Friday, November 28, 2008


Our mainstream media has been in panic mode for a couple of months, and in its continuing consternation, has clamored for the President Elect to rush, first and foremost, into naming his economic team. “Hurry up, and you better be picking some guys who understand numbers and the economy. We want experts. The best money can buy.” So you turn off the news, and head off to bed confident that although a gloomy, almost mystic storm is brewing outside your window, all will be well. An Economist will figure it out. Some hours later your wake up call is the dawn sending rolling thunder that jolts your home to its foundation. You jump, wide awake, and in a cold sweat. “What the hell is an economist?” The sun is actually attempting to cast light around your drapes.

Once upon a time, "economist" was a term applied to an individual who enjoyed a certain conservative frugality to all human endeavors. Vestiges of that connotation remain with today’s definition, although these cannot be assigned to the modern economist in whose hands we appear to entrust our economic lives, those of our children and those of our grandchildren. Not that some of our more illustrious ancestors might not be addressed today as economists. Certainly Xenophon, Aristotle or Adam Smith wore the mantle well, in addition to being philosophers. Doubtless, each would probably be perplexed by the current definition, and even embarrassed by its most modern incarnation.

Our best known are too often staggering egos, rooted in analytical methods far from the disturbing notion of public discourse and sensibilities, but readily capable of pontification on the state of everything economic. Aided by the most powerful computational powers the world has even known, they interminably scrutinize the minutiae of fractions, macroeconomically dissecting our lives, creating hypotheses felicitous of one theory, or another that each might have subscribed to. The new breed of economist hopes that the consequence of his or her efforts might eventually dissolve into public policy. All struggle to be heard in one way or another, and a few get lucky.

Alan Greenspan for example, was much more than lucky. He was feared. He was clearly not as competent as he believed himself to be, but he was feared, as well as venerated. So discombobulated were four American Presidents on the state of their economies that Reagan, Bush Sr., Clinton and Bush Jr. each capitulated, leaving him insulated, permanently ensconced in office as 13th Chairman of the Federal Reserve. For 19 years Greenspan was arguably the most powerful man in the world, if you place money at the top of the human existence food chain.

Who preceded Greenspan? Paul Volcker, who will now be Obama’s eminence grise.

Aristotles, they are not, but let's cast a slightly more discerning inspection their way, and toward the state of their art. Economists are human with any of the frailties the rest of us might also endure. They are products of their educational systems, and environments limited by the very nature of economics. It is a vast endless field of study. Some concern themselves with wide global movements of goods, people and money. Others might specialize in capital ratios, dealing with banking regulations and interpretations on depository requirements, or the standards of capital and asset risk measurements, with specializations within each area. Others are preoccupied with inflation, and just to complicate matters all countries have individual methods of calculating capital within their boundaries, though they are confined to internationally accepted guidelines. Unfortunately, they either specialize, or they really don’t know anything, and become really, really dangerous.

It was anomalous that a few economists, during the bubble’s inflation, indulged quietly on the more dire economic possibilities, but their squeaks were obscured in the noise of the herd.

We assume that society’s Greenspans can not only be visionaries with insights into mathematical models, but can hover above the fray issuing profound prognostications on the state of our malaise. We assume a dream team of economists crowded around a new Commander In Chief of Change will blend their discordant mix of views into a powerful amalgam. One capable of charting a methodical path out of a labyrinth no one really understands, and no one is taking credit for.

Repeating platitudes on the perils of assumptions would be pointless. Through the kaleidoscope of our bank accounts we are witnessing the evolution of our own wreckage in slow motion.

The first clue as to why our modern day Aristotles of economics are not the oracles we sanction them to be, is that they deal with yesterday. They present the past beautifully, and with more clarity than the Hubble’s brilliant and awe inspiring images of distant galaxies as they existed billions of light years ago. As to what will occur tomorrow, or even later today, our seers are particularly inept. Specialization and compartmentalization are dangerous competences, particularly when compromised by insecure egos.

The second clue resides in the box that hides these enigmatic specialists of the statistical tables. They have perceptibly limited understanding of the nature that is human. The culminating pinnacle of their output is theory. Not practical, but obscure and probably intangible methodologies for hopefully enhancing efficiencies, or exploiting short, mid or long term trends, and biases. Nowhere in the mix that is the economist’s alchemy, can we find a scintilla of any universal principals that might inject percepts of morality into their mental and computational gyrations. Their inclinations fall short on the E.Q. meter, and human nature is not in their catalogue of, “Things I’m An Expert In.”

Now for the third clue. It is not in the nature of the economist to be an entrepreneur. Time spent in research, and analysis also do not allow for long term commercial endeavors. Unfortunately, this limit understanding of where the proverbial rubber meets the road.

The most effective presence at the round table carving a new path out of the maze America is trapped in, would be that of an entrepreneur. One who has had extensive success in the commercialization of goods or services to the broad market over a sustained period of time. One who has demonstrated vision and creativity, as well as capacities to motivate individuals other than himself to reach unexpected productivity. One who in practice and not through vicarious imaginings, has been drenched in all elements that fuel the economic engine driving an economy.

Drawing the curtains to let the sun’s warmth fill the room, you remain hopeful, but know that as the morning news will announce yet another bailout package, you will look elsewhere for telltales of contemporary Voltaires in our midst.

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Tuesday, November 25, 2008


We read the headline on a story buried deep on a back page related to Texas indictments on Vice President Dick Cheney, and former Attorney General Alberto Gonzales, but we don’t bother reading further. What’s the point? Surely it’s related to Guantanamo Bay, or some other absurdity these guys were involved in. It did not make the front cover, so how momentous can it be? The story appears to be about prisons, or prisoners, or something else that won’t affect us much, so who cares? Things are rarely as they appear.

On closer analysis, we are offered a view of the bizarre circus that is often performed by the Texas judicial system. That is not bewildering, since the performance of many magisterial infrastructures on this continent are desperately wanting, and the Texas judiciary rarely provides a surprise. The indictment of a sitting Vice President of the United States, however, should be international front-page news, and deserves dissection with all the skepticism that CSI Miami’s labs might percolate into truth. Alas, no such disposition is demonstrated on this case, yet even for modest entertainment, the incident deserves attention.

It may be impossible to discern if this collision of hapless dominos being played in a judicial game of Texas law, is simply a Universal coincidence when all astrological forces have merged to favor the Bush Administration, or if it is an outcome of the current White House hard at work on its end game.

The endless rambling road of predictions and conjecture is littered with decimated egos, yet on this one, can we help ourselves? The opportunity is too appetizing to pass up. This spectacle in Texas, fields a cast of characters too reminiscent of the Keystone Cops, to be either funny, or an aberration. And no, this isn’t a conspiracy theory revelation, but how good can a story get?

Cheney is accused of conflict of interest because he owns substantial holdings in the Vanguard Group, which invests in private prisons, while he holds influence over the Willacy County’s federal immigrant detention center. He is also accused of misdemeanor assaults on detainees because of that ownership link. In the litany of errant decisions suspected of Cheney, nailing him with a misdemeanor does not ignite much interest, and would not even make any list of top ten transgressions. This misdemeanor would also not find much traction in most courts, yet there it stands.

Gonzales on the other hand is accused of terminating an investigation into abuses at a federal detention center in the county. Gonzales demonstrated little propensity for recollection of anything when Congress questioned him on events within his own office. How can anyone possibly believe that he might successfully be linked to events inside a Texas detention center, while he fumbled around Washington? Perhaps someone is finally crediting Gonzales of having talent.

We suspect that Cheney and Gonzales are not losing much sleep from anxiety over this affair. Neither the accused, nor the District Attorney showed up for arraignments. The D. A. was found camping outside the courthouse with a horse, 3 goats and a rooster, and clerks, judges and prosecutors related to the case are separately being indicted on charges of abuse. They are furthermore embroiled in other debilitating peculiarities, laying a cloak of dubious lineage on an already questionable judicial exercise.

So how bizarre is this game? Perhaps not bizarre at all. The timing is impeccable and the players appear perfectly suited for the performances of their lives. Burlesque or not, they may be celebrated for years to come at a now famous ranch in Crawford, Texas, and might be deserving of a badge of excellence.

For all those who have reported, with a certain glee, on the charges against the intensely disliked Vice President’s potential humiliation, don’t dive into your bath of triumph with too fervent exhilaration. You may be gawking at a perfect scenario for George W. Bush to erect a Chinese Wall around himself.

As Bush exits the most powerful office in the world, but before welcoming the 44th. President, he will dispense Presidential pardons with sanguine indifference to perceptions. He can do so even before any trial is concluded. What a perfect, non-descript, development, and excuse for a blanket absolution of his Vice President from exposure to flack flying from any and all activities, or decisions. Gonzales is just an additional moat of protection for fortress Bush. Rather than wait for events to unravel after he has left office, or for other charges to be leveled at Cheney, Bush is presented a perfectly rational circumstance for exercising the power to pardon, before it evaporates completely from his grasp on January 20, 2009.

Deployment of the protective mantle to shelter the first guard of this markedly reviled President may propel Congress to revisit the practice that has been an embarrassment to the electorate in almost every instance that a Commander in Chief has left office. Presidential pardons have no place in a Democracy that honors itself with Laws.

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Friday, November 21, 2008


Throughout the election process, image is everything. Now, post-election, the Electorate looks for signals of capacities beyond the ability to get elected. We peer in, looking for tells of what an Obama Presidency will mean. Has there been a tell? … Did we miss it?

There was little satisfaction in The Pacific Gate Post having predicted back in early July that Obama would become the next President. The conditions and road signs were easy to read. The population’s unrest was conspicuous. The discontent gaining momentum rendered Hillary’s bid for the White House, and then John McCain’s charge, little more than valiant but submerged free-style strokes against a powerful current. Obama was a refreshing embodiment of eloquence which the self proclaimed intelligentsia believed accurately reflected America’s image. In contrast to George Bush’s endless public verbal faux-pas echoed with flourish by CNN, and late-night talk show hosts, Democrats agreed, and many across the political middle acquiesced, with fingers crossed.

Since the election, the mainstream media has presented us what it believes are satisfactory analyses on the transitioning process. We have been provided examinations of moment-by-moment cameos in the life of a history making President Elect, from his visit to the White House, to the pasting of fresh faces on titles fashioning the top of the new administration’s food chain. Endless Op Eds have given us “much ado about nothing” over the Rahm Emanuel pick for Chief of Staff. Will it annoy the Israel’s neighbors? Will it make this a too pro-Israel administration? Will Emanuel’s tantrums impede or frustrate relations with some Democrats in Congress? We are not getting much reporting of the fact that he failed dismally in his fiduciary duties as a Director of Freddie Mac through a time when the books were getting massaged in that institution. But then, no one seems to be held accountable for any of that corrupted abuse of the taxpayer’s cash by Fannie Mae and Freddie Mac.

No, the Emanuel decision, although momentous, is not a tell. Neither are any of Obama’s other likely announcements on his Cabinet. How could they be? Just as George W. Bush was a product of his father’s political machine, it cannot be a surprise to anyone that Obama is a product of the Chicago political machine that produces Senators, Congressmen, or Mayors. It cannot bewilder anyone that a lawyer by training, and Senator by oratory, would surround himself with powerful members of the Democratic system that funded him into the Oval Office, or with former members of the Clinton inner circle. We expect that a couple of Republican faces will take a chair around his table in deference to campaign promises of bipartisan politics from his administration. None of this will bring change. And so, we look for signs that some may come, and we await a sign that Obama will establish a sense of history for his Presidency beyond the obvious.

We will strive to decipher the reveals on the Obama economic front, and gage his engagements to resolve the Nation’s greatest crisis. In the meantime, here is the first sign of a tell on the international relations, and foreign affairs negotiating front…

He “supports deploying a missile defense system when the technology is proved to be workable."

Such sentiment, on the surface, appears an innocuous and even benign proclamation. Not so. Not in a time of so much international tension, or fear of nuclear proliferation. Let’s take a page from the most central and dominant figure in the end game of the Cold War. Let’s glean from a master negotiator, Ronald Reagan.

Reagan’s most sobering moment may have been his realization of the devastation that would define a nuclear war. His awakening to the outcome of a nuclear attack on America by the Soviet regime sharpened his mind to the protection of his country. To buttress against the potential of such a holocaust, Reagan threw himself behind the Strategic Defense Initiative (SDI). As many of you will recall, on March 23, 1983, he committed to the creation of an elaborate umbrella of space-based missile destroying long-range strategic nuclear ballistic missiles in flight, deployed from satellites, and X-ray lasers also shot from satellites. The brain center of this program may have been the Lawrence Livermore National Laboratory, East of San Francisco, California, but its heart was Ronald Reagan. His strategy was a dramatic shift from the long assumed doctrine of Mutual Assured Destruction (MAD), and it sought a leap in weapons systems unlike any ever conceived in military history.

Far from being an “intellectual”, or ever pretending to be one, Reagan’s genius was his knowing what he didn’t know, and embracing a deep seeded conviction that American ingenuity could achieve the near impossible. His Lawrence Livermore Labs would deliver. He did not question whether SDI would be "workable". The very fact that he set Lawrence Livermore Labs on track to realize his dream, would make it so. He convinced America of it, but more importantly, he convinced the world of it, particularly the Soviets and Gorbachev.

At summits held in Geneva and Reykjavik, Mikhail Gorbachev offered concessions, including nuclear armament concessions, in exchange for abandonment of the SDI program. With power of rhetorical persuasion and confidence, coupled with his fervent distrust of communism, or communists, Reagan prevailed, undaunted, in the shaping of his audacious foreign policy. He backed the Soviet bear into a corner. The already cracking Soviet economy could not support the escalating costs of competing with such exotic technological deployments as SDI. The advantage would provide America with overwhelming dominance. An initial result of the Reagan strategy was the Intermediate Nuclear Force treaty of 1987, followed a few years later with the disintegration of the Soviet empire, and the destruction of the Berlin wall.

Some of us close to the technological capacities resting in the state of the art during this period knew that the Reagan “Star Wars” system would not be achievable for at least the coming decade, and possibly far beyond. And yet, we marveled at the brilliance, the audacity, and the execution of the Reagan strategy. Even his closest aids believed that he believed. His enthusiasm was infectious. He was never in doubt.

So, back to Obama. Where was the tell? Where was the reveal? It was too painfully, and obviously obvious.

We await the next tell.

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Monday, November 17, 2008


A new world order? Not likely. What? You’re confused as to what and who makes up this new “Group” of countries now supposedly in charge of straightening out the world's economic recession? The politically loaded international photo-op was principally aimed at instilling confidence in the folks back home with two blunt instruments. One, “Watch me as I fly off to the U.S. because I’m really concerned about your plight, and I’m going to do something about it with these 19 other leaders.” Two, “… are you still watching? I’m shaking my finger at America. It is responsible for this mess, and we’re not going to take it anymore. How do I look?” Then home they all went, back to Paris, London, Canberra, Berlin, Tokyo, etc., back to their constituencies, having achieved nothing, but having left behind them in the American capital an odorous agglomeration of blame.

Countries around the world are relishing the misfortunes befalling America a little too enthusiastically. Their own balance sheets seem not to have cowed them into embarrassment. Sarkozi started the finger pointing process, quickly followed by Brown from Britain. The more powerful presences, China and Japan, were somewhat more polite, but the gloating from all members was evident, and its obnoxious cacophony has stained the cover pages of the world’s media.

It is also evident that most member countries believe it is now time to pounce, while the U.S. version of capitalism , and the country itself, appears vulnerable in their eyes. They feel that now is the time to create new international bodies intended to redistribute the economic clout from Wall Street to somewhere else. To where? Who knows? Perhaps to somewhere between Paris and Beijing, like the North Pole, or Geneva, or Moscow perhaps, … just anywhere but Wall Street. Anywhere but in the U.S. Dmitry Medvedev completely overlooked the fact that America held an election only days ago, and the largest economy’s electorate articulated its renewal by deciding to send Obama to the White House. He and his boss Putin felt it gratifying to assert that the United States had poor market oversight. Evidently Russia has not quite been brought up to date on the full translation or meaning of such terms as oversight, transparency, or even democracy, but accuse, they did. It read well back in Moscow.

Some humorous non-decisions by the 20 leaders were worth noting. The leaders indicated they would look into executive pay scales. That should be supremely comforting to most Russians and Chinese, whose leaders and friends are pilfering the treasuries of every business they can possibly find that produces any cash. How can an international body possibly dream of overseeing or regulating corporate entities? More likely, this is an arrow, that while directed at the U.S. banking institutions involved in much of the mortgage crisis, it will land in the middle of the Atlantic somewhere just North of Bermuda.

Another by-product of this historic conference was a call for the creation of new financial market watchdogs wonderfully identified as a “college of supervisors.” This group of experts would monitor major financial institutions dealing with transactions that crisscross member country borders. Actually, this was more than a call, it was a “pledge.” Pledges have more conviction. Such earnest commitment to oversight over financial markets would bring warmth to taxpayers from New York to Vancouver, as they settle in for the winter. The most heartening element in the pledge was its inclusion of hedge funds and derivatives under the oversight umbrella. This must read well in Caracas, but surely no one in North America is taking this seriously.

Granted, the $60 trillion in credit default swaps market is an aggregate of transactions floating in the ether of the electronic digital age, but we have not reached an age where civilization has advanced enough for international bodies to take oversight positions on the financial corporate firmament. National sovereignty will not allow it. Weak countries succumb to demands of organizations like the IMF. It is foolish to expect that any one of the 20 countries representing 90% of the world’s GDP would deign capitulating to such supervision or surveillance, particularly the United States.

It is understandable that a “plan” might be difficult to fashion in so short a time, however this financial calamity did not develop yesterday, and with the thousands of insiders and experts floating through the hallways and byways of 20 governments, it might not have been too much to expect the emergence of some creative ideas or concepts.

Calls for “financial stimulus” efforts are not a “plan,” and are definitely not creative. Oversight on the existing structures, even at a national parochial level, simply acknowledge that there is a problem, but will prevent nothing, and safeguard nothing of value since the organizations under scrutiny will be in no position to execute any abusive or dangerous transactions.

The world of tomorrow, which is no more than a year away, will have new structures, new frameworks of varying complexities, new inventive manners of exploitation that will create new financial bubbles around products not yet conceived. During the Dutch Golden Age, the spectacular, and scarce Semper Augustus tulip, with its blood-red flares and flakes streaking a white background, became a symbol of the 1637 tulip bubble. A single bulb of the rarity supposedly reached a value equal to a mansion in Holland. Delusions, illusions and herds create momentum. There always exists a human being or two, being human, taking advantage of that momentum. International bodies will never have the foresight to effectively provide oversight on behalf of their constituents. We now look forward to the musings of the next G20 meeting.

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Monday, November 10, 2008


General Motors tells us it has plans for the long term. Long term plans are dreams. Unfortunately, GM’s horizon reality isn’t long enough for those plans and dreams to be realized. Pelosi and the Democratic leaders are urging Bush to provide more aid to the beleaguered auto industry. Congress bungled the specifics on the $700 billion bailout, and now it wants to extend the bungling to other areas of the economy, beyond the financial institutions. Panic is a dangerous condition, however, while it appears everyone is being conciliatory, or afraid to lose his or her job, there is an opportunity to take radical action. There exists a brief window of time when reconstruction can be enforced on a broken U.S. auto industry.

Here’s the fix:

Dear General Motors, Chrysler, Ford (yes, you too Ford, you’re in trouble, but just won’t admit it), and all suppliers and sub-contractors.

c.c.: UAW (pay attention because this is really going to affect you)

We, the ever hopeful Taxpayers, agree to come to your rescue, but feel it is time for some overhaul. We’ve been embarrassed for long enough. Over the past couple of decades most of your vehicles have looked like they were designed by committees ensconced in the shoebox concept of beauty. We don’t need to address all the other awkwardness, such as your failure to deliver reliability, while Toyota and Honda humbled even the German manufacturers. We are familiar with the rationalizations, and to some degree empathize with your being trapped in untenable labor relationships that have over the years stalled efficiencies. It is time to clear some decks in the management ranks as well as in the labor contract details. The now presents a perfect opportunity.

Please note that neither Congress nor Mr. Paulson will be negotiating the details on deals with each of your companies. Congress has demonstrated it cannot be trusted, and as for Mr. Paulson, we have been less than impressed with his ability to step back and act with objectivity, diligence or any sign of creativity and wisdom. How he became a billionaire is truly the extreme of the American dream waylaid on the road to fulfillment. Reaching dizzying heights of power and wealth with so little …, but enough of that for now. Here is the plan:

Each company will receive the same deal. All you have to do is throw up the white flag indicating that you can’t go it alone, and it becomes activated. There is no negotiation on the broad strokes. A bill will be passed, ensuring that all parties, including all employees, all executives, all Directors, and all related Unions, particularly the UAW, as well as all related contractors, sub-contractors and suppliers, abide by the terms since this will affect all of them very directly. We plan to end the excesses in the executive offices, and in the labor unions that have withered your companies.

We will take preferred share positions at the current market value for funds provided as and when the investments are made. Given the severity of the situation, the preferred shares will carry a dividend premium, we will settle for a total of 10%, and their buyback will also carry a 10% premium.

Considering the current share values, we will end up holding majority positions, which will sit in abeyance awaiting their return to your treasuries. We do not demand board representation, nor do we wish to dictate the agenda.

Since we are primarily interested in a long term success of your companies, we will not demand attached warrants on the preferreds, as other investors might be wont to do. We also recognize that adding to the overhang on the market would not be fruitful. We are not interested in promulgating evidence of greed here, just positive intentions for a significant industry we care to stimulate. Forget about going the loan guarantee route. We already have to borrow these funds, so enough borrowing already. We are anxious to get on with taking drastic action for the revival of your companies. We look forward to launching them into the twenty first century without too much surprise.

All employees, including management and officers, will take a full 25% cut in salary other than those recently hired for “non-core” jobs at $14 per hour or less. The salary cap will be $250,000 per annum, with no bonuses whatsoever. We are dealing with survival here, so whining that your personal overhead is higher than $250,000 will fall on deaf ears, and how can we say this with sensitivity, …you screwed up. Blame your egos for the extravagant lifestyles, and then move to a more moderate neighborhood. You’ll enjoy some peace of mind.

All employee agreements, unionized or executive, will be revisited. We realize that you compete in an international economy, and face competition that does not have the encumbrance of your labor history or your retired labor force. We will be reconsidering and renegotiating health care coverage as well as all 401(k) contribution programs, to bring them into line with the rest of work forces in America. While on the topic, we’re not getting with the program to shift the worker and retiree health care program responsibility from GM to the union, for example. That one smells, and workers will not get the better end of any such deal.

We will revisit the legislation that has governed labor relations, and become intrusive in the function of a prosperous enterprise. Unions abused their privileges, and executives abused their power, taking over-reaching compensation beyond common sense. Both exploited the system to selfish gain, almost killing the businesses. Executives went along with UAW coercion as long as their own incomes were skyrocketing. We are still shaking our heads at the 64% pay raise, Mr. Wagoner gave himself ’06-’07, while GM was hemorrhaging cash and it’s stock was crashing. While he was busy with his own bank account, GM was preoccupied with unproductive plant cutbacks to 80% instead of closing them altogether. The onerous position that carmakers have been subjected to by unions are no longer defendable or rational. Unions have also been taking care of their own senior executives, but their members are staring into the abyss. This will be changed. Oh, yes, and so will the “Jobs Bank” program or other arrangements such as paying “idled” workers almost all their take home pay plus benefits. You can expect us to rescind guarantees such as GM provided to keep all U.AW., U.S. factories operating.

The Board of Directors will experience an immediate restructuring so that we may implement much needed overhaul, and independence to the oversight process.

Accept this in a positive light which will stand you in good stead with the North American car buying public. Seeing some tightening of belts and constraint by unions and executives alike might endear your mobile armada to your primary market. We will not tell you how to run your business but folks, really, could you shrink the number of models? Too many of them look identical. GM, could we talk about your stake in GMAC? You’re supposed to be making cars, not financing homes. We’ll talk.

We would really like all three companies to demonstrate at least some of the vision their competitors have been actuating. We’re not talking about the kind of vision you used when you predicted a strong second half in 2008, but how about some vision on the future of the industry. This is just a “wishful” kind of thing on our parts, but we would be grateful if you could give room to the “vision” thing.

Few familiar with the auto industry would disagree that over-zealous unions have had obvious smothering impact on U.S. companies constraining their dexterity in fast changing markets. Without denigrating their significance to a labor force, we will do our utmost to ensure that common sense prevails in the relationship between unions and the auto industry. We are aware that labor isn’t the overwhelming cost factor, rendering you unprofitable, however, we are very familiar with what almost a century of accumulated bureaucratic strangulation from unions and government have done to your companies. We wish to remove all possible rationalizations and excuses on your road to recovery, and yearn to see it paved with ethical behavior.

Once your companies return to profitability, and our share positions are repurchased, your salaries will be revisited by new, and hopefully independent boards of directors.

We wish you much wisdom, foresight and plenty of good fortune. We also want our money back.

The Taxpayers.

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Wednesday, November 5, 2008


The American electorate has placed a bet. It is betting: That Obama will burnish the image of America in the eyes of the world, that he will pull America out of its economic crisis, and that the President Elect will lead the nation into a new era of change. Peering through the Obama enigma, there is a very real ray of light that may bring energy to the turn-around, however temporarily. A majority of taxpayers await with hope the revelation of the “change” definition in the Obama encyclopedia, although fear continues to permeate the country, and bad news persists in dominating the news.

The world witnessed an international reaction to the U.S. election of its first African American President. Most Americans, including many who voted for McCain, could not help but be touched by the event, and most were inevitably moved by the possibility that “hope” might find traction, though much of that hope rose from weariness and disappointment rooted in a failed 43rd Presidency.

Populations in Asia, Europe, Africa and even in the Middle East, genuinely applauded the event, and demonstrated a new support for possibilities available in the American society, polity and economy. Most countries around the world envy such freedoms, and many were stirred with a refreshed affirmation of America’s glassless ceiling. Obviously many of those countries also look to America as a source of capital coming from purchase of their products and resources. A few also procure loans for America’s expenditures.

The “goodwill” generated from the Obama election presents America with a window of time during which it will be able to further extend its borrowing practice from countries holding significant dollar reserves. America remains the only safe haven for cash. The Obama Presidency will find that extending the portent of “hope” beyond the borders of the United States could provide the Treasury an additional trillion dollars in borrowed funds with which to structure a turn-around for the world’s largest economy. The care, diligence, boldness and intelligence with which Obama allocates the country’s newfound capital will dictate the length and depth of the current recession. The window provided by this goodwill may be opened only temporarily. We will watch as he attempts to deliver on his promises, but the real “hope” is that he will use this window to dramatically energize the economic engine much of the world depends on.

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As millions of American voters stood in line for a chance to cast their votes today, their Federal government crossed a historic threshold on their collective behalf. The Federal debt quietly stepped over the 10 trillion dollar mark. The number is staggering, and one that neither candidate receiving votes today, had the courage to face or address amidst the flow of promises. During the campaign, neither candidate could confront the unfunded obligations forming the entitlement crisis.

Voters will cast votes today, in part reacting to what they believe is a disastrous administration, and in part hopeful that a new face in the White House will present them with a renewed confidence for tomorrow and the future.

Through the closing weeks of the Presidential campaign, loss of consumer confidence continued apace further suppressing home prices, and sinking car sales 31 percent in October compared to last year. These are significant events, and significant trends.

The next President will need to spend less time redistributing wealth, than steering the Nation away from self-indulgent borrowing policies, either personal or national. While the new President will have no choice but to lift spirits and morale of a stressed nation, his most daunting task will be to finally confront both the rapidly growing deficit, and the out of control debt. Even in the short time between his becoming President Elect, and his swearing-in, both the deficit and the debt will increase by a couple of hundred million dollars as the Treasury further taps foreign lenders to keep the nation afloat.

The degree to which the new President Elect takes the high road and makes hard decisions, will be inversely proportional to any blame he places on the previous administration for the depth of the nation’s economic disarray. One hopes the next President moves forward positively and without fear, doing the right thing right. The wall of massive debt requires it.

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