Good Day

It has been a good day today. Busy at work, which is much better than the alternative. Yet I did take a couple of minutes to watch a bald eagle circling the sky outside my office window. Beat that! And my undergrad alma mater, Ball State, is playing in the GMAC Bowl (funded by taxpayers, it appears) as I write. Okay, they are losing, but they are in a bowl and that is what matters. All-in-all, not a bad day. And did I mention that my small portfolio was up nicely today. If only every day were as good as this - if only.

There are, by the way, many millionaires and billionaires not having nearly as good a day as I am. I have successfully avoided all the financial stress brought on by being in the Fortune 100 richest people and seeing your empire implode. Some cannot take the pressure and chose instead a coward's way out. I think suicide is the coward's way out in this situation (not all) because it only makes an already distressing situation all that much worse for those you leave behind. Better alive and poor than leaving your family.

http://www.bloomberg.com/apps/news?pid=20601110&sid=aStLk8TPlUZo

Economic Slump Continues

Not a surprise (to me) but the economy continues its slump. Home sales, factory orders and service industries all continued their decline. Some less than expected and some more. Here is a fun point, a chief economist at UBS (like the cheery strategist from UBS I noted yesterday) is quoted by Bloomberg as stating that "[t]he economy fell off a cliff in the fourth quarter and is most likely still falling." Nothing like mixed messages.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aI_qS29m0uBA&refer=home

There were some bright spots today (like the market being up on false hope for the Obama Plan), but just as much on the not so bright side. Alcoa (remember the commodities bubble just a few months ago) is laying off 13% of its workforce, i.e. 13,500 employees. This all supports the Fed's view last month that our economy had "substantial risks." About time they woke up and smelled the economice mess they helped cause. Yes, down risks to the economy are "substantial." They actually have views on GDP and unemployment in 2009 and 2010 approaching my own, and this from a group that is typically rather reserved in what they have to say. So what does that tell you?

http://www.bloomberg.com/apps/news?pid=20601087&sid=ah1m1kDjp7Es&refer=home

http://www.calculatedriskblog.com/2009/01/fed-fears-long-recession.html

Survival of the Fittest

Here is a concept I would like to recommend to our government. The U.S. economy is in an inevitable adjustment to mean. The future economy here, for the next decade or so at least, cannot and will not support all the businesses out there. We had a very low level of bankruptcies between 2002 and 2007 because credit was way too easy, even for poorly run companies. So we have been artifically supporting a false level of companies/businesses. It is high time we let a lot of them fail.

Yes, I know this will lead to massive job loss and economic strife. Better to spend the dollars on aid to those losing their jobs than to supporting companies that have no business surviving. And here is the benefit; those that deserve to survive get rid of competitors that are cutting prices to unsustainable levels to survive. Think about it, the sooner the strong emerge and the weak subside, the sooner the economy returns to a sustainable level. Government money needs to support the employees, not the foolish companies they worked for.

Herein lies some of the problem with this recession. Some companies that should be allowed to fold, have too many knock-on effects to be allowed to fail. But I think these are in the minority. The government desperately needs to be making some tough decisions on who should and who should not survive. Instead of supporting them all, it is better to just take down those that should not survive, which will provide a good bit of the needed support to those that should survive. Letting the weak fail is a good thing - a necessary thing - in this environment. I do not think the current plan under consideration properly seeks to make these distinctions. We have time to fix that. Will we?

Credit Rates Low - Or No

Here is a nice piece from Sudden Debt showing that while Fed Fund rates and Treasury rates are hitting historic lows, even going negative, the rates companies are paying to borrow are still very high. This goes to show how ineffective the federal government has been in increasing the flow of credit on the corporate level. They have lowered effective mortgage rates for most Americans, but that is largely due to the government controlling almost all those loans through Freddie and Fannie. I guess they may need to take over lending directly to companies and take the financial institutions out of the equation if they want corporate borrowing rates to decrease. By the way, the attached has nice charts too.

http://suddendebt.blogspot.com/2009/01/are-you-listening-neo.html

Night all!

Disclosures: None.