Gacman's Random Thoughts

Our House is a Very, Very, Very Fine House

2009-02-19T16:35:00.018-06:00

I have been amazingly quiet about things these past several months. When you are on disability leave like I am, then there is much time to blog away with reckless abandon. Most know that I am chock full of opinions, but alas, I have been reserved as I watch the "Change We Need" unfold in Washington. I wanted a fair amount of time to evaluate just how President Obama would respond to clearly the most difficult "change in power" scenario in decades. For the record, it should be noted that I want for President Obama to succeed because I am first an American, and secondly, I would like to think that I am no longer purely ideologically driven. For example, from the time I could first vote (Carter in 1976) I pulled the straight Democrat ticket lever every single time I entered the voting booth right on through the failed Michael Dukakis election (he did look ridiculous wearing that helmet and riding in that tank!).

Winston Churchill once said, "At 20 if you are not a liberal you have no guts; at 40 if you are not a conservative you have no heart." This is a true statement except for the most extreme on both sides of the political spectrum. For instance, many of my most liberal friends consider all moderates and conservatives to be intolerant of and indifferent to others, environmentally unfriendly and interested in making money at the expense of all others (elitists). Conversely, my most extreme conservative friends see ALL who are left of them as socialists who believe that the government should support everyone in the lifestyle to which they want to be accustomed (lately this seems less paranoid than I would have thought a year ago). Though I realize that I am immediately going to get total and complete disagreement from the aforementioned friends on both the far right and the far left, as a baseline (though not wanting a "label") I would comfortably say that I am a right of center moderate. In the 2008 national election I voted in only 12 races (those to which I had more than just sound bite knowledge of a candidate and his/her position), 6 republicans, 5 democrats including the ousting of our long time Republican sheriff and then 1 independent.

Now that I have dispensed with the idealogical formalities I thought I would come to the point of this blog - the housing "bailout". We have truly become a bailout nation and I believe that if we do not stop propping up those who would fail (individuals or corporations) in a free market system, then we are doomed to a future of socialism akin to France or Sweden. To many this may seem like a perfect solution, but I assure you that things like the American Dream (anyone can achieve anything they WORK for) will disappear into the lore that will be taught to future generations in their high school history class. You see, in America we are granted many freedoms that allow for us to pursue our dreams, but there is no guarantee of equal results. Some will simply do better than others for a variety of reasons, but no one should call upon the government to level the playing field. Sure the government should remove barriers that hinder equal access to all of our constitutional rights (i.e., discrimination based upon race, gender, etc.), but no one should expect the government to bail us out of the mistakes that we humans make. If you buy things you cannot afford, or you choose to have unprotected sex, or you make investments without proper due diligence, or you choose to abuse drugs or alcohol or food or anything, then there are CONSEQUENCES you should expect; own up to them and then fix them or suffer!

In this post I will not formally address the Obama appointments of those who do not pay their taxes while calling for ethics in politics. Nor will I provide analysis on a stimulus bill that looks like more of the same attempt to spend our way out of recession rather than provide the kind of stimulus needed to guarantee real job creation. Let me preface this next comment with my grade for President Bush in his last year in office: F-. I am tired of hearing how Bush increased spending to record levels and now we have a bill that will break all prior records and we are calling this change we can believe in? President Bush holds much responsibility for increased government spending that was a wide departure from the core Republican platform, so why does President Obama believe that blaming Bush and then repeating his strategy is somehow different and better for America? It is not change and I am afraid that the consequences for these actions will have dire impacts for many generations, especially to our children and grandchildren.

Alas, I wandered off on a tangent once more because all I really wanted to do was "complain" about was this new housing rescue plan. One that benefits those who made poor decisions and then are now somehow entitled to assistance to save themselves from themselves. Again, my most liberal friends contend that the housing crisis was caused by slick Republican bankers who hoodwinked people into buying houses that they could not afford; a sort of "look a chicken" diversion that was part sleight of hand and part criminal. The trouble that I have with this argument is why didn't it happen to me and the greater than 80% of Americans who bought homes that they could afford? Let me take this opportunity to chastise the bankers for letting ANYBODY get loans for as much as 105% of the value. Even if housing prices hadn't tanked, when a person has nothing invested, they have nothing to lose!! It was good while it lasted for many of these folks who lived above their means, if only temporarily.

So where is the fairness for the responsible in this new housing bailout? Many like myself would have been better off putting no money down, then defaulting on our loans, then receiving a renegotiated loan at below market interest rates and debt forgiveness for an amount likely equal to or greater than my 20% down payment. What was I thinking? Now the real kicker is this and the old cliche, "Only In America" could be applied here: the government will step in, force the banks to cram down the principal amount of the loans, offer a new lower interest rate conforming loan (no ARM but fixed rate) and then when the economy recovers and housing starts to rise guess who gets to pocket the appreciation? Not the government, not the taxpayers in general, surely not those who did not take assistance, but the original irresponsible homebuyer!! And who pays for this? Those who were responsible. Harry Truman (a democrat) once said, "When in doubt, do what is right!" Today I wonder if that would be meant for the irresponsible or for those of us who are being asked to bail them out?

Please remember to vote in my latest poll...

One President-Elect At A Time

2008-11-20T18:17:00.022-06:00

Most of my friends believe that I need to go back to work so that I have less time to blog. I must admit it is boring to lay around the house all day watching the news, and worse than that, watching the market swoon in ways that have not been seen since the 1930s. In fact today, we dropped below a technical resistance point that does not bode well for the market tomorrow and perhaps the balance of the year and then some. Like it or not life as we know it in America is dependent upon efficient and effective free capital markets.

Since I have duly appointed myself as an arm-chair market and political pundit, here is my open letter/blog to President-Elect Obama:

Dear Mister President-Elect:

I realize and respect your position that America has only one President at a time, but this time, this very historic time, your silence and inaction could be very detrimental to your upcoming administration; not to mention to America at large. President Bush's recent (in)actions seem to suggest that he is done and is preparing for his move back to Texas. God bless him and Laura as they retire after many years of public service.

You simply must step up as our leader now (tomorrow at the latest). America's financial woes are worsening daily and exponentially. No disrespect to you, but at this very moment you are at least partly responsible for the continuing uncertainty in our stock market and our spiraling move towards a possible (I hesitate to say the word...) depression; yes with a "D". The truth is the world is waiting to hear from you. In these dire times, an advance peek at your initial policies (subject to change of course) is not going to violate protocol nor be considered impolite by our current President. If it does then perhaps it is time for change we can believe in, or change we need, or maybe change YOU can make happen?

I am just your average American who has seen his 401k fall by greater than 50%; most in the last 3 months. As a self-appointed average American adviser to President-Elects (just call me, "Greg the Technical Sales Executive") here are the few things you simply need to do immediately:

TOMORROW, announce your heads for Treasury and the Fed.
Within a week, announce that you will be booting (uh - firing, sacking, canning, removing) SEC Chairman Christopher Cox and name his replacement.
TOMORROW, conduct a press conference that includes the aforementioned appointments and changes. Soothe the markets by saying that you do NOT intend to raise taxes, including capital gains; at least not immediately. Do say that you will take a look at lowering corporate taxes to spur growth. Tell the people that you are in favor of free markets, free trade and free speech.

The most amazing truth is that at this very moment, Mr. President-Elect, YOU are the most powerful person in the world. Continue your legacy now by stepping up to stem the world market's free fall. America is like a sinking listing ship that needs to be set right. Times and circumstances call for swift action on your part. Please act soon, I am confident that you will not be disappointed.

Signed,

A deeply affected American

Bye, Buy Miss American Pie!

2008-11-18T19:59:00.016-06:00

Let me preface this post by saying that it is not the Democratic party nor the Republican party nor the Bush administration that is responsible for the sad shape of the America's auto industry. One could argue (that includes me) that this is, in large part, the fault of the average American spoiled by cheap gas and easy credit. You see, we have all grown up to believe that the American dream is more about what you acquire than who you are. And having the money to pay for what we want, well, that is a future problem. A future that most assuredly includes a better job and higher wages for all when the debts come due.

The following is not intended as braggadocio nor conceit, but rather, it is my personal story about pursing the "American Dream". I started my "career" making $2.10 an hour as a clerk in a convenience store while supporting a wife and a newborn baby. Let me pause to tell all teenagers in America that having children while still mostly a child yourself could lead to very somber circumstances -- DON'T do it! Back to my story...when I was 18 years old I went to a Sears store manager and asked him to extend me credit so that I could buy a tool set to do my own home and car repairs and to allow for the occasional purchase of a nice Easter outfit for my daughter Louanne. Though turned down in the "system" this manager at the Winrock Shopping Center in Albuquerque, NM believed in me enough to grant me a Sears credit line of $200; way back in 1975. I have never taken that PRIVILEGE for granted. Today, the average American seems to believe that credit and the protection from default from their own credit abuse is somehow a constitutional right.

Since 1980 I have paid cash (by saving first) for every car, never carried a monthly balance on a credit card beyond 30 days and I have put down at least 20% for each of the 6 houses I have owned since then. I have never had a late payment and I have always put off other purchases to make contributions into a 401k savings plan (which is now down a nifty 44.6% this year alone). With nothing more than a high school education I have been able to work my way up to a great job with a major corporation and, though currently struggling with a back disability, I live a life that 33 years ago I could not have even imagined. God has truly shined His light upon me!! I have my little piece of the American dream and I have never expected more from my government than the protection of my constitutional rights as set forth by our founding fathers. Today as I write this post, there is a long line of constituents looking for government handouts and in a quantity that has not been seen since the Great Depression.

Alas I come to the point of this message. Today (11/18/08) the CEO's of America's "Big Three" auto companies were in Washington DC offering up to Congress all of the reasons why they need taxpayer money to bail them out of a bad patch (as they say in the South). Did I mention they each flew to DC in separate private corporate jets!! If "we" do not bail them out, according to these CEOs who last year collectively made more than $30M in bonuses while their companies were losing BILLIONS, then catastrophic things will happen. Does this mean dogs and cats will be sleeping together as suggested in the film "Ghostbusters"? They tell us that up to 3 million jobs will be lost because of all the interlocks to their industry. Worse yet, they may not be able to find jobs to support their own lavish lifestyles to which they have become accustomed. How does one get one of those cushy jobs anyway?

Please understand that I am a compassionate man and I surely do not want to see good people lose their jobs, but what is the offer to people like Brooke and I who have always paid our bills and managed our debt appropriately? An article in last week's Barron's Magazine tells all of us who have lived financially responsible lives to suck it up and quit whining. Ah yes, this is what Joe Biden told us was being patriotic. Okay then! I will do my part and stop complaining because I have come to the realization that everyone will have to contribute to assure a recovery. But not without some very tough prerequisites and, to borrow from President-elect Obama, "Change We Need!"

First of all, the Big Three blew it by believing that life as we know it would always require big gas guzzling trucks and SUVs. I realize that all of us Americans need vehicles that can tow boats and jet-skis and carry a mini-van load of future soccer stars. But, there is a preponderance of inefficient vehicles on the road, that we simply need to move to more fuel efficient and environmentally friendly vehicles. Detroit blew it by being lulled into the belief that fuel would always be affordable and that American consumers would always believe that bigger is better (Only true in Texas now!). What we lost sight of was our responsibility to both our environment and our personal sense of financial accountability. As a result, we are faced with this current economic crisis and the pain which we all will have to endure.

I am sorry, but GM, Ford and Chrysler have failed to adjust to a changing reality, and as a result we are all faced with a major crisis in a core component of American manufacturing infrastructure. As hard as this is to accept, we simply need to let these companies go. Let them file for bankruptcy and attempt to reorganize just like any other business that gets in trouble. Set aside any foreign government assistance that may or may not have cost advantaged the Japanese and the Germans, they have simply and consistently built better cars - PERIOD! Capitalism has always been Darwinian, but now it has come home to sting so many Americans. The American capitalist system has always differentiated America and made her strong. Now recession and the potential for significant job losses is leading many to want to sell their souls to the devil no matter the cost; even if it threatens to destroy the American dream.

So, I vote against a "bail-out" for the car companies. This may well be throwing good money after bad, but worse yet, it will lead to an onslaught of comers including the airlines, then the home builders, then the retailers, then credit card companies, then the plumbers, then the electricians, then teachers, then florists and so on and so on. Stop the violence and let the auto companies fix their own problems or fail! Then again, this is just one man's opinion and I may be wrong...

History, History!

2008-11-05T05:26:00.006-06:00

All Americans just witnessed history, in fact, the whole world witnessed history in the election of Barack Obama as the first African-American President of the United States. As they say at the start of the Olympics, let the games begin! Obama has inherited an unenviable task. Not just the US, but the world financial markets are in disarray, wars are being waged in Afghanistan and Iraq, hostile circumstances exist with both Iran and Russia, and campaign promises are now suddenly due.

I congratulate Barack Obama for an absolutely amazing campaign. Speaking of history, never has a better funded nor better organized campaign ever been run. If the Republican party ever wants to have relevance again they need to learn not only from the McCain mistakes, but also, the Obama success formula. As they say in Britain, "Well done mate!"

For the record, two things killed John McCain. The first was the selection of Sarah Palin as a VP running mate and second was the bumbled handling of the financial crisis. The strongest weapon that McCain had in his arsenal was the experience card, which he threw away with the little known Palin pick. And the "suspend the campaign" tactic backfired more than my 1973 AMC Gremlin. How would I have fixed those two things you ask? Many think it was Palin's conservative bent that ruined McCain, but the selection of Mike Huckabee instead would have been a highly competitive ticket. And he could have recovered from the financial tactical snafu by voting against the rescue plan in the end. Though a plan of some kind was needed, one that included $150B in earmarks (pork) was contrary to one of McCain's key messages. Political death often comes from the smallest of details, though the Palin mistake was HUGE.

So where do we go from here? Those nagging campaign promises will now "come home to roost" and, frankly, many will be difficult if not impossible to accomplish. Obama will likely moderate and he will be forced to be right of the current Democratic leadership in Washington. And his first alligator infested waters to swim through will be shedding his mostly anti-capitalistic rhetoric and alleged position and work on fortifying the US financial markets. The reason is that too many American Democrats have 401ks that are at risk, too. To recommend government funded alternatives or to continue tough talk on global trade (protectionism) will lead to people being worse off in 4 years than they are today; the ultimate metric of a successful Presidential term. Remember, January 20, 2009 will not only be Obama's first day as President, but also the first day of his new campaign for President in 2012.

In my opinion, universal healthcare will have to be tabled in Obama's first term as it is simply too expensive to pursue in light of other priorities. If you think that the federal deficit is high now just wait for the next deficit defying stimulus package that will be proposed. Taking a page out of Reagonomics (credit driven consumption by all...er...supply sided economics) the US Congress will rush to put together yet another government funded initiative designed to get our economy jump started and out of this ditch. If Obama is smart (which he is) he will work his last days as a Senator to get a stimulus package approved and credited to the Bush administration. This would then be a win-win for him as he moves into his new role. If it works, he takes credit, if it fails he blames Bush.

This may surprise many who know me well, but I am actually looking forward to the new Obama administration. As the title of this article suggests, history is and will continue to be made as we move forward. My hope is that we will not repeat the Herbert Hoover history. Hoover was a Republican that raised taxes on the rich (similar to Obama's messaging) that took this country not only into the Great Depression but vaulted the Democrats into a historically long period of power and control of the Presidency of the United States. I hope that the history of Obama's presidency may be written as one that benefited all Americans for in his own words, "This is not a blue America nor a red America, but the United States of America!" Ladies and gentlemen let's give it up for President-elect Barack Obama...

A Novice View of America's Financial Crisis

2008-09-24T18:45:00.009-05:00

The recent crisis in our financial system points to just how little the average American and the average American politician knows about finance and the workings of our capital markets. It is also interesting to see the rush to blame the Wall Street fat cats for the entire debacle. I am not an economist, but here are Gacman's random thoughts on this crisis:

The average American is outraged (90% of calls to congress) at the "rescue plan" that most believe only makes rich Wall Streeter's whole. Here is my assessment/opinion:

The current problem is linked primarily to faltering mortgages (which were spun into financial derivatives and sold as securities) and foreclosures. Though it can be argued that financial institutions were pushing highly leveraged mortgages on "unsuspecting" customers, those who took the mortgages are equally culpable. I don't know about you but I have never carried a balance on a credit card nor taken a mortgage that I knew I could not pay. I have always taken a fixed rate mortgage (no surprises that way). The lesson learned here is that if one could not afford to pay the highest possible future mortgage payment on an adjustable rate loan with today's money, then one should not take the loan. And do mortgage companies actually think a person who puts little or nothing down has any reason not to walk on their home if economics change; especially a home that is worth less than when purchased? Bottom line is that greed on both sides of the ledger has brought us to where we are right now, and folks, it is dire!

If this plan is not approved soon we will see a melt down in our financial markets. Washington Mutual will fail and this single bank failure alone will swamp the FDIC and their reserves. And WaMu will not be the only casualty (i.e., Wachovia, etc). I predict the stock market will drop over 3,000 points and anyone who has a 401k will see dramatic reductions in value that will take years to recover. Those who need to buy cars, houses or small businesses will be unable to secure financing, regardless of credit rating. Those in uninsured Money Market funds could lose everything. Credit card purchases could become void due to no available credit (from card companies) to fund purchases. Within 60 days it is possible that one could go to an ATM and not be allowed to withdraw funds that are known to be in one's account. The domino effect of frozen credit markets would force many companies to simply close their doors, leading to rampant unemployment. We will re-live the Great Depression which most of us have only read about in history books.

It should be known that I am a free market capitalist, but I believe we simply must have the government intervene in this crisis. And done properly, the taxpayer can be paid back over time and even at a profit. I support this plan even though I will not benefit directly from the rescue since our mortgage is current and affordable. My hope is that our leaders and citizens will embrace a plan soon.

Hurricane Ike Smilebox Slideshow

2008-09-18T11:21:00.002-05:00

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