Realty Check

Over the past few weeks, it seems as though the American people have started to rethink Team Obama. The excitement at the beginning of the year, with the talk of change and progress, has been subsiding and being replaced with skepticism. Just as we found out with the kid who promised more recess and a pool, while running for Student Council, we are finding Obama to be mostly promises with little substance.

The economy is showing signs of recovery and slow growth, even though only about ten percent of the $787 billion stimulus has actually been spent. The money that has been spent, really had nothing to do with job creation and more to do with "pet projects" that otherwise would not have been funded.

health care reform looks to be more of a test of political power than anything to do with the protection of the uninsured. The administration is looking to spend over one trillion dollars, we don't have, to create a bureaucratic nightmare. If you really wanted to lower the cost of health care you would look at limiting lawsuits being filed against doctors. The real reason doctor's order "unnecessary tests" is to cover their asses, not profit generation. This would be tough for the Democrats, however, as it would anger their attorney base.

Talk to any small business owner, who is already dealing with a recession, tougher credit, and increased taxes about the health care reform and they will tell you it is going to shrink their payroll. It doesn't matter how low the cost, it is still an added expense many can't afford.

Lastly, it appears we are all taken aback by the obvious attack on capitalism. The American dream to work hard and be prosperous, is being threatened. The administration is looking to limit profits on financial companies, oil companies, Health Care providers, pharmaceutical companies and the list goes on. Now if you limit how much I can make, then you limit the taxes I pay, thus limiting your own income, which actually needs to increase by the trillions to pay off all the spending. No wonder we are getting skid dish and approval ratings are nose diving. These are our thoughts we look forward to yours...

Credit Anyone?

Watching Chris Dodd and his colleagues questioning Tim Geithner, brings to light why nobody has confidence in our economy. After Mr. Geithner defended the position taken in the AIG case, he was then asked why Banks haven't extended more credit to main street. It seems as though they want everything and expect people to just go along with it.
The question with AIG was, " If we the government, own some 80% of AIG, why don't we control everything that goes on there? Why aren't we forcing those who hold the liabilities of AIG to take 50 cents on the dollar. This naturally would lead intelligent people to assume that the government expects to hold control companies in proportion to money gained from the government. If you were a financial institution would this make government money attractive to use to lend to customers?
Now look at the Banks that took TARP money. Each Bank got the money with no strings, then with the new administration came all sorts of strings. The use of government money comes with negative stigmas, as it now shows weakness, not strength. In addition, the money comes at a rate of 6% to 8% and Banks are expected by main street to lend it at less than that because of the "Bail Out" money received.
Finally look at the new laws being past yesterday, that makes it unprofitable to lend to risky customers, who will receive less if any credit. This leaves the best customers, as it pertains to credit, to make a profit. The Banks thus have to charge fees and remove "grace periods." This may lead to less credit being used by both categories, thus less spending and less growth.
Now when you look at this group of folks in government, does this sound like a group you would partner with. If you were a financial institution would you look to use "their" money as they call it? Of course not. We would recommend calling your representative and ask them some hard nosed questions, as it is not "their" money, but our money. The quicker we get government our of business, the faster capitalism will start to work and lead to our recovery. These are our thoughts and we welcome yours....

Stress Test??

There was a statement made over the past couple of days, as the administration continues to delay announcing the results, the economy has started to show signs of recovery. Last week the unemployment rolls decreased for new claims for the first time. More and more economists are talking about the economy showing some strengths, at the same time traders on Wall Street are using more and more positive language.
Popular opinion would say that the Banks should have gone down after the leak about Citi and Bank of America possibly needing to raise cash, but the gained on Friday. Over the weekend it was leaked that they both may need up to $10 billion in additional funds. Once again the stocks rallied on the news. When you take into account that unemployment is a lagging indicator and the rolls seem to be stabilizing, then it only makes sense that the Banks will be able to start putting away less in provisions. Every dollar that doesn't go to provisions, in turn is added directly to the bottom line. More money on the bottom line allows for greater capitol ratios and more money to lend. Provisions are paid forward, so when you. Think that the Banks will have six months to raise the funds, it would be possible for them to earn their way there through the little mentioned point for being in business, revenue.
When you look at the tardiness of the stress tests it is hard to make any argument that they will be at all relevant. Luckily for the networks the press release will make for good headlines and give the "experts" something to talk about.

Taking back control??

It has been interesting over the past week as more and more people are saying thanks but no thanks to the Federal Government. The sentiment coming from Financial giants Goldman, JP Morgan, Bank of America all saying they will pay back the TARP money as soon as possible, has gone from as soon as we are able, to as soon as the government allows us without applying huge penalties. We have already seen some of the smaller banks pay their TARP money back. The CEOs of each company expressing similar views that the rules have changed, the Obama administration can't be trusted and that they will just fine on their own, thank you very much.
The latest and probably the group to carry the most weight, are the states that have recently said no to the money from the government. All of these people realize that we are all better off with the government influencing us the least amount possible. Hopefully the stands that are being made will continue and more and more of us can prevent the leaders in the administration, take us into a financial and social abyss.

Made for TV President

This week it became very apparent that this administration is going to be like none before it. They were everywhere you looked and throughout it all they still didn't answer any of the key questions holding back our economy.
First, they have yet to answer on the banks. It is simply a matter of how much regulation is the administration going to try to impose. We think it is quite apparent to everyone involved that greater government regulation would lead to a returning of TARP funds en mass. This would then remove some $250 billion from an already restricted credit market.
Second, how are they going to get people to invest in these Public/Private partnerships before they announce their intentions in regards to the bill passed by the House. This new form of securitization will have a hard time getting off the ground without some iron clad guarantees that the government would indeed stay within the bounds of the constitution.
Lastly, how do they get some of their credibility back. They denounced the bankers for the amount of leverage they were using, but then propose a plan that is based on a 6 to 1 ratio. By allowing the participants to have most of their stake on margin, buying the riskiest of assets with borrowed money. Wait a minute though, because the government had to borrow the funds to lend to the participants. Finally why participate if the money you make is going to be given to the government through taxes?
Back to the original point, all that time on TV looked good but really failed to accomplish much of anything.