It’s All About the Cycle

I listen to a lot of talk radio, most of it conservative.  To tell the truth, it has been a real downer lately.  I am not hearing much optimistic talk.  Most of these pundits think that things are going to get much worse before they get better.  (Glenn Beck was talking about a run on rope from Home Depot this morning by his listeners, if that gives you any idea).  I think much of this is politically biased.  There is an assumption that the wrong thing is going to be done, and that has yet to be proven out in any way.

If the government can keep their involvement in private business to doling out low-interest loans (popularly regarded as “bailouts”), than we should be able to weather this storm.  On the other hand, if they attempt to take equity positions in companies or attempt to tell private businesses how they should operate, that will result in very long-term problems.  Ensuring that businesses have some kind of plan (as the automakers are being asked to do) is not dictating the business but, rather, is sound judgment when making loans to troubled institutions.  I hope that this will be their approach.  So far, it appears that it will be.

The reason I am less cynical than so many experts is that our economy runs in cycles.  We have runups in value in different sectors (e.g. gold and silver, technology, housing).  These aberrations in traditional valuation always correct themselves.  That is what we are experiencing now.  The housing market has created this recession.  If the market is left to its own devices, than borrowers will lose their homes.  This is a horrible and painful lesson to learn, but it will result in a corrected valuation of real estate and a return to balance in the economy.

In the meantime, people with good credit and equity in their homes will be able to borrow money.  Others will too (although fewer than before), with less attractive rates.  The banks will be more careful this time around because they don’t want to get burned again, but they have the money to lend.  Some people will still be able to take advantage of this (rates are still low by historical standards), and the economy will begin to recover as a result.

In addition, I have heard rumors that tax cuts could be on the horizon for businesses, which would stimulate employment.  There is also discussion regarding extending tax cuts another year for all Americans.  This would encourage spending, which has slowed considerably while people wait to see what happens.  So much about our markets is pychological.  The stock market is a perfect example.  Right now, most people have a negative outlook, but history tells us that the market will recover.  Smart but distanced government intervention and lower taxes could be the answer.

 

Energy Revolution!

During the recent run-up to the election, we heard a lot about the importance of energy from both of the candidates.  They both touched on renewable resources, while McCain added offshore drilling as part of his platform.  I was disappointed that neither of them took the conversation any further.

One of the things that distinguishes the U.S. from the rest of the world is the opportunity that is available here.  People literally risk their lives to come to our shores with the hope that they can make their dreams come true if they work hard enough.  In many cases they do.  So what does this have to do with energy you ask?

Our country is in the midst of a financial crisis like I have never seen, and energy is the answer.  Energy is the most obvious way out.  I hope that we don’t fall victim to the cheap gas prices, because the prices will rise when the economy recovers.  I also hope that we don’t fall victim to political correctness.  We should be generating as much energy as we can with ALL of the resources available to us.  If we did this, we would be the ones in a position to export energy.

This country led the world with its industrial revolution, and again with the technology revolution.  I say we do it again with an Energy Revolution.  We have some of the richest reserves of coal, oil and natural gas on the planet.  We also are uniquely situated as the most wind-rich country in the world (which happens to lie right in the middle of our country).  France is 85% powered by nuclear energy, and it is a safe source of energy.  If you add solar, hydroelectric and bio-sources of fuel, there is no reason for us to be so dependent on others for our energy needs.  There is also no reason for us to have to pay so much.

I say it is time for American Ingenuity to do it again.  Do it all, and let the best and cheapest technologies win.  It will be best for our economy, our national security and ultimately, our children.  Our government needs to get out of the way, take down the restrictions and let us do what we do best, innovate!

Auto Industry (Bailout?)

I’ve really been waffling lately on how I feel about government assisting the auto industry.  On the one hand, private industry should be able to stand on its own, without government intervention.  On the other hand, we cannot afford any of, much less all of the big three going into bankruptcy.  This is not your standard mom & pop operation.  If they reorganize, which is what many legislators believe should happen, than many of their creditors will lose money that is owed to them.  This is just fundamentally wrong.  Of course, the alternative is for us (you and me) to lend them the money, which is also wrong.

I’m not a fan of Detroit playing the victim card either.  I’m from the area and will always consider it home.  I have friends who work for Ford and GM, and I want those companies to be the best in the world.  It would be great for Detroit and great for this country.  The problem is that we have put ourselves at a competitive disadvantage.  If our union employees are making $75/hr after benefits, and the Toyota workers are making $45/hr, than we will never be competitive.

I don’t buy the argument that we need more environmentally friendly cars, either.  GM makes 18 cars that get 30mpg highway.  The problem is not the product, it is the cost associated with the product.  In order to compete in this world economy, Detroit is going to have to go back to the bargaining table with the unions and cut themselves a more realistic deal.

Unfortunately, our Congress, in their infinite wisdom, will most likely require more eco-friendly cars in order for the big three to get the money they need to move forward.  If they can’t see the real problems, than we are just delaying the inevitable.  Detroit’s once lustrous past will be just that, in the past.

Welcome

Welcome to my new blog!  I expect this to focus on current events, some technology (I’m a computer guy) and maybe some personal stuff as well.  I hope you enjoy it and come back to see what’s new.