US Foreign Policy

Hi All:

One of the big news stories of the past week was President Obama's willingness to want to talk with some foreign countries who are not our friends. These countries are so anti-American that previously we haven't wanted to "sit down" and talk with them. The countries that I am speaking of are: Venezuela, Cuba and Iran. Before I continue, we should look at our country's past history of dealing with countries that also vehemently hated the United States of America.

Almost sixty eight years ago, back in 1941, we declared war (and rightfully so) against Japan after their unprovoked attack on Pearl Harbor that killed thousands of Americans. Japan immediately became our sworn enemy and we were not going to stop fighting them until they capitulated. In addition, we declared war against Germany (another sworn enemy) and were not going to stop fighting them until they also capitulated. It took 4 years and tens of thousands of our troops being killed until the US and our allies declared victory over both countries when they finally surrendered.

During the 1960's we went to "war" against North Vietnam due to their aggression against South Vietnam. Although that "war" lasted almost 10 years we didn't win and tens of thousands of our troops were killed and North Vietnam never surrendered. North Vietnam did take over South Vietnam which we were trying to stop from happening.

Fast forward to the present day. Now Germany and Japan are some of the most important friends this country has. Does that mean that we have to go to war against a country and beat them before we can sit down to talk with them that ultimately leads to our being friends? Not true! North Vietnam won that "war" but now relations with the US are becoming more normalized then anyone could have predicted back in 1973.

So why then it is such a bad idea to want to sit down and talk with other countries who are not our friends? Critics say that the US should never talk to these countries. Unfortunately that policy did not work during the past 8 years.

Common sense must be used here because diplomacy is the appropriate course of action to take. If this country can sit down and talk to these countries that eventually leads to ironing out what ever issues exist, without a single life being lost, then I am all for it. Go common sense!

Until next week.

Assault Weapons

Hi All:

Sometimes I read or watch a news program that makes me think that some people in this country have lost their minds and common sense is the furthest thing in their minds. I know that this subject is a touchy one with a lot of people, but we need a whole lot of good old common sense here!

Last Sunday, 4/12/09, I watched 60 Minutes, a well respected, news magazine show that has been on the air for decades. One segment on the show was about the State of Virginia gun shows. Did you know that in Virginia it is harder to buy an alcoholic drink then to buy an assault weapon? Yes that is unfortunately very true! The segment showed and talked about people selling any type of firearm, including assault weapons, right out of their car trunks in the parking lots at Virginia's gun shows. Now unless you are from Virginia or have attended a gun show there, you might not know that selling guns like that is perfectly legal. WHAT!!!!!!! Not only can guns be sold like that, there is no requirement to do a background check. If you have the money, you can buy any type of gun no questions asked. Some people say, so what, what is the big deal? The big deal is this: people with a criminal history or people mentally challenged can buy an assault weapon(s) that easily.

Now I know that the NRA consistently states their rhetoric that guns don't kill people, people kill people. But what exactly is an assault weapon? Assault weapons like the AK-47 were developed with one and only one goal in mind; to kill as many people as possible in as little time as possible. In a war, these guns are invaluable. But in private hands, these weapons can and are extremely dangerous. Have you ever heard of a hunter that shot their game with an assault weapon? I didn't think so.

Now the NRA and its members will tell you that according to the Second Amendment, individuals have the right to keep and bear arms. The actual Second Amendment does state that, "A well regulated Militia being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed." The current legal meaning of the Second Amendment was recently addressed in District of Columbia v. Heller. In Heller, the Supreme Court determined that the Second Amendment protects an individual right, with the majority opinion stating that. The majority wrote that "The Second Amendment protects an individuals right to possess a firearm unconnected with service in a militia and to use that arm for traditionally lawful purposes, such as self defense in the home." But the sole purpose of an assault weapon is to kill people.

I have no objection to people owning non assault weapons. I do though strenuously object to people owning automatic handguns, 50 caliber rifles and AK-47's etc., etc. There is no need to have them. If you like to hunt, so be it, but you don't use those type of weapons. I do not believe that making ownership of those type of weapons illegal, infringes on any ones rights. If anything it will save lives.

Virginia's current law that allows such sales of assault weapons has no common sense and needs to be changed ASAP. I also believe that the Second Amendment's newest ruling by the Supreme Court should have a addendum to prohibit the sale and ownership of assault weapons. Now that would make common sense.

There is no good use for and makes no common sense in the private ownership of any kind of assault weapons, PERIOD!

Talk to you next week.

Hybrid Vehicles and Radio Talk Show

Hi Everyone:

Today's topic might seem to be a continuation of last weeks blog but with a twist. Today's blog was triggered by something that I had just read and I feel a need to talk about it. I just read an AOL news article about something that Rush Limbaugh recently said on his radio program. FYI, I have not ever listened to his radio show, but it is my understanding that millions and millions of people do listen. Therefore it is safe to presume that when he says something, there are a lot of people who believe him, be it good or bad.

Rush Limbaugh said this about hybrid vehicles: "Nobody's buying them. Nobody wants them! The manufacturers are making them in droves to satisfy Obama! Sorry for yelling. Nobody wants them!" That is quite a statement!!!

Let's look at some facts. Toyota on its own has sold over 1,000,000 Prius hybrids since 1999, when they first became available. Edmunds' Green Car Advisor, per the AOL article, points out that 1.3 million hybrid vehicles have been sold in this country since 1999. It is obvious that the year 1999 was 10 years before President Obama took office.

It is also obvious that Americans do want and do buy hybrid vehicles, otherwise 1.3 million of them would not have been sold. I have heard and read that there are a lot of people who believe that there is no such thing as global warming and hence no need for hybrid cars. Let's put that argument aside for a moment. An undisputed fact is that this country increasingly imports more and more oil with each passing year from foreign countries (some of which are not our "friends"). Doing so does not and will not make us energy independent. If we do not become energy independent, this country will always be beholden to foreign countries that can and will dictate price and availability. This amongst itself affects our country's national security.

We have all recently learned that Honda is now ready to introduce its new Insight hybrid at a cost of about $20,000. That is $3,000 less then the Prius. Let the price wars finally commence and may the buying public, our environment and reducing our dependence on foreign oil be the winners. It is unfortunate that the big 3 are still behind the eight ball and are now beginning to try to play catch up, (see last weeks blog).

Although I agree that hybrid vehicles are a good start, they still use gasoline and the batteries do not last as long as the car itself. In addition, the electric only cars are also a good start, but you need to plug them in to recharge their batteries. There are still an abundance of power plants that use fossil fuels to produce electricity. I personally believe that hydrogen fuel cell vehicles will be the wave of the future. Hydrogen fuel cell vehicles don't use any fossil fuels and produce no harmful emissions, which is called zero emissions. All in all, we are in the infancy of beginning to wean ourselves off of foreign oil, thank goodness!

Now getting back to what Rush Limbaugh said. I am a firm believer that everyone is entitled to his or her own opinion, but the listening public must use common sense to distinguish between what people say as fact and what they say as entertainment. If what he said about hybrid vehicles was meant for entertainment purposes and he said so, then that is fine. Sometimes even saying something as a joke (without using any common sense) on the radio for entertainment purposes can backfire and get you fired, remember Don Imus? But, if what he said was intended as a statement of fact, then Mr. Limbaugh was dead wrong, because the facts don't support him. People in a position of being able to speak to a large audience of people should and must use common sense before opening their mouths.

Thanks for reading. I will be back April 19th. Talk to you then.

The Big 3

Hi Everyone:

This week's topic is again a front page story. The present day big 3 is composed of General Motors, Chrysler and Ford. GM and Chrysler are in dire financial straits and have received billions of dollars in federal bailouts. Ford has not received any bailout money yet. All 3 have one thing in common; their sales of new cars is in the toilet.

Obviously, the recession and the credit crunch have hurt the big 3 tremendously. I want to examine another reason for their continuing problems. In order to do that, we must look at the present day big 3's past history. In the not so distance past, 1973-1974, the members of OPEC decided to enforce an oil embargo against the United States. The embargo nearly crippled the US economy. We all learned right then and there that were outside forces (i.e.: foreign countries) that could control both the supply and the price of oil/gas. The majority of American made cars at the time got around 10-15 miles per gallon. At the time, who cared? Gas was cheap and plentiful. At the same time Honda and Toyota were beginning their foothold in this country with relatively inexpensive cars that got much better gas mileage. Let's not forget that there were other foreign car companies already selling cars here. VW, Austin Healey and British Leyland all had cars that got around 30 mpg. VW although plentiful, was not mainstream and was kind of looked down upon. The other car companies were not very popular but owners of all three realized the savings of having a car that got good gas mileage.

The American car companies then decided that they should also make small 4 cylinder cars. Cars like Pinto, Vega, Skyhawk, Pacer, Gremlin, began to appear. Yes they were small but they weren't built very well and certainly didn't get as good gas mileage as the foreign counterparts.

Then came 1979 and the second oil embargo. We as a country hadn't learned our lesson from the first embargo. The country was importing more oil than before and our American made small cars were still inferior especially compared with the Japanese cars. In viewing a 1986 copy of Consumer Reports annual car issue, it shows that there were 4 American made cars that got over 30 mpg and 7 models that got over 40 mpg. Was it the beginning of new thinking in regards to better gas mileage? Not so fast. Sometime soon afterwards the American car companies decided to produce more larger cars with bigger and more powerful engines. This meant a higher profit margin for them, but less fuel economy, (think SUV's) for us. Even though the Japanese companies kept up with the Jones' with larger more powerful cars, their core group of cars still got excellent fuel economy.

In 1999 Toyota took a leap of faith and offered a gas/hybrid car that got over 42 mpg. They have now produced over one million of the Prius'. It always seems that the American car companies are late to the party and a dollar short. Hindsight is 20/20, but who couldn't see what was coming with gas prices. It was inevitable that gas prices would increase each and every year. What no one envisioned or could have even imagined was that the price of a gallon of gas would reach an unbelievable cost of over $4 per gallon. I think it even hit $5 per gallon in California.

Just imagine for a moment that common sense was used way back when and American ingenuity developed both very high mileage and alternate fuel cars. The American car companies would be in a much better situation than they find themselves today. And we the consumer would also find ourselves in much better shape using less gas to go further distances and decreasing not increasing our dependence on foreign oil. The recession and the credit crunch would still hurt, but not as much. You will be hearing a lot more about the electric only Tesla cars that get 300 miles per charge from a 110 volt plug in.

Enough said!

Talk with you next week.

AIG Mess

Hi Everyone:

The biggest news story this past week has been about AIG and the bonuses it paid out. I feel I would be remiss if I did not include this as this weeks topic.

I am going to start with a synopsis of the facts about AIG:

1) AIG stands for American International Group, Inc.

2) AIG started out as an insurance company and became a very profitable, well run and well respected company.

3) AIG then added hedge fund on top of their core insurance business by:

-Issuing insurance for mortgage-backed securities.

-Issuing insurance on debt held by other banks around the world.

4) When the housing bubble burst, AIG was left holding the bag for billions and billions of dollars for claims that it couldn't afford to pay.

5) The housing bubble burst first here in the United States, then it spread like a wildfire across the world.

6) The claims then multiplied exponentially until AIG was for all intent and purposes was broke and unable to pay out the claims.

My first reaction to the AIG mess was where was the common sense factor in the determination to insure those mortgage-backed securities? People in the housing, banking, insurance and investment industries know full well that the housing market has peak and valley cycles and that the peak cycle the world had seen for so long had to turn into a valley (sooner rather then later). Who would want to voluntarily insure sub-prime mortgages in the first place? It is painfully obvious that greed trumped common sense. Decisions based on greed almost always ends in failure. If common sense had been used, AIG would still be a healthy and profitable company. No hedge fund, no problem.

So far, AIG has received $170 billion in taxpayer money to keep it afloat for the moronic decisions upper management made. The government says that AIG is to big of a company to let it go into oblivion. Now as we all have just learned, AIG paid out hundreds of millions dollars in bonuses. Let's examine those facts:

-Contracts were made to retain the moronic employees who either: 1) made the decision to insure those now toxic mortgage-backed securities, 2) were at the helm that led to the downfall of a once great company and/or 3) were the top salespeople of those toxins.

-$218 million in bonuses were paid out not $165 million, to a total of 73 executives.

-7 executives received $4 million.

-1 executive received $6.4 million.

-Here's the kicker....................11 of those executives who received the bonuses are no longer employed by AIG.

Here are my questions and thoughts that come to mind regarding this:

-When the American taxpayer now owns 80% of AIG, who do they think they are in giving these bonuses of taxpayer money?

-If your company is broke, it is time to break the contracts and don't make any bonus payments.

-Bonuses are customarily paid when an employee meets or exceeds stated goals.

-Why give retention bonuses to employees who sank the ship?

-Why give retention bonuses to employees who are no longer even employed? Where is the retention? No retention, no bonus, period!

AIG has shown that its incompetence has ruled supreme and it just seems to get worse week by week. I just wish that other companies are seeing the err of AIG's ill fated decisions and that they make decisions with common sense as a major factor and not just greed.

Talk to you next week.

Sticky Prices

Hi Everyone:

This week's topic is sticky prices. You may be wondering what are sticky prices? Sticky prices is a new terminology for what has happened to the price of just about everything we buy as consumers today.

As I mentioned last week, last year the price of oil/gasoline went through the roof and then came the ramifications that went along with it. One of those ramifications is now called sticky prices. We are all painfully aware of how many companies have increased their product prices. The following are just a few examples of sticky prices:

Example 1) When a garbage or oil/propane company adds a monthly fuel surcharge to your monthly bill. This charge is supposed to cover the added expense of the increase in gasoline/diesel costs to deliver their product to your home.

Example 2) When any type of manufacturing company increases the cost (due to the increase of the cost of the energy needed to produce and package the product) of their product to the retailer who in turns passes on the increases to the consumer.

Example 3) When a manufacturing company (in this example a food manufacturer) decreases the amount of their product from say 16 ounces to 12 ounces and charges the same amount as they did before the decrease. Now this started with coffee years ago and has now proliferated to almost every product in your local grocery store.

Sticky prices are when the price you pay for something increases but then the price does not go back down. So what happened to the cost of these products to us, the consumers, when the cost of energy decreases? The cost of a barrel of oil has dropped approximately $100 to $47 per barrel, as of Friday, 3/13/09. If the theory holds any truth that the price of whatever goes up with the increase cost of energy, what happened when the price of the cost of energy decreased? In this example.............................ABSOLUTELY NOTHING! The prices remain the same! That is what sticky prices are. They are stuck at the higher price or the same price with less product, which translates into a price increase.

So why are the prices not decreasing? The answer is a difficult one. First of all, companies do not like to decrease prices on a whole, except for temporary promotional sales. Secondly, since we are in a recession, a lot of consumers have less money to spend and consequently do not buy as much. When consumers buy less, companies sell less and then they lay off employees. Laid off employees obviously can not buy as much as they did when they were employed. This is a vicious cycle that seems to have no end in sight.

So what is the answer? Two examples come to mind....... Walmart and McDonald's. These two companies have actually done well in this recession. Why? Walmart's business plan has always been to sell products for less. In a recession, people who may never have been in a Walmart, now shop there because of their lower prices. McDonald's food prices have value that consumers seem to be able to afford.

In a recession, there is no common sense to keep prices artificially high. In my opinion, all it will take is for other companies to start lowering their prices and others will follow suit and for companies to end their fuel surcharges Then sticky prices won't be stuck anymore!

Talk to you next week.

Greed

Hi Everyone:

Today's blog is about greed and why is this country in such an economic disaster? I truly believe that the answer to that question is one word answer and that word is ................................GREED! Why greed you may ask? Follow my line of reasoning with just these 2 examples:

Example #1) The price of oil/gasoline. I am sure that you all know that last year, the price of a barrel of crude oil (consequently the price of a gallon of gasoline) rose the fastest ever, in the shortest amount of time, in history. Why? If you had read any online articles or newspapers and/or watched the news on TV (network or cable); the reason for the astronomical price jumps were all basically the same. There were CEO's from Exxon/Mobil and other big oil companies and government officials all saying that it was supply and demand economics. Demand for oil was increasing while the supply of oil on hand was decreasing. We were all told that this was due to the fact that China and India grew from third world countries to industrial powerhouses meaning they used more energy (oil) to run their factories etc. Then their wage earners had more disposable income and were able to buy cars etc. More cars on the road obviously use more gas. Supposedly the OPEC cartel was pumping oil out of the ground as fast as they could, but it wasn't enough. The consequence was the unbelievable increase in the cost of a gallon of gas. Now if you believe all of that BS, have I got a bridge to sell you.

After reading and learning everything I could on why the price of oil increased so much, so quickly, I finally found the true reason. There was and still is enough oil to fuel the world's economy. Using oil as the main source of energy is a subject for another day. But, do you know who owned the most oil shares in this country last year? Exxon/Mobil?-no. BP?-no. Any oil company?-no! The answer is, are you ready for this.................Morgan Stanley! Yes Morgan Stanley the investment house. They saw an opportunity to make an unbelievable amount of money by getting into the speculator market. By speculating on oil futures they went outside the foundation of a free market of supply and demand and artificially increased the price of oil. Other investment houses soon followed suit. Yes the price of oil would still have increased because of China and India but not as fast and definitely not as much.

The price of oil obviously affects every aspect of our lives. It increases the cost of manufacturing almost everything (including the cost of building houses, roads and bridges), increases the cost of delivering those products to the stores where we purchase them, increases the cost of producing the containers that products come in, increases the cost of driving or using mass transit to get to work and increase the cost to heat our homes, whether or not you used oil, gas or electricity. Those investment firms were greedy to the max and used absolutely no common sense as to the consequences of their actions. That one act of speculating would be a leading factor and the beginning of the free fall of our economy.

Example #2) In the not so distant past, in order to buy house, you had to have the following: a down payment of at least 10%, verifiable income and that the mortgage and taxes combined was no more then a certain percentage of your income ie: 38%.

Nowhere in the history of our banking system were subprime mortgages ever sold until the new millennium. To make matters worse, add to that, the banker/mortgage brokers selling to people who could not afford the eventual payment increases due to their ARMS, (adjustable rate mortgages) that were going to reset in 1,2 or 3 years. How did this happen? Somehow some and definitely not all, bankers and mortgage brokers were able to get the loan applicants to lie about their income amounts on the applications assuring them that their loan would still be approved and therefore they could get a larger mortgage amount then they needed. Banks then went around the laws that stated that they had to have a certain amount of insurance in case a percentage of people defaulted on their loans. The banks then bundled these subprime mortgages and somehow was able to resell them to Wall Street as a good investment. The originators of these mortgages made their money in 2 ways: writing/approving the loans and then reselling them. They wrote so many so fast that there was an incredible amount of money to be made very quickly. Check out what happened to World Bank Savings as an example. Remember that the housing market had not seen a valley in the normal peak and valley (up and down) cycles that always happens with home values in many, many years. People somehow forgot history and thought that the value of their homes was always going to increase and never decrease. Those who tend to forget history tend to repeat it.

Now I do not place all of the blame on the banks and mortgage brokers alone. I also place blame on the people who either signed false income statement loan apps (per the advice of whoever) or people who didn't take the time to read, understand and ask questions regarding what they were about to sign. It takes two to tango and if people had really taken the time to read everything before they signed on the dotted line, I believe that there would be a lot less foreclosures.

The combination of my 2 examples were and are a deadly duo that was sure to send our economy into a tail spin, the likes of which we have not since in 75 or so years! I personally think that the banks and mortgage brokers that engaged in the subprime mortgages should be indicted and convicted for the crimes that they have perpetrated upon the American people who now have to pay for their greed and stupidity. I wish that the lack of use of common sense in these instances could also be a crime. If these companies had only used one ounce of common sense, I truly believe that the economic mess we find our country in would not be as bad and might only be a footnote, like the recession of 2001 or 1990-91, instead of being compared to the Great Depression of 1929-1933 and beyond. When will companies learn. Maybe now! Common sense rules and greed drools to paraphrase.

Talk to you next week.