Thursday, May 6, 2010
Understanding Derivative Markets
Lets say that Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, they can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.
Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.
By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets.
Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from their cronies in Government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi's bar.
Any questions?
There is No Racism in the Tea Party
I am getting exceptionally tired of hearing left-wing pundits and even the rank and file liberals in their regurgitation of inaccurate statements and outright lies about racism in the Tea Party movement.
The left seems to hate the Tea Party because its purpose is to take back control of the government and place it with We The People so that a more responsive, fiscally responsible, and Constitutionally governed federal government can be the ultimate result.
I understand the tactic of lies and demagoguery from the left, as it tends to be their only form of combating conservative ideas since they seem to be devoid of anything that does not resemble Marxist ideals and the usurpation of our rights as Americans in their intellectual arsenal. The fact that it is relatively effective when their willing allies in the state-run media repeat these lies, only guarantees their continued use of such tactics.
That being said, the Tea Party is about restoring America to the way our founding fathers intended it to be and cries of racism are hugely inaccurate and often times fabricated by the left. See the video below for more on this.
The left seems to hate the Tea Party because its purpose is to take back control of the government and place it with We The People so that a more responsive, fiscally responsible, and Constitutionally governed federal government can be the ultimate result.
I understand the tactic of lies and demagoguery from the left, as it tends to be their only form of combating conservative ideas since they seem to be devoid of anything that does not resemble Marxist ideals and the usurpation of our rights as Americans in their intellectual arsenal. The fact that it is relatively effective when their willing allies in the state-run media repeat these lies, only guarantees their continued use of such tactics.
That being said, the Tea Party is about restoring America to the way our founding fathers intended it to be and cries of racism are hugely inaccurate and often times fabricated by the left. See the video below for more on this.
The Anachronism of the American Melting Pot
I had an interesting conversation with my youngest daughter this morning on the way to dropping her off at high school where she is a senior and set to graduate later this month. She relayed an interesting story of how she sees a lot of idiocy when it comes to conflict and strife amongst various kids, and typically due to their race or color.
She told me of how yesterday she was walking down a hallway to class when this very tall boy, who happened to be white, decided it would be amusing to push and harass a smaller boy, who happened to be black. In the process of his bullying, the one boy used the typical ignorant racial epithet towards this other boy. My daughter, who has an extremely strong sense of right and wrong, was flabbergasted and immediately started upbraiding the much larger bully for his stupidity and bigotry.
She said he stopped harassing the other boy, asked her what her problem was, called her a few hateful names, and somewhat chastised and sheepishly walked away down the hall. The other boy went on about his business without a word said evidently. I asked if anyone else said anything or if any of the other students tried to help. My daughter said, "No!"
My question then is what in the heck is going on when someone tries to do the right thing and stop a bully, especially one that is behaving in an ignorant and racist manner, and no one else even bothers to get involved other than to stand by and watch the train wreck as it occurs?
I thought all of these years of liberal political correctness had supposedly enlightened us and taught us to respect each others differences. We were supposed to learn that African-Americans, Hispanic-Americans, Native-Americans, Asian-Americans etc. all had wonderful and unique cultural aspects to their heritages. I have no doubt that this is indeed true, but by separating ourselves into seemingly more segregated sub-groups of Americans, don't we end up achieving the exact opposite of the intended goal for which we are striving?
Why must we focus on what makes one race, creed, or ancestry different from the others to such exclusion? Rather, should we not be focusing on what we all have in common as Americans? Should we not focus more on what it is about our American culture and the God-given rights and freedoms that our government is supposed to protect so that there may be justice for all of us?
Why must we separate ourselves as hyphenated Americans? Why don't we just label ourselves as Americans, because that is indeed what we all are.
When we start focusing more at the commonalities that bind us together as Americans, I suspect there will be far fewer idiots in the world that find it necessary to degrade someone else for having a different color of skin pigmentation. Further, there would not as likely be one lone voice speaking out against such ignorance, but rather there would be a lot more kids in the hallway standing in solidarity to shame a racist bully for his actions and words.
I am not so naive as to think that racism will one day be totally eradicated completely in our country, but it seems to me that focusing on what draws us together as Americans rather than on what makes us different would be far more hopeful and helpful in restoring that seemingly lost notion of the great American melting pot.
In the meantime, I am proud that this is one lesson that my daughter seems to have deeply ingrained within her character and the courage to stand up when others would rather just watch or keep on walking down the hallway.
She told me of how yesterday she was walking down a hallway to class when this very tall boy, who happened to be white, decided it would be amusing to push and harass a smaller boy, who happened to be black. In the process of his bullying, the one boy used the typical ignorant racial epithet towards this other boy. My daughter, who has an extremely strong sense of right and wrong, was flabbergasted and immediately started upbraiding the much larger bully for his stupidity and bigotry.
She said he stopped harassing the other boy, asked her what her problem was, called her a few hateful names, and somewhat chastised and sheepishly walked away down the hall. The other boy went on about his business without a word said evidently. I asked if anyone else said anything or if any of the other students tried to help. My daughter said, "No!"
My question then is what in the heck is going on when someone tries to do the right thing and stop a bully, especially one that is behaving in an ignorant and racist manner, and no one else even bothers to get involved other than to stand by and watch the train wreck as it occurs?
I thought all of these years of liberal political correctness had supposedly enlightened us and taught us to respect each others differences. We were supposed to learn that African-Americans, Hispanic-Americans, Native-Americans, Asian-Americans etc. all had wonderful and unique cultural aspects to their heritages. I have no doubt that this is indeed true, but by separating ourselves into seemingly more segregated sub-groups of Americans, don't we end up achieving the exact opposite of the intended goal for which we are striving?
Why must we focus on what makes one race, creed, or ancestry different from the others to such exclusion? Rather, should we not be focusing on what we all have in common as Americans? Should we not focus more on what it is about our American culture and the God-given rights and freedoms that our government is supposed to protect so that there may be justice for all of us?
Why must we separate ourselves as hyphenated Americans? Why don't we just label ourselves as Americans, because that is indeed what we all are.
When we start focusing more at the commonalities that bind us together as Americans, I suspect there will be far fewer idiots in the world that find it necessary to degrade someone else for having a different color of skin pigmentation. Further, there would not as likely be one lone voice speaking out against such ignorance, but rather there would be a lot more kids in the hallway standing in solidarity to shame a racist bully for his actions and words.
I am not so naive as to think that racism will one day be totally eradicated completely in our country, but it seems to me that focusing on what draws us together as Americans rather than on what makes us different would be far more hopeful and helpful in restoring that seemingly lost notion of the great American melting pot.
In the meantime, I am proud that this is one lesson that my daughter seems to have deeply ingrained within her character and the courage to stand up when others would rather just watch or keep on walking down the hallway.
Monday, May 3, 2010
Illegal Immigration and Obama
Relax guys. I am not one who believes that Obama was not a citizen of the United States at his birth, but I couldn't help laugh at this guy's sign regardless.
The Democrats, Freddie, and Fannie
This is something that I have argued continuously to my Democrat friends of how it is THEIR party that insisted nothing was wrong with Fannie Mae or Freddie Mac and consistently thwarted Republican efforts to further regulate them when the GOP saw this run-a-way train coming down the track.
Now I don't know that regulation was the answer either, but there should have been a criminal investigation into the wrong-doing and cooking of the books under the stewardship of Franklin Raines, who became Obama's economic advisor.
Seems like crooks to the left and far left have found escape in the Obama administration. I challenge any of you open-minded leftists to view the damning videos contained in this posting and tell me where I am wrong on this issue.
It is PRECISELY because of the greed of Democrats in protecting these cash cows that the housing industry collapsed thus providing the initial impetus for our current recession we are now in the depths of over the past two years.
(By the way, my thanks to Lisa for providing the link to this excellent video!)
Now I don't know that regulation was the answer either, but there should have been a criminal investigation into the wrong-doing and cooking of the books under the stewardship of Franklin Raines, who became Obama's economic advisor.
Seems like crooks to the left and far left have found escape in the Obama administration. I challenge any of you open-minded leftists to view the damning videos contained in this posting and tell me where I am wrong on this issue.
It is PRECISELY because of the greed of Democrats in protecting these cash cows that the housing industry collapsed thus providing the initial impetus for our current recession we are now in the depths of over the past two years.
(By the way, my thanks to Lisa for providing the link to this excellent video!)
Oil as a Vital Component of Our Energy Policy
Lately there has been a lot of talk, especially from the left, about our nation needing to stop the drilling for oil in light of the recent oil rig disaster off the coast in the Gulf of Mexico. This altruistic vision sounds wonderful if it were not for the fact that currently we do not have a viable energy alternative that can replace what is the largest source of our nation's energy supply.
We absolutely should be looking at VIABLE alternatives to oil for our energy, and I am certain that there are plenty of people that are indeed working on this right now. The person or certain few people that come up with the most cost-effective solutions to this dilemma will transform the energy industry and indeed the entire world accordingly. They may very well become the Bill Gates of this new energy industry. What form that energy solution will take is yet to be seen and may still be decades out before it becomes a significant percentage of our nation's energy consumption.
With that being the case, like it or not, we are stuck with the vital national interest of drilling for oil to fuel our nation's economy for transportation, electricity, and heat for our homes. Far better that oil be drilled and extracted from our nation's own untapped petroleum reserves than from those nations that are not necessarily friendly or possibly even down-right hostile to America and its interests.
We absolutely should be looking at VIABLE alternatives to oil for our energy, and I am certain that there are plenty of people that are indeed working on this right now. The person or certain few people that come up with the most cost-effective solutions to this dilemma will transform the energy industry and indeed the entire world accordingly. They may very well become the Bill Gates of this new energy industry. What form that energy solution will take is yet to be seen and may still be decades out before it becomes a significant percentage of our nation's energy consumption.
With that being the case, like it or not, we are stuck with the vital national interest of drilling for oil to fuel our nation's economy for transportation, electricity, and heat for our homes. Far better that oil be drilled and extracted from our nation's own untapped petroleum reserves than from those nations that are not necessarily friendly or possibly even down-right hostile to America and its interests.
I would far rather have our overall safety record and lower costs of extraction, production, and shipment of oil within the United States than to have to purchase oil from a Middle Eastern dictatorship that gives a wink and a nod towards terrorism as the price for their continuing rule, or from communist tyrants in our own western hemisphere working at odds against America and freedom as is Hugo Chavez of Venezuela.
Does that mean that we drill with reckless abandon without regard for our environment and without the safety precautions necessary to ensure that such is protected? Of course not, but the left's answer in typical fashion is greater regulation and restrictions on the industry. This, of course, will only serve to make domestic oil reserves ever more costly to the American consumers thus guaranteeing that the status quo remains in our purchasing of oil from not-necessarily friendly foreign sources.
Free0352 from John Galt for President summed it up succinctly in a retort to a liberal rant on another blog that was calling for more such regulations when he said, "There are regulations on oil drilling. Lots of them actually. Didn't work now did it?"
He continued, "Accidents happen. When you damage stuff, you should have to pay for it. That's how grown ups roll. We use a little common sense. Let's pretend you're British Petroleum and you just spilled several million gallons of oil into the gulf. Guess what, you get sued by the nice people of Florida, and you get a big fine plus pay for the clean up. The end. Regulations won't end industrial accidents no matter how many rules you make. You can make a rule that I can't trip and fall but guess what.... some day I'm going to have an 'accident' and those happen- so why make rules? We only need one rule. When you hurt someone on accident, you have to pay for it".
Sounds like common sense to me. If you try to cut corners by not installing all of the more expensive safety precaution cut off valves etc to counter just such accidents, then when an accident does happen, you will be paying billions more to correct the damage you have done as a company from a standpoint of environmental impact all the way to the loss of income for the livelihoods of those ruined in such rare disastrous cases.
Oil may not be the most desired or cleanest way to provide the energy our country needs, but it is one of the most abundant and prolific, and therefore cheapest sources of that vital energy currently. Until a better solution is put forth, whether the left likes oil or not, we have to use this valuable resource. That is a fact that no amount of altruistic desires can erase. Better to deal with it and obtain that oil from domestic sources in the meantime.
Does that mean that we drill with reckless abandon without regard for our environment and without the safety precautions necessary to ensure that such is protected? Of course not, but the left's answer in typical fashion is greater regulation and restrictions on the industry. This, of course, will only serve to make domestic oil reserves ever more costly to the American consumers thus guaranteeing that the status quo remains in our purchasing of oil from not-necessarily friendly foreign sources.
Free0352 from John Galt for President summed it up succinctly in a retort to a liberal rant on another blog that was calling for more such regulations when he said, "There are regulations on oil drilling. Lots of them actually. Didn't work now did it?"
He continued, "Accidents happen. When you damage stuff, you should have to pay for it. That's how grown ups roll. We use a little common sense. Let's pretend you're British Petroleum and you just spilled several million gallons of oil into the gulf. Guess what, you get sued by the nice people of Florida, and you get a big fine plus pay for the clean up. The end. Regulations won't end industrial accidents no matter how many rules you make. You can make a rule that I can't trip and fall but guess what.... some day I'm going to have an 'accident' and those happen- so why make rules? We only need one rule. When you hurt someone on accident, you have to pay for it".
Sounds like common sense to me. If you try to cut corners by not installing all of the more expensive safety precaution cut off valves etc to counter just such accidents, then when an accident does happen, you will be paying billions more to correct the damage you have done as a company from a standpoint of environmental impact all the way to the loss of income for the livelihoods of those ruined in such rare disastrous cases.
Oil may not be the most desired or cleanest way to provide the energy our country needs, but it is one of the most abundant and prolific, and therefore cheapest sources of that vital energy currently. Until a better solution is put forth, whether the left likes oil or not, we have to use this valuable resource. That is a fact that no amount of altruistic desires can erase. Better to deal with it and obtain that oil from domestic sources in the meantime.
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