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Sunday, August 27, 2006

Trickle Down or Else (Part 2) The Media Pigs

Read this article today from the Chicago Tribune written by Gail MarksJarvis. It was about Pension Reform. She writes about the archaic new law, how it's difficult to decipher for accountants, even more so for employees, how it is likely to put a stop to many pension programs, and how it is going to pinch S&P 500 companies and their stockholders.

Nowhere in her article does she talk about "reality". How the S&P 500 companies are more cash rich than any time in history, how executives running these companies are literally becoming filthy rich off their rich salaries and options grants (many of them illegally issued to time market prices) and how the S&P 500 companies have used record amounts of cash to buy back record amounts of stock over the past 2 years.

So I had to write her a little letter which is spelled out below. Just another Pig in the media frothing at the mouth while licking the asses of corporate America...

Hello Gail,

I read your article about the pending need to shore up pension obligations by as many as 1/5 of the S&P 500 companies.

I get exceeding frustrated by articles that do not paint a complete picture of reality when dealing with issues like pensions.

Does every business journalist go to a school that teaches "pensions are bad and should be reported as a burden to corporate America" at all times?

Does anyone ever think about good pensions may = happy employees who are more productive and better employees because they feel more secure about their future and happy to work for a company that is helping them with their retirement? (especially since their "government" is in the process of raiding their treasury) This attitude could go a long way to change the reporting slant on issues like pensions.

Additionally, I am amazed that your article completely ignores another exceptional reality of the cash flows of the S&P 500 companies over the last couple of years, that more cash than any time in history is in the bank accounts of S&P 500 companies and more of these companies are spending records amounts of their money from these inflated bank accounts to buy back their own stock.

Here are some figures:

The companies in the S&P 500 (excluding financial, transportation & utilities) in the US have over $640 billion in cash on hand. Yep. This is a number beyond anything seen in modern times. Why the article I read did not include the financials, transportation & utilities I don't know (suffice to say there is at least another $250 billion there).

Mind you these companies spent more than $500 billion in the past 6 quarters (year and a half) buying back their own stock. That is $500 billion spent buying back their stock! Now allot of these stock buy backs simply buy back the options they have awarded to their corporate officers. Their officers have seen this enormous build up of cash. They want to get their hands on it. In fact there should be no surprise the SEC is investigating a widespread practice of illegally backdating stock options to lock in low prices so when executives cash out they make more money.

Did you get that part about buying back stock to PAY THEIR OFFICERS for their rich manipulated stock option grants? I mean, who gives a damn about the American Citizen / worker anyway?

What exactly is wrong with America and the "reporting" that goes on? For starters we have a "corporate government" and "corporate media" who no longer sees the American citizen as a person but a consumer and employee. There is no longer any institution left to protect the American Citizen and you people in the media have been brought up with a mindset that is so twisted you should all be sent to a small village somewhere in the Andes Mountains and learn what is important in life before you are allowed to write shallow, twisted and one-sided articles like yours on Pension Reform.

Sincerely,

Thursday, August 17, 2006

Firing Squad

This was the opening sentence of an article by Andy Webb-Vidal in the FT today,

“Bankers traditionally face firing squads in times of revolution.”

Coincidentally, I received another offer to open a new credit card account by none other than a bank, Washington Mutual. Now I opened this offer since I know this bank. What I found is enough to make me want to stage a revolution.

For any of you clueless wonders of the American public who thinks your government is full of a bunch of “do gooders” as opposed to “evil doers”, you need not read on. For the rest of you, you may be familiar with the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005’’. Note in this title the portion called “Consumer Protection Act”. Well let me tell you, that is a distinct testament to our spineless, impotent legislative branch watering down a title to make citizens “consumers” think this 195 page act has something to do with protecting them. Nothing can be further from the truth. The only “protection” enhanced by this act is to set aside some rules about the accidental dumping of personal data in the public domain and some watered down requirement they send some bull shit pamphlet disclosing how the credit card companies are going to fuck the consumer by sharing their information with anyone and everyone who is willing and able to pay for it.

Anyway, I got my pamphlet late in 2005 telling me I had given up my rights to sue the credit card companies, that I could be charged any damn fee they want to charge for whatever damn thing they feel compelled to charge me for and that I could not be screwed many more times than previously possible by the credit card company.

I have been surprised by the boldness of the credit card companies offers now. This is the Washington Mutual “offer” for credit.

Interest: 9.99-19.99%

Now what exactly does this mean? Before the Bankruptcy law the interest rate was set. There was a real rate and a real index if variable. (Most were not.) However, terms are now spelled out in a way that allow credit card issuers to bull shit you and be vague as possible about what they are offering.

This is what they say about the interest rate:

“...will depend on Washington Mutual's evaluation of your application and credit history”

What BS! They would not be sending this shit to you if they did not know your credit history!!!

Other APR’s: Cash Advance 23.99%

Default APR: Prime rate plus 23.74%, currently 31.74% !

I love this one. Somewhere there has been a complete destruction of any kind of Usury Laws in the US. I am waiting for the return of “debtors prison”. If you don’t know what this is you really should look it up and learn NOW because this is what we are returning to. Anyway, that is 31.74%! What bank on the planet needs to earn 31.74% on a damn loan when the inflation is currently running about 6% (including energy and food, 2 things our government conveniently leaves out when advertising the inflation rate in the country, another evil and deceiving thing your evil doer government does) and the cost of money in the average savings account in the US is under 2% (not including money market accounts).

I love this: For every purchase outside of US border you will pay them 1% of the transaction. It’s back to travelers checks for me. They can be had for no fee now that people don’t need them.

What I really love about the Default APR is the myriad number of ways the bank can impose this fee. See this text from their “offer”.

Each time you default on this or any Washington Mutual credit card account because you fail to make at least the minimum payment when due, exceed your credit line, make a payment to us that is not honored by your bank, or are reported as delinquent on an account with any other creditor, we may increase the APRs on your account up to a maximum of the Default APR.

Yes, that is any time you default on any WM credit card but also if you are reported “delinquent on an account with ANY OTHER creditor”. Now isn’t that a gas? Tell me these people don’t know your credit history before they send you one of these offers.

Don’t forget, the enticement to transfer that balance from another credit card will cost you 3% of the transfer or $75 maximum. So if you are transferring $7500.00 you are paying 1% again to transfer the balance. Anything up to $2500 is costing you 3% off the top so better figure out what you are really saving if you are getting some interest free months to pay off that debt because you may find you are not saving what you thought.

We live in a capitalist economy where our government has confused the separation of government and economy. There is no longer a separation in the US. We don’t really have Democrat or Republican parties, we have a capitalist party government. It is a one party government not unlike a communist party government and there are no longer any choices to what kind of governance you have. If you are not a capitalist in the US, especially a right wing capitalist under Bush, you are not fit to work in his government nor contract with his government, nor live with the fear you will be followed and harassed by his government.

What does this sound like to you?

Finally, the last paragraph of Andy Webb-Vidal’s article sums up the lack of controls on anything companies (super citizens) can do in the US, “In a socialist economy you assign resources as a result of the will of who governs, but in a capitalist economy resources are assigned as a result of risk analysis.” Well, in the case of American capitalists, you assess risk then multiply by three then get the government to back you up while you screw the citizens with the judicial branch behind you.


Just a final note:

Last year, penalty fees alone (issued by credit card issuers, banks) generated $12 billion in revenue. "Banks [are] raising interest rates, adding new fees, making the due date for your payment a holiday or a Sunday on the hopes that maybe you'll trip up and get a payment in late," said Mr. McKinley.

So not only do you multiply by 3 but you add in a moving target!

Wednesday, August 16, 2006

Private Equity Update

So far in 2006 there have been 660 takeovers in the U.S. by private equity firms, according to TrimTabs Investment Research in Santa Rosa, California, and Bloomberg data.

Uh, did that say 660? This poses an interesting dilemma. Is the stock market as we know it dead?

Every day I read about Private Equity and Hedge Funds. Hedge Funds now account for at least 25% of the daily volume on the stock exchanges. They often carry a heavy stick buying substantial stakes in companies then forcing boardroom shuffles and drastic actions by the companies they target. Then there are the Private Equity Funds raising billions of dollars at a time and looking for companies to buy out, leverage and soak for cash.

It seems the big money is getting directly in the game. Why buy stock in a company that has a 5-10% return on equity a year as a public firm when you can take it private, hack it to death and rape it for 30% up front then spit it back out later if you care to?

What does this mean for the average investor? Well, lets say for the past couple of years the stock market has been stagnate after a short recovery from the crash of 2000-2001. The average Joe is working his but off to make a few percentage points from the market and if he is not awake he can have losses on the books rapidly.

For the “special” money investor, they can play the Hedge Fund industry and pay unregulated managers to do whatever necessary to rake out a higher return than the average Joe. This means heavy trading, shorting and raiding companies or trading derivative products not understandable or accessible to the average Joe in efforts to make a profit.

Or they can dump a few million in a Private Equity Fund and go along for the ride leveraging balance sheets to buy out firms and raking them for cash to show high returns.

I am reminded of the late 1990’s when it became obvious that the US Legislative Branch Government had also become irrelevant. The congress and senate became tabloid news creators falling over themselves to “dirt out” one of their opponents while the world around them spun at ever faster speeds. All the engineers dumped on the street after the cold war ended fed the technological revolution and internet phenomena. Meanwhile, the international political vacuum created by the end of the cold war was completely ignored by the idiots, many of which would stand up and brag they did not own an passport, while the international business groups were going gangbusters in the newly created “markets” of eastern Europe and Asia.

By 2001 America had a wake up call on the international soup of shit that was being dumped on the developing world and to this day the impotent idiots that make up the government (X the right wing evangelical war lords of the White House) have not figured out a damn thing. They are hell bent to knee jerk reactions to every situation, cannot think beyond their noses and are bought hook line and sinker by industry. So the US is now being governed by paranoid idiots and right wing zealots.

Back to the stock market. If the stock market as we have known it since the early 20th century is truly becoming irrelevant to anyone with real money then are we seeing the internet trading companies and news junk blasted by dozens of info.net organizations as nothing more than a way to suck money from the suckers who have visions of 20th century stock traders that could make money in “the market”?

This is a real question to ponder and one to take very seriously as the “investment community” evolves.

As is true in the world of economics “bad money drives out good” could mean an end to the relevance of the “good’ol market” and a new dominance of “new money schemes” that I have said many times over are heading for a fall in the not to distant future. It will be not till then that our impotent government full of knee jerk idiots will wake up and realize the future of the average Joe has been stolen from him just like Daddy Bush had raided the treasury and stolen our citizens future security.