There’s a genuine economic crisis out there.  I’ve lived through enough of them (barely, in a few cases) to know not to be excessively dismissive or sanguine about ’em; but for the grace of God, most of us are a couple of bad executive decisions or market breaks away from the unemployment line. 

And yet for all the media’s carping about the dismal state of the economy, “Black Friday” sales were up three percent from last year – a complete turnabout on the media’s pre-Thanksgiving drumbeat, which called for big drops in sales on the nation’s biggest shopping day.

John at Powerline has a theory about the media’s reflexive bleakness (emphasis added):

The financial crisis is real, and we are most likely in a recession. But the hysterical terms in which the economy is discussed are unwarranted and unhelpful. They are also, I think, politically motivated. Reporters and editors like the idea of a looming depression (or, failing that, an unusually severe recession) for a number of reasons. If it happens, it will be taken as refutation of the relatively conservative consensus that has influenced government policies since the early 1980s–a consensus under which a great many people have flourished, but not, notably, reporters and editors. And if it doesn’t happen, they will give the credit to Barack Obama and the more-liberal policies they expect from his administration. So for the left, hysteria over the economy is a win-win proposition. Not so for the rest of us.

Not to mention that it sells papers; hysteria gets people tuned in and/or buying those papers.

Or so the theory goes.

Oh, yeah – read the whole thing, naturally.

(more…)

As Washington flirts with bailing out the auto industry, Ivan Osorio wonders what we’re saving, and ponders the downside of socializing the market:

As The Wall Street Journal’s Paul Ingrassia notes, Detroit doesn’t need more money, but radical change, including getting rid of union contracts, which, as he noted on NPR this week, include burdensome work rules. Here’s one example he cites in his Journal op ed:

A few years ago the UAW even waged a spirited fight to protect the “right” of workers to smoke on the assembly line, something that simply isn’t allowed at, say, Honda’s U.S. factories. Aside from the obvious health risk, what about cigarette ashes falling onto those fine leather seats being bolted into the cars? Why was this even an issue?

In what other industry would this even be tolerated?

Yet even that is not all — then there is the UAW “Jobs Bank,” which keeps allegedly laid-off auto workers on at full salary and not working. This is beyond Soviet. In the former Communist bloc, people had a saying: “We pretend to work and they pretend to pay us.” Not even pretending to work and getting paid for real beats that every time.

He invokes the Russian “Lada” marque – not that you have to go back to the USSR to see the historic failure of socialism in the auto industry.

…but it could be the next. Nobody really knows how deep “it” will go or how long it will last.

In the wake of a 50% drop in the stock market, comparisons to the great depression are apt to occur. Learning from history may reduce our chances of repeating it and all that.Is it possible, theoretically, that we could experience another great depression? If you believe that there is, there hasn’t been a more precipitous collection of events conspiring to repeat that chapter than we have right now.

Are we really so much smarter or better equipped than we were “back then?”

There are a lot of very smart analysts and economists debating both sides of this argument but one fact remains. There has only been one such event in America, and only a handful of major recessions. A dearth of data upon which to formulate analysis of current events.Every time we have a market crash, pessimists exhort “This time is different,” but it never is and the market has always recovered.

Recessions however are caused and measured by multiple elements, the stock market representing only one of them. To say that we aren’t witnessing the beginnings of another great depression simply because conditions are dissimilar to those the led up to the last one is sheer folly.

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.’s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o’clock shadows asking, “Brother, can you spare a dime?” we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today’s woes look like a flesh wound.

That’s easy to say in retrospect but we’re not done yet. Unemployment hasn’t peaked. Real estate values haven’t stopped falling. Credit hasn’t started flowing. Banks haven’t stopped failing. The market hasn’t stopped falling.

A forensic analysis determines the conditions of an event but does not rule out other conditions that could have the same result.

I’m not saying that in fact we are going to experience anything like the Great Depression nor do I know anyone that does. Policymakers however can not continue to penalize the productive, facilitate bail outs, effect government takeovers of entire segments of our economy and drive deeper our national debt without fear of paying a much higher price in the future.

A price that we may not have the resources to pay. Then what?

It isn’t clear what Barack Obama intends to do to correct the course of the economy. It isn’t clear there is anything he can or should do. What is becoming clear however is that a liberal administration and a liberal congress have no intention of sidelining additional bailouts and government largess. The policies that got us into this mess will be perpetuated for at least the next four years. Like oil turning to sludge in a V8 engine, the productive and corrective forces of our free enterprise system are becoming ever more encumbered by liberal lawmakers that have no business messing with economic policy or worse, feel that they know better.

The next great depression may have been caused by a whole new set of circumstances. The last one was caused by a lack of government intervention. The next one could be caused by exactly the opposite.

Democratic leaders in Congress denied the Jet-Setting Big Three CEO’s saying show us your plan before we show you the money.

The Big Three are on their own for now.

Congressional efforts to rescue Detroit’s auto makers collapsed Thursday, with lawmakers saying the industry lacked credible plans to return to profitability.

The decision came after two days in which leaders of three of America’s largest corporations pleaded for a taxpayer-financed rescue from lawmakers in front of a national television audience. The spurning of their pleas leaves in question the future of companies that have been synonymous with American industry for decades and together employ 239,000 people in the U.S. (Please see related article on Page B3.)

Democrats in Congress offered only a glimmer of hope, saying they would reconsider a rescue if General Motors Corp., Ford Motor Co. and Chrysler LLC submit convincing turnaround plans by Dec. 2.

This is a dire, critical juncture for America’s auto makers but you have to admit, Congress asking The Big Three for a business plan laying out their plans for the money if they got it? Requesting accountability? Discerning fiscal efficiency?

That’s humor.

…and it would be funny if it wasn’t real.

Frank, Pelosi and Reid wouldn’t know a business plan if they saw one let alone offering anything in the way of analysis or assessing viability.

That would be like getting marital advice from Barney Frank. Advice on manners and professional comportment from Al Franken. Executive leadership advice from Barack Obama.

Good luck Big Three. Just copy some economics paper from your freshman year of college and show it to them. They’ll never know the difference.

The Dow broke through 8000 in earnest yesterday, moving below the “50% down” benchmark that some analysts believe is/was the line in the sand between a recession and a really really bad recession; maybe, not likely, even a depression, a term that has evaded technical definition (or at least a consensus thereof) due thankfully to its rarity.

Congress showed GM the Door. The market showed the rest of us the bird. Word is once US economic data is revised, it will show that a recession was upon us as of January. Not 2009. 2008.

Which may sound like good news if recessions still last an average of eleven months. If that were true, the market would have started to build back as another rule of thumb is that the market turns when a recession is about 55% done. As it stands, this recession could last as long as twenty four months using that rule of thumb and given the market’s failure to launch.

I get asked the question “What kind of news will it take to make the stock market go up?”

As much as I would advise investors to ignore the market right now I have to at the same time advise them that the market being on the rise will be the news. It will signal the midpoint of the recession and that the market is starting to price in an anticipated rise in earnings and profits. Problem is, we will only know this once the trend is established in earnest; it will manifest itself only in hindsight; which is to say there is no way to predict when it will happen.

The market usually tells us what will happen, not what is happening or what has happened (save a terrorist attack or some other external event).

What to do?

Hang in there. For investors with long-term time horizons of at least ten years, this market may represent a significant opportunity to buy in. Increase monthly or payroll contributions – at least temporarily – to average in lower.

Does that mean that the market is done melting? Maybe not. But it is almost certainly closer to the bottom than the top.

As Warren Buffet says, be greedy when others are fearful and fearful when others are greedy.

…and buckle your seat belt.

As a GM Lessee, I got a personal note from Troy Clarke, Group President of General Motors North America. I didn’t know he had my email address.

…we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid. (emphasis his)

Despite our successful efforts to restructure, reduce costs and enhance liquidity, U.S. auto sales rely on access to credit, which is all but frozen through traditional channels.

Troy, that’s funny. I went to lease a Cadillac CTS and a Chrysler 300C and what they told me was that neither GM nor Chrysler will lease me a car, but banks like US Bank will. I went to Infiniti three weeks ago and they leased me a car. I tried to buy American but to no avail.

The Americans stopped leasing cars well before the credit crisis.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking for your support in this vital effort by contacting your state representatives.

Troy, I think it would be a great idea to contact my State Representative. I agree that we need to do something for you because our government is responsible for some of your issues. I also believe America needs to stay in the automotive manufacturing business. If for no other reason, its a matter of pride, and probably national security.

But you guys have made some really boneheaded moves over the decades and have allowed the unions to run the show. Take a lesson from Northwest Airlines. Price the jobs at what they are worth, let the strike begin, and fire the ones that don’t show up. There are plenty of good people looking for work.

If you won’t, you don’t deserve to exist, you’re not getting my business and you don’t deserve help from taxpayers.

Nonetheless, my wish would be that you get your loan, but only under the following conditions:

1. Congress suspends CAFE regulations with an eye to abolishing them completely so that you can focus on making great cars that your customers actually want. Let them buy an Aveo from Hundai. If they can make money schilling them, all the power to them.
2. The Unions will have to make a choice. Reduce pay and benefits to bring labor costs in line with the rest of the market word wide or be gone.
3. Rick’s gotta go. You need a CEO with a spine. Someone who knows how to run a chainsaw.
4. You still have too many brands. Lose Hummer and combine Pontiac and Buick or Pontiac and Chevrolet. Combine Chevy Trucks with GMC. Lose the fat. Badge engineering has to go, once and for all.
5. You have to agree never to cancel the Corvette. I want one. A new one. Some day.
6. Fix the radio in my Suburban.

Thanks for the email. I hope the wife and kids are well.

What would happen if Congress failed to bail? Preferred to defer? Adjudicated to abdicate?

A look at U.S. history suggests that even during the worst U.S. recessions, Americans have been able to turn things around. There were times when things looked so bleak that only a fool might have hoped for a brighter future. Eventually, that brighter future arrived.

Is this time different? Yes. Every time is different, but that doesn’t mean we won’t overcome this one, like the rest.

Why?

Because we can. As embattled and encumbered as the free enterprise system is by liberal policies, corruption both corporate and federal, incessant layers of useless regulation and tort abuse, America is still the world’s comeback artist. As watered down as our flavor of capitalism has become it is still the only proven system of sustained prosperity; socialists take note.

Some of my clients are disturbed by the precipitous drop in leading economic indicators such as demand for shipping, logistics and packaging. Some companies have chosen to extend holiday breaks to their employees; starting now. To their credit, I find employers are more concerned for their employees than for themselves, a quality lost on Barack Obama, who feigns concern for the working man for the sole purpose of indenturing him further to the Democratic Party, and seeks to penalize those that employ.

At the same time, these same business owners are just as certain that this too shall pass. Because it always has.

But this one’s gonna sting.

Why did things always work out in the end? Because we remembered who we were when times got tough.

Limiting Government

The U.S. has always distinguished itself relative to its major trading partners by having a higher faith in free markets and a greater respect for the limits of big government. Sure, the U.S. passed a stimulus package now and then, but it also let failure run its course and refused to resort to excessive big- government intrusions into the private sector.

I fear many Americans have no idea how deep and persistent this recession could be. Real Esate has fallen for seven consecutive quarters and may not be half done. Unemployment is on the rise. New cars, even Toyotas, are stacked three high at dealerships. The Dow (another leading indicator) is bouncing off 8000 likes it’s trying to break through.

…and we have a President-Elect and Congress hell-bent on raising taxes (on those that actually pay them), increasing government, putting failed business models on life support and spending our dollar into oblivion.

Today I read that John Kerry’s defeat was “the luckiest thing to happen to Democrats in 40 years.”

The next four years are a hot potato, now in the hands of BHO.

Barack Obama may very well be the luckiest thing to happen to Republicans since 1981. Not because Barack Obama isn’t up to the task – in all fairness its too early to tell. Rather because I’m not sure any President could survive the next four years politically, even if he/she made all the right moves. Twelve percent unemployment will have a rather deleterious effect on even the most popular President. The most likely remedy for this particular recession is exactly what Obama doesn’t have.

Time.

Americans have become increasingly dependent on the government, mostly because of the policies of liberals like Barack Obama but it is that very thing that will bring about his political demise. Americans expect the government to create jobs and facilitate “soft landings.” They have little patience and little appetite for sacrifice and thrift. Those are the hallmarks of generations past.

Ultimately our salvation will be invention, innovation and hard work, despite the worst efforts of liberals who will keep printing money until we have double-digit inflation and 16% mortgage interest rates.

We survived the Seventies – in fact a lot of great music was probably borne of the pain and suffering that marked the decade. We will survive this time too, and maybe in the process create a whole new genre of future classics in the process.

In the mean time the Obama Presidency will be marked by the worst recession since the Great Depression and unless he (and we) get a lucky break, The Great Recession of 2009-2011 will be his 9/11.

Obama has neither the tools, the people (save Paul Volcker?) nor the ideological inclination to save us or his legacy and the result will be a resurgence of conservatism. He won’t do the right thing, which may be nothing, bail-out-wise. His congress will pull all the liberal levers. He will sign. The recession will follow its course unabated. The incriminations will ensue: “Obama, it was you.”

Jimmy Carter will be proud.

…and off the hook.

Twasn’t us. Trust us. By the way, can we have some government cheese please?

Rather than admit that the UAW’s plum labor agreements and contentious negotiations have contributed to the current gloomy situation, the United Auto Workers head man says that the economic downturn is to blame for everything, and that Congress should approve loans to the auto industry, saying “We cannot afford to…see this industry collapse.” You’ve got to love that black and white logic. The current state of the economy, and in turn the automakers’ pain, are both closely related, and separate issues at the same time.

Word to the wise: update your resumes. Any government bailout will only delay the inevitable. The Big Three will become the Big Two or Big One.

I’ve often thought Denny Hecker’s empire was built on sand these past few years as he levered his automotive empire, already a survivor of one financial crisis into the Real Estate and Mortgage markets.

…talk about bad timing.

And now this…

Denny Hecker sues Chrysler’s financial arm

The ubiquitous auto dealer also is expected to file for bankruptcy for some of his businesses as soon as today.

Minnesota auto dealer Denny Hecker filed a federal lawsuit this morning against its longtime partner Chrysler Financial Services for allegedly acting in bad faith after it froze Hecker’s credit lines, affecting his rental car business, fleet sales business and 13 Hecker dealerships including one in California.

If you will allow me to ramble, consider the cascade effect manifested here.

Corrupt (and Liberal) officials at ACORN, Freddie Mac and Fannie Mae simultaneously crash the markets for Credit, Homes and Equities. Congress and the Unions slowly bleed the domestic automotive industry to death.

As a result, a local billionaire goes bankrupt, likely taking local jobs and investment with him.

Thank you liberals. Your evil plan is coming together. I can’t wait to see your solution. Lemme guess: it will involve more of the same. Higher taxes, bigger government, more regulation.

The backlash that will be the Conservative Revolution can’t come quick enough.

The phrase that started it all. First AIG then the rest. The Big Three are about to become U, S, and A. The UAW and the Congress killed the Big Three, now we’re going to own them.

Let’s assume that the powers in Washington — the Bush team now, the Obama team soon — deem GM too big to let fail. If so, it’s also too big to be entrusted to the same people who have led it to its current, perilous state, and who are too tied to the past to create a different future.

In return for any direct government aid, the board and the management should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible.

That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others, and downsizing the company. After all that, the company can float new shares, with taxpayers getting some of the benefits. The same basic rules should apply to Ford and Chrysler.

So first shareholders take it in the shorts, then taxpayers.

In the Washington mind, there are two kinds of private companies. There are successful if “greedy” corporations, which can always afford to pay more taxes and tolerate more regulation. And then there are the corporate supplicants that need a handout. As the Detroit auto makers are proving, you can go from being the first to the second in the blink of an election.

For decades, Congress has never had a second thought as it imposed tighter emissions standards on GM, Ford and Chrysler, denouncing them for making evil SUVs. Yet now that the companies are bleeding cash, and may be heading for bankruptcy, suddenly the shrinking Big Three are the latest candidates for a taxpayer bailout.

…Senator Debbie Stabenow (D., Mich.) wants another $25 billion, this time with no strings attached.

Barack Obama implied at his Friday press conference that he too favors some kind of taxpayer rescue of Detroit, though no doubt he’d like to have President Bush’s signature on the check so he won’t have to take full political responsibility.

Why would there be a political liability for bailing out our automakers? Is it possibly because most Americans are against it? Think about that for a second. Our government is increasingly acting as if it is no longer accountable to it’s citizens.

A bailout might avoid any near-term bankruptcy filing, but it won’t address Detroit’s fundamental problems of making cars that Americans won’t buy and labor contracts that are too rich and inflexible to make them competitive.

While GM has spent billions of dollars on labor buyouts in recent years, they are still forced by federal mileage standards to churn out small cars that make little or no profit at plants organized by the United Auto Workers.

Sounds like good money after bad to me on the surface, but the government, along with the unions are culpable. This scenario is an example of the effect of overarching regulations. CAFE standards force automakers to flood the market with cheap, poorly-conceived high-mileage models to bring down the Corporate Average Fuel Economy, forcing automakers to manufacture a higher percentage of a certain model than the market demands from that particular manufacturer. This along with an inflated labor cost destroys profitability, in turn forcing Ford, GM and Chrysler to come to the government with their hands out.

The Japanese have proven that there is a stong market for small, efficient cars but since they don’t make large vehicles, which are also in demand for certain consumers, they aren’t forced to dump smaller cars on the market at a loss to meet CAFE standards.

We need to allow the Big Three to shed themselves of union extortionists and at the same allow the free market to determine how many small cars people want to buy and from whom.

Otherwise, expect the government to have to bail out (what’s left of) the domestic auto industry every few years.

Update:

Why GM can’t survive bankruptcy

Does this mean I get to keep my Suburban and not make the lease payments? Mr. President elect? Hello?

Dems push for the fed gobbling up a stake in the Big Three automakers:

Congressional Democrats are pushing legislation to send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., hope for quick passage of the auto bailout during a postelection session that begins Monday.

Of course, the British auto industry went through a similar (in many respects) process starting around 40-odd years ago. 

Note the British auto industry’s powerful position in the world car market – and the fearsome reputation they had for quality during their nationalized years.

Advisers doubt Obama

The majority of financial advisers have little faith in President-elect Barack Obama’s ability to put the nation back on sound economic footing.

An exclusive InvestmentNews survey of 968 advisers last week found that 61% lacked confidence in the new commander-in-chief’s ability to resolve the country’s economic woes.

After last Tuesday’s historic vote in which Mr. Obama was elected the nation’s first black president, advisers across the country began considering ways to protect client assets from changes that could go into effect under the incoming new Democratic-controlled government.

That’s not encouraging. Investment advisors are already advising their clients on ways to protect their assets from the President and his Economic Geniuses?

…and it might be too late to escape? (emphasis mine)

“Very possibly, we’ll be looking at a retroactive tax increase for upper-income people to Jan. 1, 2009,” Federal Policy Group managing director Ken Kies told more than 1,000 advisers who participated in InvestmentNews’ post-election webcast last Wednesday.

“the tax increase will be significant, and it’s going to be a lot more than anything he campaigned on.”

Before you dismiss this because you don’t count yourself among upper-income earners, remember, Obama’s standard for this distinction has and could fall further.

That’s right Mitch, the Market didn’t exactly endorse Obama’s victory. In fact, Barack Obama made history two days in a row: the largest post-election stock market plunge in history.

Nov. 5 (Bloomberg) — The stock market posted its biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.

Apparently the market has a different idea as to what will stimulate growth. Does the market not think that raising taxes and expanding government are good things? Is the market wondering why Liberals and their followers haven’t learned their lesson yet?

History…

Year Dow President-Elect

2008 -5.05% Barack Obama

2004 +1.01% George W. Bush

2000 -0.41% No decision: G.W. Bush v Al Gore*

1996 +1.59% William Clinton

1992 -0.91% William Clinton

1988 -0.43% George H. W. Bush

1984 -0.88% Ronald Reagan

1980 +1.70% Ronald Reagan

1976 -0.99% James Carter

1972 -0.11% Richard Nixon

1968 +0.34% Richard Nixon

1964 -0.19% Lyndon Johnson

1960 +0.77% John Kennedy

Draw your own conclusions…

Not everyone is celebrating The One’s ascenscion:

A case of post-election nerves sent stocks plunging Wednesday as investors, again anxious about a recession, began questioning what impact a Barack Obama presidency will have on business and the overall economy. The Dow Jones industrials dropped more than 400 points and the major indexes all fell more than 4 percent.

That last brief flash of pre-election McCain optimism, I’m pretty convinced, was what gave us that nice Monday rally.

When voters enter the booth tomorrow, Iraq won’t be much on their mind as a whole. Iraq is going so well (as wars go) that the media has turned a blind eye. Covering it after all would only benefit John McCain whose criticism of George Bush and promotion of the surge proved to be dead on.

In the days, hours and moments leading up to the moment of truth in the booth, it will be the economy, once again.

I have heard numerous comparisons of Barack Obama to Jimmy Carter in the sense that like Carter’s administration, an Obama era will create such an economic disaster that Americans’ short memories will be restored and an era of fiscal conservatism will be ushered in once again.

It’s a sad day when the upside is how bad things will be.

Then again, is this a lesson America needs to learn once and for all?

Chances are, our economy is going to get a lot worse before it gets better no matter who ends up in the White House. Even Ronald Regan, if elected on Tuesday, wouldn’t be able foster an economic turnaround for at least a year if his presidency is any measure.

There is great cause for concern however that a President that has among his many ambitions a desire to further the Socialism experiment that has weaved its way through our history as a nation.

Raising taxes on the wealthy and giving it to the less-so, isn’t Socialism; but it is one of it’s major tenets. Forcing lenders to lend to borrowers not qualified to do so isn’t either but it it also smacks of Socialism and social engineering.

If Obama’s platform was to raise taxes for everyone and pay off the national debt, I would consider it but even then, he’d have to cut them first to stimulate the economy and stimulate job growth, wait for the result, and then raise taxes. This assumes that raising taxes is the means by which to pay down our debt – and that’s a stretch at best.

Then again, if he cut taxes, revenue to the government would increase dramatically, as has been proven time and again, and those dollars could then be funneled to pay down our debt. In order to stimulate our economy and pay down our national debt, it’s magnitude having become a national security issue, our nation faces the inevitable pain of our government cutting spending dramatically while at the same time cutting taxes to stimulate the economy.

This will happen by choice, if sooner; by force if later, under the weight of simple economics and mathematics. It’s coming friends, whether we like it or not.

Barack Obama lacks the character, leadership, experience and political inclination to make these tough choices, encourage temporary sacrifice and guide our nation through the most dire and precarious economic conditions in modern times.

John McCain on the other hand has the all of the above and a record to prove it. I will be voting for him because of the two, I think he has the best chance of steering us clear.

Obama has been touting the absurdly transparent notion that 95% of Americans will receive a tax cut under his “plan”.

As long as you make less than $250,000 $200,000 $150,000 $100,000 $50,000 and aren’t a corporation, you’ll be “safe.”

But businesses and employers are too smart for that; you will pay. We all will.

An increased tax burden will become a cost of doing business. A cost that will be passed through and ultimately borne by consumers via higher prices on goods and services that soon they won’t be able to afford any way because so many will have lost their jobs; rendered by the cutbacks (already in progress by the way) necessitated under an Obamanomics regime.

Does Obama really believe that the rich got that way by taking losses or swallowing costs?  When the price of gas or copper or labor or insurance or anything else increases, businesses and the people who own them have two choices: they can lose money or they can raise prices and pass the cost along to their customers.  What do you believe they will do?  If you need a moment to figure this out, you are probably a hardcore Democrat and you can stop reading now.

Anyone else, conservative, moderate, or apathetic, knows the answer: businesses cannot lose money.  They will pass along any increased taxes in the form of price increases.  The taxes they pay, you pay — eventually.  The only difference is that unlike the hated 5 percent of Americans that Obama openly brags of punishing with new taxes, you will not get a bill from the government declaring your new taxes.  You’ll just pay more for milk and gas and credit and clothes and iPods and everything else you buy.  At the end of the month, you will have less money and not know why.  Doubtless, Democrats will tell you to blame the rich for that too.

I heard someone (It wasn’t a wealthy person or a business owner – I can tell you that) say this week “No one believes that the rich will stop making money just because they have to pay higher taxes.”

I agree. The wealthy, business owners, the employers in America won’t stop trying to create wealth. To them, a bad day running their own business is better than a good day working for someone else. It’s their nature. They will innovate and do it with with less. Less employees – the very people that Obama professes to be the messiah champion of. Suckers.

The effect of liberal policies is reflected in the current (or should I say latest) crisis in our domestic automotive industry. Workers “served” so well over the years by their Unions will soon be losing their jobs as GM and Chrysler merge – Chrysler will disappear, only after closing half it’s manufacturing plants. Tens of thousands are about to lose their jobs.

Permanently.

Earlier this week we published a Battle Royale between General Motors and Chrysler in order to determine in a fun way which vehicles from each automaker that compete directly in the marketplace would survive if the two merged. Out of 12 matchups, GM vehicles won eight and Chrysler four. A new report by consulting firm Grant Thornton LLP largely confirms that our experiment was spot on. The report says that if a GM/Chrysler merger happens, only the Dodge Ram, Chrysler and Dodge minivans and a few Jeep models will survive.

…Chrysler’s model lineup across all three brands would largely be wiped out if a merger with GM happens, as well as the plants that build those models and the workers who do the building.

America’s auto unions have “spread the wealth” too, forcing employers to pay an artificially high price for labor, in turn bringing on the demise of the domestic auto makers because they simply can’t compete with higher-quality product produced by people that are willing to work harder for less money. In the end, it is no consolation that the American has had it so much better when his foreign counterpart still has his job.

Try as you may to manipulate our economy with “wealth spreading”, the market will ultimately determine the value of products, services and wages. Liberals decry the evil of outsourcing when it is their very policies that incent American corporations to seek it.

Employers are already running scared and their employees know it – hence the drop in spending and growth. We have one quarter of decline already in hand. One more, and we officially have a recession. And Obama hasn’t even taken the helm yet.

Obama’s economic plans will not “save” anyone. Raising taxes will simply be throwing sand in the gears of our economy and everyone will suffer for it. Exactly the wrong idea at exactly the wrong time.

I am less concerned for Obama’s now obvious ambitions and ideologies, and a liberal Congress doing his bidding. I’m more concerned that if Obama is installed, it will be exactly the other way around. There is a greater chance Barney Frank and Nancy Pelosi will see their plans manifest in policy than Obama’s “redistributive change.”

Admittedly John McCain hasn’t been the most charismatic media darling like his smooth-talking Marxist opponent but he represents the closest thing we have to a savior in a time we are about to need one. We need someone that will stands up to a democratic congress to bring some semblance of balance.

…and hope…that things don’t get a whole lot worse…for a whole lot of people.

A great many Americans are poised to vote against the status quo without regard for whom or what they will get in its stead.

Change? Hope?

Unquantifiable values by design. The deliberate work of a candidate and a campaign to sweep the electorate off its feet with empty promises of a better time and place.

But what of Obama’s Agenda? What designs does Obama have for the Presidency if he wins? That should be the question voters and the media should have asked by now – and haven’t.

When what little detail Barack Obama has selectively, calculatedly seen fit to share with us, coupled with his tactical “present” votes is put in the context of the nature of his associations…The Socialist Party,  Terrorist William Ayers, “God Damn America” Reverend Wright, 2007’s Senator Joe Biden (2007’s Third Most Liberal Senator; Guess who was first), The Corrupt Barney Frank,The Convict Tony Rezko, Demolition Expert and Campaign Adviser Frank Raines…it is clear.

Barack Obama is declaring a War on Capitalism. He wants to redistribute wealth while at the same time punishing those who create it. A shocking level of ignorance of basic economics – heck, even mathematics.

Look at just a few of the things he and congressional Democrats have in mind: Higher taxes on successful entrepreneurs (anyone earning over $250,000), higher taxes on capital gains, higher taxes on dividends, a possible raid on Americans’ 401(k)s, a takeover of America’s private health care industry, strict new limits on what CEOs can make, and the reimposition of the death tax.

Add it up, and Obama will usher in a new era in America — one where capital, the engine of our economic growth and success, is punished severely through the tax code. If Democrats win a filibuster-proof majority in Congress, it’ll be the only form of capital punishment their party will support.

And this is just what we know so far.

From a Chicago Public Radio Interview of Barack Obama in 2001 on the radical Warren Court; a set of ideals and leanings that Barack Obama would never express now, in the throes of a Presidential campaign, but nonetheless reveal the radical leanings of a man America has yet to truly come to know:

…the Supreme Court never ventured into the issues of redistribution of wealth and, uh, sort of more basic issues of political and economic justice in this society. And, uh, to that extent as radical as people try to characterize the Warren Court, uh, it wasn’t that radical. It didn’t break free from the essential constraints that were placed, uh, uh, by the founding fathers in the Constitution, at least as its been interpreted, and the Warren Court interpreted it in the same way that generally the Constitution is a charter if negative liberties-says what the state can’t do to you, says what the federal government can’t do to you, but doesn’t say what the federal government, the state government must do on your behalf. Uh, and that hasn’t shifted. And one of the, uh, I think, tragedies of the was um, because the civil rights movement became so court focused, uh, I think there was a tendency to lose track the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change [emphasis mine], and uh, in some ways we still suffer from that.

The Stock Market is already factoring it in, but if Obama becomes President, Americans may be in for a surprise. Democrats will be donning “Not My President” bumper stickers, as the true ambitions of an extreme liberal unfold.

Redistribution of Wealth is simply a seemingly innocuous way of saying “raise taxes” and “spend more.” It’s like siphoning the gas out of a car, getting in and turning the key, and Change/Hope-ing it will still take him somewhere.

The effect on our economy could be devastating as legions of economists have already attested. As is it stands, our economy may already need several years to dig out of the challenges we already face, without a liberal super majority making it worse.

Higher taxes lower returns on capital. This means everything — wages, stock prices, real estate — will have to decline further as Obama’s tax hikes take hold. That means fewer jobs.

This reverses what has always been America’s recipe for success: an economy built on low taxes, few regulations, free trade and, in general, letting markets decide winners and losers.

Obama says he’s merely “spreading the wealth” — taking money from those who’ve earned it and giving it to those who haven’t. But we already “spread the wealth.” According to economists Gerald Prante and Andrew Chamberlain, the top 40% of households redistribute $1 trillion each year through the tax code to the bottom 60%. And yes, that includes the middle class.

By the way, the top 5% of earners — those squarely in Obama’s tax-hike cross hairs — already pay 60% of all taxes. Obama’s changes would skew that further.

Worse, many of Obama’s “get the rich” tax hikes are really targeted at successful small businesses that create nearly 90% of all U.S. jobs. Among tax filers with adjusted gross incomes of $200,000 or more, some 67% report small-business income.

This is radical stuff. These are catastrophic positions and beliefs that would otherwise be intolerable to Americans, but that are being advanced part and parcel via the popularity of a candidate, The One, for one simple fact:

He’ s not George Bush.

Its not just Joe the Plumber that will be hurt by higher taxes and will stop hiring and spending and start firing and scrimping.

It’s “Fred Ex” too. Big business, employing the rest of America that doesn’t work for Uncle Sam, is and will do much the same.

There are few better people to ask about our current economic precipice than Mr. Smith — or, as some people call him, “Fred Ex.” His company has $38 billion in sales, employs four football stadiums full of workers, owns 300 jet airplanes, and tens of thousands of trucks and vehicles. FedEx moves an incomprehensible seven million packages each day to every corner of the globe.

Broken Record: “Middle Class” Americans won’t care about lower taxes or a stimuless check in their hand if they have lost their job or are concerned they may.

Washington Is the Problem

“Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We’d buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate.”

Buying more Boeing 777’s, an American product; made in America by Americans, would mean more good-paying “Middle Class” American jobs. This is but one example. There are thousands of employers, large and small that face the same challenges, brought on by Washington’s corruption, mismanagement and liberal agendas.

Fiscal conservatives understand this. Liberals like Obama and his posse will ramrod their social engineering designs without regard for what damage it will do to the economy, hurting the very constituents they claim to work for.

There are a lot of movies whose sequels should not have been made. The first installment sucked bad enough.

The pay-as-you-go Social Security system is another such performance for which a sequel would be inadvisable to say the least.

A lot of Conservatives are concerned that a Democratic Trifecta may lead to a level of catastrophic creativity not seen since The New Deal.

Unfortunately, we don’t even have to wait for the election to see some of the most obtuse products of this alliance.

If you have a 401(k) or equivalent retirement plan, you’ve probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets.

Well, it could be worse. But don’t take heart, for what we mean is it could get worse. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it.

We have a Social Security system that is currently running on fumes, backed by a trust fund containing a treasure trove of I.O.U.s.

We have a generation of taxpayers that hold little hope of ever recouping their contributions, many (most?) of which aren’t saving enough to make up for it. What is the solution?

Take away the tax benefits of saving into a 401k including the incentive the employer has to match contributions.

In exchange for what?

Another Social Security benefit. Guaranteed by whom?

The U.S. Government.

The same government that has pissed away $10,000,000,000,000 (and counting).

What would the money be invested in?

Special “Government Bonds” that would pay inflation plus three percent. Forfeit a bouquet of shares in a carefully arranged and assorted arrangement of global enterprises that have averaged between 8 and 12 percent per year over periods of time that easily fit twice within the average career span. Trade them for a share of the magnificent crater that forty years of tax-once, spend-thrice government corruption and mismanagement has left for us and the next twenty generations.

Sounds swell.

I’ll take my chances with the stock market, thank you.

Democrats think Americans are too stupid to save for retirement. The sad thing is, they might be right. Most don’t save enough. We know that.

As usual, the Democrats think it’s the government’s job to confiscate the hard-earned assets of the self-reliant, the prudent, and the hard-working and dole it out to the spendthrifts, the lazy, the leeches who can’t or won’t do anything for themselves…but vote.

But these guys are. And Nobel Prize winners too:

We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.

After hearing such economic criticism of his proposals, Barack Obama has apparently suggested to some people that he might postpone his tax increases, perhaps to 2010. But it is a mistake to think that postponing such tax increases would prevent their harmful effect on the economy today. The prospect of such tax rate increases in 2010 is already a drag on the economy. Businesses considering whether to hire workers today and expand their operations have time horizons longer than a year or two, so the prospect of higher taxes starting in 2009 or 2010 reduces hiring and investment in 2008.

That’s right. The very prospect of raising taxes is already causing pain for Americans as their employers tighten their expenditures and defer hiring, spending and investment.

…and ends with L-O-S-T.

Barack Obama declared last week that his economic plan begins with “one word that’s on everyone’s mind and it’s spelled J-O-B-S.” This raises the stubborn question that Senator Obama has never satisfactorily answered: How do you create more jobs when you want to levy higher tax rates on the small business owners who are the nation’s primary employers? (emphasis mine)

The answer is “you don’t.” Don’t believe it?

How about a word from an expert. A Democrat at that (emphasis mine).

Democratic Senate Finance Chairman Max Baucus of Montana. Here is what Mr. Baucus wrote in a joint press release with Iowa Republican Charles Grassley on August 20, 2001, when they supported the income tax rate cuts that Mr. Obama wants to repeal:

“. . . when the new tax relief law is fully phased in, entrepreneurs and small businesses — owners of sole proprietorships, partnerships, S corporations, and farms — will receive 80 percent of the tax relief associated with reducing the top income tax rates of 36 percent to 33 percent and 39.6 percent to 35 percent.”

Then they continued with a useful economics tutorial:

“Experts agree that lower taxes increase a business’ cash flow, which helps with liquidity constraints during an economic slowdown and could increase the demand for investment and labor.”

Twelve Senate Democrats voted for those same tax cuts. And just to be clear on one point: An increase in “the demand for investment and labor” translates into an increase in J-O-B-S. So if lowering these tax rates creates jobs, then it stands to reason that raising these taxes will mean fewer jobs. From 2003 to 2007 with the lower tax rates in place, the U.S. economy added eight million jobs, or about 125,000 per month. The Small Business Administration says small business wrote the paychecks for up to 80% of new jobs in 2005, for example.

Apparently there are thirteen Democrats that know what is good for the economy.

Sadly, Barack Obama doesn’t happen to be one of them.

Tax “cuts” for people that don’t pay taxes in the first place coupled with tax increases for those that already bear most of the burden is a tax hike, net/net.

Tax increases of any sort for anyone is a bad idea right now and will further undermine an economy that is about to get a lot worse, with or without Obama’s “help.” Don’t believe it? Does history offer a clue?

In 1932, Democrat Franklin Delano Roosevelt was elected president as the nation was heading into a severe recession. The stock market had crashed in 1929, the world’s economy was slowing down, and all economic indicators in the U.S. showed signs of trouble.

The new president’s response was to restructure the economy with the New Deal — an expansion of the role of government once unimaginable in America. We now know that FDR’s policies likely prolonged the Great Depression because the economy never fully recovered in the 1930s, and actually got worse in the latter half of the decade. And we know that FDR got away with it (winning election four times) by blaming his predecessor, Herbert Hoover, for crashing the economy in the first place.

Change the names, and what is about to happen doesn’t seem so far fetched. Eight more years of hearing about the failed policies of the Bush administration, who pushed the same ineffective stimuless button that Pelosi is proposing. Obama and his Liberal Flunkies have blamed George Bush for everything so far, why stop now?

MSN Money today, or at least two of their columnists, attributed the 413-point gain (4.6%) on the Dow today to Ben Bernanke’s endorsement of a potential Pelosi stimulus package.

The Democrats are also taking Bernanake’s words out of context to promote their “stimulus” plan, essentially a plan to further mortgage the future to generate welfare checks.

Stocks soared today as higher oil prices set off a big rally in energy stocks and as Federal Reserve Chairman Ben Bernanke endorsed the idea of a second economic stimulus package from Congress.

This based on an out-of-context snippet of Bernanke testimony today…

“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate”

“Consideration” is not an endorsement. Unless of course you are a liberal looking for corroboration of your failed economic policies.

Here are excerpts from the full transcript in context (emphasis mine):

I understand that the Congress is evaluating the desirability of a second fiscal package.  Any fiscal action inevitably involves tradeoffs, not only among current needs and objectives but also–because commitments of resources today can burden future generations and constrain future policy options–between the present and the future.  Such tradeoffs inevitably involve value judgments that can properly be made only by our elected officials.  Moreover, with the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear.  All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.

Should the Congress choose to undertake fiscal action, certain design principles may be helpful.  To best achieve its goals, any fiscal package should be structured so that its peak effects on aggregate spending and economic activity are felt when they are most needed, namely, during the period in which economic activity would otherwise be expected to be weak.  Any fiscal package should be well-targeted, in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue; at the same time, it should go without saying that the Congress must be vigilant in ensuring that any allocated funds are used effectively and responsibly.  Any program should be designed, to the extent possible, to limit longer-term effects on the federal government’s structural budget deficit.

Finally, in the ideal case, a fiscal package would not only boost overall spending and economic activity but would also be aimed at redressing specific factors that have the potential to extend or deepen the economic slowdown.  As I discussed earlier, the extraordinary tightening in credit conditions has played a central role in the slowdown thus far and could be an important factor delaying the recovery.  If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses, and other borrowers.  Such actions might be particularly effective at promoting economic growth and job creation.

He’s not ruling it out, but it’s not an endorsement of Liberal welfare stimulus checks. He warns of any plan’s detrimental impact on our future (read national debt), and seems more concerned with job growth (read tax cuts) and less so on putting cash in consumer’s hands (liberal stimulus packages).

…and yes, I am well aware of the fact that the last (also failed) stimulus package was pressed into service by a liberal by the name of George W. Bush.

So why did the last one fail? The same reason the next one will. The same reason Obama’s Marxist “spread the wealth around” policies will fail.

Because our economy is hyper-sensitized to job growth and job security. Right now small businesses are freezing new hires and new expenditures until they see who occupies the Oval Office, what happens in the credit markets, and what is in store for tax and fiscal policy.

As a result, consumers are deferring discretionary purchases; especially big-ticket items manufactured in America. Putting a few hundred dollars in their pockets won’t assuage the insecurity they feel about their jobs and cash flow for the foreseeable future.

Bernanke is convinced that the goverment needs to do something to loosen frozen credit markets and stimulate job growth. Hence the relevance of Joe the Plumber of late. Americans are realizing what a hero Joe and other small business owners are in times like these. They create jobs. Right now they need to be incented, not penalized for doing so.

Barack Obama’s policies play into the worst fears of those who hold in their power the ability to grow our economy. I suspect that has a lot to do with the tightening of the race for the White House.

Question is…is there still time enough for the American people to realize which of the two candidates is most likely to take actions, based on their records, that will address the challenges our economy faces?

PS: So why did the stock market go up today? Because there were more buyers than sellers.

Mitch and Ed are talking about despondent conservatives on the radio on my credenza as I type. Many of us have resigned ourselves to the fact that we are likely to have a Democratic President, House and Senate and may even have lost filibuster protection in Congress. In a sick example of double jeopardy, Al Franken could be the last building block of a Liberal Supermajority.

The huns are at the wall. Soon, no one; nothing may stand between hard-working, self-reliant folks and those that think we are a people of the government, by the government, for the government, and not the other way around as Abraham Lincoln set forth in his Gettysburg Address.

Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven’t since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s.

Why do you suppose that happened? Because those were very bad times. America’s economy at its near worst. You’d think that there are enough of us around to remember how bad things were back then, but as they say, history tends to repeat itself; humans being humans after all.

As for being a despondent conservative, I have found my optimism wavering to say the least but at the same time I have given much thought, especially as a financial advisor, as to how this translates into pragmatic action and counsel.

Assuming the worst, what does it mean for the average American? What should we do? How can we prepare?

Sorry Senator Biden, but you are so very wrong, again. Sadly, for the foreseeable future, it will actually be “patriotic” to save more and spend less.

Obama’s “tax cut”, characterized more accurately as a wealth redistribution scheme by analysts with a little more economic acumen than “That One,” will essentially be taking capital from those that have historically known what to do with it and giving it to those that historically have not.

Job creation, investment, and growth will give way to an insignificant blip in consumer spending, mostly on imported goods, and visits to the casino. A drop in consumer spending and job growth will create a cyclical effect that will magnify the effects, even the perceived future effects of a more burdensome government.

You see when you run a business, every dollar you spend is a dollar not spent or invested somewhere else. It’s called opportunity cost. If the government increases its burden on consumers and employers, those dollars have to come from somewhere.

Even the prospect of higher taxes and slowed economic growth will be cause for pause among business owners and consumers. It’s happening already, which is why many believe we have been in a recession for some time now.

And in fact, I have some advice for you: make adjustments now, before you are forced too. Look at your finances with an eye for necessity. Discretionary spending should be closely scrutinized to maximize its value to you and your family or business.

Build a financial buffer of safety around you and your family as the taxman is coming and he doesn’t care what damage he does to your employer. He will simply be doing the bidding of Obama and his liberal economic pinheads.

The verdict isn’t in yet, but your financial advisor may also start to advise you to move your portfolios into allocations slightly more conservative than they have been in the past as financial analysts may determine the higher potential returns earned by investors in exchange for taking more risk (versus risk-free investments) may be reduced for the foreseeable future.

Assuming that a recession has already begun, and the liberal powers that be are likely to make exactly the wrong moves, a recession could extend itself into a depression – essentially the term for a very long recession.

Cash will be King.

And much to the surprise of the liberals that will have caused it, the rich will get even richer as assets will return to their rightful owners as the wealthy scoop up many and varied bargains in equities and real estate discarded by those who have become under or unemployed.

So don’t wait for the effects of an Obama administration and an activist liberal congress to trickle down to your financial situation. Prepare yourself now.