Saturday, April 25, 2009

The first 535 people in the phonebook...

I don't know who coined the phrase, but I think it's a good time to reflect on an old adage that is apropos to the times and struggles we Americans face. The adage specifically was: "We'd be better served by the first 535 random names in the phonebook then we are by our current 535 members of Congress" (435 in the US House of Representatives and 100 in the US Senate).

More succinct words could not be applied to a vast majority of those we've elected to 'serve' us as representatives. To those of you who know me personally, you are acutely aware of my less-then-positive feelings for a majority of those who end up in Washington DC as well as our various state capitals. A good deal of these negative feelings are directly attributable to the flawed and undesirable two-party system that overwhelmingly ensures that are choices in the ballot booth are either a Democrat or a Republican. Far too many of my friends and acquaintance's wrongly assume that I fall into the latter camp because of my conservative leanings, both fiscally and socially; this is a mistake. Granted, I have overwhelmingly voted for Republicans since I was old enough to vote, however this was more by default then true choice in that more appealing independent-party candidates either weren't on the ballet or simply didn't have any substanitive chance of winning (or so I thought).

The fact is, conservatives aren't really served that well by the GOP and neither are liberals by the Democratic Party (if you doubt this, just consider for a moment how disappointed dedicated liberals and conservatives become months after 'their' person wins an election and quickly begins to backtrack on the promises they made while running).

Our Founding Fathers would be up in arms if they could come back and see what's happened to the Constitutional Republic they forged for us; and I have no doubt they would rail against the two-party system, seeing it as a form of tyranny. Why do we act so surprised when an Eliot Spitzer, Rod Blagojevich, or Randel Cunningham is exposed for the corrupt fraud they are? The truth is that the very nature of politics is such that it tends to attract the least principled, most narcissistic, egotistical cretans among us.

At least with the first 535 random names in the phonebook, we'd get a true cross-section of Americans. So regardless of your political leanings, I encourage you to consider the 'road less traveled' when it comes to voting and pull the lever for an independent third-party candidate and where confronted with only a choice between a Republican or a Democrat, choose none-of-the-above.


Friday, April 10, 2009

The Great Oil Hoax and where we go from here

If some well-informed experts are right, Saudi Arabia's oil reserves are a fraction of what they've been telling us. Why does it matter? Because everyone has believed for decades that Saudi Arabia's oil supply is virtually unlimited. That's what the Saudis have said over and over again for more than 30 years. If an oil shortage threatens to cause a recession or a market crash, we can count on the Saudis to come through. So people think. But in a private briefing, one of America's top oil experts told President George Bush exactly what I'm telling you. In fact, this same man was a consultant to the secretive task force that drew up Vice President Dick Cheney's energy plan in 2001.

In other words, the guy is a heavy hitter who knows the energy business. He warned Bush that the Saudis don't have anything near the oil reserves they claim. They already pump less oil than most "experts" think, and here's the real kicker... Saudi oil production is about to drop sharply. And it will keep going down for good. Other experts have analyzed the numbers and come to the same conclusions. If the charges are true — and I believe they are — we could be facing...
Oil at $150 per barrel and gasoline at $6 a gallon or more. The oil is running out. It's as simple as that.

But that's not what you hear from so-called experts. If you ask government officials, our intelligence agencies and even powerful Wall Street financiers, they tell you the opposite.
They say the Saudis could quickly double their oil production from the current level if they wanted to. And given a few years, they think the Saudis could produce four times as much oil as they do now.

Why 2008 was a year of crisis? The oil and gas shortages we've seen lately are nothing compared with what's on the way. When the truth comes out, it will send shock waves through the world economy. Everyone will find out too late — when gasoline soars to $5 or $6 or more per gallon. The cupboard is bare and nobody knows it. Americans used to run Aramco, the huge oil company that manages the Saudi fields. But in 1979, the Saudis booted us out and took over.
And then a funny thing happened... The Saudis started keeping everything a secret.

No one knows for sure how much oil they've got in the ground, or how much they produce each year or how much they could produce if they wanted to push it to the max.
It's all secret. Experts try to figure out how much oil the Saudis sell by monitoring tanker traffic in and out of the world's ports. That's how little we know for sure. But wait, it gets worse!

After the Saudis took over, an even funnier thing happened... Their figures for proven reserves kept going up and up and up — even though they didn't find any major new oil fields!
In 1979, the Saudis adjusted proven reserves upward by 50 billion barrels. Then eight years after that, their proven reserves magically grew by another 100 billion barrels. Their estimated reserves increased by 150% in nine years — to a total of 260 billion barrels. And they didn't find a single major new oil field!

And here's the funniest thing of all... For the last 18 years, they've claimed they own 260 billion barrels of proven oil in the ground. The figure never goes down, even though they pumped out 46 billion barrels during that period. Let's see... 260 minus 46 equals 260. Saudi math!

Based on these bogus figures, the Saudis claim they can produce as much oil as the world wants for the next 50 years. As recently as 2004, they claimed their reserve estimates are actually conservative. That's why most of the world's governments and intelligence services believe the Saudis could pump 20 million barrels of oil a day if they wanted to. Trouble is, we've got no proof except their say-so. If it were true, we wouldn't have a thing to worry about. But it's not.

It's horse hockey. Before Aramco's American owners were shown the door in 1979, they told Congress that Saudi Arabia had proven reserves of 110 billion barrels. There have been no major new discoveries, so 110 billion barrels was probably about right. And since then, about half of that has been used up. So why do the Saudis insist everything is just fine and they have 260 billion barrels of reserves? One reason is they wanted to discourage non-OPEC nations from looking for more oil or switching to alternatives.

It was a devious plan, and it worked perfectly. But that wasn't the only reason the Saudis lied about their reserves. They did it because everyone does it! Everyone in OPEC, that is.
The Biggest Lie of All: OPEC's Imaginary Oil. In the 1980s, OPEC's claim of total reserves magically leaped from 353 to 643 billion barrels without a single major discovery. Industry experts call it the quota war.

You see, OPEC had to limit how much oil each member could sell, because prices were too low. The quotas were based on... each member's oil reserves! That's right: The amount of oil OPEC would let a member pump depended on how much that member had in the ground. So it paid for OPEC members to claim the biggest reserves they could. And that's what they did.
The Saudis alone jacked up their estimate by about 100 billion. Kuwait added 50% to its reserves in one year, 1985. Venezuela (remember Hugo Chavez leads that nation today) doubled its reserves in 1987. Iraq and Iran doubled their estimates, too.

What's more, OPEC members did like the Saudis and kept their reserve estimates the same year after year, as if no oil were being pumped out and sold. Everyone claimed to have a bottomless well. Now, if you're like me, you prefer to base your financial decisions on the real world, not on a fantasy.

Let's look at how much oil there really is... In the 1970s, when Western managers were still in charge, they believed for a time that Saudi output could reach 20 million barrels a day. But by the time the Americans lost control in 1979, they figured the peak would be 12 million.
They also predicted that peak production would last only 15–20 years. 1979 plus 20 is 1999. We're past the peak, if these men were right. But we already know they were too optimistic.
The truth is that Saudi production never got to 12 million. "In all probability, output peaked in 1981 at an unsustainable level of about 10.5 million barrels per day," according to Matthew R. Simmons, a leading oil industry authority.

And yet the lies go on... In 2004, Saudi officials claimed they boosted production to 9.5 million barrels per day and maintained that level for five months. It's almost sure they were lying. The International Energy Agency is the group that keeps an eye on these things for the developed, oil-importing countries. The IEA could find no sign the Saudis were selling more oil.
As far as anyone can tell, they pump only around 5 million barrels a day, and that's all they've pumped for years.

It's déjà vu all over again. In spite of being lied to at least once, the IEA, the U.S. Department of Energy and other forecasters believe the Saudi claims. ALL their projections of our energy future ALWAYS assume the Saudis could produce 15–20 million barrels a day.
The lies have worked. Not only do Western politicians believe them, but so do many oil industry experts and investors with huge amounts of money at stake. They've been had.

Our whole economy is at risk. Your investments are at risk. Your retirement plans are at risk.
America has been so prosperous the last couple of decades, a lot of people forget what the energy crisis of the '70s was like... The price of a barrel of oil shot up 400%. Long lines formed at gas stations practically overnight. Folks had to pay four times as much for a gallon of gas, and there came a week when one out of every five gas stations in the United States had no gas to sell at any price.

The U.S. had three major recessions within 10 years after the first oil crisis in 1973. And those recessions were deep, with double-digit unemployment, double-digit interest rates and double-digit inflation:

Think 10–12% unemployment.
Think 15–18% mortgage rates.

Got the picture? That was the ‘70s. Not fun. My take is that a similar crisis will rock the nation before we solve our problem with clean coal, liquefied natural gas, oil from tar sands, high-mileage cars and safe nuclear plants. More than likely, the politicians will quarrel for years before they do what has to be done.

The hybrid engine isn't it. And the hydrogen car isn't, either
The race is on to design the car of the future. Every player in the industry is scrambling for the prize, and the winner will dominate the world car market for decades. The three big contenders are the hydrogen fuel cell, the electric hybrid vehicle and the diesel.

Let's take a look at the three cars in this race... The hydrogen fuel cell gets the most hype
Detroit put all its chips on fuel cell technology, and it's been telling us since the late 1990s that a breakthrough was just around the corner. In 1997, German-owned DaimlerChrysler actually predicted 100,000 fuel cell engines on the road by 2005. In 2001, General Motors projected about the same timeline. Even George Bush got into the act, declaring in his 2003 State of the Union message that "America can lead the world in developing clean, hydrogen-powered automobiles." It didn't happen and it probably won't. The short explanation for Detroit's failure is that the engineering problems were bigger than it thought. On top of that, the fuel cell engine costs 10 times as much as a conventional engine.

Worse yet, there's also the problem of building a national network of fuel stations where you can fill the tank with hydrogen. Hydrogen isn't found in nature in a usable form, and it's very expensive to produce. A national hydrogen rollout could cost $100 billion. There's still hope that hydrogen will come through in the end, but the National Academy of Sciences believes the "hydrogen economy" is decades away.

Meanwhile, electric hybrids roar ahead. When Toyota announced a heavy investment in electric hybrids a few years back, Detroit snickered. To Detroit, it just seemed like a halfway solution on the way to the fuel cell car. Wrong. I don't need to tell you that the electric hybrid Prius is a sensation, and Detroit is now rushing to play catch-up. It'll come out with a number of hybrid models in the next few years, many of them using technology licensed from Toyota.
What's more, the electric hybrid is not just an underpowered small car. Toyota now offers a high-end SUV hybrid with better acceleration than the standard model!
So hybrids are where it's at, right? Wrong again!

The Prius has problems. First off, the gas mileage on the Prius is not all it's cracked up to be. Consumers have noticed, and some aren't happy. What happened is that the EPA tests vehicles under ideal conditions on a flat surface. In the real world, it looks like Prius' mileage is not so hot. Also, most of the hybrid's big mileage gains occur in stop-and-start city traffic. On an open road, the conventional engine actually gets better gas mileage. When you look at the Prius' true mileage, there are plenty of conventional vehicles that do as well or better. Add in the high extra cost of the hybrid engine, and some say you have to drive the car a hundred thousand miles to recoup the extra money you pay for the fancy technology.

There's a third alternative, a "sleeper" technology that's going to surprise everyone.

And the winner is..
The humble old diesel engine — the third and final competitor for car of the future.
How can that be? Diesels are loud, dirty and smelly. A pollution nightmare.
You can hear a diesel truck from a mile away, see the soot from halfway down the block and smell the exhaust as it rolls by. Except — surprise! — those diesels you hear and smell are antiques. Thanks to new technology, diesels aren't so dirty anymore, and the gas mileage is better than ever!

Here's what happened: Europeans have to pay heavy gasoline taxes and they worry about global warming, so they invested in the diesel engine as a stopgap, just in case the hydrogen car hit a snag. As you know, hydrogen DID hit a snag. Now the stopgap looks like the winner in the great auto race. You see, diesel gets about 30% more miles to the gallon than gasoline, and those savings are real, in any kind of driving conditions. What's more, people who worry about global warming prefer diesel because it emits up to 20% less carbon dioxide.

But wait, it gets even better... Diesels have a huge, surprise advantage. Diesels now rival traditional gasoline engines for quiet, and European refineries have removed most of the pollutants from the fuel. The engines cost more, but the fuel savings almost make up the difference.

Diesel's biggest edge is something you'd never expect... You don't need crude oil to make diesel fuel You can make it from coal, plant matter or even cooking oil. (No kidding! A restaurant can invest in a cooking oil converter kit that lets you fry a batch of potatoes and later reuse the oil in your delivery truck). In India they make diesel fuel from cow dung!

Every year and, indeed, every month the world will grow more desperate for the alternative fuels and technologies. India imports more than 75% of its crude oil. It's so desperate for alternatives, it recently promoted cow dung as an important energy source. A new use for sacred cows! The problem is Asians these days are buying cars like... well, like Americans.
The Chinese would have to buy 650 million vehicles to reach American levels of car ownership. That's not likely. But a fraction of that figure will create an oil and pollution crisis big enough to finish us off.

In the vast markets of India and China, a vehicle that runs without crude oil will be irresistible. But there's still more to the diesel story... A hybrid diesel engine is the next step. A combination of hybrid and diesel technology will take the fuel savings up a notch. Make that two notches. And it will happen soon. An MIT study predicts the diesel hybrid could outperform a hydrogen fuel cell engine on both gasoline mileage and carbon emissions — within 10 years.
In other words, the hydrogen fuel cell car may never get to market. It's dead in the cradle thanks to breakthroughs elsewhere.

-Byron King

'Est iustus alius falsidicus politician.'

Check the YouTube Video yourself, if that isn't a bow then our President was perhaps checking to make sure that Abdulla's shoes were tied properly? As John Lovitz used to say in his 'Chronic Liar' stitch: "Yeah, that's the ticket."

Personally, I don't really care if our President (who I didn't vote for by the way)bows in person to the Saudi King because in truth, America's BEEN bowing to Saudi Arabia and the rest of OPEC since 1973.

What does irritate me is when our current President's handlers feel they can 'LIE' to us and say he didn't do what he clearly did! Where's the integrity? Just tell the TRUTH (how refreshing that would be actually)!

Just like his 'I Bowl like a kid from the Special Olympics' on the Tonight Show with Jay Leno, this event (and his staff's pathetic attempt to deny or cover-it-up) exposes Mr. Obama for what he is, just another politician who lies as easily as he puts his socks on. I'd expected more from a guy who ran for office espousing CHANGE.

Obama est iustus alius falsidicus politician (Obama is just another lying politician).


Wednesday, April 8, 2009

Michael Moore Spoof on Gun Control

For those of you who are nausiated by the sight and emminations of fellow Michigander Michael Moore (especially those of us who really wish he'd STOP wearing that MSU ballcap), I received this YouTube clip from a friend and I think you'll get a kick out of it:

16 Depression Era Money Saving Tips

BillShrink Guy
April 7, 2009
File under Tags: cost cutting, recession, savings, tips & tools
We are often told that the current financial meltdown is the most serious since the Great Depression. And while that may be true, comparing today’s times to such an awful and demoralizing crisis has the effect of scaring people, thereby making the situation worse. This is the wrong way to react to the situation. Rather than passively absorbing fear and uncertainty, we would do well to remember that some people managed to stay afloat during the Great Depression - and to learn how they did it. In that vein, here are 16 Depression-era money saving tips and how they can be utilized today.

Pay Yourself First


Without a good-sized chunk of money stashed aside, there is literally nothing standing between you and financial disaster. While you may manage to chug along the way things are now, the slightest change (a sudden spike in credit card rates, temporary loss of income, etc.) could send you reeling. That being said, it’s no surprise that paying yourself first by continuing to save was a common trait of people who survived the Great Depression. You should do the same today, no matter how uncomfortable or counter-intuitive it feels at the time.

Only Buy What You Truly Need


Together with regular savings, buying only necessities forms the bedrock of the Depression mentality to surviving economic turmoil. You can bet that when people were jumping out of skyscrapers because their net worth evaporated overnight, the people who held it together were not blowing their money on excesses. Similarly, until you conduct a thorough inventory of your spending habits, methodically eliminate waste and ensure that you are only buying what you truly need to survive, you will not be as fortified from disaster as you could be.

Awaken Your Inner Bargain Hunter

Another defining characteristic of Depression survivors was their relentless spirit of bargain hunting. When money is scarce and the future uncertain, there is simply no excuse for paying full sticker price on any of your purchases. Such times call for a different mentality, one of price comparisons and serious research into where the cheapest prices can be found. Luckily, the Internet makes this task far easier for today’s consumers than Depression-era bargain hunters. A few minutes of research before making any major purchases will usually assure you of getting a better deal.

Avoid Debt Like the Plague


Today’s recession (much like the Depression of the 1930’s) was caused by excessive borrowing and debt. That being the case, it would be utterly foolish to exacerbate the problem by going into debt yourself (especially if you already have outstanding debt in the form of credit cards or loans.) Going into debt during a recession takes you from the frying pan into the fire, exposing you to the full wrath of collections agencies, ruined credit scores, and possibly even bankruptcy. Rather than allowing this to happen, adopt the Depression mentality: see debt as a plague to be avoided at all costs.

Discard Catalogs or Enticing Advertisements


It is well known by psychologists that one’s environment has a great deal of influence on their behavior. Interestingly, a survey of Depression survivors by the Healthcare Council of Illinois revealed that many of those survivors promptly threw away mail-order catalogs and other enticing advertisements as soon they arrived. It was (and still is!) much easier to stay on your chosen path of frugality when you are not constantly surrounded by ads for things you don’t really need. Heed this advice today and you will be less tempted to splurge!

Question Every Expense

Notwithstanding trust fund babies and lottery winners, people who survived the Great Depression didn’t do it by accident. One of their strengths was a refusal to accept any expense without tirelessly scrutinizing it. Only when it was determined that they were spending the least possible amount of money would they rest easy and pay it. You should adopt this same attitude with regard to any kind of services or ongoing fees that you pay, be it for insurance, home security systems, warranties, Internet connections, and even electricity. Haggle, negotiate, and shop around until you know it would be impossible for someone to spend less and still get what you’re getting.

Use Less Energy


One of the familiar stories of the Depression era is homeowners who turned their home thermostats down and bundled up in coats and sweaters around the house. It’s uncomfortable to imagine going to that extreme and no one gets excited about using less of something to save money. That said, there is no faster, more straightforward way to save money so far discovered. Rather than seeing it as a painful sacrifice, make a game out of it. See how much less of everything you can use without making life unbearably worse. You might be surprised at how frugal you can be (and how much you can save) with heating, lights, and gas!

Buy in Bulk - Intelligently


It’s no secret that buying in bulk can save you money by enabling you to take advantage of volume discounts. Unfortunately, it can also be taken too far, such that it actually costs you more money. Without careful discretion, you might wind up buying things you don’t actually need in bulk, because it’s in bulk, rationalizing that after all, you’re “saving money” on it. This completely defeats the purpose of buying in bulk, which is saving money on things you need to buy. Avoid this pitfall by only bulk buying necessities (ie, nutritious food) and not excesses (ie, 50 gallon drums of shampoo.)

Keep or Start a Garden


Cutting down on restaurant meals means eating more meals at a home, but if you have to buy all your food ready-made, you still wont be saving as much as you could be. That’s why many Depression survivors kept backyard gardens to grow fresh fruits and vegetables. While there is still the cost of seeds and maintenance (ie, water costs), this is far cheaper than buying from stores and ensures that food costs are kept to the absolute minimum

Move to Where the Work is

A tragic fact of the Depression is how many people suffered by staying in stagnant areas when they could have (perhaps at a high cost) moved somewhere more prosperous. Don’t make that mistake today! Many of those who came out of the Depression financially intact had the prescience to see that the job outlook at home would only get worse and the courage to move somewhere else. If you have the opportunity to do the same, take advantage of it.

Develop Multiple Income Streams

It wasn’t called the Great Depression for nothing, but the gloom and doom we associate with it overshadows the fact that not everyone was hurting. Amidst all the mass suffering and despair, a small minority of people actually managed to thrive by diversifying and developing multiple income streams. You can do the same! Whether it’s investing (Warren Buffet says to be greedy when everyone else is fearful), starting a business, or picking up a second job, anything you can do to spread your risk across more than one thing will make you safer and more secure.

Spend Less to Entertain Yourself

A hallmark of Depression-era spending habits was spending less to entertain yourself. Rather than spending gobs of money on extravagant nights out on the town, people found joy in life’s simpler and less expensive pursuits - exercise, reading, or enjoying the great outdoors. While you may not be ready to cut all entertainment expenses out of your budget, you can at least buy your thrills wisely. Fly during non-peak times of the year, see matinee showings of movies, and split entertainment costs with friends in a group.

Buy Used

Buying used clothing is an extreme that many are unwilling to consider, regarding it as “going too far” and scoffing at the idea of ever doing it themselves. But the bare, crass fact is that new clothing is expensive, and when times are tough, the difference between spending $50 or $500 for a similar outfit could mean the difference between keeping the lights on or not. Depression survivors bought used clothing without shame, and if you are feeling the crunch, perhaps it’s time to consider following suit.

Don’t Pay Others For What You Can do For Free


While it’s true that nothing is truly “free” (there is the opportunity cost of your time to consider), in recession, it often makes sense to do yourself what you would normally pay others for. This includes everything from haircuts to lawn care to accounting and tax preparation. If you have an abundance of free time, spend it on tasks like these and avoid shelling out money for them.

Make Things Yourself Instead of Buying Them


You would be amazed how far a little ingenuity and resourcefulness will go in preparing your own food, stitching your own clothes, and making other things that you would usually buy. In addition to saving the money you would’ve spent, you will have the satisfaction of using the things you yourself created!

Pretend That You Are Worse Off Than You Are


People who lived through the Great Depression will tell you that your mindset and overall attitude was just as important (if not more so) than the specific money-saving strategies you used. It took a pervasive mentality of penny-pinching and getting as much from what you had as possible. The best way to cultivate this mentality? Just pretend that you’re broke. Even if you are not technically on the brink of financial ruin, pretending that you are will force you to make decisions differently and more prudently than if you assumed a more comfortable state of affairs.

Monday, April 6, 2009

Still a great season for MSU

Like millions of Michiganians, I'm a little down that our Spartans fell to a great N. Carolina team in tonights NCAA Champioship Game. However, the fact remains that they put together a fantastic season and had a great run in the hardest bracket of the big dance, kncking-off two #1 seed teams on their way to the championship game.

We should all be very proud of our Spartans and our great Coach, Tom Izzo for providing us a memerable year.


Saturday, April 4, 2009

Bubbling Green Baby!

Go right through for MSU, watch the points keep growing

Spartan Teams are bound to win, their fighting with a vim

Rah, Rah, Rah

See their team is weakening, we're going to win this game

Fight, Fight, Fight Team Fight

Victory for MSU!

Bump pa, bum bump pa da, Bum, Bunp Bump Bump Bump Bump, Pidda Bum
Bump pa, bum bump pa da, Bum Bump Bump Bump Bump Bump, Pidda Bum
Bah Bah pa dump-pa ba bump bump bump bump bump Pida Bump,
Bah, Bah, Bah,
Bump Bump Bump Bump Bump Bump

Go right through for MSU, watch the points keep growing

Spartan Teams are bound to win, their fighting with a vim

Rah, Rah, Rah

See their team is weakening, we're going to win this game

Fight, Fight, Fight Team Fight

Victory for MSU!

Umm, ah, excuse me. Feeling a wee-bit exhuberant about now...



Thursday, April 2, 2009

Financial Accounting Standards Board Rule Changes.

Mark-to-Model Returns with a Vengeance, by Samatha Burker.

The heat is on in Norwalk, Conn., this week. The Financial Accounting Standards Board’s headquarters quakes down to its foundation as Congress bullies it toward sweeping rule changes. Those changes govern the balance sheet values of those very pesky loans and derivatives that started us on this road to crisis in the first place. And the rule overhaul could strike as early as this week.

Finally, a Government Decision That Will Add to Your Bank Account:

A recent government announcement will dramatically change the way energy is produced in the United States — and early investors have the unique opportunity to grab gains as high as 661%.
You are among the very few to hear about this announcement...and the window to act on it is very small...and could close as soon as April 2.
So, what are you waiting for? The government has handed you the opportunity to make one of the first big fortunes of the 21st century. You just need to make your move...
But make it before tomorrow at midnight when our special half price offer ends.

Right now, the FASB recommends a mark-to-market practice for a majority of financial assets. But Congress wants to mark to model — because that’s what ailing banks want. To see what marking to model looks like, let me give an example of how that would work for your 401(k) quarterly report.

Each quarter, instead of finding out your current account value, you’d get a figure derived from a series of equations using various probabilities for what the value of your fund might be at your target date for retirement. In my case, something like 2045.
Of course, I don’t think I’ll be living in the same America in 2045 — even if I never move overseas. And that’s the problem. As the mortgage-back securities blowup taught us, these models — especially those developed by and for the banks — didn’t price things correctly in the first place.

Sure, we all have moments when we think the market’s current valuations are crazy. Maybe because we know the industry better than anyone, or we have a friend who’s found some old land on the books, or we’ve seen the heights of a cycle and expect it to return. If stocks are at the mercy of the market — and its potential for misinformation — shouldn’t we hold other assets to the same standard?

This mark-to-market accounting rule change isn’t the Change the president was after. As a step toward further protectionism of Frankenstein financials, it’s more of the same. Switching over to a mark-to-model system is like a college student who must present her dorm room for inspection. What’s to be done? The floor has a throw rug on it, so she lifts up a corner and swishes all the dust bunnies, dried vomit, spare change, and other detritus under the carpet.
Bloomberg offers the take from former Lehman Bros. managing director, Robert Willens:
“By letting banks use internal models, instead of market prices, and allowing them to take into account the cash flow of securities, FASB’s change could boost bank industry earnings by 20%.”
We note that the April 2 changes will apply to first-quarter financial statements. So I’m assuming that means all the recent earnings announcements will head back to the SEC for restatements in the hopes of attracting new suckers…I mean shareholders. Such a ruling would allow Citigroup to cut losses by 50-70%. Of course, this rule change threat has been afoot since late 2007, but the rush is on as our can-do Congress takes control.

It’s all about swinging those net losses into net gain territory come hell or high water. (Fargo, N.D., for one, is drowning under the Red River as I write).
The industry rhetoric always ends in a rousing “just say no to fire-sale prices.” Funny, I thought Wall Street had an awfully large conflagration going upon which Congress and Treasury are eager to throw more cash. (Well, I’d rather they burn through decimal places than burn books, I guess. But I don’t see the FASB quenching these flames). How March 12 Changed Everything
On March 12, the House Financial Services subcommittee called FASB chairman Robert Herz to the stand. His statement blames the underlying financial conditions — and not the standards — for the write-downs banks are having to suck up. He also says that capital adequacy “is beyond the purview of the FASB.” He makes it clear that the FASB exists to protect investors’ right to information.

However, House Financial Services berated him, belittled him, and told Herz he couldn’t make the rules anymore. Last I checked, the FASB was actually an independent private sector organization. But that’s not so important anymore. Check out this exchange:
“Chairman Rep. Paul Kanjorski (D-PA): You do understand the message that we’re sending?
“Herz: Yes, I absolutely do, sir.”

So now Herz has to get a new fair-value rule finished by April 2. Technically, it’s the SEC who has the oversight here, not Congress. But that’s not the worst part.
Herz admitted, after his congressional grilling, that the financial industry and their trade groups are doing the heavy lobbying. Not investors.
Who holds political action committee strings? None other than beleaguered Citigroup, and others like the Bank of New York, Mellon, Bank of America and Wells Fargo.
Take a look at what the Federal Election Commission tracked for just one representative’s, Chairman Kanjorski’s, re-election. Citigroup put up $6,500. Bank of America topped that with $7,000, and Wells Fargo offered the most: $13,000. Of course, it was all chump change to them. And we, the chumps, are already down about 50% this year and don’t have the spare change to dump in the House Financial reps’ pockets. Our only influence comes by selling short more bank stock.

It’s Time for Plan B: Before you kiss your dreams of an early retirement goodbye, you’ll want to take a look the best “little-talked-about” retirement secret out there.
“Plan B Pensions” give you many, many times more options for rebalancing your portfolio in a shifting market than you’ll see in either the classic plans or more modern versions, like the 401(k) approach.
You can get into some of these “Plan B Pension” programs with as little as $10.

Congress Follows Newton’s Sacred Law: Newton’s Third Law: For every action, there is an equal, opposite reaction. Chances are you heard that an awful lot in grade school, and have seen this reality break up many a marriage. Well, in the case of the FASB, Congress, and the bold new plans coming out of Timothy the Timid (who stood firm as a lion on his recent Meet the Press junket), we are left with a big naught.

You see, the new age of mark to model that Congress asks the FASB to inaugurate runs directly opposite to what Geithner fixes to do for the banks. Geithner wants to allow banks to sweep this trash from their balance sheets (and onto our Treasury’s and those of “private” investors tempted in yenta-like matches — whose prospects may be read in that famous attempted union of Citi and Wachovia. If you’ll recall, Wachovia fled at the altar for Wells Fargo). But Congress — with the help of the FASB — wants to let these banks keep the stinking assets…every last one. Mark to model will be left up to the bank’s choice of equations plugged into its internal modeling of future market conditions — and not it being made to write these assets down to below “fair market value.” Thus, they won’t be selling these suckers to the Treasury.

Before you think that means we’re home free, that it’ll keep those dollars in the Treasury (or from being printed in the first place), realize that in five years, 10 years…whatever the fixed term…those assets will actually hit the marketplace.
It could send banks swimming with their favorite enemies — the short sharks — all over again. And those sharp-eyed shorts have every right to signal to the market, “Here are the weak fishes — cut the school down to size.”

What the New and Improved “Fair Value” Could Look Like: Right now, fair value is determined by marking these assets to their market price once a quarter. Is that really so much to ask? The sally from the banks is always the same: Some of the banks will hold these assets to maturity, which could be 10 years down the road. The model, on the other hand, is only the most mathematical guess where the market will be in 10 years. There’s just one flaw. Even holy Goldman doesn’t know the future, and no matter how many ex-execs it puts in public service, we’ve seen it can’t MAKE the future.

When the math guys, fondly called “quants” — short for “quantitative” — modeled these derivatives the first time around, their calculations indicated what would happen 99% of the time, when there would be some measure of profit, and neglected the other 1% of the time, when losses would be catastrophic. Obviously, Congress would do better by putting a ban on all “black swan” events. But most important of all, some banks could be freed from tapping the government bailout if mark to model rules the day: Wells Fargo, M&T Bank, U.S. Bancorp, and PNC Financial.

For edification, I leave you with a quote from Wells Fargo’s own CEO, John Stumpf:
“If you’re a pessimist, there’s a lot for you to like about 2009.” He further says that you should look for more bankruptcies; more borrowers in a bind — hence more loan losses — and, icing on this mud pie: higher unemployment…signaling more borrowers underwater and more loan losses. However, Stumpf sweetly echoes the best politician (or Mr. Pollyanna, Warren Buffett) when he offers: “We continue to believe in the spirit, ingenuity, work ethic, creativity, and adaptability of American workers. We’re capitalists and proud of it.” What he really must believe in is the work ethic of folks like Rep. Paul Kanjorski and friends on the House Financial Services Subcommittee. Stumpf should know he’s the one paying for it.

Regards, Samantha Buker