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  • Keep Your Eye on Europe (updated 9jan2011)

    George Rebane

    [This is my regular column published in 8jan11 issue of The Union.  Its online edition can be accessed here.]

    This promises to be the year of fiscal pyrotechnics from Sacramento to Washington to Berlin.  The socialists worldwide are in terminal denial of what earthquakes for the coming months their perennial spending programs have guaranteed.  In California the current budget is $28B out of whack and $500B in long term arrears.  And Governor Jerry Brown, our newly elected retread, promises us a future of gnashing teeth and rending of garment.  But that only after ‘the people of California’ decide who is going to do the gnashing and rending.

    The more liberal than ever legislature is going to make sure that the Peter/Paul Principle will be uppermost in the minds of their constituents for the coming special election in March.  That’s when all the remaining Peters will be dunned to pay yet more to the Pauls who now make up the majority of the state’s electorate.   Someone once said that a mind is a terrible thing to waste.  If so, then the state’s progressives have gone wholesale into waste management.

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  • The Fear Factor of 2011

    George Rebane

    [This is the transcript of the 7jan11 broadcast of my regular bi-weekly commentary on KVMR-FM 85.9.] 

    It’s no use pretending, 2011 in California will not be pretty.  The state’s voters bucked fiscal responsibility in November and returned the same gang to Sacramento that got us to the edge of bankruptcy.  And now with a new leftwing governor to lead them, we can expect the final chapter in the state’s fiscal failure to begin in earnest.

    As the world’s 8th largest economy, California still cannot print its way out of the half trillion dollar obligations that it has run up just in public sector pensions.  Balancing its $100B budget is nowhere in sight.  Yearly deficits of at least $20B are projected by the state’s Legislative Analyst Office to continue through 2015.  And then what?

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  • The Shrunken Presidency

    George Rebane

    BarackObama Syndicated columnist and scholar Victor Davis Hanson is a keen observer of humanity’s foibles and the progressives’ programs now playing on our national stage.  He recently wrote a mid-term assessment of Barack Obama, the man and the President, in a piece titled ‘Our “Pay No attention to that Man Behind the Curtain” Moment’ that could be sub-titled ‘Look Ma how We Shrunk the President!’

    The piece begins –

    At some point in late 2010 once optimistic independent voters, moderate Republicans, and centrist Democrats stopped listening. They abruptly concluded that their 2008 Barack Obama proved not to be the great uniter, the great communicator, and the greater humanist who was to bring the country together around “centrist” values.

    At about the same time, a once ecstatic liberal base began to worry that President Obama was not the brilliant postracial social organizer, the brilliant progressive explicator, and the brilliant big government architect who would take a center-right country with him hard to the left.

    RR readers know that I have not been a fan of Obama’s ideology, nor his background, experience, character, and approach to governance.  As President he has been a good-looking guy who knows how to deliver a speech; otherwise, an empty suit.  Hanson’s detailing of the sorry record of his first two years is a must read.  I urge you to invest the time.

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  • And they still don’t know jack –

    George Rebane

    My career as a markets watcher and investor goes back to 1970 when I started tracking stocks and mutual funds along with my aerospace company engineering peers.  We heard the pundits, analysts, and economists make their sage assessments and predictions, and pooled our resources to subscribe to some pricey financial and investment newsletters.  What we also studied very closely were the prognostications that these gentlemen issued to earn their daily bread and public adulation.

    Being of a quantitative and analytical bent, we started paying attention to the high priced predictions we received through the mail, in newspapers, and on TV.  A little research quickly showed that these guys didn’t have a clue about what they were talking.  It was all blather.  Yet, then as now, the media audiences kept lapping it up, and the government agencies kept quoting their wisdom in support of whatever policies and/or regulations they were trying to foist.  The bottom line we discovered was that it was bad for your bottom line if you acted on what the stuffed shirts spouted.

    EconomistPredictions 

    But what galled us most was that they got to keep their jobs with whatever university, agency, or bureau they were with after constantly making such horrendous errors in their work product.  As engineers, any of us screwing up just once and half as badly would have been shown the door.  And back in those days such mistakes would have followed you to your next job interview.  As a result many unfortunate engineers gave up engineering, got their teaching credential, and became classroom teachers.

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  • Contemplating 2011

    George Rebane

    Here are some thoughts about the coming year that have been cooking for a while.  This is the annual season of prognostications in which pundits, publishers, politicians, and propagandists are bellying up to the bar to be heard.

    The Economist, venerable ‘newspaper’ of opinion economics, has slid markedly leftward during 2010.  It is now taking another fresh look at capitalism and the role of markets, letting its readers know that free markets have had their chance and have been found wanting.  Some of the data for my prognostications is taken from that publication’s generous research.

    In response, the eligible electorate did rise to the occasion and deliver a massive repudiation of President Obama’s government overreach which repudiation totally failed to deliver its intended message to the principals involved.  They instead have retreated to hone their ‘communication skills’.

    Nevertheless, there is evidence that some countries in Europe are discovering that unhinged spending on social programs and green jobs is a sure invitation to financial disaster and blood in the gutters.  Their toe-in-the-water cutbacks in 2011 in the aggregate will amount to less than 1% of GDP – but it’s a start.  Meanwhile America’s states will continue to head toward the fiscal mud.

    California is judged by many to have one of “the most useless governments on Earth.”  I would add that this November’s election guaranteed that California will be among a handful of states lobbying Congress to enact the equivalent of Chapter 9 laws allowing those jurisdictions to declare bankruptcy in the desperate attempt to avoid becoming federalized.  Perhaps sidestepping your creditors and unfunded financial obligations through formal bankruptcy is the softest form of failure that leaves some local controls intact.

    New year’s resolution for California

    SuspendAB32 

    The Federal Reserve will stand fast denying its program of debt monetization.  Meanwhile the rest of the world will continue playing musical chairs with the dollar.  The dollar has been backed by nothing but hope that the American economy will not bite the dust before any given debt holder can bail out.  But the last two years have demonstrated that our economy, often characterized as a huge ocean liner, may indeed turn out to have the unexpected vertical dynamics of the HMS Titanic.  The question of the year will be what to do with your extra dollars.  Borrowing to the hilt is the current advice of financial pundits because you can pay it off with the coming cheaper dollars.  But then, where are those mentally challenged lenders?

    In this regard the housing market will surprise us again.  Its return from bubble levels is far from complete and the government’s easy money policies and mandates, which caused the bubble in the first place and have prevented the market from settling, are back in full force.  The longer the distortion continues, the harder will be the ultimate fall.  And it could happen as early as this year as the administration is pulling all the triggers to delay the inevitable correction (crash?) until after the 2012 election.

    Peter Schiff argues in the 30dec10 WSJ that ‘Home Prices are Still Too High’, and states that “without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more.  These are not conditions that inspire confidence for a recovery in prices.” 

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  • Happy 2011!

    George Rebane

    CH_1jan11 Here in Nevada County the new year arrived clad in a light blanket of snow with a few flakes still drifting from a gray but hopeful looking sky.  The nearby photo from our office window says it better.  It will warm up later.

    Jo Ann and I take this opportunity to wish all RR readers a healthy, prosperous, and hopeful new year.  Although, to keep with the distinctive tenor of these pages, I have to admit that I can’t offer the ‘hopeful’ part as an equal opportunity wish to all readers.  Some of you of the 20% progressive bent might take extraordinary pleasure in seeing things happen in the next twelve months that would bring another tear to the eye of the 40% rest of us.  Instead, to those so afflicted I wish a robust start on the road to recovery, especially in the understanding of things economic and financial that affect both our national welfare and personal finances.

    In the last regard, I will put on my financial engineer’s hat more often than in the past, and try to write more pieces useful for interpreting the fate of the public purse and its implication on your private purse.  There is much mismatch between what the administration says about our economy and the effects of public policy on that economy, and what we here on the ground experience every time we go to the store or pay a bill.  One need look no further than the much cited 2.6% official inflation rate, or our Social Security ‘fully funded’ by a drawer full of IOUs.

    If nothing else, I sincerely hope that such reports will help you to ask more revealing questions of your financial advisor and/or improve your own financial planning.  My hidden agenda is that when we better understand how to handle our money, we will also make wiser decisions in the voting booth.

    The flip side of such commentary is that it will require dusting off some math that many of us left in high school for safe keeping when we graduated.  But when something comes down to reality, it inevitably comes down to numbers.  Besides, those who have alternative approaches and/or want to refute my assertions will have something firm to cite for comparison and correction.

    So thank you again for visiting these pages.  Your thoughtful feedback is always welcome, and the discussion threads you have launched have been stimulating.  In spite of our different views of the where, the why, and the how in our country, we can all join in a prayer that in the coming year America will be an ever stronger, independent, and sovereign nation-state, and keep its place as the achievable example and pinnacle of mankind’s civil governance.

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  • The quiet is deafening

    George Rebane

    Gold is now comfortably at above $1,400 an ounce and rising.  It has risen over 28% in 2010 and over 170% in the last five years.  The other precious metals – silver, platinum, palladium – have done even better. 

    AdjMonetaryBase The official word is that there is nothing to worry about.  The world economies are slowly working their way out the Great Recession.  Interest rates are low.  More fiat money is being printed daily to make it easier to borrow.  With all the pent up demand and new cleantech legislation just kicking in, the job situation is bound to get better in the coming year.  Inflation – excluding education, healthcare, food, fuel, and utilities – is low.  At the same time the biggest buyer of US Treasuries is now our own Fed using freshly printed bills to quantitatively ease the economy.  We are assured that none of this is monetizing (sounds better than ‘inflating out of’) our debt.  Things are looking up.

    Meanwhile, over to the side, right there behind the curtain, central banks the world over are quietly laying in stores of bullion, as are corporations and private investors.  And who knows what it all means that also quietly, ever so quietly, people who don’t need to but can, are beginning to borrow as if they didn’t have to pay it back.  No one wants to spook the sheeple for then there will be hell to pay.  Shhh!

    From the 29dec2010 WSJ – U.S. investment bank Goldman Sachs Group Inc. says it expects gold prices to climb to $1,690 an ounce, and potentially even higher, over the next 12 months as a new round of quantitative easing keeps real interest rates low and drives excess capital flows from countries with trade surpluses—which have traditionally parked their money in U.S. government bonds—into other investable assets, such as gold.  “We believe that the crisis of confidence in the financial markets is just getting started,” says Peter Grosskopf, chief executive of asset-management firm Sprott Inc., which holds $6.5 billion of assets, including physical gold bullion. “Deficits will widen and we will continue to invest more in the precious-metals sector.”

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  • Pleasant surprise on the long drive home

    George Rebane

    Brutke's We got back this afternoon from a Christmas visit to our ‘Northern Tribe’ in the Seattle area.  The ‘Southern Tribe’ (from SoCal) was able to join in to make a big family get together with our kids and grandkids.  Jo Ann and I said our good-byes on Sunday morning and drove away into the perennial rain of the Pacific Northwest.  With our puppy on board, we have abandoned the marathon non-stop runs between Nevada City and Seattle.  We used to make it in eleven hours and forty-five minutes door to door.  No more; going both ways we now stop in Oregon for an overnight, usually in Eugene.

    Yesterday as we headed south, a little arithmetic indicated that we would arrive in Eugene too early to call it a day.  And things south of Portland indicated a clearing of the weather was in the offing.  So we decided to push on through the mountains to Medford for the night.  Jo Ann made the appropriate arrangements after finding a nice motel in Medford that took dogs.  The plans were etched in stone as we passed Eugene and started winding our way into mountains that now seemed to huddle under massive black clouds – where did all the clearing go?

    The rain started with our first long climb through the still wet forests.  And the more we climbed the more it rained.  The highway seemed unusually busy for a Sunday with a lot of folks heading toward California at speeds above 70 in a driving rain on a constantly curving highway.  The wipers barely allowed enough visibility to keep everyone in their lane.  In that black sheeting night we appreciated the bright display that Carli (our name for the GPS) painted of what was in front of us.  Especially valuable was knowing ahead of time the sweeping curves of I-5 that became tighter as we climbed higher toward the three mountain passes that stood between us and a warm bed.  These would present the biggest challenges on their downhill sides.  And the rain just kept pouring down, with the drops changing to sludge balls when the temperature played footsie with freezing.

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  • For unto us …

    Nativity 

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  • Laughing at Laffer Again

    George Rebane

    Sheeple Oregon’s sheeple voted to increase taxes on the rich a couple of years back to solve their budget woes.  Their dimwits with the eyeshades figured if nothing changed (the everlasting curse on a mind in stasis), that the higher tax would bring in an additional $180M.  Instead it brought in only $130M, and we’re not even counting the loss of business, jobs, and related tax revenues.  At last count Oregon lost over a quarter of its 38,000 wealthy tax filers, and the state is now projecting even lower takes for 2010 and 2011.  In the next decade this tax policy will cause the state to lose 80,000 ‘wealthy’ tax filers.  And so it goes.

    California, of course, continues to drive out its high-earners.  And the example of other states like Maryland – where in 2008 one third of its millionaires vanished from the tax rolls – just tumbles off the back of the scumbags who pander to the poorly endowed in order to get re/elected.  The bigger the economic calamity, the more they can pin punishment on the prosperous.  In the end it works out for everyone – the politicians get elected, enough voters remain convinced it’s the rich stealing from the poor, the rich are prompted to leave sooner than later, and the continuing lack of jobs demonstrates once more to such minds that more of the same will fix the problem next time.  The Peter/Paul Principle rules.

    ‘The eyes of Texas are upon youuuuu, all the livelong daaay, …’

    Speaking of Texas, the Census Bureau reported today that there now 308,745,538 of us.  And things have shifted around a mite.  It seems that a lot of people have moved from Democrat areas to those usually voting Republican.  What were those people thinking?  The effect of that has been that 12 seats have shifted from predominantly blue to red, and that’s going have an impact as the new round of gerrymandering takes place.

    Not a surprise to RR readers is that Latinos in America seem to be ‘self segregating’ according to the census people.  For some reason those people like to live more and more with people like themselves.  Maybe it really does have something to do with culture and folks being more particular to what they perceive as ‘their own’ culture.  That kinda frosts those who would like to see voters gather instead according to their definitions of class.  Oh well.

    And Texas gained four more congressional districts while some of those New England blues gave up a bunch.  All together now, one mo time!

    ‘The eyes of Texas are upon youuuuu, all the livelong daaay, …’

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5 comments on Keep Your Eye on Europe (updated 9jan2011)