All Good Things

According to a 1993 Jackson Browne song, "All good things got to come to an end."  Over the years, I've come to accept that it's so.

I had wanted a Porsche 911 Carrera since I saw a brand new 1967 Arctic Silver 911S when I was a freshman at College of the Sequoias.  Most of us were into muscle cars, such as Mustangs and Camaros and GTOs but I got the sports car bug right then and there.

Of course, there was no way a college kid from a modest background could afford a Porsche 911, even a used one.  The solution was my first sports car--a 1961 Triumph TR3.  By the time I graduated from college and had a real paycheck, I realized the paycheck wasn't big enough to buy a 911.

In the ensuing years my paychecks grew but never as fast or as high as the window sticker on a 911 Carrera grew.  Bummer.  The solution, then, was a string of pretty good sports and GT cars, including a Porsche 914, two Nissan (Datsun) Z cars, a Mazda RX-7, a BMW M3 and another Porsche, the 968.  They were all good cars--all good things.

Then, in 1995, Porsche introduced the new 911 Carrera (model designation 993) and I fell in love all over again.  Lo and behold, a quick check of the window sticker and a comparison with my paychecks of the time proved I could buy one of them if I wanted.  Finally!  I found the one I wanted, negotiated the deal and had the pen in my hand, ready to sign.  I couldn't do it.  No way.  I could not force my hand to sign a paper buying a $55,000 car.

Fast forward to the late fall of 2008.  The economy was in the tank, investment markets were in free-fall and I was losing almost as much money per day in the stock market as the cost of a used '95 Carrera.  This is really dumb, I thought.  So, I started looking and by January 2009, I'd found my dream 911 on eBay in Chicago.  It not only looked right, it had all of the right after-market performance goodies already installed.  All I had to do was turn the key and drive.  Awesome.  It was, too--awesome, I mean.  It still is.

Things are different, now.  I'm semi-retired and self-employed.  My son, Alex, just turned sixteen, will be getting his driver's license very soon and his sister, Julia, will follow that act in two years.  My life has moved on, too.  I found I was driving the Porsche less and less.  Instead, I was driving my big Ford Expedition more and more, going to the barn and hauling horse stuff or guitar and amplifier stuff.

When I was a kid in the Fifties and Sixties I wanted to be a pilot.  I'm not sure why but the idea of flight and the freedom of it really appealed to me.  Later, during the Viet Nam era, I had the chance to join the Air Force but declined, even though I still wanted to fly.  During the Eighties I fulfilled that dream by getting my private pilot's license and doing some recreational flying for a few years.  It was great while it lasted but my life moved on to new homes and jobs in new towns and it's been about twenty-five years since I've flown as pilot in command.  I think about it every once in a while but with no regrets.

It's with mixed emotions that I'm selling my Guards Red Porsche 911 Carrera--the car I'd wanted since I was a college freshman in 1967.  I fulfilled that dream and living it--driving it--was every bit as great as I'd hoped it would be.  I'm sure I'll think about it every once in a while but with no regrets.

"All good things got to come to an end
The thrills have to fade
Before they come 'round again
The bills will be paid
And the pleasure will mend
All good things got to come to an end


All good times, all good friends
All good things got to come to an end."


Jackson Browne

The Trouble With Congress

There are a lot of problems with Congress and our elected representatives.  I won't try to list all of them but  recent events have dragged one of those problems to the forefront:  Our U.S. Senators and Representatives are doing lousy jobs.  Some would say they aren't doing their jobs at all.

Our U.S. Senators and Representatives repeatedly fail to make correct but difficult decisions to control spending, reform taxes and drastically reduce the soaring deficit because, among other things, voting for unpopular but necessary changes in government will cost them their jobs.  Congress, especially the House of Representatives where elections for all seats occur every two years, has become more about RE-elections than about governing our nation.

A lot of people have realized the problem and the governor of North Carolina, Bev Perdue,(D) has offered a solution.  Unfortunately, her proposed solution is as incorrect as her identification of the problem was correct.

According to the Raleigh News & Observer, Governor Perdue stated at a recent Rotary Club gathering, "I think we ought to suspend, perhaps, elections for Congress for two years and just tell them we won't hold it against them, whatever decisions they make, to just let them help this country recover.  I really hope that someone can agree with me on that. You want people who don't worry about the next election."

http://projects.newsobserver.com/under_the_dome/perdue_suggests_suspending_congressional_elections_for_two_years_was_she_serious

She's half right.  Fear of being thrown from office is paralyzing Congress on key issues.  However, guaranteeing these folks get to keep their jobs through an election cycle isn't the answer.  The answer is TERM LIMITS.

In 1951 the 22nd Amendment, which limited the term of the Presidency to two elections and no more than ten years,was enacted.  Congress and the States correctly recognized that staying in government for too long was not a good thing.

There have been several term limit Amendments proposed  for Congressmen and Senators.  As recently as November 2009, Jim DeMint, U.S. Senator from South Carolina, introduced S.J. Res. 21, which would limit office to two terms for a total of 12 years for Senators and three terms for a total of six years for Representatives.

This is the correct solution to the problem but S.J. Res. 21 was sent into a black hole.  The last action on it was a referral to a Senate committee where it will lay for eternity.  Why?

At the same time that resolutions proposing term limit amendments are offered by Senators such as Jim DeMint, Senator Harry Reid, top dog in the Senate, and Congressman Barney Frank, former top dog in the House, are among a group of legislators who have sponsored a resolution to repeal the 22nd Amendment limiting the time a president can serve.

Are Reid and Frank nuts?  I'm not a psychologist but I know they've taken a backwards position on this key issue.  I'll leave the overall evaluation to you.


In my opinion, Jim DeMint should be applauded for recognizing the severity of the problem, recognizing the correct solution and actually trying to fix the problem.  That takes smarts and guts.  Way to go, Jim.

As for Governor Perdue, she was intelligent enough to recognize a serious problem, even if her solution was misguided.  To her, I can only say, "What were you thinking?"

The Beat Goes On

What beat?  The beat of political drums is pounding across America.  Cut spending!  Raise taxes!  Create jobs!  Help the sick and the poor!  Defend our country and our way of life!

As political debate rages around us, spending, taxes and the federal budget deficit remain high on the list of topics.  If people thought the deficit issue or the problem would go away with the recent passage of an increase in the federal debt ceiling, they were sadly mistaken.  Our government faced the enemy and it was staring back at them in the mirror.  They had a chance to do the correct thing for the good of our nation but, instead, they blinked.

At the eleventh hour and fifty-ninth minute they agreed on a not-at-all-sufficient deficit reduction program offset by a too-small debt ceiling increase.  They kicked the can down the road until another day in the not-too-distant future:  2012.

What was the hang-up?  The answer is easy but sad.  They—both sides—worried more about getting re-elected than doing the correct thing for America.

What should they have done?  Although complicated and not at all popular, this answer is easy, too.  They should have raised the debt ceiling in conjunction with significant spending cuts and an increase in taxes on the very rich.  Now that I've said it, I may not be very popular, either.

Warren Buffett, a very smart and really rich guy whom many of us respect, wrote recently, "My friends and I have been coddled long enough by a billionaire-friendly Congress.  It's time for our government to get serious about shared sacrifice."  [Excerpted from an opinion article in The New York Times.]

I agree with Buffett.  The “very rich” should pay higher taxes.  The problem is where one draws the line.  President Obama says he wants millionaires and billionaires to stop getting a free ride and pay their fair share.  He talks about taxing the super-rich, flying around in their personal jets but his proposals call for tax rate increases on incomes of $200,000 or more.  Does anyone recognize the term, “disingenuous?”  

Who, exactly, are the very rich?  According to Warren Buffett, he made $40 million dollars last year.  That’s very rich.  It’s also a long way from the $200,000 annual income figure that the Democrats use in their tax proposals.

So, what’s the correct income number on which to pay higher taxes?  If it were up to me, the magic number would be two additional tax rate brackets at $500,000 and $1,000,000, respectively.  The top tax rate, now, is 35% on income above $380,000.  I’d keep that rate and the lower brackets where they are but add a 37.5% rate at $500,000 and a 40% rate on income above $1,000,000.

So, what’s that going to cost?  A couple filing a joint return with taxable income of $500,000 would pay taxes in the future equal exactly to what they pay, now.   No increase.  Let me repeat that—No increase for 99% of tax filers.

However, a family who earned $1,000,000 would pay $12,500 more in federal income tax than before.  They can afford it.

Someone who had a very big income of $2,000,000 would pay $37,500 more under this new tax plan than they would under the current structure.  Again, they can afford it.

Incidentally, if Warren Buffett's income was ordinary earned income, he would have to pay a little over $1.5 million more in federal income taxes but, in case you’d forgotten, he’s not complaining and, you guessed it, he can afford it.  In reality, he wouldn't have to pay it because most of his reported income is from long-term capital gains, which I have not suggested changing.

Further, these proposed new income brackets and tax-rate increases would not destroy jobs, deter investment or prevent jobs from being created.  On the contrary, the financial stability that a realistic deficit reduction program would bring to the economy would encourage new investment and encourage corporations to begin spending some of the cash they’ve been hoarding.

To quote Warren Buffett, again, "I have worked with investors for 60 years and I have yet to see anyone--not even when capital gains rates were 39.9 percent in 1976-77--shy away from a sensible investment because of the tax rate on the potential gain.  People invest to make money, and potential taxes have never scared them off."  I can buy that.  The statement isn't true because Buffett said it, rather he recognized the truth of it in our economy.

How much new tax revenue are we talking about?  According to the most recent complete IRS information I could find (2008), returns with $500,000 or more of taxable income represented 19.2% of total taxable income from all returns.  These proposed tax rate increases would generate a little over $50 billion in additional tax revenue annually.  That’s $500 billion over a decade but it alone won’t fix the problem—and it shouldn’t. 

Actually, $50 billion of new tax revenue is only a drop in the bucket.  The deficit in 2010 was $1.3 trillion, which was more than 37% of total outlays of $3.5 trillion.  I’ll come back to these numbers later, so please remember them:  $1.3 trillion deficit; 37% of total outlays.

Is there a lot of waste in government spending?  Yes but it alone can’t save enough money to fix our problem.  Real cuts need to be made.

Where should we cut?  Isn’t everything on which the federal government spends money critically important?  No, it isn’t.  That should be the easiest to cut but some of the really important stuff will need to be reduced, also.

First, we, the people—represented by our federal government—spend approximately 20% of our annual budget on Social Security payments.  Current spending and current beneficiaries should not be touched.  Social Security is a future problem that must be fixed in the long term but not today.  We should adjust the start-point for future benefits of people who are under 55, today, so that the program will be sustainable in the future but current recipients should not be negatively impacted by any changes.

We also spend approximately 20% of our budget on defense, in one way or another.  That includes the costs of two wars that have cost many precious American lives and burned trillions of American dollars, many of which will never be accounted for.  We cannot afford to weaken our defense but we cannot afford these two wars of dubious value and accomplishment.  We surely cannot afford the waste and outright fraud that has accompanied them.  We should pull out of Afghanistan and Iraq and focus on the real defense of our nation.

We spend a whopping 21% of our budget on Medicare and Medicaid.  Are they sustainable?  Not in any calculation you can make.  Recent legislation has done nothing to reduce the runaway increase in healthcare costs.  Rather, it is an insurance program designed to decide who receives medical treatment and who pays for it.  Further, the cost of what is most often called Obamacare is enormous, does nothing to reduce the cost of healthcare and will most likely be judged unconstitutional.  We must find a way to cut these two huge programs—Medicare and Medicaid—now. 

We spend about 6% of our budget on interest payments on Treasury debt.  The bad news is, because of runaway deficit spending over the last decade, we’re borrowing way too much.  The good news is rates are cheap.  The yields on all bonds, including US Treasury bonds, are at historic lows.  The ten-year T-note is currently at a yield slightly below 2%.  If interest rates double over time, our debt service cost could double.  We cannot reduce this cost immediately because our sovereign debt must be honored but we must reduce the rate at which we’re adding to our national debt.  Then we have to find a way to reduce the debt itself.  Nothing less should be tolerated.

The remaining 33% of our expenditures should not be safe from reduction or elimination but there are no really big single programs to attack.  Instead, there are a bunch of little ones.  With these programs, the job of finding reductions will be different but we must reduce or eliminate many of them.

So, here we are at another critical crossroads.  If our government could reduce the cost of Medicare and Medicaid by one-third (7% of budget), defense by one-third (6.67% of budget), and the cost of other catch-all of programs by one-half (16.5% of budget), we’d still have a deficit of around 7% of expenditures.  The tax increases proposed above on incomes greater than $500,000 would further reduce the deficit to about 5.5% of total expenditures.  That sounds pretty good compared to the 37% of outlays in 2010 but it’s still too high.

The solution to a balanced budget in the future lies beyond this correction phase in a little thing called growth.  With renewed confidence in the stability of our government and our finances, people and businesses will invest.  They’ll put people to work and pay them salaries and those workers will pay taxes.

With our newfound responsible approach to expenditures, we also will need to hold the growth of spending to around 4% annually, compared with a historic average since 1950 of about 7.5%.  By itself, that won’t be enough.  We’ll need a steady increase of revenue, not from more tax increases but from economic growth.  Between 1990 and 2000, government receipts doubled, reflecting a 7% compound annual growth rate.  Between 2000 and 2010, gross receipts increased only 7%, reflecting the effects that two serious recessions had on economic activity.  The solution to this problem is clear:  Actively pursue government policies that promote economic growth with a targeted GDP growth rate of 4-5%.

This is what Congress and the White House should have been brave enough and strong enough to do for the good of the country, irrespective of political affiliation or the outcome of the next election.  Unfortunately, their priorities lie elsewhere.

Decision Time?

After taking the summer off from all of the hard work of blog writing, I decided it was time to put my brain back in gear and restart this blog.  There certainly is no shortage of things about which I have a strong opinion.

I saw this article on-line this morning on "Politico" called Decision Time for GOP Elite.   http://www.politico.com/news/stories/0911/62633.html

To summarize quickly, the point of the article was that big-time Republican donors needed to decide which horse to back in the race.  The authors further stated it had become a two-horse race between Rick Perry and Mitt Romney.

Decision time?  Maybe but I think of it more as "wake up time."

It's time for Republicans to wake up and realize that any nominee they select from the hard-core, right wing conservative ranks of the Party will ensure an Obama re-election.  As was the case in 2008, the 2012 election will be decided by the middle of the electorate.  It is these swing voters from the ranks of independents, moderate Republicans and conservative (Blue Dog) Democrats that must be won in order to win the general election.

About one-third of voters will vote for President Obama, irrespective of whom the Republicans run against him.  These voters represent the extreme left of the political spectrum in America.  They have a sitting president representing the left and they will support him actively.

Another third of voters will vote for anyone the Republicans nominate and the farther to the right the candidate, the more energized these voters will be.  These voters also are the ones who will select the next Republican candidate for president.

In 2008, Obama carried the remaining one-third in the middle.  Result?  Place a win in the column on the left.

If Republicans are serious about winning the White House in 2012, they must nominate a candidate who can take the middle away from President Obama.  Nominating a hard-core, right wing candidate who is more ideologue that rational won't do it.  Candidates such as Rick Perry, Michele Bachmann and Ron Paul cannot capture the swing voters.  If Sarah Palin enters the primary race and wins the nomination, she'd face that same fate as the others:  Energize the right for her; energize the left against her; lose the middle to President Obama.

Result?  Another four years of an Obama Administration in the White House.

Like it or not, and too many Republicans don't get it, the only Republican candidates who can capture the middle and win the general election in 2012 are Jon Huntsman and Mitt Romney.  Will Republicans nominate either of them?  Probably not.

Republican voters today are too wrapped up in Tea Party ideology to look beyond it to reality.  To these voters, I say, leave the tea in the cupboard.  It's time to wake up and smell the coffee.

The Purple Gang

Using red and blue colors on a big television map has been around for a while but it was during the Presidential election of 2000 that the terminology became part of the established American lexicon.  Red was Bush and blue was Gore.  (http://www.nytimes.com/2004/02/08/weekinreview/ideas-trends-one-state-two-state-red-state-blue-state.html)   Over time, the Red State / Blue State jargon was accepted to mean red for conservative states and blue for more liberal states.

I suppose these colors are as appropriate as any to describe the extreme ends of our political spectrum, even though the traditional color for socialist parties and countries has always been red.  Remember Red China or Pinko Commies?  "I'd rather be dead than red?"  Maybe it was a mix-up or maybe it was political correctness not to label the left-leaning, liberal Democrats red and assigning that color instead to the conservative Republicans.

I've believed for as long as I can remember that the biggest thing wrong with government is politics.  That is nowhere more evident than in a national presidential election.  You see, winning the right to run in the general election representing a specific national political party is all about politics in the extreme, as the extremes of both major political parties dominate the process.

To be a Blue Candidate, the person will have to appeal to the extreme left wing of the Democratic Party.  To be a Red Candidate, the person will need to appeal to the extreme right wing of the Republican Party.  Anyone with moderate views on any issue need not apply.  The Republicans are probably the worst offenders, as they even have a derisive name they give to pretenders who aren't worthy of being called True Republicans:  RINOs.

We see this syndrome now, as all of the Republican contenders are scrambling to move their statements and claimed beliefs as far to the right as possible.  John McCain did it during the last presidential primary season, even though he had always been a moderate.  Mitt Romney, the Republican front-runner, and Tim Pawlenty are doing it now.  They are both changing positions on key issues in order to prove they "are Real Conservatives."  http://www.google.com/hostednews/ap/article/ALeqM5hCwy8zBneOYklYsCPP1GbpA2vaDg?docId=6936af934fbc4f3d86b4ece0a98732be

This is really faulty logic on the part of the Reds and Blues because the candidate with the best chance of success in the general election is almost always the more moderate of the two.  You doubt it?

About one-third of the electorate is hard-core Democrat Blue and another third is hard-core Republican Red.  So long as each candidate passes their party's various litmus tests, these voters are in the bag.  No doubt, no risk.  The only question is about the remaining one-third of the voters?

According to a recent AP article, "The latest Pew Research study suggests that independents, who 'played a determinative role in the last three national elections,' will have even more clout in 2012.  They comprised 30 percent of the national electorate in 2005, Pew found. They now make up 37 percent."  Any way you stack it, that's a big number.  Whoever wins this group will win the general election.

So, what's it all about for me?  Will it be Red or Blue?  If I had my choice, it would be neither.  What we need in this country and in our political lexicon is a strong dose of Purple.  You read it correctly:  PURPLE!

Many of the positions taken by the Republican Reds on fiscal and governance issues are absolutely correct.  We desperately need less government and, more importantly, a less costly government.  As Ronald Reagan said, once upon a time, "Government isn't the solution.  It's the problem."

We need to reduce spending dramatically and we need to reduce the intrusion by government into the daily lives of Americans.  We need to live within our means and balance the budget without raising taxes on ordinary citizens or businesses.

During the 1992 election campaign, Bill Clinton got it right.  His campaign mantra was, "It's the economy, stupid."  This slogan kept the campaign focused on the one key issue that would eventually put Clinton in the White House for eight years.  Whatever you think of the man or his politics, during the campaign his job was to get elected and he did--twice.

If the Republicans could stay focused on the economy, jobs, spending and taxes, the Reds would actually have a chance to win.  The reality is they'll drift away from these critical issues, just as the leading candidates are doing now, to embrace and push the far right's social agenda.  In the process, they'll alienate much of the middle third of the national electorate they need in order to win the general election.

On the other side of the great divide, the Democrat Blues are not any better.  The big difference in this presidential election cycle is that the Blue candidate is a known quantity.  The chance of someone other than President Obama running for the Blues is something less than zero.

In the previous election, President Obama was able to capture the one-third of voters in the middle of the political spectrum--The Purple Gang.  In this election, he can afford to move his positions to the center, because he doesn't have to convince his Blue Crew that he's liberal enough to be called a True Democrat.

Red candidate, blue candidate?  What America really needs is more purple.

Where were you?

Most people I know who were alive and cognizant at the time remember where they were when they heard President Kennedy had been assassinated.  I was a sophomore in high school, sitting in my French class when the announcement came over the speaker system.  I was never a big Kennedy fan and never understood the entire "Camelot" thing other people felt but it was a very, very sad day for America--not the least of which was putting in office the worst president in American history.  I could elaborate but this Blog post is not about Kennedy or Johnson.

Everyone I know knows where they were when the first airliner struck the first of the Twin Towers of the World Trade Center in Manhattan on the morning of September 11, 2001.  I was at work when someone told my teammates and me about the crash.  We all ran to a television and watched in horror what we thought was the aftermath of a tragic accident.  We were still watching as the second plane hit the second tower.  We knew instantly it wasn't an accident and our lives and our world had changed profoundly.

Fast forward nine years and seven months:  Although it took a LOT longer than we Americans wanted and sometimes demanded, Osama bin Laden is dead.  It was late and I was getting ready for bed when my wife, Lori, called, "Come quick! "  She was watching television and had just seen the report.  We watched long enough to see the same news over and over about sixteen times while we waited for the official announcement from President Obama.  I am confident I'll remember this news as well as I remember 9-11.

Several things stuck me as I looked back at the past nine-plus years and ahead to whatever the future holds for us.

• I give our government, our military and our intelligence services a tremendous amount of credit for getting the job done.  We didn't always know of the efforts being conducted behind the scenes in secrecy but they never gave up.  In the end, their patience was rewarded with a solid result.
• I was surprised that bin Laden had been hiding in plain sight in relative luxury.  http://www.cnbc.com/id/42854159  I thought he was hiding in a cave, somewhere in the rugged mountains between Afghanistan and Pakistan.  To some extent I was disappointed in this because I'd hoped he living as miserable a life.  Oh, well--at least he's dead, now, and justice has been done.
• Although justice was done and the mastermind behind Al Qaeda is dead, unfortunately, Al Qaeda still lives.  The terrorist threat is still with America, as it is with all the countries and citizens of the West.  In this regard, bin Laden's death will not be the life-altering event that 9-11 was.
• Finally, I'm very glad bin Laden was taken out face-to-face by a US special ops team with feet on the ground, right in his luxury hiding place.  I would not feel the same level of closure and satisfaction if he'd been wiped out by a Predator drone.

SEALS ROCK!

Give Me A Break!

The Senate Investigations Sub-Committee looking into the financial collapse of late 2007 has released its findings.  Here is the opening of a CNBC story posted last night.

Conflicts of interest, excessive risk-taking and failures of government oversight triggered the financial crisis and helped push the country into the deepest recession since the Great Depression, concludes a new report by the U.S. Senate.

Getty Images The Goldman Sachs booth on the floor of the New York Stock Exchange

The two-year, bipartisan probe by the Senate Investigations Subcommittee examined the economic crisis and the role played by Wall Street in creating it.

The Republican and Democrat co-chairs of the committee agree on its findings.

"The report tells an inside story of economic assault that cost millions of Americans their jobs and their homes while wiping out investors, good business and [the] market," said Sen. Carl Levin (D-Mich).

"It shows without a doubt that lack of ethics in some of our financial institutions who embraced known conflicts of interest to accomplish wealth for themselves, not caring about the outcome for their customers," said Sen. Tom Coburn (R-Okla).  http://www.cnbc.com/id/42576329

All of this is true but, not surprisingly, they left out the part that Congresses controlled at different times by both major political parties and Administrations from both parties played in creating the economic and regulatory environment that made all of these "conflicts of interest, excessive risk taking and failures of government oversight" possible.  The government failures they cite were reserved for various regulatory agencies, such as the Office of Thrift Supervision and, to at a far lower level of culpability, Fannie Mae and Freddie Mac.

In the report, they also don't lay blame properly at the thousands and thousands of home buyers who bought far more house than they could afford to pay for ever in their lifetimes.  I guess Senators believe it's somebody else's fault when a borrower knowingly claims more income or fewer debts than they actually have in order to qualify for a nothing-down, declared-income mortgage that put them into a $500,000 house when what they could afford was a $250,000 house.

Give me a break.  Asking Congress to investigate and report on the financial meltdown associated with the collapse of the housing bubble/mortgage debacle is akin to asking Mr. Fox to investigate and report on the Great Chicken Coop Raid that decimated the flock.

How did this happen?

It started decades ago when the home loan business shifted from a market in which lenders approved, funded and collected the loans they made, to a market in which loan originators made and sold loans to packagers who securitized them as mortgage-backed bonds and resold them to investors, individual and institutional, all over the world.  This phenomenon grew and grew to a point that almost all mortgages were processed in this fashion.

Then the most recent real estate boom started and home values starting escalating really, really fast.  Loan originators kept making and selling loans with fewer and fewer requirements so more and more people could afford to buy homes, which is just what Congress intended.  Among other things, in 1999, a Republican-controlled Congress passed and then-president Clinton, a Democrat, signed a bill requiring Fannie Mae and Freddie Mac to make higher-risk loans to less qualified buyers.  That proved to be a really bad idea but at the time an overwhelming majority of our politicians of BOTH parties thought it was really the cool thing to do.

At the same time, the government decided it was cool to lower the capital requirements of these big financial specialty firms.  In some cases the new standard was an incredible leverage ratio of 30:1.  Yeah, if you realized that meant they had capital equal to a little over 3% of assets, you did the math correctly.  That meant if the value of their CDO (Collateralized Debt Obligations) portfolio fell by 4%, they were insolvent.

During this period, home buyers bought homes in which they planned to live and they bought vacation homes and they bought homes speculatively as investments.  They did so because the qualifying standards were relaxed more and more: No down payment required; no verification of income; no credit checks; crazy adjustable-rate mortgages with terms such as 3.0% for the first eighteen months, at which time the interest rate would jump to 10.0%.  People kept getting the mortgages and buying the houses because, hey, they had eighteen months to worry about refinancing or selling the house.  Besides everybody KNEW that the house was going to double in value in eighteen months--didn't they?

So they thought.  They were wrong.

The problem with that strategy was that as home values flattened and mortgage rates reset, homeowners and investors starting defaulting.  Oh, wait--that's not supposed to happen. No but it did.

As mortgages defaulted and home values fell, the collateralized mortgage obligations that included them began to fall in value and were required by SEC regulations, to be marked to market.  As bond holders needed cash, they needed to sell those bonds, NOW.  Other more well-capitalized holders were able to continue holding but they, too, had to mark the bonds to market, which caused their capital to fall.  The death spiral had started.

With me, so far?  OK, it's time to go back to Mr. Fox and the Chicken Coop.

The excessive risk taking, greed and stupidity cited by the Senate Investigations Sub-Committee in their report were real.  The SEC did a poor job of supervision of many of the big investment banks, such as Goldman Sachs, Bear Stearns and Lehman Brothers.  The OTS did a poor job supervising big savings banks, such as WAMU.

However, the failure of the Senate Investigations Sub-Committee to include Congress and various Administrations in the blame is ludicrous in the absurd.

The Budget Mess Is, Well, A Mess!

Our Federal Government has been broke for a long time.  That is, of course, if you define broke as spending (federal expenditures) far more money than you have (US Treasury) or are likely to earn (tax revenues).

If our Federal Government was a family in similar circumstances, it would have to do just what you or I would do in order to survive.  We'd cut spending to a level consistent with our ability to pay or borrow enough to pay the mortgage and buy the groceries until we could reduce spending or increase our income.

The problem with our Federal Government is it isn't a family and it doesn't play by the same rules that apply to you and me.  If the family wanted to borrow to cover its cash shortage, it could only borrow an amount consistent with its ability to repay and the loan would only be a short-term solution.  If the family overextended itself by borrowing more than it could repay, the house of cards would eventually collapse and foreclosure, bankruptcy and possibly homelessness could follow.  During the real estate boom during the middle of the previous decade a lot of folks learned all about this outcome.

Our Federal Government's rules are very different.  If it wants (notice I said wants, rather than needs) to spend more money than it has, it too can borrow.  The difference is, unlike most families, lenders seem willing to loan any amount for which the government is foolish enough to ask.  Our government, the borrower, and the buyers of US Treasury securities, the lenders, appear to believe the house of cards can and will never fall.  The reality is it would fall eventually but that's a longer-term problem.

There is, however, one real limit to how much the Feds can borrow.  It's called the Federal Debt Ceiling, which is about to be reached.

Since the government is unwilling (notice I said unwilling, rather than unable) to cut its spending to match its earnings and since the Feds are about to hit the Debt Ceiling, our government is about to stop paying many of its bills.  The only way to stop the shutdown is for Congress and the Administration to agree on a new, higher Debt Ceiling and various funding resolutions that will authorize payments.

Seems pretty simple, doesn't it?  It should be.  The problem is Congress can't agree on future spending and the Administration isn't helping.

Before I go any farther, I need to remind everyone this isn't a Democrat or Republican issue.  It's a national issue affecting all of us.

On one side (the Democrats) we had a proposal to trim the budget by a whopping $13 billion, to which the other side (Republicans) cried, "Foul!"  That's a lot of money, isn't it?  Not really.  It represents about 1/3 of 1 percent of the total proposed 2012 budget of $3.7 trillion.

On the other side (the Republicans) we had a proposal to trim the budget by an even more whopping $61 billion, to which the Democrats cried, "Foul!"  Come on--$61 billion out of a total budget of $3.7 trillion represents only 1.6% of spending.

Are the Democrats telling the Republicans and the taxpayers they can't find 1.6% of the budget to trim?  Could you reduce your family's expenditures by 1.6% next year.  Well, yeah.  We all can and have.

Quite frankly, the $61 billion reduction proposal is not nearly enough.  If it were three or four times that amount, it would be a good start.  The proposed 2012 budget deficit is $1.1 TRILLION.  That's an enormous 30% of proposed expenditures or 42% more than projected revenues.

Returning briefly to the $3.7 trillion budget figure, if you think that is a large number, you're right.  It is almost exactly double the total proposed expenditures of the Federal Government in 2001, only a decade earlier.

If the Federal Government shuts down on Friday, which is not improbable, remember why.  The Republicans didn't ask for nearly enough and the Democrats are rejecting reality as well as reasonableness.  It appears the only thing wrong with government is politics.

"It was the best of times, it was the worst of times;..."

"It was the best of times, it was the worst of times;......." at least according to Charles Dickens in A Tale of Two Cities.  I was thinking about that quote as I reviewed some of the recent economic news but realized that it didn't quite fit the circumstances.  Maybe I should paraphrase it to, "It was the worst of times, it was the not-quite-as-bad-as-it-might-be of times."

The bad?  Yesterday's release of the January 2011 S&P/Case Shiller Home Price Indices (http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----) showed another decline in the values of existing homes.  To be more precise, the twenty-city Composite Index posted its 57th consecutive monthly decline, showing a drop of 31% from its May 2006 peak.  Not all markets within the composite shared equally in the fall, as Las Vegas and Phoenix occupied the cellar at -58% and -55%, respectively.  While Chicago posted a decline approximately equal to the Composite at -30%, Denver and Dallas values have fallen the least at 10% and 7%, respectively.

All of this data is relative, given that not all of the markets hit their peak values at the same time and across the country not all home owners bought at the peak.  Closer to home, we bought our house in March 2005, and its value climbed fairly steadily for a couple of years.  Although the greater Charlotte Metropolitan Area has values down 16%, which isn't bad compared to the national average, our home is only down about 2% from the purchase price.

This continuing slide of home values means more pressure on an already over-burdened real estate market.  The continuing fall in values means more homeowners are under water on their mortgages and lower values continue to hold down the number of home sales in a market where there is already too much inventory.

When you're in a hole and want to get out, you first have to stop digging.  So far, that hasn't happened.

The good?  This morning ADP, the payroll processing giant, reported some positive employment information.  According to The Wall Street Journal (http://online.wsj.com/article/SB10001424052748703806304576232393531640116.html) ADP said the US economy added 201,000 private-sector jobs, with the average monthly gain over the past four months of 211,000.

This would be much better news if the unemployment rate wasn't expected to remain extremely high at 8.9%.  To move that 8.9% number, which represents about 15 million people out of work, down to about 4.5% over the next three years, the economy will need to create new jobs at a rate that's at least twice as fast as it has during the last four months.  Job growth at 200,000 per month is good enough to stop digging our hole any deeper but not good enough to bring the American employment picture back to a more normal view.

When larger numbers of people go back to work, they'll buy more goods and services.  Producing, moving and selling those goods and services will put even more people to work and larger numbers of them will buy some of those houses that have been sitting in inventory, losing value.  The taxes all of these new workers pay will help put our local governments, including school districts, back in the black, too.

In my opinion, private-sector job creation is the number one challenge facing us today.  Everything else is a distraction from that mission that we cannot afford.

The Real Estate Mess & Unanticipated Fallout

For decades, home ownership was part of the American dream.  We all wanted it, even those of us who rented apartments or homes wanted it.  It was the way of life to which we all aspired.

The federal government thought it was a pretty good idea, too, so it promoted home ownership with the deductibility of mortgage insurance, by exempting the capital gain on personal residences, by attacking banks for redlining practices, by passing and aggressively enforcing the Community Reinvestment Act and by forcing Fannie Mae and Freddie Mac into funding more and more sub-prime mortgages.  All of these--especially the latter two--helped to build the false economic prosperity of the decade 1995-2005.

For as long as I can remember, another part of the American dream was being able to obtain credit when we wanted and needed it.  We bought cars and refrigerators and washing machines on conditional sales contracts.  No self-respecting American could be happy without a wallet or purse full of credit cards.  The use and growth of consumer credit in part helped the American economy grow to become the biggest and strongest on the planet.

Along with mortgages and revolving credit lines came the responsibility to honor our obligations.  For generations, we Americans felt that obligation deeply and the overwhelming majority of borrowers honored those obligations.  If times got hard, we'd do without something else in order to make the mortgage or car payment.  We did so because of a sense of duty but also because we feared the stigma of default.  Bankruptcy was bad.  Foreclosure was terrible.  With them came dishonor and disgrace.  Didn't it?

In today's troubled times we have a long way to go before we recover.  Far too many homeowners have fallen behind on mortgage payments, far too many have suffered through default and far too many still are on the brink of foreclosure.

Some of these problems have been the fault of the homeowner, as many bit off more than they could chew, but most of them have been caused by lost jobs and reduced incomes.  There have been so many credit defaults and foreclosures that existing home values have been pushed to a nine-year low with an unsold inventory of almost nine months on the market.  It's a great time to buy if you're in the market but the market may not normalize for several more years.

A by-product of the current real estate mess is a troubling trend of people walking away from their obligations without concern or remorse.  I'm not referring to the people who simply can't pay the mortgage.  I'm talking about an increasing number who choose not to pay the mortgage.

I don't have statistics but the anecdotal evidence is that an alarmingly high number of people are continuing to spend money as if they had it.  They spend for vacations and electronics and cars while choosing not to make mortgage and credit card payments.  They continue to "run up" their credit card debt as high as they can to pay for their children's dance lessons and travel soccer teams, knowing they'll never be able to pay.  When the credit runs out, they walk out leaving the keys on the floor.  At least for them, bankruptcy and foreclosure have become acceptable solutions.

Why is this happening?  I won't offer any defense of this phenomenon but I will offer a partial explanation.  The stigma once associated with a credit default, bankruptcy or foreclosure has been lost.  So many good people have lost their homes through no fault of their own that some not-so-good people are taking advantage of the opportunity.  Shame on them.

I wish every reader well and hope that none of you ever face this dilemma personally.  I also hope that if you witness this sort of irresponsible behavior by others that you'll take a stand and tell the offenders how wrong their actions are.

Quo Vadis?

Quo Vadis is a Latin term meaning, "wither goest thou?".  I don't speak, read or write Latin and I don't make a habit of using it.  However, in this case, I'm applying it to the US economy and investment markets.

Given all of the recent turmoil in the Middle East (read that as concern about oil) and the earthquake/tsunami double tap that hit Japan, markets have been erratic at best and quite negative at worst.  There have been several bad days recently on world stock markets, including ours, but it might be helpful to put some of these recent loses into perspective.

Using the Morningstar US Market Index as representative of the entire US market, it was down 4.6% from its recent peak on February 18, and down 1.6% since the Japan earthquake and tsunami.  A total negative move of almost 5% is not insignificant--I know my portfolio certainly has taken the hit--but in a market where 1% daily movement, up or down, is the norm, it's not a lot.

In the long term, most market movement is rational, with investors making decisions based on the same known information.  In the short term, not so much.  Investors, even institutional investors, are people and people sometimes react irrationally.  In this case, I think (highly technical investment terminology) that many investors are overreacting.

The US economy runs a $60 billion annual trade deficit with Japan.  A lot of that is automobiles and auto parts, in spite of the fact that the Japanese auto makers are now manufacturing a fairly significant number of cars in the US.  The disruption in the Japanese auto industry, while having an extremely negative impact on the Japanese economy, may actually open a window of opportunity for US auto manufacturers to fill the void.  Further, reducing the US-Japan trade deficit is not a bad thing for the US economy.

I'm not saying that US investors should seek profit opportunity in Japan's disaster.  Far from it.  I've previously commented on the tragedy and how deeply concerned I am for the people of Japan.

What I am saying is don't overreact to short-term irrationality in markets.  Market corrections happen.  They also make comebacks.

So, where is the market going, right now?  It will have up and down days and it's likely that more of them will be down than up.  The problem is that I can't tell you on what day that will change and we'll begin to see more up days than down.

It is not improbable that I'll make some changes to improve quality or reposition my allocation tactically. When the turn comes, I want to be invested and not sitting on the sidelines.

Tragedy In Japan

For the first forty-six years of my life I lived in California, where I experienced several earthquakes first hand.  One of the biggies was the Northridge Quake in January 1994, with an epicenter only about ten miles from our home.  That was a shake I'll long remember but the quake was only a 6.7 (moment of magnitude) on the Richter Scale.  All the same, it was plenty big enough for me.  During that quake thirty-three people were killed, thousands injured and Southern California suffered tremendous damage.

In California we lived with the thought that "The Big One" might occur at any time but nobody dwelt on it.  If it happened, it happened.  We knew that if we were there when it did happen, there was nothing we could do about it.  Sound engineering preparation was our only hope, as the sky scrapers and highways in Los Angeles supposedly were designed to survive it.  For the most part they did survive the Northridge Quake but that was only a 6.7 shaker.  Luckily, we never got the big one.

Last year a 7.0 quake hit the island nation of Haiti with enough force (three times the shaking amplitude of the Northridge Quake) to demolish much of the country and kill a Haitian government estimate of 316,000 people.  As terrible as that tragedy was in loss of life, it was not the big one.  Much of the damage and resulting loss of life in Haiti would probably not have occurred if building codes and requirements had been similar to those in California--or Japan.

Japan got The Big One.  I saw a report yesterday afternoon that, although much of the media is still calling the Japan Quake an 8.9, the US Geological Survey had upgraded it to a 9.0.  If the relative measures of the Richter scale are to be believed and accepted, the Japan Quake would have had a shaking amplitude 100 times greater than the Haiti quake of 2010.

The toll of damage, injury and loss of life is far from finished in Japan but the Japanese people will be struggling with the aftermath for decades.  In the final tally, much of the damage and loss of life will have been caused by the tsunami, rather than the quake itself.  How much of the tally will have been caused by damage to the nuclear power plants is an unknown and may take decades to determine.

My heart aches for the people of Japan.

Unions in the News

I live in Union County, North Carolina, which is one of the most heavily Republican counties in one of the least unionized states in the country.  Go figure.  Although our professional football players are unionized, our teachers are not.  I'll come back to both of those professions a little later.

Shifting quickly to one of the most heavily unionized states in the country, the Wisconsin legislature found a way to pass restrictions on the bargaining rights of most public employee groups.  The pro-union forces thought they had the legislation blocked by playing hide-and-seek but the pro-taxpayer forces defeated them, eventually, by changing provisions in the controversial bill so that anti-democracy legislators could no longer block it by running away and refusing to vote.

It seemed as if the pro-union forces were saying, "If you won't let me win, I won't play.  In fact, I'll run an hide so I won't even have to watch the game and by doing so, prevent the game from being played."

The tactic worked for a while and managed to draw the attention of the entire nation.  Battle lines were drawn and large demonstrations were held in support of both sides of the issue.  Overlooked somewhere in all the rhetoric were many of the facts.

The Wisconsin bill was not anti-union per se.  It did not affect the bargaining rights of any workers at private companies.  It only applies to public employees who are paid by the taxpayers of a state that was going quickly bankrupt.  How bankrupt?  Very.

Wisconsin was facing an immediate revenue (read that as tax receipts) shortfall into the hundreds of millions of dollars and longer-term deficits into the the billions.  That's serious money the state didn't have, with the only means of getting it by taxing its citizens who didn't have it.  The new limits on public employee collective bargaining won't fix the entire problem and there will need to be many other shared sacrifices by the citizens of Wisconsin.  This is only one piece of the puzzle.

Although I haven't analyzed the Wisconsin budget, the biggest budget item for every state is employee expenses.  Salaries make up a large part of it but, according to most published reports, Wisconsin taxpayers, the majority of whom work in the private sector, were being asked to pay for healthcare and retirement benefits of public employees that were far in excess of anything offered in the private sector.  That's pretty tough to swallow if you're struggling to pay your mortgage, pay the power bill, put food on the table and put your kids through school.

Speaking of school, teachers have one of the most important and undervalued roles in our society.  They are critical to our children and our future and they are not overpaid.  In many situations they are underpaid.  Teachers in my family are bright, capable, caring professionals who are very good at their jobs and the children in their classrooms are lucky to have them.

 In Union County we have our own budget woes and we've had our share of cutbacks.  A county government has to do the same thing a family does when there's a shortfall of revenue--cut expenses.  I don't always agree with our school administration about where they cut or how they spend our money but none of that is the fault of the teachers.  Our schools are still open and our children are still being educated by a caring group of dedicated professionals who are not represented by a union.

In case you haven't heard, there's also a collective bargaining war being waged in the National Football League where the median annual salary approaching $1 million and the average salary well in excess of it.  I love football as much as anyone but that is collective bargaining gone insane.

Happy Anniversary!

Happy Anniversary.  Today is the second anniversary of the low-point in the S&P 500 after an eighteen month fall of 56% of it's value.

That was the worst eighteen months of my experience as a financial professional and changed many of our lives.  Like many boomers I was looking ahead at the retirement for which I'd been planning, although it was still five to seven years in the future.  I was looking at my retirement nest egg with satisfaction and counting some chickens before they hatched.  My, how things can change.

I was prudently invested and well diversified, as I hope all of you are, so my portfolio didn't take as bad a hit as the stock market.  Even so, it lost about 30% of its market value.  Ouch.

Based upon averages, that's about four years worth of gains that would have to be replaced.  If I'd been thirty or forty years old, it would have been a relatively temporary set-back.  I'd have had plenty of time to make up for the losses.  At age sixty, not so much.  That's why it was so important to catch the wave of improved returns that started two years ago and ride it back to the future I wanted.

During that eighteen month fall from the peak, I cautioned my investment clients, "Don't panic."  Values were falling but they would return.  The analogy I made was that of a round-trip airplane ticket.  We had all paid dearly for a very expensive round-trip ticket and it was imperative that we not miss the return flight.  That meant we had to stay invested.  Although we had to be on the plane, we didn't necessarily need to be in the same seat.  That meant we should upgrade to better, more appropriate investments for the return ride if possible.  We should look to improve quality and adjust allocations where it was appropriate--but we should stay invested.

Of all my clients at that time (approx. 200), all but two stayed invested and made it home.  I did, too, as my portfolio, now, is right back to where it was after taking a wild, two-year adventure.

A psychiatrist who was a sales trainer and coach once told me that I should think of my job as if I were a doctor.  He said it wasn't enough to diagnose and prescribe treatment--I had to convince my patient to take the treatment.

I've moved on to my own consulting and investment business, now, but I still think about the two families who missed the flight home.  They panicked and directed me to sell all their securities at the very bottom of the market.  I had failed to convince them to take the treatment.  I hope they are well.

Since March 9, 2009, the S&P 500 has gone up 95% but it didn't make that gain in a straight line.  There have been many ups and downs, as the past few weeks have demonstrated.  There will be more ups and downs, I assure you, but it doesn't change this fundamental truth of investing--no one knows when the ups will change to downs or vice versa.

The moral of the story is, be prudently invested appropriate for your objectives, stay well diversified but stay invested.  The treatment for ailing investors is Time In The Market, not Market Timing.

15 Million People Out of Work

Depending on whom you believe, about 15 million people are unemployed in the United States.  That's a lot of folks.

Although the January unemployment figure fell to 9%, nationally, down 0.4% from the previous month and the lowest rate since April 2009, it marks the 21st consecutive month the rate has been 9% or higher.

At the same time many job vacancies are going unfilled.  According to Bertha Coombs, a CNBC contributor, in an article published today, "While there are more than 25 job seekers for every open position in fields like construction, the exact inverse is true in technology, health and science-related jobs."  Can this be so?  Probably.


The truth is that many technical or highly-skilled jobs are staying open longer because it's a buyers market.  Employers can wait for the perfect candidate, partially because they've learned to operate their businesses leaner and, well yes, meaner.  Simultaneously, extended unemployment benefits, while hardly a replacement in dollars or self-esteem for real paychecks, make it somewhat easier for job seekers to hold out for better, higher-paying jobs.

I don't mean to understate the severity of the economic and jobs collapse we suffered.  It was bad and could have been far worse.  It's still bad, even though it's better than it was.  However, many economists, including those at the Federal Reserve, are saying that full or normal employment might leave as much as 6.7% of the workforce out of work at any given time.  That contrasts with the traditional number of 5% that they used for generations.  The difference may not sound like much but in today's labor force it's almost 3 million workers.

The bottom line is unemployment remains the single biggest problem our economy faces.  When you watch the news or pay at the pump or listen to another politician claiming his party has the answer and those other guys don't, don't lose sight of the fact that the answer to the current problem is JOBS.

I Must Be Officially Old

Several years ago on the eve of my 50th birthday I received my first invitation to join the AARP.  Of course, there is nothing wrong with the AARP--I'm now a member--but come on.  I was only forty-nine years old and trying desperately to hang onto the last vestiges of whatever youth I falsely could claim.  If that wasn't bad enough, they kept sending invitations, reminding me how old I really was.  The entire episode was a total downer.

Now that I'm old enough to claim Social Security Benefits, although I have yet, I no longer have any delusions of being in my middle age.  I gladly and proudly joined AARP in the hope of garnering important discounts on hotel rooms or auto insurance or whatever other scam might also be available to we old geezers.

However, today I learned that I truly am old at the age of only sixty-two.  How?  Not AARP, as they'd found me more than a decade ago and I eventually succumbed.

Now, the Scooter Store has found me.  Yep.  They're ready to help me get a Power Chair and help me maintain my mobility and independence.  Lucky me.

Intellectually, I know that it is not only older citizens that use Power Chairs.  Intellectually, I accept that it has nothing to do with age and that even the young can need them.  Emotionally, it feels just like getting that first AARP invitation a dozen years ago.  Bummer.

In closing I'll confess that just prior to getting today's mail and finding this little bombshell, I was out driving around the countryside in my Porsche Carrera and shopping for new leathers and stirrup irons for my most recent distraction--riding horses.  Hey, maybe I'm not as old as they think.

Is March The Cruelest Month?

Happy March 1st, everyone.  Although the calendar indicates it's late winter, it definitely feels like spring in the Carolinas.  The unusually warm weather brought last night's thunderstorms but they've blown over and today will be seasonably perfect, with Carolina Blue sky and a temperature of about 60.  I'm not sure what the rest of March will be like but today looks to be terrific.

The calm, cool morning and severe clear sky this morning started me thinking about analogies to the economy and investment markets.  I know--I'm weird that way.

Is this the calm between the storms of winter and spring?  Are our improving economy and recent successes of the stock markets merely a calm before we enter another stormy season?  Let's take a look at what's happening.

As of the end of February 2011, The S&P 500 stock index is plus 4.4% YTD and plus 20.5% over the trailing six months.  Since hitting bottom two years ago in March 2009, the index has risen over 96%.  Wow!  That's really, really good but the sad truth is the index is still about 15% below it's peak in October of 2007.  Bummer.

Will the markets and our portfolios ever make it back to where they were?  Surely they will.  How soon?  That's the question for which I don't have an answer.

Can equities keep up the blistering pace they've set over the past two years?  Unfortunately, that is not likely.

Will we see a continued upward trend in the equity markets?  It is not improbable that we will.

Why?  It's still the only game in town--almost.  I'll get back to that "almost" later.

Real estate values are still in the tank and they don't seem to have found the bottom.  Interest rates on money market accounts and deposits are virtually nil and bonds, government or corporate, remain at historic lows.  What's even worse in the bond market is that rates and yields poised to go higher relatively soon make buying bonds, now, a risky choice.

If you're sitting on a pile of cash, as many fund managers and big-time investors are, where can you put it?  Stocks, of course, which, together with pretty solid corporate results, are driving stock prices higher.  That is likely to continue, albeit at a slower pace, for the remainder of the year.

Will all markets and the equities traded on them rise uniformly?  Not in the short term.  I still believe strongly in broad diversification, including developed and developing international markets, but in the short term the US market is likely to outperform its international counterparts, especially the developing world.

Should you sell all of your international equity holdings and buy a S&P 500 Index fund?  Probably not.  However, it makes a lot of sense tactically to trim positions in international holdings and reposition them in the US markets.

Isn't there anywhere else to invest?  Well, remember that "almost" from a couple of paragraphs ago?  The alternative for many investors has been commodities.  Over the past six months, the Dow Jones UBS Commodity Index, representative of a broad range of various commodities, is up a whopping 24.2%.  That surpasses even the strong gains stocks have posted during the same period.  What's more, commodities, including oil, copper, gold, cotton and corn, are likely to go higher.

So, should you sell your stocks and buy commodities?  Should you get rid of your S&P 500 Index fund and buy pork bellies?  Probably not.  However, it makes a lot of sense to add or increase commodities exposure to portfolios.

Are there storm clouds on the horizon?  Aren't there always?  Among them are the political and economic turmoil in the Middle East and the looming debt crisis, with all of its ramifications, at home.  These are very serious issues and worthy of our serious attention but, at least for now, let's hope they'll blow over, as last night's thunderstorms did.

Everyone Is Entitled To My Opinion

Congratulations!  You're reading the first post on my new blog.

I've sometimes been called opinionated, among other less flattering things, and that's OK.  I am opinionated.  I usually have one about most subjects and if I don't value it, why should I expect anyone else to.

Many of my blog posts will have an economic or financial slant, because that's my expertise and training.  I often see circumstances and events in those terms.  Some of my more serious posts will touch on issues of government, education, ethics, philosophy or common sense.  Some of the more light-hearted posts may be about riding fast horses or driving fast cars, both of which appeal to me greatly, or about good jokes I've heard or good wines I've tasted.

Some of my posts will inform you and some may entertain you but I don't intend for any of them to bore you.  Some of them will challenge you and may even inflame you but I hope none of them offends you.  If you do feel offended, it will not have been intentional but I'll not apologize for my opinions or for expressing them.

I may not post everyday but check back often.  You never know when I'll reveal the secrets to the mysteries of the life or divulge the recipe for the world's best chicken salad.

Sincere regards,
David Kloth