I can’t get in the car and turn on the radio these days with out putting myself through hours and hours of depressing talk about the state of the economy, the world on and on.. But before you stick your head in the oven and turn on the gas.. a soothing thought I’m sure lets put some thoughts out there. The world is confusing, but you have Dear Old Mr Sank here to pat your hand and guide you…
So, a few thoughts from your special friend Sank, I’m not the brightest guy in the world but here’s what I see/think…
Bailouts I could make the argument that the scope of these bailouts is a big part of the problem, I could also argue that things would be alot worse if it hadn’t been for the bailouts. At the end of the day I’m not comfortable with the government stepping in and supporting failed businesses. Just as I’m not going to be in favor of the government bailing out my over-extended neighbor by forgiving their home loans. Then again. I don’t know that I want to live next door to a house that’s going to be empty for a year or more.
Here’s my bottom line on the automotive bailout… I find it appalling that it took until day three of these hearings for someone in Congress to ask the f#’n car execs for a business plan. If it were me, I’d say no bail until the following occurs 1) Top execs at all three companies are replaced. By who? Hell, bring in Honda execs, they seem to have had the foresight to have understood how to make a car that makes money instead of being $1400 in the hole the day they roll off the line. 2) The existing UAW contracts are null and void, to be renegotiated. This Ron Gettelfinger dude is claiming that the UAW’s has already given blood, it’s managements turn. He’s right about it being managements turn, but he’s wrong about concessions. This is an industry that’s sick, the patient has cancer, and has had a heart attack. We’re treating the heart attack to keep them alive, but there’s a bigger problem. A MUCH bigger problem and both parties in this case have to decide is getting laid off permanently at $23.00 an hour better than keeping a job at $15.00 or so? Man, we’re all taking hits these days.
Presidential Transition So far Obama has been judicious in his cabinet selection. No radicals, no socialists, looks like we got Hillary at State, I like that pick. We got Dashale at Health and Human.. good choice there. Eric Holder is a solid choice at AG. Only blemish on his record, that stupid Marc Rich pardon. Sounds like Robert Gates will stay on at Defense.. I like that play a lot. Seriously. The one thing I’m curious about is where the change might be. We’re bringing back a lot of Clintonista’s, but then again the Clinton administration wasn’t bad.. I do really like Rahm Emanuel, or as we liked to say in the days of West Wing- Josh Liman, who was modeled after Rammie.
World Events Imports into US ports are down 10% in September. Chinese factories are shutting down left and right, production is slowing down big time. This creates a big a problem in that country. China has modernized by embracing capitalism but not a level I think they understand. There’s pretty good evidence to indicate that they Chinese have been lying for years about the rate of growth. Chinese fiscal year ends in January and in 4 weeks they have their year recapped and reported on? It takes the best accounting firms in the United States 2 months to generate the same information about their clients. The Chinese have been manipulating their currently, moving peasants from the country to the cities. Building away, being the factory for most of the products sold in this country…
Now that the Chinese are facing an economy with an employment deficit they won’t know how to handle. What do you do with 6% unemployment in a country of 1.3 Billion? That would be 78 million people without jobs in a country with little or no safety net. 6% is probably seriously understated should the economy continue to be in recession. Demand for Chinese products in the United States continues to erode, the Chinese economy does so faster and harder. For the Communists this has to be a big concern. These are people who have been told where to work and what to do for generations. Now you’re going to have them on the streets? The media has already reported the first job riots in China. 65000 factories have shuttered in China this year. The good news, this is creative destruction that capitalism creates. This may, more than anything, bring about profound regime change to China. This is the cost of engaging in the global economy.
Now, China is in peril. India on the other hand… I’m thinking they’re going to come through this much easier. For one thing, the Indian economy is built on the basis of free markets. While there is corruption and government intervention, Indians have a history of business acumen in government missing in Communist China. India is enjoys a better model for self sufficiency than China. I sort of attribute that to India amazing spiritual traditions. People in India haven’t been existing on government directives their whole lives, they’ve been free to make their own choices (mostly), and they recognize that there is something bigger than themselves and generally aren’t out screw thy neighbor in the same way I see Chinese business.
Markets Seems like heady times just a few months ago when we were all worried about inflation. Gas was $4.00 a gallon. Some dumbshit Russian oil guy was thinking $200 a barrel oil by this year.. The market was at 1400.. those were the days. And just like that the crash of crashes. The Market gives up 43% of its value YTD… This is ugly no question.. I happen to believe that were not quite done sinking yet. There still some carnage left in the market. Citigroup will go down and no question that’s to rattle us. We’re going to see some old names in manufacturing cease to exist. Retailers are going to seriously thin the herd. Real estate companies are going to consolidate… and then.. it’s going start getting better. I think you’re going to see manufacturing jobs coming back to the United States. Agribusiness will be strong, there’s going to be a seriously pent up demand for homes and properties when people start feeling better about their own jobs. I don’t think that’s going to happen for another year or more. Again, the destruction cycle of our economy can be brutal.
On a lighter note, this pirate thing in Somalia is most amusing to me. Here you a non-functioning country of entrepreneurs who have found a way to bring millions of dollars into their communities. And while we don’t like their objectives, you have to respect their methods. Personally, I think using some of their ill-gotten gains to hire caterers and support services for their hostages and captured ships makes you think they’re the new modern pirate, Robin Hoods, ripping the da man to pay the local poor. If we really wanted to stop this shit we’d follow the direction of the Russian defense minister and put together multi-task force and invade the pirate stronghold and wipe’m out on the ground. Kudo’s to the Indian navy for sinking the other ship earlier this week.