Brothers and Sisters in Christ, our brother Greece has been sick, but we have Prayed for him and Infused him with the Holy Spirit and He Is Cured!!! The Holy Spirit has Entered his Banks and Cleared his Finances!!! Brother Greece, I Command You, Rise and Walk Again and Be Whole!!!! The European commission has met, and released some paper, and everything is all better now. No more financial crises, Satan has been Purged!!! In any case, the S&P broke decisively through its 200 day moving average, and will likely continue to go up a bit for most of the rest of the year. Barring any new political insanities.
The Euro meeting is over. The gist of their agreement:
One big part of the European banks' exposure is the credit default insurance they've bought or sold. I've written before that US banks have a lot of exposure here, no one knows how much. Now there's talk that a lot of this insurance might not trigger due to the cuts being "voluntary" - this is not a credit default event. If the CDSs don't trigger, this brings the entire CDS market into question. Why are the cuts on Greek bonds "voluntary?" It's for exactly this reason: French and German banks have issued a lot of CDSs on Greek bonds. So calling the Greek haircut "voluntary" is a transfer of money into German and French banks from the banks of smaller countries who thought they were protecting themselves with German insurance. This sets a precedent: the next time someone is thinking of buying Eurobonds with a CDS to protect themselves, they're going to remember that CDS don't protect. For that matter, those who are currently holding Euro sovereign debt with CDSs protecting them are going to have to think about dumping the debt. I love it.
Italian bonds just auctioned off at 6.06%. The only reason they're under 8% is the intervention of the EFSF in the market, buying bonds to keep the interest rate down. What we're seeing here is the European version of Quantitative Easing, the US Fed policy that has doubled our money supply in the last few years. One day this will come home to roost, and there will be huge inflation in the US and Europe, starting unexpectedly and basically overnight.
Bottom line: the can has been kicked again. Greeks are rioting in the streets, but Greece and their citizens have been voted off the island: no one cares what they think anymore, it's all about European banks now. But very little has been done about the fact that essentially no major European bank is solvent anymore, nothing has been done about Portugal's apparent death spiral, nothing has been done to calm the Irish who are waiting patiently for their help. Basically they threw a medium-sized Greek seal at the Great White Shark terrorizing their financial beaches, and the Great White has retreated into the deep for a short time with its latest meal. So everyone is now invited to get back into the water. People who decline to swim "lack confidence."
Muslims are now taking over Paris streets to pray. This is illegal in France's secular state. I can't even begin to guess how this will end, but it seems clear France has enough problems without a growing entitled uneducated alienated underclass.
The Super Committee is reportedly deadlocked over whether its plan to cut $1.2 trillion from the federal deficit should include tax cuts. Democrats presented the committee with a plan to cut the deficit by nearly $3 trillion over 10 years, of which 50 percent would come from tax increases, but Republicans are standing by their pledge not to accept any tax increases coming out of the committee. If the committee deadlocks and fails to come up with budget cuts, Standard and Poor's will almost certainly further downgrade US debt.
President Obama yesterday announced a plan to help students escape from college debt. By limiting student obligations to repay,
and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuition
faster than inflation. The Obama plan limits repayment obligations on those federal loans to just 10% of "discretionary income" which
it defines as total income above 150% of the federal poverty level - currently translating to about $16,000 for an individual, or
$33,500 for a family of four. The plan also limits the term of obligation to 20 years. Assuming that a successful college graduate
would earn, on average, $80,000 per year over the course of the 20-year obligation period, the repayment burden under the new plan
will total somewhere around $4,500 per year, or $90,000 for the life of the loan. A less successful graduate who earns say $50,000
per year, on average over the 20-year obligation period, would have a repayment burden of just $1,500 per year, or just $30,000 over
the life of the loan. Any loan amounts above those totals will be forgiven. As the repayment burden will be capped to a percentage of
average income, loan repayments will be the same for any loan beyond a certain threshold. These policies could remove all barriers
for larger and larger loans, which will then allow universities to charge higher and higher tuition. Obama is turning higher
education in to a third-party payer system much like current health care system, which is also characterized by outsized cost
increases. Under this new system, colleges can charge whatever they want because their customers simply turn the bill over to the
U.S. taxpayer who has no say in the transaction. I'd feel a lot better about this if the government tracked which majors had the
default forgiveness rate and started putting a cap on student loans for those majors. We need some financial hints for
our youth that a $120,000 degree in Feminist Studies is very unlikely to land you a $160,000 per year job as a middle manager at 3M.
Thinking of buying a car? Car purchases are fundamentally emotional decisions; none the less the engineer in me thinks that the rational should at least slightly intrude on this process. One major portion of the cost of a car is gasoline. Other major portions include depreciation, insurance, oil and maintenance, tires. Here's a table showing the cost difference per year for gasoline if you switch cars. Imagine you have a GMC pickup truck routinely getting 15mpg, and you switch to a Prius getting 50mpg. You look along the top row to "15", follow that column down to "50." If you drive 10,000 miles per year, and gasoline costs $3.80 per gallon, then you save $1773 per year. More miles or higher gas prices increase this number. Similarly, f you have a Prius now getting 50mpg and you switch to a GMC pickup truck getting 15, then you follow along the top row to "50", then down that column to "15" and see your savings are -$1773 per year.
|Current Car Gas Mileage|
If you're primarily interested in gas mileage, reliability, and good resale value you should be looking at: