Rooting for the Econopocalypse/ The Greedometer

I have to admit, I agree with this. Read it, it's short.

Now that you're done reading, let me add: A little over a year ago I got to "reorganize" my 401k investments. I moved all my mandatory installments over to low-risk investments, sold my way out of all my Euro funds, and put a lot of it into cash and CD's. I then lowered the amount I was investing to the minimum required to keep the account active, and my wife and I rebudgeted the extra income into pure debt reduction. We have reduced our total family debt by 35% in the last year.
Because of those (I'll admit I had no idea things would get this bad) fortuitous investment choices, my wife and I have been basically shielded from the market collapse. Our total investment is down a paltry 8%, as opposed to some here at work who are down 40-50%, some even more. Many of the people in my age group here at work, who consider retirement a far-off dream, tossed all their 401k money into the "Group 6" investment strategy at work, which is basically the most volatile, highest yield/highest loss category. In '05 and '06, Group 6 made about 18 percent a year. In '07 it broke even. In '08, I'm afraid, it was down 30%. It's heavily invested in Euro and emerging markets, which have dropped off significantly.

So as I watch the Dow drop, I think of all my peers that sneered at my conservative, low-yield investment strategy, and I admit I have to feel a tiny shred of glee. Oh man, I only lost $148 for 2008! My friends lost over $15k. (Disclaimer: if the stock market recovers they'll be fine unless they get stupid and sell). Now that economists are squabbling over who can prophesy the bottom the Dow will reach, I root for the bottom too.

Maybe that's terrible, I freely admit. I don't cheer for job losses, or for increased unemployment benefits spending, or for suffering and poverty in foreign nations. Those things make me sad. But I, along with a lot of people, became so jaded and distrusting of the Dow and the stock market, we delight in our being correct. To me, the DJIA is almost like this big "Greed Thermometer", or Greedometer, and watching the Dow fall is like watching a bully, who had previously controlled the playground with reckless aplomb, suddenly get caught and get a tongue-lashing and detention from the recess duty teacher. We all look on, watch the teacher scold him, and hope his detention is as long as possible. We hope he'll be so punished he learns his lesson and never tries to bully us again.

But that never happens, does it. The bully just gets meaner. And the sad reality for me is that this is temporary, and the DJIA is actually just a wandering mosquito, looking for the next investment blood bubble to swell it back up.


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A solution for the massive doctor surplus

Yes, the government should immediately hire a boatload of health professionals. Because, you know, it's not like there isn't already a massive shortage of doctors (1, 2, 3, 4) and its not like the nursing shortage isn't actually even worse (1, 2, 3, 4). Adding doctors and nurses isn't exactly shovel ready work; at best a future doctor is still 8 years in the making, plus residency time. Nurses typically take 4-6 years, and typically bail out of the business in less time than that. Unless the U.S. rapidly expands the number of accredited medical schools in this country the shortage will only get worse, but for now, there is no quick fix.

The other obvious problem being that who the hell wants to be a VA doc? The pay sucks, the patients are all dying, your boss is a bureaucrat, the insurance claim system is a nightmare, etc etc. There's just no incentive for doctors that are highly in demand to choose a low-reward specialty like VA.

So here's how I would fix it: Obama needs to fund college and medical or nursing school for any high school graduate willing to specialize in VA. If you are a college student and qualify to enter medical school, your college tuition is paid for you, and all loans are forgiven. Your medical school tuition is paid for you. Your residency stipend is generous. All you must do is give the VA system 10 years of good doctoring after you finish your residency. All current medical students that volunteer will have all undergraduate and medical school loans forgiven and all future tuition paid. They will be given a generous stipend during residency.

Obviously, what I am getting at here is that Obama needs to incentivize VA medicine for doctors and nurses to the point that there will be an immediate influx of qualified professionals.


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How Low Can the Stock Market Go

This question always comes up when the market hits a new low. Conversely, whenever the market surges someone askes "how high can it go?" so its not like the situation is unique to just right now, today.
If we simply define the Dow Jones Industrial Average as a measure of confidence in the U.S. economy, then you could say that the Dow could easily reach zero. However, the DJIA is an average, and there are publicly traded companies, like Walmart, that are doing quite well. So it's highly unlikely the DJIA would drop to zero. But it is possible for other measures, like the S&P 500, to drop to zero. These measures follow a certain set of companies and it does not change from day to day. A sudden collapse in a large percentage of these companies could drive the S&P 500 to near death, while the overall trading on the floor in New York could still be humming along briskly.
The other factor, to me, that prevents the DJIA from dropping to zero is that lower prices for stocks encourages buyers. There is a point where even a paranoid delusional anti-investor like myself goes "Holy cow, Garmin stock is below 5 dollars?!" and invests a couple grand in Garmin stock, knowing that the company will inevitably recover when the rest of the economy does.

What I find the most interesting, however, is that the stock market is down, way down, since President Obama's election in November. The DJIA is down 17%, which seems paltry in the face of the overall scheme of things right now, but if this were 2005 and the Dow dropped from 12,500 to 10,300 there would be panic in the streets.
Also, since the passage of the economic stimulus, the Dow has risen for only 1 day. Investor sentiment on the trading floor is very low because most believe that the current administration has no more clue how to bounce the economy back than the last one did.

Important note: the rise and fall (and fall and fall) of the stock market should not be used as a measure of the economy. Although the stock market is off more than 40% from its high earlier this decade, the economy is actually significantly larger than it was at that same point. And though the market is down 17% since President Obama was elected, the economy as a whole is down far, far less.

As far as how fast will the economy will recover, I'm not sure it ever will. My mind says it will, but my gut is telling me to start stockpiling food. I am just happy I took the minimum deduction into my 401k this year, I've only lost a few hundred dollars, many of my coworkers have had thousands wiped out. Of course, if they don't withdraw their money early, they can pray for a recovery. But dollar-cost averaging can only get you so far when the economy L's instead of U's.


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Ocean Front Property

Now, of course, whenever someone builds an insanely large, mobile...anything...the obvious question becomes not "how did they do it" but rather "how long til an oil sheik owns one?"

In this case, 2,800 engineers have worked for Royal Caribbean to create a new super-super-super-liner, capable of hauling 5,400 passengers (and 900 crew) using 3 engines (with a combined 30,000 horsepower). The new design comes complete with nature park and world's largest floating pool.

Why the rude oil sheik joke? Well, when Airbus debuted their A380, the world's largest passenger plane, there was already a large backlog of orders for one...to be converting into a single passenger flying palace. The orders were all for exorbitantly wealthy. Including more than one Middle Eastern oil tycoon.

Did I mention that a single A380 flight from La Guardia to Paris emits roughly the equivalent amount of carbon as a Hummer would if driven 24 hours a day for 75 years?

And with a $400 million dollar price tag, a single-passenger A380 is a great luxury, and the ultimate status symbol...or at least it was, until this new $1.2 billion super-super-super-yacht debuted.

So I ask again: "How long until Royal Caribbean sells a custom Oasis of the Seas to a private individual?"

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A lesson from the EU

Now I don't pretend to know the detailed political intricacies of the European Union, but one thing is fairly clear to me: there political affiliation with one another is tenuous at best. The current economic downturn has long-since moved global, and things in the U.S. aren't as bad as in many eastern European countries. Unfortunately, there isn't an overriding governmental authority like here in the United States that can effectively moderate military and fiscal operations, so when Romania, Latvia, and Hungary come looking for Western Europe bailout money, caustic relations that have existed quietly suddenly boil forth, and the IMF can only do what it can with the money it is given by the Western European nations that fund it.
Anyway, seriously, I am not an expert on European politics. But the infighting is noticeable and we should take the hint.

Earlier last month I argued that states' rights, mostly in regards to the Tenth Amendment, are no longer being recognized at the Federal level; but perhaps I should take a moment to recognize that the Federal Government does in fact have a purpose: it provides an overriding and unifying authority that can act on the behalf of the country in general without regard for one states' animosity for another.
Mostly, what I mean is that the Federal government effectively runs the countries' interests, at home and abroad, more effectively than could be done if all 50 state governors met monthly or bi-monthly and decided things that way. Or all 50 state Treasurers.
For example, if after Hurricane Katrina trashed Louisiana and Mississippi, the governors had met and the governors from the Midwest and Rocky Mountain states had said "well wah, wah, we have tornadoes all the time, or blizzards, solve your own problems, we're tired of sending our state national guards to bail water out of your flooded towns" things might have gone worse than they did (insert your own sarcastic comment here about Bush and FEMA mishandling Katrina to the point that Bush's tarnished legacy may be defined by this).

Now I am not saying the Tenth Amendment is crap, nor am I waffling on my opinion that the government, by and large, would be better served at the state level and the Federal government cannot possibly govern 300+ million people effectively anymore, but the desperate situation of Eastern Europe, coupled with Western Europe tending toward refusal to help, shows how a group of states can be best served when the will of the Union can override the individual states for the survival of all the states.

The problem the EU faces now is one of a stack of dominoes. If Hungary and Romania collapse, their homeless and unemployed will flood into Bulgaria, Greece, Slovakia, and Slovenia...which will collapse under the added weight, which will then flood migrants into Austria, Italy, Poland, and the Czech Republic. And if those collapse, well, then pretty quickly you'd have 50 million people looking to Western Europe for help.

I don't mean to frighten anyone, but things in Europe seem to be basically how they are here, with a 1.5X multiplier. In Japan, a 2.5X multiplier. In 2 years, the world is going to be a very different place than it is today.


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Warren Buffet's Agenda

Now if you were a CEO of a company that made big profits by buying companies when they are below actual value and then watching them perform much better than their stock value implied, wouldn't it serve your personal interest to tell other stock traders to SELL SELL SELL THE RECESSION IS GOING TO LAST FOREVER!!! so that people will bail out of stocks, lower the value of them, and make it easier for your investment firm to buy companies below their true value?

Isn't that exactly what the Oracle from Omaha is doing? Or was he just trying to make excuses to his shareholders how even he, the "greatest investor ever ever ever" could produce massive losses by investing in mortgage backed derivatives?


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Scenes from the protest

Images from yesterday's protest at Senator Claire McCaskill's office. Protesters (estimated 200+) marched and shouted during near-blizzard conditions. Way to go Democracy!


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