'll get a haircut--I look like a Q-tip.