Where's all of the new money Going?

Mish's Global Economic Trends has a great post showing just where all of the new funny money is going. Here's the gist of it.

Base money is soaring but all of it is sitting in bank reserves. In other words, banks are not lending. Clearly we have a huge monetary distortion, but banks seem to understand that lending money in this environment would do nothing but increase losses.

The charts show wild increases in the money supply, but decreases in the amount of money actually in circulation. Banks are hoarding it. To me, this looks like a great recipe for wild inflation down the road, but I'm no expert.

Obama Skepticism and Paul Volker

So far, almost everyone and their dog has praised the economic team that Obama has assembled, even while noting their widely varying views. I'm highly skeptical. The cornerstone of Obama's economic plan is to spend, spend, spend and not worry about the debt. Part of his team, even if just on an advisory basis, is Paul Volker. Here's a bit about him.

Volcker is back, tapped by Barack Obama as a special economic advisor. And if the president-elect follows his advice on the current economic crisis, there could be pain again and no doubt many protests -- but also the possibility of long-term benefits.

Small chance of that as Paul Volker's advice runs completely contrary to the majority of Obama's team.

His concerns go to the very core of how America lives and how Wall Street operates. A child of the Great Depression and a man of legendary personal thrift, Volcker thinks Americans have been living above their means for too long.

"It is the United States as a whole that became addicted to spending and consuming beyond its capacity to produce," Volcker lectured the Economic Club of New York in April. "It all seemed so comfortable."

Bringing consumption back in line with income would not only crimp individuals and families, but also require major readjustments in the global economy, which has relied on the U.S. as consumer of last resort.

Paul Volker is a dramatic example of the wildly diverging advisors Barack Obama has assembled.

He (Volker) also will have to work with some outsized egos and giant intellects on Obama's economic team: Lawrence H. Summers, chairman-designate of the National Economic Council; Timothy F. Geithner, nominated to be Treasury secretary; and Christina Romer, chosen to lead the Council of Economic Advisors.

The group is generally not of one mind. Major differences exist in how they view regulation, monetary control and fiscal policy. Summers, for example, was among the Clinton administration officials who helped relax federal regulation on Wall Street, recalled David R. Henderson, a conservative economist at the Hoover Institution. Romer has questioned how well fiscal policy works at all, a central tenant of Democratic economic thinking.

To me, this is a clear indication of intellectual chaos within Obama's thinking. I've run teams of researchers, major projects and 100+ person organizations. At no time did my staffs and I have significantly different world views. It made no sense at all to do so. As a leader, you need a staff who will execute your plans and enact your vision. If they disagree with it, you'll be forever chasing them down and changing the decisions they make when they're away from you.

Can you imagine the staff meetings? How is anything going to get done with everyone coming at the problems from completely different viewpoints? It's hard enough to come up with plans of action in the time you've got to meet, much less do it in an environment where people have deep disagreements.

So why would you assemble such a team? First off, there is no way Barack Obama has an economic vision at all. You would not bring together this kind of team if you had a clear direction for the government. Second, the team consists of high-profile people who are guaranteed to earn Obama kudos from everyone. Financial scrooges like me love the Volker selection and profligate spenders love some of the others.

My conclusion is that Barack Obama's primary goal is adulation. Beyond that, he has very little intellectual discipline and no vision of his own. The team has been assembled to garner him praise from all quarters and to insulate him from criticism as every viewpoint will have been heard. I think that's an achievable short-run goal, but in the long run, after we've blown through a couple of trillion dollars and have nothing to show for it save a massive financial hangover, his lack of vision and purpose will become obvious.

Barack Obama at the center of his council of economic advisors.

We're About to Buy GM

The auto bailout bill is now supposed to be around $15B. GM's market capitalization is about $3B. The bill would "give taxpayers stock warrants equal to 20 percent of the loans" which amounts to $3B. Even if the loans are divided among all three automakers equally, that amounts to us buying a 1/3 stake in GM. There's also this.

The Democratic proposal would let the president appoint a so-called car czar to oversee industry restructuring, and give taxpayers stock warrants equal to 20 percent of the loans. It would prohibit the automakers from paying dividends and owning or leasing corporate jets, and pay and bonuses would be limited.

This is madness. Almost no one in congress has any commercial world experience at all, much less experience running even a small business, let alone a monster like GM. Add to that the fact that Barack Obama has no experience at this at all. Not good.

Together, we can get GM this car working again!
Image used without with permission from the WickedStyle blog. Thanks, Veronica!

Blagojevich to Oversee GM

... well, maybe not him, but probably someone just like him. Dig this.

According to a 76-page two-count indictment unsealed by prosecutors in Chicago on Tuesday, Federal Bureau of Investigation agents allegedly heard the governor on wiretaps attempting to trade or sell the Senate seat being vacated by Mr. Obama when he becomes president next month.

In exchange for the Illinois seat, federal agents say Mr. Blagojevich is heard seeking a number of arrangements, including a salary for himself at an organization affiliated with labor unions, a cabinet post or ambassadorship for himself, cash or campaign funds, and placing his wife Patti on paid corporate boards.

Let's put Patti on corporate boards such as, oh, I don't know, GM's, maybe?

WASHINGTON -- Congress and the White House inched toward a financial rescue of the Big Three auto makers, negotiating legislation that would give the U.S. government a substantial ownership stake in the industry and a central role in its restructuring.

How well do you think a quasi-governmental agency, overseen by corrupt(able) officials will compete against Toyota and Nissan?

Amusing Your Cat and Other Links

Is important. And should be recorded for posterity. Our Missionary to the Frozen, Northern Wastelands has more.

Our Official Artist has a new quiz.

Our Cantor of Chemistry has been posting a series called "What I Believe. Here is entry #3. I've enjoyed them all and this one in particular.

There was a recent flap over some sexist behavior by an Obama appointee. I yawned at first, but our Grand Inquisitor has an angle I hadn't considered.

The Monks at the Monastery of Miscellaneous Musings share our dread over the auto bailout.

A future Theocracy member, The Liberator Today, has a typically insightful post about the mortgage bailout schemes being considered.

Finally, our Pater of Prowling has a cool post about the French Foreign Legion, of all things.

Enjoy!

Captchadefs

I am way behind on my captchadefs, so let me try to catch up, just a little bit. For those who haven't seen the previous post, these are definitions for the anti-spam captcha words that you have to type in on some blogs when leaving a comment. Some generous readers have been leaving their captcha words and I've decided to perform a public service by letting you know what they mean.

Here we go (again).

swincon (n) - a conservative given to spending wildly, particularly on pork. The entire Republican party, post-Gingrich, has been dominated by swincons.

Vizenes (n) - a small, but growing cult of people addicted to eyedrops. It's about the mildest form of teenage rebellion possible. If you notice an excessive number of eyedrop containers in your child's room, he might be in the grip of Vizenes.

muricate (v) - to cover with mulch or leaves. "Martha! Stop muricatin' over there and help me with this tree stump!"

telinati (n) - a secret society believed to be responsible for the increased use of cell phones.

chros (adj) - to be angry about the time. "If I'm late one more time, my wife will be very chros with me!"

That's just a small taste of the captchadefs that have built up. Feel free to leave us some more and we'll try to get to them more often!

Lies and Ignorance Just Don't Sell Any More

... or so the management of the Tribune Company is finding out.

Tribune Co. is preparing for a possible filing for bankruptcy-court protection as soon as this week, according to people familiar with the matter, in a sign of worsening trouble for the newspaper industry ...

Tribune owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and Baltimore Sun, plus a string of local TV stations ...

Tribune's latest actions underscore the deepening distress enveloping Tribune and other newspaper publishers. Their businesses are being battered by dwindling advertising sales, and many are carrying debt loads that are unmanageable in current market conditions. Industry insiders expect some papers will need to fold in coming months or seek protection from creditors to reorganize.

Can we please have one more completely fictional story about homicidal Marines on a rampage in Iraq before you go, just for old times' sake?

Well, That Will put an end to our Pre-Emptive Use of Nuclear Weapons

Our lobby CNN TV is reporting that Obama will use diplomacy to try to improve our relations with Muslim countries. Man, is that a welcome change or what?

Still, I'm going to miss seeing these over Saudi Arabia, Iran and Indonesia.

On Building Roads and Bridges and Investing

This is a thought piece written as an open letter to my financial guru (I'll bet you didn't know you were a guru, did you?) who reads this blog.

Despite Obama pouring mounds of printed money into roads and bridges, I don't like Vulcan Materials (VMC) and I don't like Caterpillar (CAT). There. I've said it. Here's why.

As a neophyte investor, I'm developing my set of criteria for buying stocks. So far it consists of two principles. First, I'm happy to make a mistake and miss out on a stock that goes way up, but I'm not happy to buy a stock that tanks. Second, I only want to invest in a company that I'd have fun managing. Despite the fact that both are scheduled to open much higher today, VMC and CAT fail me on both counts.

VMC makes the raw materials you need to build roads and bridges. They are going to be major beneficiaries of Obama's spending spree. However, VMC has huge debt problems. It's not just the magnitude of the debt, it's the maturation of the stuff. Right now, the thought of rolling over short term debt would terrify me. Every government in the world is sopping up all the investment cash there is and they still have to print money in the basement to cover their irrational, profligate stimulus packages. If you look at VMC's balance sheet, you see they have $31M in cash. They have $2B in short term borrowings. If I was the CEO, I wouldn't sleep at night. Even if you threw in their accounts receivable, which is no guarantee of getting paid these days, you still only pick up another $389M.

Ouch.

CAT is a harder decision for me. I like CAT. I think they're going to do well in the future, I just don't like them now. On other blogs, I've read that commercial construction is falling off a cliff and that Obama's cataract of freshly inked dollar bills isn't going to come close to making up for the drop in commercial construction spending. I haven't looked into that closely, but it makes sense to me, so I'm in no hurry to get into CAT.

Both of these stocks are going to shoot up today, making me look silly. That's OK. I'd rather miss out on a good thing than chase a bad one.

Heavy equipment! What guy doesn't want to invest in things like this?
Image used without permission from A-2-Z Trading LLC.

Maybe the Market is Oversold

... at least I think so when I read things like this.

Danieli, Italy’s biggest maker of equipment for the steel industry, has $1.49 billion in cash, or almost 40 percent more than the combined value of its shares and debt after a 73 percent stock plunge this year, Bloomberg data show.

Emphasis in the original.

That means that Danieli could pay off all of their debts and buy back all of their outstanding stock and still have $596,000,000 left over.

I Think I'll Stock up on Incandescent Bulbs

... after reading this.

Christmas Gifts for Pit Bulls

My fiancée has a very nice pit bull. She's a delightful dog, just larger and more powerful than most other dogs. And most locomotives, for that matter.

She loves stuffed animal toys as gifts, particularly ones that make squeaky noises. She plays with them aggressively and they are typically ripped into tiny bits in about 90 seconds.

It's like getting a Christmas present for the garbage disposal.

Picture slowly lowering this cute little hedgehog toy into your In-Sink-Erator
Image used without permission from Freebears.

Obama and his Chinese Creditors

... don't seem to be seeing eye-to-eye.

Obama:

Obama, who takes office Jan. 20, said his advisers are still working to determine the size of the economic stimulus package needed to pull the country out of the longest recession since 1982. “But it is going to be substantial,” he said, without giving an estimate.

While calling the federal budget deficit he will inherit “enormous,” Obama said economic recovery is more important, “and that means that we can’t worry, short term, about the budget deficit.”

Obama yesterday outlined an economic program focused on spending on public projects that he said would be the biggest such investment in the nation’s infrastructure since the Eisenhower administration.

The Chinese:

“We hope that the U.S. can take all necessary measures to stabilize its financial markets and economy as soon as possible and ensure the safety of China’s assets and investments in the U.S.,” Wang said. “To work together to tackle the financial crisis is the most pressing task that we are facing.”

Zhou urged the U.S. to increase savings, after excessive consumption and debt helped to trigger the crisis.

Emphasis mine. The Chinese are starting to wonder if the US was such a great investment after all.

Obama as a Weathervain

... and no I didn't misspell that word.

Our Grand Inquisitor has a nice post on Obama turning his back on the progressives.

Obama's liberal coalition has served its purpose - to get him elected - and will be replaced by those who will also serve their purpose - to keep him there.

I haven't been thinking of politics much lately, but one thing has struck me when I have. There is almost no way that Obama can have a set of core principles. None of his behaviors match up with one you would expect of someone with a definite vision for the world.

Conservatives railed appropriately against Obama's attendance of the racist, paranoid, lunatic church of Rev. Wright. When Obama threw him under the bus, conservatves were worried that this was only temporary and that Black Liberation believers would sweep into the White House along with Obama, should he be elected.

That's precisely what you would have expected from someone who actually believed what his pastor, spiritual mentor and friend of 20 years was preaching. It's clear now that Obama didn't believe much, if any of it. There's not a whiff of raving lunacy in any of his appointments. Most of them are just Clinton retreads.

How could you attend such a strident church for 20 years and not carry any of that philosophy with you? If you were someone with a vision, how could you leave that behind? If you had a purpose in life and you attended such a church regularly, that church's teachings would be in concert with your purpose, right?

The obvious conclusion is that there is no core to Obama outside of the squishiest of standard leftist pablum. More money for education, more money redistributed, more jobs programs and so on. The real Obama is interested in nothing more than Obama.

This is Obama's real purpose. Pomp and speeches in stadiums filled with adoring fans.

Blogging from my Linux Machine

... and enjoying it. My Windows XP machine is on the decline (again) and it's being backed up to Mozy right now. (If you don't use Mozy, please look into it. It's fantastic.) The biggest thing that keeps me using the XP machine is Adobe Creative Suite. Dreamweaver, Photoshop, Flash and Premiere Pro are too good to throw away. I can live a fulfilled life with OpenOffice instead of MS Office. Since almost everything I do is aimed at the Interweb Tubes, I don't really have much of a need for any of the other features on my XP machine, but Creative Suite is central to what I do.

Maybe staying with XP is kind of a security blanket. I know that I can find an application that does what I want that works on XP, no matter what that is.

I recently stumbled across LiVES, a Linux-based video editing package. It's free, of course. That might break me of my attachment to Adobe Premiere. I wonder what I can find to replace Photoshop, Flash and Dreamweaver ...

Help me Pick a Photo

... to blow up into a print and give to my fiancee for Christmas. These are roses from a garden that has a particular meaning to us. I went out and took a swarm of shots yesterday and these are the best three of the lot.

Red


White and Red


Pink


Vote now!

Cheezburger of the Day

more animals

It's not all bad News

Falling prices for stocks, commodities and real estate means your cash is worth more. For example, I filled my gas tank for $25 the other day. That's a reason to be cheerful. My 401(K) has been killed, but my current contributions are buying more shares per dollar than they used to. Jewelry costs less. Home prices have fallen to where a first home for a frugal, thrifty family is within reach or a rental property can almost pay for itself now. It's not all bad.

The recent financial crisis has made Dave Ramsey out to be a total genius as cash really has become king.

Can You Spot the Flaw in This?

Dig this.

"We must ... prevent the auto companies from collapsing, or we risk adding millions of more Americans to the unemployment line," Reid said. He said "any help must include specific requirements that ensure viability and strong oversight" of the industry.

Somehow, giving Congress strong oversight over an industry doesn't give me a lot of confidence about that industry becoming profitable again.

Pioneers vs. the Aristocracy

This is an addendum to my previous post asking, Where are the Pioneers?

Here is a photo from rural China.


It looks like the set of an updated Western. A Chinese Gary Cooper is probably driving a beaten up pickup through the streets right now.

Consider the comparison of 1880s America to 1880s France and England. How did that work out? Now consider the comparison of modern American and modern China.

Globalization makes the rich poorer and the poor richer as opportunities flow into what used to be an economic wilderness. If we want to compete with the folks who are seeing these opportunities for the first time, it would behoove us to spend more time re-learning the work ethic and morality of our pioneers and less time finding reasons to hate them.

1880s France and England deluded themselves into thinking they were our superiors. The aristocracy always does.