Tuesday, September 30, 2008

Why call it recession part III, the Bail out

Many people today are probably wondering what the bail out means for main stream Americans and what is the bail out really about. For those who think the bail out is ONLY about Wall St big fish.
Let me share a little light on the subject. Let's start by analyzing the chain of events.

Financial Services Modernization Act of 1999 The proposed Financial Services Modernization Act of 1999 would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933, one of the central pillars of Roosevelt's New Deal after the financial crisis of 1929. Under the old law, banks, brokerages and insurance companies were effectively barred from entering each others' industries, and investment banking and commercial banking were separated. More over, it existed a CAP on how much leverage one company could be exposed to. More importantly, reserve money requirements (To cover investor's possible losses) were more tightly regulated. Banks were required to maintain specific liquidity.

After the deregulation, many investment and commercial banks jump head first into the housing market lending game without any limits on leverage, liquidity or how diversified their debt instruments could become.

2005 John Thain, Goldman Sachs CFO is appointed Chairman of the NYSE. While all the casino investment was going on, and nobody complained. He amassed $300 million in Goldman stock. It was widely believed that Mr. Thain was also a front runner to head Citigroup. The same group that is now "saving" all the other banks. Or should I say cashing on the mistakes of other banks?One must wonder after amassing such a fortune at Goldman Sachs where these person's loyalty lays...

2006 Hank Paulson, CEO of Goldman Sachs leaves the company to serve as Secretary of the treasure (happy coincidence?). Paulson left the firm after stock holders inquired about questionable investments in Patagonia, Argentina; These assets ended up as a property of a non profit run by his son. Oh, did I forget to mention this piece of property is floating in petroleum? Opps, my mistake.

2007, the sub prime loan crisis start showing signs of the truth underlying the sourness of loans backed by air.

March 2008: we had the failure of Bear Sterns, to whom the Fed came to rescue and arranged for a purchase at 7% of their original share price.


July 2008, the Fed takes over Freddie and Fannie, the number one instruments through which the American dream of home ownership is made possible.

August 2008: We had the fall of Lehman Brothers, all time number # 1 competitor of Goldman Sachs, whom the Fed of course lead by Hank Paulson allowed to fail. I wonder why....

AIG was rescued with a credit line of 85 billion dollars from the Fed. I wonder who will be chasing the interest on those loans and who will be the underwriter of all those debt instruments now that ONLY two investment banks are left.... Could it be Goldman? Hmmm nobody knows....

In a brief explanation this is how the picture has been forming. Now Hank Paulson is asking for 700 billion dollars to "rescue" the economy.

But what do these 700 billion mean to the US government and the investment banks. Why would the government do that?
Could it be that the US had planned the financial crisis for a while in order to be able to enter the most profitable industry in earth for a cheap price? Now that the lending to 3rd world countries is drying off because they are outsmarting this game just as China did?. Could it be that the US has turned to lending to big institutions and is trying to turn their own citizens into suckers that will pay taxes, that will in turn be lent back to them in the form of Home mortgages to make a profit that they will never see?

Could it be that some investment banks not only knew about this but also facilitated this situation by coaching the government on how to do it?

I don't know, but it seems to me that these few investment banks that are left had something to do with everything and positioned themselves just like a kid under a pinata waiting for the free candy to fall. Because that is exactly what the price of these "rescued" banks were, "free candy".
These so called bad loans are not 100% bad, there is a lot of money to be made and not only the government has the money to purchase them, but also the power to work a deal once they have been purchased, so delinquent borrowers are able to stay in their homes and pay at least some of the debt.

Think about it, you buy the loan for 0.20 cents of the dollar, settle with the delinquent borrowers into making the loan worth 0.50 cents of the dollar and it becomes, a win situation, if you add the interest that the borrower will still pay on that loan, voilá, you have a ton of money in profits that the tax payer will never see. This would translate into the government buying a delinquent $300,000 loan at a price of $60,000 and settling with the borrower as if the price of the "new government Aided loan" were of $150,000 instead of the 300,000 they previously owed. Do you think that would solve the problem of delinquent loans? I definitely think so, and the government has the power to do it. and there is still plenty of profits to go around.

I think this is exactly what the bail out is all about.


The big question is, will this be enough as a strategy to maintain the dollar as the #1 world currency? The safe heaven? What will happen to the dollar when investors realize that US brilliant GDP was based on consumer spending originated by this home equity loans backed by thin air? What will happen when foreign investors realize that the US is a non producing country whose business have been surviving for the last 1o years may be more, by short term loans from commercial paper and ultimately IPO's that transferred the cost of the business loans to institutional investors like Wachovia that purchase these securities with American's retirement money?

Will we survive as the empire we once were or will we become the cheap labor market?

What do you think folks?

Sunday, July 6, 2008

What you don't know can kill you

Have you ever asked yourself why all types of cancer are spreading so rapidly all over the globe?Specially in highly industrialized nations?

While doing some research on Lymphoma and the possible causes. I came across one of the "possible" causes. Exposure to Benzene is presented as a slight possibility.

Well, you may wonder, where the heck will I be exposed to Benzene, and how harmful is this chemical. The answer is, EVERYWHERE.

Uh??? Yes you can be exposed to Benzene everywhere. Even though it was confirmed since the 1920's that a single exposure to this chemical can cause cancer, we are still using it today.
Current uses of benzene include widely-produced derivatives include styrene, which is used to make polymers and plastics, phenol for resins and adhesives (via cumene), and cyclohexane, which is used in the manufacture of Nylon. Smaller amounts of benzene are used to make some types of rubbers, lubricants, dyes, detergents, drugs, explosives, napalm and pesticides.

Gas also has benzene. Thank God our government requires that the levels of this chemical are kept below 1%. Drinking water has it too! Government suggests that it should be kept at at 0.005 milligrams per liter. I feel so good to know they are watching out for us!!!

Gas, gas emissions, plastic Tupperware people use for their lunches, plastic cups we use for our kids, drugs we take to make us feel better, dyes, detergents that we use to wash our clothing and dishes, pesticides we use to kill pests that carry disease, pacifiers we give our babies in order to sooth them at night, even Nylon clothing has it.

And how horrible this substance is? Well nothing bad, it only penetrates you body, is assimilated almost immediately and the residual epoxied, benzene oxide, which is not excreted readily can interact with DNA to produce harmful mutations.

And people continue to wonder why 1 in every 5 people will develop cancer during their lifetime? Could it be that the sunscreen we use to protect us from the UV rays of the sun also contains carcinogen components? Start reading what you buy folks, otherwise don't complain. The government does not do crap for us, we are on our own. This chemical should not even be permitted to be in use. But the government makes "sure" is kept under levels. Specially now that most manufacturing has moved overseas. Therefore the name of my blog. For the Government we are neither black, or whiter or Hispanic, it does not matter anymore... We are just a way to get paid, to produce and spend more Green dollars.

So what is there for us to do as citizens? Well, the biggest criminal is right at home, look in the mirror. We buy all this crap, and not only we buy it, we demand it. We buy bigger and better SUV's, that require more gas, more plastic, and more crap, more computers, nylon products. etc.

Funny to think that many people has developed a sensitivity to nylon clothing, certain detergents, or smells. Hmmmm could it be that the body is trying to warn us, but we completely ignore its plea? Then if we get cancer it is not our weak immune system the one to blame, but our weak will power, that dictated that we had to buy a bunch of things that we really never needed and which production is leading to our self destruction.

Think about it folks...

In order to learn more about this deadly chemical go to:

http://en.wikipedia.org/wiki/Benzene#Health_effects

Friday, June 27, 2008

Why call it recession? Part II

Hey guys I called it first! Now is not a recession anymore? It is a catastrophic financial crisis? Well I could probably go on and on about why this may be one of the worse economic crisis since 1929. But I will let this NY times article explain it instead. It is just fascinating that even though I know so little about economic theories, I had better grasp of the economic situation than some well read fellows that were telling me I was nuts a few months ago. Should I say... I told you so? What brings me to wonder... Is the interpretation of economic data more related to the study of the theories or to the grasp of the bigger picture? I studied art, not economics, but I have seen in many instances that the ability of being able to close your eyes and picture things that don't exist yet, can be applied to many more fields than just design...

Read and enjoy!

Battered by Oil, Dow Touches Bear Territory

Tuesday, April 22, 2008

This is a sign of better things to come...

How many times have we heard this in the past few weeks?

Bear Stearn's fall was the last big fall related to the mortgage meltdown, that was why the government bailed them out. Right??
Wrong, what about the recent losses at Chase, Bank of America, Merrill Lynch and Wachovia???
Every day there is a new announcement of major banks reporting huge losses and earnings being 70% down from last year.

And each time we hear the same thing from the economists.

"I am sure this is a sign that the meltdown is nearing the end of the downturn, and we will see the market getting better over time".

Bull!!!!! I am just surprised at how easily people accept what they are told even when their own senses indicate otherwise.
Inflation is under control they say? ONLY 6% a year? Crap!!!, how come from January to April of this year the same bottle of canola oil jumped from 5 to 8 dollars? The same applies to many groceries that people need every day.

Does that reflect a 6% to anyone? more like a 65% in 3 months it is! that without taking in consideration how the price of gas has increased. But gas and other everyday goods we need to buy don't count on measuring the inflation.... So everything is under control...

I wonder what they are measuring???? Hmmmm
May be the price of grass? or crackers???oh it must be the price of fake meat made of old shoe bottoms flavored as meat... they must also include the shoe laces as spaghetti and conclude that the price of those has not gone up much therefore the inflation is under control.

I think if these people wipe their buts the same way they measure inflation and other economic indicators.... well it must be quite smelly in Washington!

I mean really... can we glue the cracks of the economy with just boogies? and if we do, how long will it last? Until someone sneezes? Watch out! It is allergy season!

Wednesday, March 5, 2008

Does alternative thinking derive from unsuccessfulness???

During my last conversation with one of my best friends, we were trying to find the answer to this question. We have both been always surrounded by people who were in many ways alternative thinkers and activist. And although many were poor or middle class people, some are also considered successful in our society.

Which leads us to think that the answer to this question is, NO, alternative thinking does not always derive from unsuccessfulness and frustration.

But a more interesting question pooped up in our heads. Where does it really come from? Non conformists? Rebels? Or simply crazy people?
We could say it is a little bit of everything. Many times it derives from need, although in many occasions, it comes from those who realize that the rules and systems in practice today, were once someone else's vision and ideas. Then if you do not respect that same vision, why try to comply or succeed under the same rules that simply do not reflect who you really are?. You might as well create your own game and try to steer the system towards it, hoping that it would become main stream or at least recognized as fair. I think they find more fun out of life doing things that way :) Are alternative thinkers people who are bored??? Most likely...

In my opinion, alternative thinking and good ideas come from at times brilliant people, whose roles in society and family have been diminished to a position that only exploits a minimum percentage of their abilities. These people are in NEED of change, and at times seem to be in constant conflict with everything. They need a challenge, and since their life does not offer much if it, they create their own form of entertainment. And while the world may think they are crazy or they have some sort of deep rooted problems. Later generations benefit from their once rejected and abandoned ideas.

Introducing change and alternative ideas is an art that takes time to master. Patience, that unfortunately many brilliant people did not get in their combo. That may be why so many of them seem unsuccessful during their life time, to be finally recognized by some later generation.

So as we see, alternative thinking do not derive from loosers but it surely can result in a lot of unsuccessfulness. Therefore the confusion on the concept.

Tuesday, February 26, 2008

Practical guide to survive the system.

When I talk about "The System", I am referring to this economical turmoil where housing prices inflate and deflate in matter of months; retirement is being threatened by a weakened social security system and mutual funds that are becoming increasingly shady; Food prices creeping up, and price of oil reaching new all time highs every day.

When thinking about the right thing to do, what most people are doing at the time usually seems to be the best choice. Every way we look at it, it makes sense and many times seems as the only way. However, this is the way we were trained to think ever since we can remember. People do not want to deal with the pressures of taking a different path. Why? What will the family say, or how to justify something that just "feels" right but we can't explain?.

However, my studies of many economic and stock wizards suggests that doing somewhat the contrary it pays very hefty. Sounds confusing? Well, A famous stock market wealth manager, George Soros, teaches that timing is the key. May be doing the opposite of what everyone else is doing in the beginning of a new trend, is not the best option, but once the trend has developed while everyone else is following it without knowing why, it is the best time to change directions and do the opposite.

Here lies the question? How much more money would I have gained if I followed the trend just a little bit longer?? The answer is: A good investor is the one who ALWAYS pulls out with a profit, no matter how small. If you followed the trend longer you may have lost everything. Many consecutive profits add up to a lot.

This small talk about the financial markets, can also be translated into the Home economics. What? But home economics have nothing to do with investments? Or do they? Yes and no. While you may be able to make money along the way playing your cards right, most of home economics is based on getting the best bargains while surviving every day, in order to have some money laying around to take advantage of this inflation and deflation of housing prices, multiplication of wealth in stocks, right before it's transition into trash securities.

Here are some tips from a hippie of how to take advantage of Disadvantageous every day challenges:

While gas goes up, and up... And everybody tries to go green. Get rid of the SUV, or get rid of your second car, Shut, get rid of both cars, save the money and move near public transportation, move to a city! There are plenty that are still affordable! And ride your bike to work. You will also save in GYM fees :)! Nt to mention that you will have more time to spend with the family because your commute will be of only 15 minutes.

When house prices start climbing: If a mortgage for let's say 3 br home is more expensive than renting the same home, continue renting until prices deflate. Except you plan on staying in that house for more than 10 years.
It is easier to refinance for a cheaper interest mortgage than pay a low interest mortgage on the price of a house that will deflate over time. Only buy houses when they are cheap.

If you already own a house, wait until you see everybody buying to speculate, then sell. Keep the money in the bank, and live in a rental for a while. It will pay a hefty price for your patience. You will probably end up being able to afford 2 houses. Rent one of them until they go up again. And repeat!

When wheat, corn, meat, or even tomatoes go up in price.. Don't just readjust your spending in food. Grow up instead, and learn how to cook with other ingredients that are cheaper, your wallet will thank you and you will also be contributing to the deflation of the price of this food, since lack of market creates oversupply, thus lowering prices.

Never leverage your self to the maximum amount possible. In other words, do not purchase excessively on credit. Try to buy cash as much as possible, and always try leaving a cash flow cushion of at least $600 or more monthly, life gives you many surprises, sickness, unexpected repairs, or events. If you use every monthly penny to buy on credit you do not leave room for errors, or unexpected expenses, thus, forcing you to borrow even more and pushing yourself into constant bankruptcy. In other words, if you make 3k a month, do not commit more than 2400 on monthly bills including housing, food, fuel and utilities.

Use uncle Sam as a forced savings bank. Allow for tax withholdings as unmarried with no dependents even when you are married and have kids. It is true that you will gain no interest for that year from giving extra money to uncle SAM. But money that you do not see, it is money you can not spend. And receiving a $6000 dollars check in tax season is a nice thing!


When having kids, always analyze the pros and cons of both parents working. Example: in my case, the cost of getting a $2200 a month job was: days care for my 2 kids would cost about 2k monthly,plus transportation and eating out, plus the time I will not spend with my kids that is priceless.
How much would I be really making??? Nothing, as a matter of fact, I would have been spending more money than if I stayed home with the kids. Not that I love staying home, but the human and economic cost is far greater than my boredom. Once they go to school going back to work will make more sense.

If you have stocks or 401k's or IRA's, PAY attention to what's going on with the markets. If you see the markets excessively receding, sometimes pays off to take the money out for a little while and then put it back again, even if it takes paying some taxes, the losses may be far smaller. Even if it takes transferring it to a health savings account or something non taxable that does not involve stock or mutual funds purchases. Forget about that ridiculous idea of trusting someone else manage your money to ensure your future....


This few tips may seems silly but 6k here and 3k there add up, and sometimes it is all you need to snap a piece of opportunity, it could be a down payment for a house or a contribution to a 401k or a private pension. Perhaps a foreign investment or a minimal investment on a private venture. All you need is to have the means (cash) to be prepared.

Think about it! How many times on your life you have lamented not to have 5k laying around and an opportunity was lost?

When you live unprepared, you are not only loosing 3k or 5k, you are loosing the opportunity to have transformed that money into perhaps hundreds more few years down the line as it would happen with the simple purchase of a home.

Tuesday, February 19, 2008

Organic lies

Hello, I am back.

This time to try to decipher how our food transitioned from a life giving source, into a disease plagued poison. Could it be again another case of the "bad economics" virus?

With an ever growing population in our country, it is hard to think how to deliver food to the more than 200 million Americans every day. The simplest way would have been of course to buy local, cook with whatever is available each season according to the region... However, this would translate into too much competition and not much of a profit for the national food chain corporations. Then, their better solution was to buy extremely cheap from other countries or areas of our country, and making it available any season in all regions but all this at much higher price than we bargained for. Our health.

But how was this food to survive and this corporate owned crops to produce quick cheap food to restock corporate chains, if it were not for preservatives, chemicals and hormones?

But,what is the problem of buying this laboratory engineered food if fire kills all? Or so they convinced us to think.
The cruel truth is that 50 years ago, 1 in every 50 people would likely develop cancer, and today 1 in every 5 will. Why do you think that is? Air pollution? lack of exercise? or chemicals that go into the food and into our bodies that is left to rot into our cells because our bodies are unable to get rid of? Could it be that these chemicals attach to our cells eventually mutating our DNA to transform our healthy cells into silent killing machines... or cancer as they call it?

The answer is right there folks, we are what we eat. And today's organic standards are being lowered by the FDA due to the pressure of big food chains that want to enter he game of "organic" buyers. Trying to sell us organic labeled crap. and undermining our recently acquired knowledge about the ills of inorganic grown food.

Organic eggs that are not organic, free ranged chickens that are not really free... But how would we know what really organic tastes or looks like if we have been eating crap almost all of our lives? it is very easy to fool us.
Well there are ways of having a general idea. An organic tomato for example, should not grow bigger than a human fist, and it's color should be uniform inside and out.A bigger tomato would indicate growth hormones, and uneven colors would indicate not only hormones, but also too much time in cooling facilities thus artificially decelerating the natural ripening process.

Organic, free roaming eggs or chickens?how to distinguish real ones from fake ones? Well, the egg yoke supposes to be almost orange color not yellow, and a free roaming chicken have the opportunity of copulating with the roster almost daily, thus the roster sperm should be present in almost all eggs right next to the yoke. Roaming chickens tend to be leaner and smaller than the ones raised on cages. Any "organic" chicken that weights more than 4 pounds should raise questions.
How to realize if other "organic" labeled food is authentic??? Mostly by researching, but a very good indicator is the time that takes for it to spoil. Organic food should never last most than 5 days in the refrigerator without showing any sign of spoilage. And that is why it would not make good business for corporate chains.

So, going back to the subject of economics. Our inorganic problem derive from a cheap way of delivering crap, I mean food to the unsuspecting masses, that ignore the dangers of the hidden poisons within.
And although we realize that we should eat better, the Economics issue raises the question of how much organic can we really afford. When the fact is that if we could shift our buying habits into supporting more local growers, they could not only become more competitive but may also flourish,instead of disappearing as is happening today.

It is interesting to see how undernourished we are becoming, either due to lack of money to buy enough food or for lack of sufficient money to buy the right foods. Since without realizing it, by supporting the corporate owned crops we are artificially increasing the cost of fresh goods. All that transporting and refrigerating adds to the cost and thus to our pockets, and eats away our ability to achieve a balanced diet.