Archive for September, 2008

>It’s all over

September 30, 2008 Leave a comment

>It’s all over.

The 2008 US Presidential race, that is.

Who would have thought that the good ship SS McCain would be sunk by a torpedo fired in 1977 by Jimmy Carter?

That’s what happened when the Carter administration initiated Community Reinvestment Act, supercharged by Clinton’s further deregulation, reached the only outcome it ever could, bringing down some of Wall Street’s biggest names along the way.

There’s a Republican in the White House and the buck stops with him, as Harry Truman would say and the American voter would agree.

As I pointed out the other day, barring a major scandal Barack Obama will be the next president of the United States.

Check out the current opinion polls and betting market.

Gallup (Obama 50-42)

Rasmussen (Obama 50-45)


The real threat to the US lies not only in the inevitability of an Obama presidency but also in the fact that with such a sentiment sweeping the nation the Democratic Party may pick up the required number of Senate seats to be able to ram through any legislation they want.

And then we’ll really see the US economy tank.

Unfortunately, we’ll all pay the price.

(Nothing Follows)

Categories: Politics, United States

>Regulation – not Deregulation – caused financial crisis

September 28, 2008 2 comments

>The current financial ‘crisis’, which I refer to as a ‘perturbation’, was caused by compassionate policies aimed at achieving higher housing affordability for low income workers.

As the video below shows, the legislation was originally introduced in the Carter administration and had an almost immediate effect of starting the housing bubble that was eventually going to pop and nearly bring everything else down with it.

Dennis Prager has a nice line that the problems with liberal policy is that it places compassion above standards.

Here is a classic example of the sound standards of work, savings history and deposit being thrown out the window in an effort to improve people’s lives.

The video describes the result as ‘cruel’.

I wouldn’t use that term.

‘Unwise’ is a better description, though it doesn’t matter what you call it – every mortgage owner in the world is going to pay the price.

(Nothing Follows)

Categories: Economics

>Sunday night rock ‘n’ roll

September 28, 2008 Leave a comment

>Red Hot Chili Peppers are an American rock band formed in Los Angeles, California, in 1983. For most of its existence, the band has consisted of vocalist Anthony Kiedis, guitarist John Frusciante, bassist Michael “Flea” Balzary, and drummer Chad Smith. The band’s varied musical style has fused traditional rock and funk with various elements of heavy metal, punk rock and psychedelic rock.

In addition to Kiedis and Flea, the group originally featured guitarist Hillel Slovak and drummer Jack Irons. However, Slovak died of a heroin overdose in 1988, resulting in Irons resigning. Irons was replaced briefly by former Dead Kennedys drummer D. H. Peligro before the band found a permanent replacement in Smith, while Slovak was replaced by up-and-coming guitarist Frusciante. This lineup recorded the band’s fourth and fifth albums, Mother’s Milk (1989) and Blood Sugar Sex Magik (1991).

Blood Sugar Sex Magik was a critical success and sold over twelve million copies. However, Frusciante grew uncomfortable with the band’s success, leaving abruptly in 1992. Kiedis, Flea, and Smith employed Dave Navarro of Jane’s Addiction for their subsequent album, One Hot Minute (1995). However, it failed to match the critical acclaim of Blood Sugar Sex Magik and sold fewer than half the copies of its predecessor. Shortly afterwards, Navarro was fired from the band due to creative differences.

Frusciante, during his time away from the band in 1998, completed rehabilitation, rejoining the band at Flea’s request. The reunited foursome returned to the studio to record Californication (1999), which went on to sell fifteen million units worldwide, becoming their most successful album to date. It was followed three years later with By the Way (2002), which continued their success. In 2006, the group released the double album Stadium Arcadium. The band has won six Grammy Awards. They have sold over fifty million albums worldwide, have had seven singles in the Top 40 of the Billboard Hot 100 (including three singles in the Top 10), have had five #1 singles on the Mainstream Rock charts, and a record eleven #1 singles on the Modern Rock charts.

Higher Ground


Can’t Stop

(Nothing Follows)

Categories: Music

>Mr Obama, Mr President

September 26, 2008 4 comments

>There is little doubt that John McCain is the better candidate for president in 2008.

However, there’s no point listing his superiority over Barack Obama in terms of experience, competence and knowledge.

There’s no point analysing McCain’s superior ideology, founded in the greatness of the United States, with Obama’s Eurocentric ‘global citizen’ philosophy.

There’s no point reading the conservative commentators who accurately distill the issues in this election into informative and entertaining columns in order to sway people’s opinions.

There’s no point trying to work out who won the presidential debate; McCain was expected to win easily, landing a knockout blow on his inexperienced interlocutor. It didn’t happen, which only serves to strengthen Obama’s position.

There’s no point highlighting Youtube videos of Barack Obama blathering on like a man trying to win a stammering competition. The general view is that he is a terrific speaker; people don’t care that he needs a teleprompter.

There’s no point analysing the root causes of the financial market crisis and quite rightly demonstrating that the majority of the blame rests with Democrats and, especially, senior Democrats such as Barney Frank who resisted George W Bush’s and John McCain’s attempts to tighten regulations around Freddy and Fanny. There’s a Republican president and therefore he takes the blame. Remember Harry S. Truman’s aphorism – “the buck stops here”.

The current Betfair market is as follows:

$1.51 Barack Obama
$3.00 John McCain

With only six weeks until the election this is an impossible advantage to overcome barring a huge scandal from the Obama campaign.

It makes me think that the polls showing Obama with a 6-7 point lead such as the latest from Gallup are correct.

If Obama makes any mistakes then they will be papered over by a mainstream media that is so deeply in the tank for him that they need SCUBA gear. Naturally, any mistakes from the McCain/Palin team, no matter how trivial, will be blown out of all proportion in the media.

We had a similar situation here in Australia at the last federal election that saw a change of government when the media embarrassed itself with its support for now prime minister Kevin Rudd and failed in its duty to provide balanced, apolitical reporting.

Using the Realclearpolitics’ electoral map tool and having a look at how the race will end up I come up with the following as the result of the election.

I can’t see any way for John McCain to win this election. He has too much baggage to overcome.

Therefore, Barack Obama will be elected as the United States’ 44th president on November 4.

President Obama.

Get used to it.

(Nothing Follows)

Categories: Politics, United States

>What is more important in the 2008 US election?

September 26, 2008 Leave a comment

>What is more important?

The scar on John McCain’s face or the Rezko scar on Barack Obama’s reputation?

John McCain’s attempt to strengthen the oversight of Fannie and Freddy or Barack Obama’s status as second largest recipient of political donations from them?

The number of houses John McCain owns (that were purchased with Cindy’s and his own money) or the source of finance for Barack Obama’s house?

John McCain’s long history in support of free speech or the Obama campaign’s frequent attempts to use the law to shut down their political opponents?

John McCain’s ‘reform’ or Barack Obama’s ‘change’?

John McCain’s desire to see a market bail out not paid for by taxpayers or the Democratic Party leadership’s attempt to attach pork to the bill that would not only see shale oil drilling continue to be banned but give hundreds of millions of dollars to ACORN?

What is more important?

The real mother of Sarah Palin’s Down Syndrome child or Barack Obama’s friendship with terrorists Bill Ayres and Bernadine Dohrn?

Sarah Palin having Trig when he was prenatally diagnosed with Down Syndrome or Barack Obama’s support of partial birth abortion?

Sarah Palin originally being for the Bridge to Nowhere or Sarah Palin killing the Bridge to Nowhere when the full scale of the corruption became apparent to her?

Sarah Palin being a heartbeat away from the presidency or Joe Biden being an impeachment away from the presidency?

(Nothing Follows)

Categories: Politics, United States

>Fannie and Freddy caused by Democrats and will help Obama win

September 25, 2008 1 comment

>While this video is factual I do not believe that even if every voter in the country knew its contents that it would alter the outcome of the upcoming election one iota.

I think that the electorate has stopped listening. All Barack Obama has to do is run a disciplined campaign from here on in and he will win – though he might want to muzzle the embarrassment that is his VP pick until after November 4.

You can see from the betting graph that Obama has a big lead, which has increased due to recent poor economic news. Opinion polls may tell one story but money always seems to be the strongest indicator of performance.

The irony is that voters will be electing the party that caused the mess in the first place.

(Nothing Follows)

Categories: Economics, United States

>Financial market graphs back to 1950

September 23, 2008 3 comments


It’s interesting to see that the downturn after the Dot Com boom and September 11 was much deeper than what has happened recently.
If confidence can return to the market, backed by loan facilities supported by the government, then you’d expect things to improve.

S&P – 2 years

S&P – 5 years

S&P – from 1950

(Nothing Follows)
Categories: Economics, United States

>Nostradamus 1999 – Freddy and Fannie

September 23, 2008 3 comments

>From September 30, 1999, comes this piece by Steven A Holmes in the New York Times:

Fannie Mae Eases Credit To Aid Mortgage Lending

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

The goal of the Clinton administration was to make loans more accessible to minority groups who could not otherwise get affordable credit.

A laudable goal you might think.

However, the research showing racial bias in home lending was later debunked completely but, of course, the changes stayed and now the world is in a mild financial mess.

I use the term ‘mild’ because that’s what it is, at this point anyway. If things don’t get worse then the result is to simply set market values back a couple of years. Press the play button for five years and the market will be much higher than before the recent perturbation.

I made a point in a recent comment about the best description of how Fannie and Freddy got into the current mess, which is that it’s akin to telling someone that they can go and gamble in Las Vegas and that their losses will be covered but that they can keep their winnings. It simply must lead to more risky behaviour.

The market always understood that Fannie and Freddy were government backed so their management were in an all care, no responsibility position.

President Bush and John McCain have both attempted to reduce the risk to taxpayers of exactly the type of failure that we now see but were thwarted by Democrats, for whom Fannie and Freddy are a source of post-political jobs as well as large campaign donations, and a handful of Republicans who had also been corrupted by the large amount of money to be had from those organisations.

I prefer to let the markets work but if there’s no liquidity then there’s no market.

There’s another point that is being somewhat overlooked, which is that millions and millions of people have benefited from the access they’ve had to ‘easy’ credit in order to purchase a home. The majority of those will retain their homes and continue to make payments.

The usual suspects on the left are talking about the meltdown being an example of the failure of capitalism.

No surprise there.

In their usual ignore-the-good-news manner they completely ignore the fact that emerging economies – China, India, Brazil etc – have had access to much more capital since deregulation in the 1980s than they would have through the traditional source of the World Bank, which has led to improved living standards for hundreds of millions of people.

(Nothing Follows)

Categories: Economics, United States

>Australia’s left does not understand either the US or the world

September 22, 2008 6 comments

>In one short opinion piece in Melbourne’s The Age newspaper Bruce Grant, author and former diplomat, demonstrates how out of touch with reality the left in Australia has become.

Grant’s proposition is that it is Australia that is now showing the United States the way rather than the other way around.

My own view is that the English-speaking-world shows the rest of the world the way forward.

IT’S a strange feeling, while watching the elections in the United States, to realise that the US is trailing Australia in important respects. America has been for so long the fountain of all that is “new” that to think of it being behind the times, especially as set on this side of the Pacific, requires a wrench of the imagination.

But Australia is out of Iraq and has signed the Kyoto Protocol on climate change, on both of which the US is still undecided. And this is just the tip of the iceberg. The next president confronts a lengthy list of things to do to catch up with the contemporary world.

It is truly shameful that Australia has withdrawn any of its soldiers from Iraq at a time when the surge has undeniably worked, the government is getting its act together and the country is getting back on its feet. Australia actually signed the Kyoto Protocol when it was first drawn up – more than 10 years ago – but did not ratify it for two very good reasons: it seriously affected our economy; and it achieved absolutely no good outcome at a cost of trillions of dollars. Grant also fails to let his readers know that the United States Senate voted against ratification of the Kyoto Protocol while Bill Clinton was president by a whopping 95-0.

He will need to revisit US opposition to the International Criminal Court, a ban on anti-personnel landmines, a treaty on bio-diversity and a verification mechanism for the Biological Weapons Control Treaty. The US is also yet to ratify the Comprehensive Test Ban Treaty and persists with an anti-ballistic missile system.

The reason that the US opposes the International Criminal Court is simple; it would allow bad state actors to take action against the US even when it is using its armed forces in humanitarian roles (which actually comprises the majority of its overseas engagements). The US is the most powerful nation in the world and has a moral duty to ensure that people who can’t defend themselves are supported, an achievement completely unable to be achieved by Grant’s so-called “contemporary world” be it the EU, the UN or any individual nation.

It seems to be still imbued with the old-fashioned idea that unilateral military power is the way to get things done and that peace-keeping is for wimps. It spends as much on defence as the next 10 highest spending countries. It is rare for armed forces to be stationed in another country, yet the US has its forces in about 60 countries. Its air force and navy patrol the globe and it has the most advanced satellite technology for gathering intelligence. Moreover, it has more nuclear weapons than any one else.

No country spends more time and effort in trying to keep the peace than the United States. As JFK put it in his famous inaugural speech, “Let every nation know… that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty” and “For only when our arms are sufficient beyond doubt can we be certain beyond doubt that they will never be employed”.

I’m sure that US taxpayers would be thrilled that they could scale back their military and do what Western European nations did after World War II – reduce their military spending and build up their social programs secure in the knowledge that they had a protector in the United States keeping them safe.

The American way of life is not the beacon it once was for the rest of the world. The US economy is not coping well with rising fuel costs and home loan mortgages, let alone the more substantial challenges of climate change that the national political leadership has not yet tackled. The double deficits of government spending and import consumption have turned it into the world’s biggest debtor nation. While we struggle in Australia to improve social welfare and hospital services, the US, advanced in technology, has yet to reach our level of access. It was a novelty when Julia Gillard discovered recently in New York an innovation in education she would like to follow.

If the American way of life is not the beacon it once was then why the heck do so many millions of people want to move there? The economy is coping just fine with the current Wall St woes, which in a few years will be but a distant memory as the market posts record after record. Why anyone would use the decrepit New York education system, beautifully uncovered by John Stossel as completely dysfunctional, is beyond me.

Even in the category of trivial pursuit, the US has slipped a little. It came second to China in the Olympic Games. Bollywood is becoming as outrageous as Hollywood. The richest person in the world is an Indian. China and the Gulf states are building the most striking architectural creations since the Empire State became the tallest building in the world in the early 1930s.

Let me get this straight. Grant is saying that the United States is not the world leader but then compares other country’s achievements to the United States, which those countries have looked to for inspiration?

When the Cold War ended nearly 20 years ago, the US seemed to have the world at its feet. It chose to interpret its victory, however, in a way that recently has stressed the military component of the Cold War, not the ideological battle for “hearts and minds”.

From a military perspective, we can argue about when the Cold War ended — 1990 when the two sides declared themselves no longer to be enemies, or 1991, when the Warsaw Pact was formally disbanded. But for most people it was on 9 November, 1989, when the Berlin Wall was breached. The wall was not erected in 1961 in response to military pressure. It was built to stop East Germans from escaping to the good life in West Germany. Nor did it collapse in response to military pressure. It was breached when it failed to stop East Germans from getting to West Germany through Hungary and Czechoslovakia.

Jesus wept. For a diplomat he has an unbelievable knowledge of history…

From this perspective, Pope John Paul ll was a catalyst for the end of the Cold War, as were Lech Walesa, Vaclav Havel and many others. It was arguably opposition to the system from within, armed with the authority of the Helsinki Accords and using human rights to erode state power, that brought the Soviet Union to an end, rather than cruise missiles and nuclear warheads.

The left simply cannot bring itself to say that Ronald Reagan and Margaret Thatcher, along with Pope John Paul II, brought an end to the human travesty of the Soviet Union. No Reagan means no Welesa and no Havel. It’s pretty simple.

Globalisation, released by the collapse of the bipolar world of the Cold War, gave the twin pistons of American supremacy, democracy and capitalism, a clear run. But it also undermined the authority of the nation state, ushering in an interactive era of interdependence. American political leadership has not yet adjusted to this.

Elections still bring out the old rhetoric of American “exceptionalism”, which sets the US above and apart from the rest of us. The test of presidential character is not as global peacemaker but as commander-in-chief of the armed forces. So far in this election, there has been no discourse on the outstanding job of political leadership in the 21st century, which is to make the new global system work. Indeed, I can think of only one recent example, when former president Bill Clinton said the US should use its power to create a global security system, so that when it was no longer powerful it would still be safe.

If the United States ever chooses to “retreat” to within its borders then the rest of the world will become a much more bloody, violent place.

Here again Australia is ahead. Much is made of the fact that the Australian Prime Minister speaks Mandarin. Not enough is made of his liking for middle power diplomacy, which contrasts the “realist” view of power politics with an “idealist” view, as defined by Walter Lippmann: “Ideals are an imaginative understanding of that which is desirable in that which is possible.”

Australia’s attitude to its friends and neighbours is sometimes a mystery, even to ourselves. I happened to be at a football match in Melbourne a few weeks ago when international teams paraded at halftime. There were cheers for China, India, Denmark, Sweden, Tonga, the Peace team … everyone. Except Britain. The old enemy. A robust burst of booing. And New Zealand. Boo. Then came the United States, late in the parade. What would be the great Australian reaction. Boo!

Does that mean we have accepted the Americans into our own world, whatever that is? I think it does. The first task of the Australian Prime Minister when the Americans decide their next president will be to take him aside and give him the benefit of our new way of thinking.

When do Australian Prime Ministers not talk straight with their foreign counterparts including the United States?

What Grant is saying is that our Prime Minister must lecture the next President on what we expect from him.

In that regard, we have absolutely the right PM for the job.

(Nothing Follows)

>Sunday night rock ‘n’ roll

September 21, 2008 Leave a comment

>Neil Leslie Diamond (born January 24, 1941) is an American singer-songwriter and occasional actor.

Neil Diamond is one of pop music’s most enduring and successful singer-songwriters. As a successful pop music performer, Diamond scored a number of hits worldwide in the 1960s, 1970s, and 1980s. Critic William Ruhlmann wrote of Diamond, “As of 2001, he claimed worldwide record sales of 115 million copies, and as of 2002 he was ranked third, behind only Elton John and Barbra Streisand, on the list of the most successful adult contemporary artists in the history of the Billboard chart.” As of May 2005 Diamond had sold 120 million records worldwide[citation needed], including 48 million records in the U.S.

Though his record sales declined somewhat after the 1980s, Diamond continues to tour successfully, and maintains a very loyal following. Diamond’s songs have been recorded by a vast array of performers from many different musical genres.

Diamond was inducted into the Songwriters Hall of Fame in 1984, and in 2000 received the Sammy Cahn Lifetime Achievement Award.

If you don’t have Hot August Night in your collection then you’re probably in the minority. It truly is one of the great live albums ever.

While people may know Neil Diamond as a great performer they may not be aware that he has also written major hits for other artists including The Monkees’ I’m A Believer and A Little Bit Me, A Little Bit You (both of which went to #1 on Billboard), as well as having bands do covers of his songs that became bigger hits than he had with them such as UB40’s Red Red Wine.

Crunchy Granola Suite

Love On The Rocks

Solitary Man

Song Sung Blue

(Nothing Follows)
Categories: Music