We must vote for those candidates of any party that reflect these values: hard work, self-determination, smaller government, fiscal responsibility and honesty. Look to the character of anyone you chose to support. Their past does matter if they haven't learned from it. Their personal life is as relevant as their public one. We must be able to trust those who will be advising and leading us on what our country must do next. -Glenn Beck

Monday, February 23, 2009

"I was expecting the Stimulus to be a little more Stimulus-y than this... That Barack Obama is..."

Help me out with something... Isn't the point of the economic stimulus to help the state of the economy? So why does the economy just keep getting worse and worse with every move President Obama and Congress make? If this was the answer to all our problems that the Democratic Congress passed, shouldn't we see cheering in the streets and a major rebound in the market?

I'm not an economics expert, but here is a link to a great article written by a couple of professors who are:

http://www.realclearmarkets.com/articles/2009/02/the_market_is_shorting_obamas.html

THE STOCK MARKET

The article is entitled "The Market is Shorting Obama's Stimulus". The Stock Market is a public forum for buying and selling shares in a corporation. When a private company makes the decision to "go public", what they are doing, in essence, is saying "We don't have enough money as is to pursue our plans to grow our business. We need to raise more money." Let's say that the company needs to raise $50 million. They decide to sell 10 million shares at $5 each to raise the money.

We, as investors, say "We will buy shares in your company and, in return, when you make more money, you will pay us a share of the profits ('dividends')." I buy 100 shares in the company for $500, and I become a part-owner in the company. When the company takes that $50 million and generates a profit and they decide to pay a $0.50 dividend on each share, I make a $50 that year on my investment.

SUPPLY & DEMAND

That is the primary stock market. Over the years, a secondary market has evolved. The most basic law of economics is "Supply & Demand". As some stocks became consistent money-makers for investors, more and more people wanted to buy those stocks. (In other words, there was an increased "demand" for shares in the company.) But the number of shares was limited to the original 1 million. (In other words, the "supply" of shares was fixed.)

What happens when demand is greater than supply? We see the result every Christmas with the hot items. Whether it's the Tickle-Me Elmo or the Nintendo Wii, the result is the same. People are willing to pay $350 for a $250 Nintendo Wii system.

(The opposite is also true: If supply is greater than demand, than sellers have to reduce the price in order to give incentive for people to buy, like exactly what is happening in the auto market right now.)

So investors were willing to pay me $6 for the $5 share, because they anticipate that they will end up making more money in the end.

MAKING A PROFIT

This secondary market created another phenomenon. Investors started seeing the values of stocks increase because of the increased demand, and they anticipated that the stocks would continue to increase. So they would buy the $5 for $6, not because they wanted to earn the dividends, but because they figured that stock would soon go to $7, and they could sell the stock at a $1 profit on their investment.

Many of the stocks in the stock market today don't even pay dividends; investors today mainly buy stocks because they anticipate that the value of the stock will increase.

THE SHORT SELL

All of this background is to define what is meant in the article by the market "shorting" Obama's Stimulus plan. The idea of a short sell is a method to make money when you anticipate that the value of a stock is going to drop.

As an example, six months ago, you could have made a deal to sell gas to a person at $3.95/gallon because that's what gas cost at the time. But if the person didn't come to collect their gas until today, you could buy the gas you're selling to them at $1.65/gallon, which means you would make $2.30/gallon profit.

Investors in the stock market who anticipate a stock is going to go down in value "sell" stocks they don't actually own at current prices. Then when it comes time for them to actually buy the stocks, if the price has gone down, they can make a profit. (If, by chance, the price has gone up, then they lose money on the transaction, just like as if gas had gone from $3.95 to $4.95 -- I would lose $1/gallon on the transaction.)

THE MARKET AS A FUTURE INDICATOR OF ECONOMIC PERFORMANCE

Because investors spend a large percentage of their time studying the companies and their forecasts and earnings reports and the market, the Stock Market is generally a good indicator of what is going to happen to economic growth in the future. When the stock market is up, economic growth is positive; when the stock market is down, the future doesn't look good for the economy.

Investors are selling (and short selling) stocks right now. What does that mean they anticipate is going to happen in the market in the near future?

The Dow Jones Industrial Average is a group of stocks from a variety of industries that are averaged to give investors some sort of indication on how the stock market as a whole is performing. Here is how the Dow Jones has reacted to the attempts of the government to "fix" the economy:


  • 10/04/2008 - Mortgage Bailout Passes: Dow Drops 508 points
  • 11/05/2008 - Obama Elected: Dow Drops 444 points
  • 01/20/2008 - Obama Sworn in as President: Dow Drops 332 points
  • 02/13/2008 - House and Senate Pass Stimulus: Dow Drops 298 points
  • 02/18/2008 - Obama Signs Stimulus: Dow Drops 90 points
  • 02/19/2008 - Obama Unveils Mortgage Plan: Dow Drops 100 points


I'm sensing a pattern here...

PERSPECTIVE

To give some perspective, let's say that my personal finances were looking bad. What would be the solution? If I was starting to miss payments and it was looking like I might lose everything, which would be the proper approach:

A) Mortgage my house, cars, television and everything I could think of to get more money so I could have cash on hand to make all of my payments, and then start building an addition on to my house.

OR

B) Cut back spending, sell my home and cars if needed, and put more time and money into education so that I can get a raise at work.

Hmmmm... This is a tough one.

HARVARD

Does President Obama not recognize this? Of course he does! He's a smart man. He graduated with a Juris Doctorate from the best and most rigorous universities in the world: Harvard University. You have to be extremely smart to get a degree from Harvard! (Unless you earned an MBA from Harvard and your name is George W. Bush, that is... Then you're stupid and must have cheated.)

So why is President Obama and the Democratic congress pursuing plans that are making matters worse? There has to be an ulterior motive. The answer is that President Obama is a smart man. He sees this as a great opportunity to infuse his ideology into the government and further his agenda at a time where we "can't afford to spend time" debating whether it is good for our country or not. He is spreading fear far and wide so that we will make rash decisions.

HOPE AND CHANGE

Hope is not lost. Governor Bobby Jindal and other Republican governors who have said that they will not accept stimulus funds (although the Dems were clever enough to include a clause that forces them to) show us that there are some true conservatives out there.

I have had the thought cross my mind time and time again about how things would have been different if Mitt Romney had been able to get momentum a little bit earlier and had been the Republican nominee. Romney is a true conservative who understands how money works and has a proven track record in business. Here is a snippet from Wikipedia about Romney and the 2002 Olympics:

"Romney served as president and CEO of the 2002 Olympic Winter Games held in Salt Lake City. In 1999, before Romney was hired, the event was running $379 million short of its revenue benchmarks. Plans were being made to scale back the games in order to compensate for the fiscal crisis. The Games were also damaged by allegations of bribery involving top officials, including then Salt Lake Olympic Committee (SLOC) President and CEO Frank Joklik. Joklik and SLOC vice president Dave Johnson were forced to resign.

"On February 11, 1999, Romney was hired as the new president and CEO of the Salt Lake Organizing Committee. Romney revamped the organization's leadership and policies, reduced budgets, and boosted fund raising. He also worked to ensure the safety of the Games following the terrorist attacks of September 11, 2001 by coordinating a $300 million security budget. Despite the initial fiscal shortfall, the Games ended up clearing a profit of $100 million, not counting the $224.5 million in security costs contributed by outside sources.

"Romney contributed $1 million to the Olympics, and donated the $825,000 salary he earned as President and CEO to charity."


I wonder what the Dow Jones would have done on November 6th if Mitt Romney had been elected President.

Whether it's Jindal or Romney or another true conservative, 2012 won't get here fast enough for me. Thank goodness we at least have congressional elections in 2010. The way things are heading, I imagine at those elections the dominating theme of "Change" will still hold true.

Thursday, February 12, 2009

Lincoln and Obama: No Comparison

I know I've posted twice recently, and I don't mean to monopolize the blog, but I saw something today that made my blood boil, and I need to vent. I went out this morning and turned on my TV. I changed the channel to CNN, and they were running a special called "From Lincoln to Obama".

Throughout the campaign and the first few months of his presidency, President Obama has spoken about and compared himself to Abraham Lincoln. The media has taken the cue and proliferated that idea. The part of the special I watched had the reporter asking college students how Obama compared to Lincoln. I will answer that question: There is no comparison.

The best book I've ever read is a biography of Lincoln's presidency called "Team of Rivals: The Political Genius of Abraham Lincoln" by Doris Kearns Goodwin. She has said that she spent over 10 years writing this masterpiece. Goodwin has pieced together from 120 pages' worth of refrences a book that has a narrative flow unlike any other biography I've read. After reading this book, little doubt is left that Abraham Lincoln is the greatest President in the history of this country.

President Obama has also referred to "Team of Rivals" as a great influence in his life. The premise of the book is that Lincoln chose his party Rivals to fill his cabinet, and that doing so had a great influence on his presidency. Because Obama chose Hillary Clinton to be his Secretary of State, he and the press have concluded that he is the new Lincoln.

There is no doubt that Lincoln would be proud at how far the country has progressed in terms of race. For a man of black descent to be elected president would be confirmation of everything Lincoln had fought (and died) for.

Two of the students who were being interviewed on the "From Lincoln to Obama" special were black, and the first thing out of both of their mouths was about how Lincoln really didn't care about freeing the slaves, but rather he just wanted to unite the union, and that he was actually a racist. This view, pushed onto students by the liberal school system, is completely false.

Goodwin, who is one of the foremost scholars on Lincoln's life (and a liberal), said in "Team of Rivals":

"There is no way to perpetuate Lincoln's personal feelings about race. There is, however, the fact that armies of scholars, meticulously investigating every aspect of his life, have failed to find a single act of racial bigotry on his part. Even more telling is the observation of Frederick Douglass, who would become a frequent public critic of Lincoln's during his presidency, that of all men he had met, Lincoln was 'the first great man that I talked with in the United States freely, who in no single instance reminded me of the difference between himself and myself, of the difference of color.' This remark takes on additional meaning when one realizes that Douglass had met dozens of celebrated abolitionists, including Wendell Phillips, William Lloyd Garrison, and Salmon Chase. Apparently, Douglass never felt with any of them, as he did with Lincoln, an 'entire freedom from popular prejudice against the colored race.'"

"Lincoln always believed, he later said, that 'if slavery is not wrong, nothing is wrong' and could not remember when he did not 'so think, and feel.'"

Lincoln fought every day of his political life for the abolition of slavery against the Democrats, who battled him every step of the way. He was a Republican -- The first Republican president, whose main platform was antislavery.

Of course Lincoln's greatest desire was to save the Union. From the first day of his presidency, the southern states has suceded from the north to form their own country. Lincoln held this country together during its darkest days. He emancipated the slaves and saved the nation. His life was taken because of his beliefs.

Barack Obama has done nothing. Absolutely nothing. This has nothing to do with politics -- Perhaps Obama will be the greatest president this nation has ever seen. Only time will tell. But to date, he has done nothing. How could he? He's been in office for less than a month. To draw a comparison between Obama and Lincoln is completely ridiculous.

Obama has risen from poverty like Lincoln -- So have others. Obama selected Clinton to be his Secretary of State. But William Seward, Lincoln's Secretary of State, became one of his greatest friends and trusted advisors. (I guess that could happen with Obama and Clinton, right...?)

Making a comparison between Obama and Lincoln is like saying that I have studied Tiger Woods' life, and I use Nike One golf balls, and thus I am like Tiger Woods. Obama has risen to the office of President of the United States as Lincoln, so the analogy might be better if I earned my PGA card (I'm working on it.) But a PGA card and a Nike One golf ball still do not make the comparison valid -- There is only one Tiger Woods.

On the birthday on the greatest President in the history of this country, let us not insult his memory by making such a ridiculous comparison. There is only one Abraham Lincoln.

Wednesday, February 11, 2009

Econ 101

Chapter 1: WHAT IS A STIMULUS?

With all the talk of the economy and stimulus, I thought I'd add my two cents. (We need every cent we can get, right?) I'm far from an expert on economics, but I've also probably studied more economics than your average Joe.

The idea behind a stimulus is to jumpstart the economy. An economy is dependent on money changing hands. When I decide I can't afford to eat out, then the restaurants begin to lose money. They cut back by letting an employee go, and then that employee can't buy the new DVD player he wanted to, along with others that have been laid off from other businesses. So the electronics store loses business and has to close its doors, creating even more people who aren't spending moeny. And so it goes.

The idea of a stimulus is to get money changing hands again. I decide I can afford to go out to eat, the restaurant gets money, the employee buys a DVD player, and the electronics store stays open. On the surface, it sounds great.

Chapter 2: PRIMING THE LAWNMOWER

I have a lawnmower that was given to me a couple years ago by a friend. The lawnmower was in excellent condition with one minor exception -- It wouldn't run. You could start it, and as long as you kept pressing the primer button, it would run. But the second you stopped priming the engine, the engine would quit.

The stimulus is like the primer on the lawnmower. Under the right circumstances, the primer can facilitate the process of getting the engine running smoothly. But it would make no sense to try to mow the entire lawn while pressing the primer button repeatedly.

Given the present economic circumstances, if the government sends you another check for $1200, what are you going to do with it? If you're like me, you're going to sock it away in savings or pay down debt. How do either of those things help the restaurant or the electronics store? They don't. Saving the money is actually the worst possible situation, because it pulls even more money out of circulation.

Where does the money for the stimulus come from? It's money that should have been yours in the first place -- It comes from the taxpayers. Does the government really have $789 billion extra dollars lying around to stimulate the economy? Obviously not. So where is the money coming from? The contractors that are going to build the new $886,000 Frisbee Golf Course included in the stimulus bill are going to want to get paid. So the government prints more money to pay these contractors.

Chapter 3: BASEBALL CARDS

I used to collect baseball cards. Any idea what the most expensive baseball card is? It's a 1909 Honus Wagner baseball card that sold in February 2007 for $2.35 million. (Talk about stimulating the economy.) Why would anyone pay that much for a piece of cardboard? It doesn't take an economist to figure out it is worth so much because it is so rare. What if there were 100,000 of those cards still around? The relative value of each card would be much less.

So what happens to the value of each dollar we have when more dollars are printed and infused into the economy? The relative value of each dollar becomes that much less. We can buy less for our money, which is what we refer to in economics as (price) inflation.

It becomes obvious that printing money to send out checks to those of us who are going to sock it away in savings is not the answer to our economic problems. So why do they do it if they know it won't work? Because you and I like recieving a check for $1200 from the government (as long as we don't worry about where the money came from), and they expect we'll remember that when it comes time to vote.

Chapter 4: WHY RICH PEOPLE ARE RICH

What does the richest man in the world, Warren Buffet, do with his $1200 stimulus check? Ironically, he doesn't get one. But if he did, I guarantee he wouldn't sock it away in savings. People who are rich have learned to spend their money on things that will make them more money -- That's why they're rich. You and I take our $1200 and spend in on a new HDTV. Warren Buffet would take his $1200 stimulus check and turn it into $2400. How? He would invest in a small company or buy stocks or find a rare baseball card to buy. His uses his money to make money, and he uses the money he made to buy a new HDTV.

President Obama recently put a salary cap of $500,000 on executives recieving federal bailout money. Let's say the executive was making $20 million before the salary cap. What did that executive do with the other $19.5 million? He spent it. The corporate jets need pilots, the huge houses need contractors, the sports cars need vendors, and the extravagant parties need hundreds of workers. While you and I save, the rich can afford to spend.

Rush Limbaugh pointed out a couple weeks back the irony in the percieved evil of the automakers taking their private jets to Washington to ask for federal bailout money (which, keep in mind, is a loan that will be paid back, not a handout like the stimulus is), and yet there is no problem with senators flying in on their private jets for the inauguration.

Chapter 5: IT'S ABOUT CONTROL

Large portions of the stimulus are dedicated to projects in the economy. The $886,000 in the House stimulus bill for the Frisbee Golf Course in Austin, Texas, referred to earlier, is designed to create jobs for people. If we build this frisbee golf course, jobs will be created. Again, a good idea on the surface.

John Thain, former president of Merrill Lynch, was ousted after paying $1.2 million to renovate his office with bailout money. Who did the renovation? My guess is that Mr. Thain wasn't there in his coveralls. Architects and contractors and designers were hired, as Rush pointed out. Jobs were created from the office renovation just as well as they would be created from the frisbee golf course or anything else on the House and Senate stimulus bills.

So why is the frisbee golf course good and the office renovation bad? It's about control. Speaking generally, liberals seek for power. Liberalism taken to its extreme left is Communism. The government has total control over its people. The idea of liberalism and communism is that the individual people can't take care of themselves, and that the government, who has the power, can take care of them. The Democratic government seeks for us to depend on them.

Chapter 6: WHAT IF EVERYBODY WERE LIKE ME?

The principle of caring for one another is the crowning prinicple of God's plan. It is the most noble of characteristics. It would seem on the surface that Universal Health Care and other programs that care for all Americans are also noble ideas. So why does Communism fail, economically-speaking?

A wise and dear friend of mine once pointed out that a good way to evaluate ourselves is to ask the question, What if everybody were like me? The question can be asked about work: What if everybody at work were like me? How would the company function? I've asked it in terms of church service: What if everybody in my church were like me? Would everyone be cared for? And I've asked it in terms of my country: What if everybody in the country were like me? Would we be a strong country or would we fail? This soul-searching question continues to shape my life.

If I were to tell you that you could pay $100 per month for health care or you could recieve it "free", which would you choose? The inherent problem in Communism is that there is more taking than there is contributing. Productivity decreases as people realize that they aren't gaining much for the effort they are putting in, and they in turn put in less effort. What if everyone was like the person living on welfare?

Chapter 7: SO WHAT IS THE SOLUTION?

With that in mind, the solution becomes easy: Reward people according to the amount of effort they put in, and there is incentive to become more productive.

A couple years back, I decided I was going to start investing in the stock market. Since I had no experience, I decided I would run a test first. I started with an imaginary $1000 and "bought" and "sold" stocks on a spreadsheet over the course of one year as I saved real money. In the end, I averaged a 35 percent increase on my money. I was pumped... until I realized that nearly half of that short term capital gain would go to tax. My imaginary 35% turned into 17% in my mind, and I didn't feel that it was worth the risk to invest my money that way.

America is the land of opportunity. But it is difficult when 50 percent of that "opportunity" is immediately taken away.

The stock market is considered a rough indicator of economic growth. Meaning that if the stock market is thriving, the economy will likely grow; if the stock market is dying, the economy will likely follow. What would happen to the stock market today if Congress announced they had passed a bill cutting the corporate tax rate in half? My guess is that we would see the largest one-day gain in history.

We need to cut taxes for everybody, but especially for those who turn money into more money, for those who create jobs, and for those who can spend freely. We decide where the extra money goes. By doing so, we will in turn be more productive as an economy, raising the income of everyone.

TIME TO ACT

If we don't act quickly, the stimulus will go through. The only thing that gets through to our elected officials is their constituency and their future. Make a call, write a letter, send an e-mail, and let your elected officials know that if they vote for the stimulus, this will be their last term in office. It's time for them to go back and take Economics 101.

Monday, February 2, 2009

A Meal at Cafe Rio

I had an interesting experience the other day. I was standing in line at Cafe Rio, and the father of the family in line in front of me pulled out a wad of cash containing at least a couple $100 bills to pay for his meal. I had the thought pop into my head, What would happen if I turned to them as I picked up my meal and said, "You're in a much better situation than I am to pay for my meal, so you can pay for it" and walked away?

It struck me how obvious it was that doing so would not be proper behavior. We would never expect that a perfect stranger would pick up our meal.

What if this gentleman had instead turned around and offered to pay for my meal? The story changes completely. This is perfectly acceptable (and admirable) behavior. (I don't claim to be in need, and I wouldn't have accepted the offer.)

So what is the difference between the first situation and the second? The answer is agency.

It is interesting to me that the same individuals who would never think to ask for the person in front of them in line to pay for their meal expect that they should be able to have a surgery or retire or go to school and have a stranger pay for it.

The government would have us believe that health care is an entitlement. In other words, everybody is entitled to have "free" health care. How is it free? Are the doctors going to work for free? Obviously not. The money has to come from somewhere. Where is it coming from? The gentleman in line in front of me at Cafe Rio with the wad of cash.

There is no difference in asking the gentleman to pay for my dinner and asking him to pay for my surgery. Whether it's asking this gentleman to pay for a mortgage I got into that I couldn't afford or to bail out the business I mismanaged, it is all the same. It is not acceptable behavior.

But what about individuals who need surgery who can't afford it? Or elderly people that can't work anymore? Or young students who can't afford tuition?

I believe Republicans (who used to represent Conservatism) have gotten a bad reputation over the years for being greedy cold-hearted Scrooges who only care about themselves. My experience has been different -- Some of the wealthiest Conservatives I know are also the most generous.

In fact, I was just curious about whether Democrats or Republicans give more to charity. I did a quick search in Google, and found this page:

http://abcnews.go.com/2020/story?id=2682730&page=1

Here are a couple of interesting quotes from the article:

"It turns out that this idea that liberals give more…is a myth. Of the top 25 states where people give an above average percent of their income, 24 were red states in the last presidential election."

"When you look at the data, it turns out the conservatives give about thirty percent more per conservative-headed family than per liberal-headed family. And incidentally, conservative-headed families make slightly less money."

As Conservatives, we believe that if there is a person in line behind us in need, that we ought to turn around and offer to buy their meal. (That's not to say that Liberals don't, because I actually believe that many people are Liberals because they have big hearts and have simply been misled in what Republicans represent, but rather to dispell the stereotype given to Republicans.) But it ought to be our choice.

Cut taxes, reduce spending, and put more money in the hands of ALL Americans. Create private avenues for donations for those who can't afford surgeries or to retire or to go to school. And keep the government out of it (not because they have no authority, although that is also true) because the government is the antithesis of efficiency.

Let the generosity of the most generous people on the face of the earth, the United States of America, show through. It's what's proper.