Not much news this week, but the markets nose-dived at the end. They rose up a bit for the end of the month. I expect them to drop some more for a couple weeks, down perhaps to S&P 1000. At some point I expect the Fed to step in with yet another misguided effort to boost stocks, which will most likely raise prices. But not just yet. Of course if Greece implodes and takes down a bunch of European banks with it, all bets are off. At the time of this writing (Monday), European markets are off 5% on the day and US futures are off 2.5%.
Greece was due to get their next slice of bailout money last week, but due to missing some goals they didn't. Talks with the ECB and IMF are on-going. "I expect a hard default definitely before March, maybe this year, and it could come with this program review," said a senior IMF economist who is keeping close tabs on the situation. "The chances for a second program are slim." Greek interest rates are now up to 50%, indicating the markets believe a hard default is very likely in the near future. If Greece hard defaults (meaning no warning, no preparation), many banks would be in serious trouble, especially several French banks. A Dutch politician says future help for Greece should be contingent on their leaving the Euro.
The latest news from Germany shows that Angela Merkel has lost the amount of votes needed from her own party to vote for the latest EFSF bailout, reports The Telegraph. If Merkel has to rely on opposition votes to push the rescue package through, many suspect that her coalition government will collapse. Merkel has canceled a trip to Russia to deal with the crisis, which also faces potential opposition from the country's constitutional courts. The EFSF fund had been pegged at Euro $638 billion. However its unclear how successful the fund could be without Germany's support. "Hysteria is sweeping Germany " said Klaus Regling, the EFSF's director. In an election Saturday, Merkel's party was creamed.
So, you heard about GM, the government's big success story, right? You know, bankrupt, lotsa shares given to the unions, then they're making money again, cranking out impressive new models, like, Washington knows business better than Detroit, right? There's a little clause in new GM's corporate charter, they don't have to make any union retirement contributions until 2015. So, are they still making money when you add up the delinquent contributions? They're currently thought to be $35 billion behind in contributions. Their market cap - share price times shares outstanding - is $33 billion. So by Washington standards where tomorrow never comes, yah, they're a huge success. By normal accounting standards, they're completely broke. Oh, and did I mention that car sales are dropping lately and they're likely to lose money in the last quarter or two of this year? In the early 90's United Airlines went bankrupt. The shareholders were wiped out, new shares were issued, and most went to the union (sound familiar?). Six years later United was bankrupt again. My prediction for GM? I think you can guess.
The feds are suing the 17 big banks, including BofA ($57b), JPMorgan ($33b), RBScotland ($30b), Deutsche ($14b), Credit Suisse ($14b), Morgan Stanley ($11b) and Goldman ($11b), for misrepresenting junk mortgages to Fannie Mae and Freddie Mac causing $196 billion or more of losses. Many have also been sued for fraud for making "false and/or misleading statements" about the securities and the underlying loans. The FHFA has asked for unspecified punitive damages. They're also suing several individuals. Call it the New York Lawyer Full Employment Act. Notice that for all the heat we took three years ago from Europe for causing this problem, many of these banks are European. Bank stocks are dropping fast. Say a prayer for the banker's bonuses this year, 'cause only Jesus can save them now. My prediction: not all of these banks will survive the coming year.
In July, the employment-population ratio for the 16- to 24-year-old civilian non institutional population that was employed has dropped to 48.8 percent, a record low for the series. Similar drops in youth employment in the middle east and Europe have led to demonstrations and riots. Perhaps their parents didn't have X-Boxes and Netflix.
First black president helps blacks? The unemployment rate for black Americans spiked to a shocking 16.7% in August. The unemployment rate for black males rose a whole percentage point to 18%. Even more staggeringly, the black youth unemployment rate in August was 46.5%, up from 39.2% in July. Why are things so bad for blacks? According to a study by the U.C.Berkeley Department of Labor, government jobs are the most important source of employment for African Americans and a key source of high-paying jobs, especially for black women. African Americans are 30% more likely to hold government jobs than other races. As long as governments continue to shrink, black unemployment and poverty will continue to increase.
Several of our largest corporations paid no taxes last year. Here's a list of a few of the most egregious:
|Corporation||2010 total revenue||2010 federal income taxes||Lobbying expenditures|
|Stanley Black & Decker||$8.4 billion||$75 million refund||$260,000|
|eBay||$9.2 billion||$131 million refund||$1.7 million|
|Bank of New York Mellon||$9.4 billion||$670 million refund||$1.4 million|
|Chesapeake Energy||$9.4 billion||$0||$2.8 million|
|Marsh & McLennan||$10.6 billion||$90 million refund||$1.1 million|
|Prudential Financial||$38.4 billion||$722 million refund||$8.8 million|
|Boeing||$64.3 billion||$13 million||$17.9 million|
|Verizon||$107 billion||$705 million refund||$16.8 million|
|Ford||$129 billion||$274 million refund||$5.6 million|
|General Electric||$150.2 billion||$3.3 billion refund||$39.3 million|
Additionally many on Wall Street pay only capital gains (15%) on their tens or hundreds of millions in salary and bonuses. My solution: 1) Cap the capital gains exclusion at $250,000 per year. 2) Throw out the corporate tax code and replace it with something so simple that any high school graduate could do GM's taxes. My proposed federal corporate tax return looks like this:
I'm a lesbian too: Elmhurst College in Illinois has become the first in the nation to add a question about sexual orientation to its college application. The question asks, "Would you consider yourself to be a member of the LGBT (lesbian, gay, bisexual, transgendered) community?" Answers to the question will be used to help determine eligibility for institutional "enrichment" scholarships given to applicants from underrepresented groups. By adding the question, LGBT students will now be considered among other groups of underrepresented students for the financial award, which covers up to one third of the cost of tuition.
The War on Boys: One of my favorite pastimes is conducting highly informal unscientific surveys, then absolutely believing the results. The best thing you can say about my surveys is that my victims certainly feel like they were chosen at random. For several weeks now I've been talking to young women, asking their opinion of young men. Today, as I picked up my In-n-Out hamburgers, I said to the 20ish girl, "There are 11 people working here today." "Yes." "Two men, nine women." "That's right." A couple other girls paused in their work to look at us. "If there are no boys with jobs, who do you date?" "Oh, we don't date, we're busy with work and school." A few other nearby girls nod and smile. This is a routine answer to my questions. If I have more time I ask if they intend to have kids, the answer is nearly always yes. I ask how they think they'll get married if they never date. I'm routinely told that the right man will just happen along when they're ready, or if not they'll just have their kids without a husband. This is not unprecedented: in Sweden 55% of all births are to unmarried women. It used to be in divorce court we were accused of being nothing more than sperm donors; now we're raising a generation of boys suitable for nothing else.