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Weekend Reading – The Crisis of Middle-Class America

Very nice reading in the Financial Times this week.

One of my favorite topics since I themed the year with our 2010 Outlook "A Tale of Two Economies" and in the years before that I’ve been bitching about the topic of wealth disparity in America to the point where even arch-Conservatives Alan Greenspan and David Stockman are now forced to agree with me.  So that’s two down, 99,999,998 to go!  That’s right, just 1/3 of our fellow countrymen now identify themselves as Republicans or Republican’ts, as they are affectionately known on Capitol Hill – where they block every possible effort to change the status quo that’s been eating away at our nation and destroying the middle class for an entire decade now

How bad are things for the Middle Class?  Well, the FT points out that, since Nixon took us off the gold standard in 1973 and began the long, slow death-march of America from Creditor to Debtor nation, the real (inflation-adjusted) incomes of the bottom 90% of American families have risen just 10% – TOTAL.  Over the same period of time (37 years) the real average income of the top 1% has TRIPLED with the top 0.1%, gaining a full factor of 10 – exemplified by the average CEO’s salary rising from 26 times the median income to over 300 times today. 

How did 300,000 of our fellow Americans get to be worth as much as 30M (1/4) US workers?  It was bad enough when 140M workers would have to contribute 2% of the profits of their labor to support top management but now it seems the top 1% are skimming 20% off the top – that’s just nasty!  Even worse, the pie isn’t growing as real wages are up just 10% overall – it’s just the top 0.1% are taking a much larger slice of it than ever before, leaving the bottom 99.9% to fight over the remaining crumbs. 

2009-12-03-warren34.jpg

"Nowadays in America," says the Times, "you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.  Combine those two deep-seated trends with a third – steeply rising inequality – and you get the slow-burning ­crisis of American capitalism. It is one thing to suffer ­grinding income stagnation. It is another to realise that you have a ­diminishing likelihood of escaping it – particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse."

Notice in the above chart that women have been forced to work (as there is no possible way that men could have earned enough to survive the inflation) yet they are earning half as much as the men so they become another low-paid labor for US Coprtorations by maintaining that status quo!  And what is the status quo?  Skyrocketing Health Insurance Costs and Child Services and Home Prices – in short, all the things the Democrats want to remedy to give the Middle Class a chance to catch their breath.  Notice also that the massive increase in costs of those necessities (and taxes are up because wages are up so don’t be silly thinking that matters) forces the middle class to spend LESS money on Food, Autos, Clothing and Appliances – in other words, the things that AMERICAN WORKERS used to produce, which created AMERICAN jobs, have been sacrificed as we allow these other expenses to get out of control. 

Of course those bottom 90%’ers who were foolish enough to chase the American dream by purchasing a home with their life savings have been pretty much wiped out by the housing crisis while their children were being sold expensive degrees by for-profit education services like Goldman Sach’s (38% ownership) Art Institute of Fort Lauderdale, where graduates work to pay off $70,000 student loans by stripping for broker employees, who take their clients to lunch at the clubs and stuff bail-out money $20s into the G-strings of the women they’ve impoverished.  Ah, aint that America?  

The chart above EXCLUDES capital gains, which are over 90% of the top 0.01%’s incomes so it grossly understates the situation but it does give you a clearer idea of what was going on in the lower brackets leading up to the crisis.  Go ahead, do the math – add up the total wages of the bottom 90% against the total wages of the top 10% and then let me know what a fair and just system we’re participating in

For the past 30 years, the top 10% (Bankers and the investing class) have lent the bottom 90% money for cars, boats, homes, vacations, hot tubs, big-screen TVs – all the stuff their companies make and that has driven US Household Debt up 120% while dropping the saving rate by 90%, US household debt is now approaching $20Tn, 130% of GDP while personal savings have dropped from $20Tn to $8Tn and falling fast as home-buyers struggle to dig themselves out of leveraged home loans.  What is the upshod of this $20Tn transfer of wealth to the top 1%?  It’s a life of indentured servitude for the Middle Class, who will work their entire lives and be lucky to escape the debt burden they have fallen under. 

Meanwhile, our Government has run up $10Tn of debt during the same time period, mainly to pay for the "War on Terror" as well as $4Tn of tax breaks given to the top 10% as the Bush Tax Cuts shattered the "lock box" surplus that was run under Clinton – and that’s a debt that now moves down to our children’s generation and perhaps their children as well as it doesn’t look likely we’re going to be fixing it anytime soon under the current political system…   

Of course we just can’t blame the Republicans for turning our daughters into prostitutes.  Over in Michigan, the Great Lakes Gold Rush store (one of those charitable operations that buys your gold and silver jewelry for steep discounts) is training teenage girls to shake it (pom-poms made of cash, of course) on the streets in skimpy outfits (the girls, not the cash).  The owners want the government, who are trying to enforce an ordinance against pedestrian promotions, to get off their back.  Hopefully the local Tea Party will come down and rally for them – I’m sure Sarah Palin is writing a speech on her hand as we speak…

julie murphy.jpgScore one win for the Nanny state as the Portland Health Department’s Inspectors put a stop to illegal signage that described lemonade as "yummy" and threatened the proprietor of a street fair stand with $500 fines, which made her cry - as it was far more than her allowance would cover (the girl was 7 – that’s her in the picture, in happier times, before her entrepreneurial dreams were shattered).  "When you go to a public event and set up shop, you’re suddenly engaging in commerce," the government inspector said. "The fact that you’re small-scale I don’t think is relevant." 

We definitely need to do more to encourage small business in this country. (Cameron Herold makes a great case here for teaching our children to be entrepreneurs, but aviods the hot-button debate on lemonade stands)  99.7% of the businesses in the US are "small," with less than 500 workers yet, surprisingly, small business makes up 97% of the US’s export volume.  Last year there were 672,200 new businesses started in the US but, unfortunately, 595,600 closed down and 43,546 additional ones went bankrupt – this "birth/death" ratio for small businesses is a far bigger impact on the US job market than anything that’s happening in Big Business.  We need government stimulus to get small business back in gear – the best way to make America strong is to make sure we have a diversified base of small business, who are nimble enough to pick up the slack in the economy in troubled times.  Unfortunately, with the banks refusing to lend, what usually turns us around in a recession is dead in the water and our Government refuses to help as every bill aimed at aiding small businesses for the past 3 years has been filibustered to death

One of the hardest things to his small business last year was the shut-down of Advanta in March, as Advanta was focused exclusively on small business credit cards and the shutdown left one million small businesses with no access to credit - essentially without warning.  No one has stepped in to fill that hole and that has ground hiring and, of course, spending to a halt as small businesses join consumers in trying to work their way out of debts – even when their cash-flow is good. 

Laurie Santos did a very interesting study on chimps which goes a long way towards explaining why Conservative Capitalists act irrationally and would rather go down in flames, protecting their shrinking pile of wealth, taking a chance that the economy will not collapse without any aid from them (taxes), risking losing it all – rather than sensibly contributing to the greater good in order to raise the standard of living for the whole society and vastly improving their own chance of success in the long run.  Very interesting…

Also interesting is Money.cnn.com’s map of the Fortune 500, especially the top industries by growth (Pipelines) and Profits (Networking) – until the government does start doing something to help the smaller businesspeople (and the citizens) of this country, Big Business continues to be the horse we’re going to be betting on:

Visualizing the Fortune 500 in America (Infographic)

 


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  1. shadowfax

    I listened to the Sunday morning news shows and was Not surprised the conservatives would not answer any question with more than a planed answer that doesn’t answer after all they are the republican’ts. But how dumb and brainwashed are the liberals saying extend GWB tax cuts for 2 years? Why not jump behind Greenspan and Stockman? DEMS (  )  REP (  ) NONE OF THEM (XX)

  2. stjeanluc

     Interesting tidbit:

    However, one tidbit in the report that has received little notice is that by acting, Congress actually reduced our potential deficit problem. Given the policy steps taken, Blinder and Zandi estimate that by the end of the 2010 fiscal year, the federal budget deficit will be $1.4 trillion and it will fall to $1.15 trillion in fiscal year 2011 and $900 billion in fiscal year 2012.
    However, had Congress done nothing, the deficit would have ballooned even higher, hitting over $2 trillion by the end of the 2010 fiscal year, $2.6 trillion in fiscal year 2011, and $2.25 trillion in fiscal year 2012. That’s right, doing nothing would have meant that the 2012 federal budget deficit would likely be over 2.5 times as large as taking the steps we took.
     
    How’s this possible? Quite simply: a big reason that the deficit is rising is because unemployment has risen and incomes are falling. As my colleague Michael Linden has pointed out, the reason for the deficit is the recession itself:

    The great deficit of 2009 was the result not just of increased spending, but also of dramatically lower tax revenues. In 2009, federal receipts were $419 billion below 2008 levels, a 17 percent drop, which was the largest decline from one year to the next in more than 70 years. Individual income tax receipts decreased by 20 percent, and corporate income tax revenues plummeted by more than 54 percent, which means corporations paid less than half in taxes than they paid the year before.
    Of course, the main culprit here is the economic recession. Corporations paid lower taxes because they made lower profits. Individuals paid less in taxes because they lost their jobs, didn’t get raises, and didn’t make as much on their investments. The tax cuts directed at both families and businesses passed as part of the American Recovery and Reinvestment Act had a part to play here as well—about 15 percent of the decline in tax revenues can be attributed to provisions in ARRA—but the overall trend was driven primarily by the weak economy.

    By taking actions to avert greater unemployment, we averted a bigger deficit. It seems there’s a win-win here that everyone should get on board with: the steps taken to shore up our economy have ended up being a better investment for jobs and for the deficit than doing nothing at all.

  3. shadowfax

    stjeanluk
    Great post, if only 300,000,000 others could read or hear this we might get out of this mess. Right now nobody believes anyone because all we hear are non-fact sound bites.

  4. humvee4me

    Yeah Guys:  Obama’s big pitch now is "well it could’ve been even worse", that is a very tough sell.  I still not convinced that it isn’t going to get worse  before it gets better. 

  5. humvee4me

    St Jean:  Blinder and Zandi also say: 
    To keep the recovery going, President Barack Obama should extend former President George W. Bush’s tax cuts for families making as much as $250,000 a year while phasing in increases for those earning more, Zandi said.
    “The recovery is too fragile to digest the higher tax rates at this time,” Zandi said.
    Tax cuts enacted in 2001 and 2003 under Bush are scheduled to expire at the end of this year, and an election-year fight looms over whether to continue them. Obama and congressional Democrats want to extend the tax cuts for households earning as much as $250,000 and allow those for wealthier taxpayers to expire.

  6. humvee4me

    Phil:  according to news sources yesterday (FOX to the rescue); Portland backed off and the little girl is back in business!!

  7. shadowfax

    humvee
    The morning talk shows revieled  that the democrates want to extend all of the bush tax cuts for 2 years, Obama wants only $250,000 and above. Greenspan and Stockman, republican conservatives, want to let the tax cuts expire, "the country can’t afford them". Evidently Zandi is paid well by the status quo, it’s in my beast interest who cares about the rest. What is the rest of the story?

  8. shadowfax

    diamond
    This if it happens will do little for Apple’s bottom line and if you want to hear that, selective preseption will do that for you. The problem is a contract with ATT that Verizon will not accept or the bandwidth hogging problem. Verizon is going 4G and likes it’s less hungry new products and 5gig limit vs T’s 2 gig. AAPL wants HD even though it makes no difference even for ipad size and has forced it on T’s network. Why would Verizon want the problems? Fact is they don’t and now they have more reason and that is why they make more money. Their phones not as much bling but way more usable and sevicable considering the networks capabilities. All rumors are considered true until they are denied, they do have an  effect, stock price goes up then down creating 2 money makeing possabilities if your fast enough. Watch out on options, big spreads, stock is a safer play. Good luck all profits are good!

  9. humvee4me

    http://www.bloomberg.com/news/2010-07-28/blinder-zandi-say-u-s-bailouts-likely-averted-a-depression.html
     
    Shadowfax:  here’s the link of the article

  10. snow

    It does make you wonder, how long this will go on. With reference to another struggling nation, I’ve heard it said by better-informed people than I, that part of North Korea’s problem is the Korean people’s high tolerance of poor leadership. How high is our tolerence – and at what point do we bring forth a Marat or a Cromwell…..

  11. shadowfax

    humvee4me
    Thanks for the link as it is nice to hear the story in full, they expllain everything except the reason for the phase in but no shock sounds reasonable although there is a theory that the economy needs a shock restart. I hope all hear their point that what was done was necessary not political.

  12. shadowfax

    WHAT IS WRONG WITH THE MEDIA
    Headline: Medicare fund may last extra 12 months
    First sentance: Medicare is in better shape because President Obama’s sweeping health care overhaul and will stay afloat a dozen years longer than earlier projected, trustees forecast Thursday.
    Problem: Too many, mostly poor readers, read only the headlines. They usually finish the paper in 10 minutes with a comment on a sale item. Jackson Hole Daily 8-6-10 p. 11

  13. ronresnick

    Dear Phil,
    I subscribed to your website for your market insight, not your ignorance-filled Leftist rants! Please stick to the markets and leave your personal political propaganda out of your commentaries!
    Ron Resnick

  14. diamond

    ronresnick – You MUST be a newbie … 

  15. shadowfax

    ronresnick
    Politics, Policy, and Taxes effects market insight. If you read old posts you will find more members are rightists like you. Most of us like to hear both sides. Check about a week ago Phil answered your implied question.

  16. rj_jarboe

    Phil,
    Please continue your helpful political insights. Unlike many others, you provide documentation for your many so called "rants". It is too bad that some think their view of the world is the only view and that no level of information can sway their preconceived beliefs. It must be fun listening to others try to dictate to you what content you should have on YOUR website.

  17. shadowfax

    rj_jarboe
    I love all the rants also and like you wish the opposers to Phil"s view would back up their view with facts.
    ronresnick
    I look forward to reading your apposing views, please don’t delay exec, cap, and others will back whatever you say without question!

  18. shadowfax

    opposing views!

  19. gel1

    snow
    I love to read your posts, and I understand your connection to South Korea. I have, in the past, made many visits to Seoul and have been impressed with the well balanced business community. I always was treated wel,l and I personally enjoyed my business connections within S. Korea. For me, this goes back many years ( I even remember being caught up in a curfew, after entertaing some folks in a Restaurant/ Geisha House ) Was forced to sleep in the restaurant untill 3:00 AM, before returning to the Intercontintal for a few hours of sleep before my appointments the next day.
    This leads me to my question…. the Koreans are very intelligent and generally aggressive in their effort to improve their lifestyle, so why is there such a disparity in the North.  Have they been dummed down to think they have a satisfying existance?  Would you consider this difference in values and mind-set between these two totally different life styles, as a result of mind manipulation, or just fear. This really is a puzzle to me, as I know the people well, and I have often wondered how this can exist within such a close geographical proximity..

  20. hanna5

     Phil / HPQ – What do you think about selling August 40 or 42 puts (depending on the prices) on monday morning for a planning entry to the stock at these levels? Assuming the CEO story is just personal, the company shouldn’t be impacted that much, and valuation looks good. I’m thinking if i can get a clean $40 net entry or less (maybe this is too good to imagine?), I will go for it. Thanks.

  21. gel1

    ronresnick
    I saw your post, and would like to offer some insight to your opinion re Phil’s stance related to political theory. I, for one, believe Phil is laying out his deep seated belief that the liberal, left-leaning philosophy is right for our country at this time.  I presonally disagree, and lean as far to the right, as he does to the left.  One thing that should not be overlooked -  Phil is DEFINITELY not ignorant or uninformed.  His political beliefs are seated in a  profound desire to achieve equality within the economic classes of our country, which is a good objective.  Our differences lie in the method of reaching this desire, and that is where the debate originates.. In chemistry, it might be compared to an imbalance between a totally acidic solution to one that has the acidity of lye, but mixing the two, you can achieve the balance that is needed for congruity.
    Just a "heads up"… The markets are influenced minute by minute by political events, so the subject is a very large part of our investment / trading strategy.  Just embrace it and use it to your benefit.  If you want to ignore the political rants, then just go to the next post, and you will receive many multiples of your expectations in trading education, from some of the best out there. There is nobody that can match the expertise in option trading and market direction that Phil shares with us each day. If you want to gain from the PSW membership, and achieve your trading goals…. believe me, it all there. If you do not accept some of the liberal editorials for their content – just say it ain’t so. ( I do )

  22. gel1

    Hanna/HPQ
    I like your idea selling puts on the open…. I am planning to do so. The deep drop in the shares is "way overdone". Hurd was good for the company. but they have a deep bench, and will benefit for years from his direction..

  23. shadowfax

    Very good post gel wish I had mentioned you when saying there are more with your view than Phil’s, Love it all, keep up the great posts, makes trading fun and more profitable. Like up and down, left and right, and me Bi-political, hope there is nothing wrong with that, if if there is forgetaboutit!

  24. shadowfax

    gel1
    As you know I say hold off on Apple but you said you were buying last week so please buy some anti-everything, if you can play futures you can afford it, and can’t affordnot to have it as Apples do get infected, disabled, and spyed on. I actually love their word processing and that is why I tried an IMAC in March.

  25. diggintunnels

    I’m beggining to believe you only write these articles to impress your liberal elite echo chamber of friends in you coctail heavy upper eschelon NYC life.  You actually believe the Dem’s are for the little man, lololol.  Both parties are the same, taking us to same place at different speeds. 

  26. shadowfax

    Phil and the rest who care
    I live in a red state and next to a red state, The Teton Valley hospital is in trouble, fraudulent practices that are charged against 3 in the billing department, of course total denial but in the right’s way the fired vise president from Jackson’s St. Johns Hospital in Jackson WY, hired by The Teton Valley Hospital as president and CEO has suspended the suckers with pay. It might help him sleep but I did turn them in for Med-i-care fraud and now I feel better. The can’t forget issue is they paid me a $79 rebate and forgave hundreds attempting to pay me off but it didn’t work. I really hope Virgil Boss goes to jail but never in Mormon Idaho. In some states the right prevail and get backing, it is their right to pillage! This is a fact check it out Teton Valley Citizen, I don’t buy the biased newspaper so if you don’t believe me check their website.

  27. gel1

    Shadowfax
    Anecdotally, I spent a night in the Cody WY jail many years ago.  Was returning home from college with a couple of buddies, and wound up in a ditch in Yellowstone Park, close to Cody (fell asleep at the wheel after too much partying the previous evening).  While waiting for the car to be repaired, the Sherriff offered a few jail cells to us for the overnight stay (we were very broke).  Sure beat sleeping in the town park. ( Never will forget the hospitality !

  28. kustomz

    ronresnick..cap is that you!!

  29. shadowfax

    gel1
    Those guys wouldn’t do that today but just for laughs in the 80s I was with a bunch of motorcycle guys living in Montana and snow in july stopped us from going over Bear Tooth Pass and we spent the night in that town park, Cody Wyoming. Thanks for the memories remembered, check wher the road goes, almost 11,000 feet!

  30. snow

    Korea/Gel1 – Yeah, it’s a bit of a mystery. Here’s a bit of history, though, since it is the weekend. The north/south split originally happened just before the Russo-Japanese War, with Japan proposing the split exactly where it is today – so the 38th parallel didn’t arise out of thin air after WWII. After WWII, the split was proposed by the US et al, mostly out of ignorance. When the US army came ashore at Inchon the Korean provisional government was all lined up to greet them and get things rolling. The US officers walked right past them to the Japanese occupation governors, and set things up talking with them – including the 38th parallel split to keep the Russians happy. I don’t recall how Kim IlSung came to power up north, but a lot of his cachet came from his record as a resistance fighter during the occupation. The Korean War itself was one of those US-Russia proxy things, helped by heavy sword rattling both by Kim Ilsung and Syngman Rhee, the US-controlled dictator (disclaimer: Rhee kept my wife’s great-aunt imprisoned the entire time he was in power, so we have some family bitterness toward him. She was queen at the time, and well-respected, so Rhee was afraid of her).
       The Korean War itself, whatever the point was, devastated the country. Both south and north were left severely impoverished and dependent upon their big brothers. Both countries went the route of autocracy and media control for many years, but for whatever reasons – somewhat better natural resources in the south and better help from big brothers – the south became more prosperous and eventually developed into what it is now. There was some modeling on Japanese business/economic models, and Park Chunghee threw a little stalinism in as well – appropriately, I think (look up the "new village movement").
       Meanwhile the north maintained very tight media control and held forth that while things were tough, things are equally tough in the south and even in the rest  of Asia. This was true for a time, but that time is past and they still hold to that line. The government there is essentially a monarchy, and not even a traditional Korean monarchy, since Korean monarchs didn’t follow strict succession – they selected from within the royal eligibles, the best person to rule at the time….although sometimes they were looking for someone to easily manipulate. King Kojong was supposed to be like that, although his wife Empress Myeongseong grew his backbone for him. Anyway, Korea is a very strongly Confucian country, and respect of subjects for ruler is one of the 5 relationships. It’s supposed to be reciprocal, though, and when south Koreans have felt that not to be the case, they’ve overthrown the government. Often it’s the college and high school students who start that ball rolling.
         That said, Koreans because of that tradition of respect, have great patience with bad leadership. I think, though, that the communications to the north are opening up, things are bad, getting worse, and the people are realizing it, so now mainly what’s holding them back is fear. That said, I expect the country to be reunified, I think it will be sudden and unexpected, and I don’t think Kim Jongil or anyone similar will have to die for it to happen, although that would help. An obstacle is that the US, Japan, and China really don’t want the country unified, and do things to keep it from happening – but it will come, regardless.
         One trick will be the shape of the unified government, since the northerners have been conditioned to be afraid of the US and see the south as US puppets. Thinking is running along the lines of strong local governors with perhaps a restored monarchy as a cultural unifying symbol. This would mean the crown prince would likely have to quit his job as a middle manager at Hyundai Corp, but I think he’d be willing. An more worrisome alternative, given that the north like rulers who were resistance heroes, would be to select someone from the Min line of royal family rather than the Yi line – Empress Myeongseong, Kojong’s wife, is seen as a heroine because of her efforts to block the occupation, and two of her nephews were resistance heroes, one of them was killed for it (as indeed was Myeongseong). So a possibility that’s been mentioned is for the current matriarch of the Min clan to consider the symbolic role. It’s worrisome to me because that’s the person I’m married to, and that would be quite a life change. So, we shall see.

  31. pstas

    ronresnick- echoing some of Gel’s comment re: Phil’s politics – If you do not accept some of the liberal editorials for their content – just say it ain’t so. ( I do )- good advice. I have said before and will repeat that Phil’s market commentary and options / stock advice is very thorough and mostly sound. His politics, for the most part could not be more wrong. I find his commentary to be on the far left fringe of the bell curve and the rants get a bit tiresome at times but such things do move the markets and are fair game for all. As Gel said- skip the nonsense or use it to your advantage- that choice is still yours – that is until Phil and his fellow travelers finish taking over. :)
    BTW- one of the favorite themes here is greed. Here is interesting snippet on the subject:
    http://www.youtube.com/watch?v=RWsx1X8PV_A

  32. pstas

    Snow- Korea – very interesting background. Could you elaborate on this comment?
    "the US, Japan, and China really don’t want the country unified"
    What’s the motivation? I can see China wanting the North as a foil to the US; I can see Japan possibly worried about a stronger Asian competitor and repercussions from WWII; The US fearing a loss of an Asian military outpost?
    Thanks,

  33. snow

    Korea/pstas – you nailed it exactly. For a good many years, the US had nuclear warhead-tipped missiles in Korea – may still have, although I don’t think so. China also worries about the economic competition; a unified Korea after the costs of reunification would be very powerful indeed – for example, the north used to generate quite a bit of hydroelectric power. There’re also persistent rumors of oil deposits off the eastern coast of north Korea.

  34. gel1

    snow…. Thanks much for your comprehensive explanation…. very interesting.  I feel, as you do, reunification is the most likely outcome – much like the events in Germany in recent years.  It would be the most likely resolution. China might give support, as the Chinese are very worried about the potential refugee problem should there be a revolution. They, therefore should support the North folding into one country with the South, The US should support the idea for humanitarian reasons, if nothing else, and should provide monitary assistance in exchange for the sunsetting of the military threat. Japan would not like the idea, I would guess, as it would threaten their exports into China.

  35. humvee4me

    Snow:  Fascinating post, great insights.  Who knows you may be able to truly say that "I am sleeping with Queen".

  36. diamond

    snow – The 38th parallel was a very important demarcation to China as well.

  37. kururi67

    Hey Ron Resdick, 
     
    Take a break, OK?

  38. Phil

    Good morning!

    Tax cuts/Shadow – See tax chart from the post the other day.  Conservatives are trying to cloud the issue.  Obama said from day one that they had no intention of taxing couples under $250K and that’s what the Dems are proposing.  Somehow now, doing what Obama said he would do when campaigning is being called flip-flopping on the issue.  The Reps are, of course, completely against any concept that taxes the top 1% and not the bottom 99% because (and they are right about this) once this happens and the World doesn’t end, the bottom 99% of the voters might realize (as they do in most civilized countries) that it does kind of make sense to tax the people who earn 566x more than the average citizen ($17M for the top 0.01% vs $30,000 for the bottom 90%) a little bit more money than the rest. 

    It is very scary for Conservative strategists to see the Dems drawing a line right at that top 1% mark because people in the top 10%-1% are their key contributors because they tend the THINK they are the wealthy people the party is protecting, even though the average wages for the bottom 9% of the top 10% is "only" $250,0000 vs over $500,000 for our top 1.5M citizens and even that is nothing compared to what the top 150,000 earn ($4M per year not including cap gains and dividends).  That last 1% earns $800Bn (and this was 2006, it’s much worse now) and the other 9% of the top 10% earn $2.1Tn so that’s pretty close to $3Tn vs $4Tn in wages earned by the other 90% of America. 

    So if, by some miracle, the bottom 90% were able to do some basic math (and the system is designed to make sure as few of them as possible can), then it might occur to them that taxing the top 10% 20% more would allow them to pay 10% less and Conservatives REALLY don’t want a debate heading in that direction because it’s not a big stretch from there for the bottom 9% of the top 10% (who can do math) to realize that if the top 1% were charged 20% more, then THEY wouldn’t need to pay the increase either. 

    So the primary goal of the top 1% strategists is to keep the ball down in the bottom 9% if the top 10% because, if they lose them, then this whole game can start unraveling for them because, as much as they like to bluster about it – most of them can’t leave this country as the bottom 9% of the top 10% are perfectly capable of starting and running their own companies and if the rich start pulling up stakes and leaving the US, they may also be leaving behind enough top management to bury them down the road because America isn’t that dead yet that we can’t wipe our asses without some rich jerk blessing it.

    Most people working in Big Business have simply forgotton what America is all about – opportunity.  Opportunity doesn’t mean the chance to make someone else even richer as our main goal in life – it’s a chance to do it for ourselves and that’s a lesson the top 0.01% don’t want anyone to re-learn…

    Win-win/Stjean – LOL!  I like that statement that "everyone should get on board with" – if only "everyone" had the best interests of our nation at heart…

    Lemonade/Humvee – All right!  Score one victrory for the entrepreneurial spirit!  That poor kid.  She’s going to go through life with a grossly inflated sense of self-importance now as she’s had cameras in her face for 2 weeks now.

    AAPL – Is it possible that T could be rolling out CDMA (even assuming the AAPL rumors are true).  I have a feeling the whole story is simply and APPL-boosting rumor which is, of course , a Nas boosting rumor to get them over the 2,300 line as AAPL was dragging us down on Friday and you can’t manipulate the Nas without an Apple rally.

    How high is our tolerance for poor leadership/Snow – Need I remind you of 8 years of Bush?

    Media/Shadow – I think what’s wrong with media is the public’s belief that they are not biased.  People read things in "the paper" or see it on TV and assume it’s a balanced assessment but it rarely is.  Even though the Web makes it possible to read the same article from multiple sources (which I do all the time), people generally tend to go the opposite way and get all their news from their "favorite" source - which is, of course, the one that already conforms to their world-view so we end up with a completely polarized nation of zombies who can’t think outside of the box that they’ve trapped themselves in and feel any viewpoint that upsets their world-view is an intolerable threat – it’s a sad state of affairs….

    Politcs/Ronres – Wow, you are so right!  You have completely changed my mind – from now on, I promise to be on of those fake jerks who pretend they have no political philosophy in order to get money from as many people who disagree with me as possible.   Boy, you are a real eye-opener – I didn’t realize I could enhance my site revenues by being a big giant phoney – thanks for the tip… 8-)

    LOL Diamond!

    Thanks RJ. 

    I will remind new members that politics (and other non-market nonsense) are generally avoided during market hours but after hourse – well, we all hang out here and we are all intelligent people who respect each other’s strengths and there is much to be learned from having CIVIL discourse with a group of people who you "know" as opposed to just randomly leaving comments in various political chat rooms.  As Shadow said, I did mention last week that politics shapes the markets and, if you are blind to that, then you are doomed to never having any idea what’s going on with your investments.  To say that political discussion has no place on an investment site is like saying that gravity should not be discussed at a physics conference…

    And what Gel said!

    HPQ/Hanna – The Hurd thing is personal and it is a good idea to sell puts into the excitement.  Depending on what the succession looks like, HPQ may bounce back fast but Hurd was considered a good CEO and, of course, they had their Carly years so he notion is that CEOs matter a lot at HP.  $40 would be a great entry price for them, even without a CEO and I’m sure something will be sellable that gets you close to that point.

    Echos/Digg – Yes, it’s all about impressing the cocktail crowd….  Actually I just spent the weekend working with people who do a fantastic job of pretending to care about the little man.  They are so good at it that they were up until 3am Saturday (no cocktails, just vitamin water and cofee) and we had breakfast at 8am this morning and they were still working when I left and no one is paying them so boy, do they have the little man bamboozled!   These people will never be elected (they have regular jobs), nor will they have power, nor will they become wealthy from what they are trying to do and the chance of a person like you ever understanding their motives is so remote that I won’t even waste my time bothering to change your "unique" perspective. 

    TVH/Shadow – I hate to tell you but if  you Google the hospital and look for news, there’s no mention. 

    Cody/Shadow – Drunk in a ditch and you get a free room and make friends with the sherriff?  Those weree the days…

    Korea/Snow – Very interesting.  Does not sound to me like an easy resolution is in the immediate future but maybe when Kim Jung Il is gone.  Of course, Vietnam’s reintegration gives anyone hope. 

    Speaking of Vietnam – They have the World’s coolest robot that not only looks cool but can play ping-pong!  Makes you realize how we have totally lost our tech edge in this country

    Of course the Japanese robot that plays the violin is very cool too… 

    Perhaps the reason this country falls behind is because our government is busy cutting education budgets while Japan’s government sponsors "Robot of the Year" competitions to encourage education and innovation. 

    Their auto show is pretty cool too

    Greed/Pstas – Ah, so Russia and China run on greed so we should all give up and do the same.  That’s just a fantastic attitude – I don’t know why we ever bothered leaving our caves…  Here’s your buddy Milton telling you that drugs should be legalized too so I guess I’ll be seeing you at that march soon?  Here’s Noam Chomsky deconstructing Friedman and Reagan (6 parts), pretty accurately fortelling the coming collapse that was evident to him at the time (late 2006).

  39. Phil

    Free Maket Fantasies, also by Chomsky, is well worth listening to as well…

  40. Cap

    kustomz …. NO … but I had to laugh !  :grin:

  41. Cap

    How Low is our tolerance for poor and corrupt leadership:
     
    almost 4 years of Pelosi and Reid; 2 years of Obama.
     
    tune in in November.
     
    The other guys may be just as poor, but not as corrupt and reckless.  A sad state, indeed.

  42. Cap

    Chomsky ???
     
    What is this, the People’s Daily ?

  43. snow

    Commie/Cap – lol! good morning, Cap, we radicals missed you yesterday!

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