Spinning the News

We all know that Faux News (I'm sorry, Fox News) is expert at winding up the political dreidel to attack, derride, and degrade those who do not share their views.  Funny, I thought that the news was simply supposed to contain a factual digest of current events; you know, the who, what, when, where, why, and sentence.  Unfortunately, journalistic embellishment through adjectives constantly skews the what, and the why and sentence of the news is rarely more than an opinion column.

And not to defend Fox news at all, but there are many outlets that wind the dreidel in the opposite direction and spin it just as aggressively.  Check out this photo of Arizona Governor Jan Brewer.  Now, I don't agree with many of her positions, but I'm willing to hear them and give them a fair review.  And if it was my job to report the facts, I would most certainly do so with every effort made at standing the dreidel on its point.  And if I was a news photographer snapping hundreds of shots at a press conference, I certainly would choose a different shot than this if I was attempting to remain objective...

Apparently media objectivity is an impracticable concept, save in the press box at a sporting event, where cheering is still symbolically not allowed.

Random Thought of the Day

Last night at a city council meeting, Compton officials raised the prospect that the city may need to consider bankruptcy in the near future,  which could make it the fourth California city to do so since the financial collapse.  At the same time, political campaigns raise hundreds of millions of dollars from deep pockets and celebrities just to blow on mud-slinging advertising.

I wonder what it would be like if celebrities and deep pockets channeled their influence through municipalities to promote electoral campaigns; would any of these cities have gone broke? I'd like to think Dre and The Game would have made the CPT a hip-hop tourist resort town, by now...

Stunning Partisan Fact of the Day

When we look at the partisanship of business, we generally see established businesses subscribe to conservative politics, and young companies tend to adapt more progressive policies.  Even more so, we tend to associate Big Oil with the Republican party.

But did you know.....?  LA-based Occidental Petroleum, the third largest US oil company, made political campaign contributions in favor of Democrats at a clip of 1.47 to 1 in 2008.  True Story.

Wild Market Ride

Yesterday was the first trading day since the S&P downgraded their rating of US debt, due to the fiscal policy instability in our country.  The instability stems from a complete inability to compromise on Capitol Hill.  The left side of the aisle points their fingers at the right side, saying it's going to take both spending cuts and revenue increases to fix the problem that the right side won't listen to, and the right side of the aisle is throwing their hands in the air claiming a mandate from the Taxpayer to fix rampant spending abuse in Washington, then folding their arms and playing chicken with default.  But ensuring true, longterm economic health is not an overnight fix, something both sides were looking for and stood firm on.  Even with an analytical error, S&P was right to downgrade US debt, because there is a major structural issue to address.

That is a large part of what caused yesterday's massive selloff, taking the stock market under 11,000 and closer to Bear Market territory.  The other major fundamental aspect to the economy that would let the air out of stocks is that it appears that QE has ended, and the debt deal hints that it wouldn't be prudent to inject any more liquidity into the markets, artificially inflating them.  Therefore, the market is now right-sizing to what it would be sans intervention.  Of course, today we had a pop-back in reaction to the Fed leaving rates low, but once that announcement gets fully digested, I think the market will interpret the statement as I did: You're on your own, now.

Today's Fed decision was to leave the target benchmark overnight interest rate between 0-0.25% until the middle of 2013.  The bond market naturally went nuts over the news, as a 2-year T-Bill essentially became an overnight note.  The stock market went schizophrenic, unable to decide whether all of the dire ajectives about the economy overshadowed the low-rate environment or not.  The little engine that could (open-market LIBOR rates), however, has continued to chug along as it has for the last month in an upward direction.

So, based on the fact that 1) LIBOR is on a slow but consistent rising trend, 2) There were 3 dissenting FOMC members to today's statement, all which would have preferred to keep rates low for a shorter duration 3) The Fed has never set a target date horizon for a consistent rate level, leading me to believe that the decision, while probably an analyzed and educated estimate, is more of an emotional appeal to appease the market and rates may not in fact remain this low until 2013 --  We're in the full-swing of a US Treasury bubble, or an inverse bubble for rates.  Market returns must out-pace inflation, and as mortgage rates get pushed under 4% again this week (just watch), investors will begin to again search out a predictable stream of income (i.e. dividend paying stocks, corporate bonds) that will provide a more reasonable investment return.  Comparative risk appetite may increase in the mid-term, which should cause a demand decrease in US Treasuries and the subsequent and ineviable rise in yeilds.  This is the slow and healthy process of the cyclical economy, and hopefully we're disciplined enough to accept this over a quick fix as we have in the past.

The Debt Ceiling: Time For a Banker to Weigh In

There's been plenty of sqwaking in the media and political posturing on Capitol Hill these past few weeks, especially as it relates to the Nation's debt ceiling, and either raising it or risk default.  I figure that, as a lender who deals with credit and risk management on a daily basis, it's time for me to weigh in.

I had a client sent me a panicked email today, asking if it would be okay if they sent in their Q2 financial reporting on Wednesday the 3rd instead of Monday the 1st.  The client felt horrible about being late, but had been bogged down by an increase in business this year, and needed a couple extra days to finish reconciling the books.  Why am I telling you this?  Because this is an example of not a good, but a GREAT client that is managing its reputation around the full faith and credit of itself as a business-- with flying colors.  We're not talking about payment delay or default, or even any substantial risk change in the business, and they are reacting with great sensitivity.  Side note: Of COURSE I granted them the extension to report their financials!

Take the opposite end of the spectrum.  For a large institution like the US, reporting statistics has become almost an automated process, and gaining the info within these reports is not such a chore, as can be with middle-market banking.  BUT...this institution has been running red ink (a budget deficit) for far longer than any credible business would be able to sustain prior to a credit downgrade.

This is why I can say with almost complete certainty that at some point next week, we'll be discussing the downgrade of US debt from AAA by both Moody's and S&P.  Risking delayed payments to any debtors has negative implications, and increasingly leveraging the country with budget deficits only protracts those risks.

Spending is out of control, and the waste inherrent in that spending has increased over time as more people have become keen on how to play the game.  I'm all for important social progams, but you have to instill a slapping mechanism for when the beneficiaries of these programs bite the hand that feeds them.

Washington is playing politics with our country's credit rating hanging in the balance, and this is sure to have a negative affect on the interest rate environment.  While I'm sure there will be a deal to increase the debt ceiling next week, it appears that there is still plenty of posturing on the right to make the deal a 6-9 month fix, and posturing from the left to close tax loopholes.  And why can't they compromise?  Because this is a game to politicians, and the Republicans 'win' if the debt problem comes back before the next election, and Democrats 'win' if they can close tax loopholes so that they don't have to cut spending as drastically.  It's disgusting, and all of us ordinary Americans are going to pay a price for their game of chicken, but most likely not to the extent that the media is hyping it up.  Remember the lessons from Carmageddon on this one!

LA Mayor Villareigosa Visits the West LA Chamber

This past Wednesday, mayor Villareigosa visited the West LA Chamber's monthly networking breakfast.  Rather than giving a speech, the mayor took a Q & A session, and was pretty open and straightforward with all questions brought forth.  The mayor was emphatic about the 30/10 plan, and noted that while the Westside had previously been opposed to rail line expansion, the area has become a large advocate of the program.  He added his enthusiasm for the Expo line opening this Spring/Summer.
The mayor also addressed the issue of education and the struggles of budgetary constraints.  Education is another issue the mayor spoke passionately about, and recognized that the UTLA, and CTA as a while, is operating in a broken system and needs to recognize the need for prudent reform.
I really enjoyed the opportunity to interact with the mayor in this town-hall type venue.  Mayor Villareigosa will be touring the various Chambers in LA this spring.

The politics of saying big things and yet nothing at all

Is anyone else pissed off by election season this go-around? Without a doubt, the last eight years have been really crappy for most all of us, and I'm pretty sure that everyone can agree that America isn't in the same position it was 10 years ago, when spirits were probably higher than they've ever been and everyone was in an SUV frenzy. Stocks were soaring and the American people were prospering. Uh oh, 'is he about to give a Democrat's pitch?' No, nor am I going to give a Republican one. I'm not a fan of partisan politics, I think they're counterproductive.

But this election's season is turning out like almost every other. Accusatory remarks and generalizations of platforms promising the People everything....from BOTH sides. Then listen to each opposing party's message and they're conveying that the other candidate is promising the OPPOSITE of what was said. How is this helpful?

I for one, would like some actually informative remarks. I did hear a solid statement from John McCain last night, however. He said that if elected president, he will double the dependednt child tax credit from $3,500 to $7,000. I know that people near and dear to me would benefit significantly from the implemententation of that plan. However, so as not to sound biased (because I'm not, I still haven't made up my mind how I'm voting yet), I was perplexed when the same candidate said that Barack Obama's plan was to raise taxes. I'm pretty sure that I heard Mr. Obama say that he wanted to cut taxes for 95% of all Americans. So I'm confused; are the Republican charges categorically false? Probably not, because nothing in politics ever is, but what are the taxes they believe he intends to raise? And on the flip side, what are the taxes he plans to cut? When you can throw out a number like 95% of the population, you'd better be able to explain that figure to me, otherwise I'm going to think you're just blowing smoke up my ass, which I'm not the biggest fan of.

Long story short and to summarize my point....unless these two candidates stop the BS and start talking issues and more specifically on how they plan to help the people and change the country, then McCain's campaign manager, Rick Davis, is correct in saying the election would be decided more by voters' views about the candidates' personalities than about issues.

And Mr. Obama, if you believe that your personality is really not why you think you're going to get elected into the oval office, then let's start putting some SERIOUS substance in your speeches and start talking to the American people about them, not John McCain. We don't know you so well, Mr. Obama, but we really would like to, honestly. Just be a true leader and explain to us what specific actions you are going to take in order to achieve the change you are promising. And I don't want to hear that you're going to cut taxes and spend money on programs without telling me how you plan to fund these programs. It's basic math; you can't take in less money and go out and spend more without going deeper into debt, which the average Ameircan is feeling pretty adverse to at this point, given the credit crunch and all.

Okay, end rant. Begin with the info gathering!

Those Crazy Russians

Okay, let's get it out there; the recent Russian 'liberation' of South Ossettia and Abkhazia is rather unnerving. Not that I don't see what they are doing, and it's pretty smart. It's just their approach that's flawed is all, which makes me think that something else is up.

Think about it....Bush wanted to get us into Iraq and get Saddam out. Critics say he wanted the oil, and more critics looked at it as invading the sovereign country of Iraq. The Black Sea area is ripe with oil and natural gas distribution and production, and Russia has stood behind its actions as helping the people of S. Ossettia and Abkhazia while the rest of the world looks at it as an invasion. Parallels? Bush cried WMD, Medvedev is crying ethnic cleansing. Only difference is that Bush tried to direct attention to the WMD issue before going into Iraq, and that's where Russia has muddied itself with the rest of the West. Immediate unilateral military action without first saber-rattling is uncouth in Western Politics these days. But are we really going to descend into Cold War II over a misjudged communication slip?

One thing is for sure, though. This little sqwabble is most likely going down in history as a large bullett point in what will probably known as "The Energy Revolution." Who cares who is right and who is wrong and which state is sovereign, etc. What matters is that the Russians screwed up. The United States, led by people like T. Boone Pickens, who has more than a little influence over a good part of American aristocracy, has begun changing its habits. As this energy shift gains steam, it won't matter that China's energy need grows by a high percentage...in shear numbers, American consumption will decrease world consumption of oil as we switch to solar, wind, and natural gas, of which we have an abundance of all. Good luck propping up $100 barrells of oil when nobody wants or needs them anymore. So hang on for Cold War II, the Russians have gone short-sighted again, shooting themselves in the foot on the way to another economic bust. Moscow awoke from the coma of communism only to find that it was on life support, but apparently doesn't believe it and is about to pull its own plug. Crazy Russians!