Another CDO Investigation

After chewing on Goldman Sachs’ ankle for a while, this morning the Wall Street Journal is reporting that the federal government is investigating how Morgan Stanley marketed CDOs. CDOs are collateralized-debt obligations, bond deals tied, at least in these instances to mortgage derivatives.

Morgan Stanley and Goldman Sachs allegedly bet against these deals while marketing them for their clients. There’s a shock.

The last time I bought a security on the advice of a broker I lost a ton of money. I make and lose money now, but instead of relying on the advice of a broker I make my own decision based on published company financial statements, SEC filings, news and sifting through the advice of numerous investment experts.

Investment companies are not evil, they are out to make money – just like you and me.  If you decide to take your hard earned money and invest it in something you know nothing about, that’s your problem. People don’t want to be accountable for their actions (lets blame someone else for lapses in judgment) and certainly the Federal government says you don’t have to be. The government wants to look out for you’re well-being all the time.

Folks, sometimes you’ve got to do the homework so you can make an informed decision.

Back to the CDO’s – these are offered to investors who are supposed to know their stuff, not passive investors looking for a better mutual fund. These folks are well-equipped to know the risk-reward of their decisions, and if they didn’t think the housing bubble was going to burst, well – too bad.

On the surface it might seem evil to bet against something you’re marketing, but it happens all the time. Your policy with the insurance company is a wager, as is that trip to the pawn shop, the agreement with the bank loan officer and 50 cents you put down on tonight’s ball game.

The American way is to take an educated risk – not an uneducated one. If you have to make a personal decision to hold or fold, and you have to assume that someone is always betting against you.

Average Work Force

Maybe it’s the era I grew up in. No, that’s not it because there are a lot of people my age who don’t care about their jobs.

It really gets me when people want to have great careers but don’t want to work to get there. They put in as few hours as possible and perform at half-baked levels and then expect their bosses to bow down before them. Amazing.

Many times these half-baked employees have sold themselves as being completely indispensable and, amazingly, their bosses believe it.

There are other employees who work their butts off to put out a better product (it may not be the best, but that’s what their striving for), put in extra hours, get some continuing education and get very little reward for their effort.

What’s wrong? Generally speaking — and I’ve been one of these business people — employers are afraid to cut the cord with the folks who talk up their jobs and don’t do them. I’ve been gutless and it has cost me. Once you see that an employee is adding no value to the organization, and may in fact be dragging it down, cut the cord. There are plenty of the other workers out there, people who want to make a difference.

Businesses are not in the business to provide a job. Businesses are in business to make money. Yes, there is some level of social consciousness that takes over once you make a commitment to an employee (like PTO, working through some bumps in the employee’s road) but there is no reason to keep slackers on the payroll.

Wise up, business people. If you want to make money, surround yourself with people who take pride in their work – take pride in themselves.

So two senate seats need to be filled – one each in Minnesota and Illinois.

Al Franken leads Norm Coleman after yesterday’s fina tally and senate republicans say they will filibuster should Franken seek to be seated. On the democratic side, the dems say they will block Burris from being seated from Illinois.

And the constitutional reasoning? It’s not there.

The wonderful thing about the U.S. is that if you don’t like some of the things the constitution permits, just wait until the next election because usually the will of the people will prevail to swing the pendulum the other way.

Palin: Does it Matter

The revelations about Sarah Palin and her family are – well, probably not going to amount to much, much to the dismay of people in all parts of the political spectrum who just don’t want a non-traditional vice presidential candidate.

A few folks don’t know of families with a petty thief, convicted felon, bankruptcy, addict, pregnancy out of wedlock, affair, a child re-doing a grade, or you-name it. There are very few perfect families and fewer yet perfect individuals. There are a few individuals who have never ever had to be in contact with flawed people and I dare say that plenty of them have probably run away from those flawed people rather than walk a moment with them.

That does not mean we have to accept the flaws with open arms. Convicted felons, some addicts, kids who just want to have bad grades – are not people we should hold the banner of success over. But, the fabric of life is made up of individuals. Some people run into snags in life – and the ones who need to have the banner of success held over them are the ones who overcome and move on.

The felon who becomes a model citizen, the kid who realizes that academic excellence trumps being a hoodlum, the mother who raises an initially unwanted child to become an active participant in the world and the addict who turns around and lives a clean life may be far better role models than people who maintain high expectations and scrutinize everybody – driving people with weak constitutions into the shadows.

Now, living for the moment and succumbing  to passion will get you into trouble. For some its the extra piece of cake. For others its alcohol and then driving. For others its a swing under the sheets outside of marriage.

If you don’t personally know a person who has screwed up in a major way, you live in a very small circle.

Does Sarah Palin’s husband’s DUI 20 some years ago matter? Not if that’s his major offense. Is her daughter’s pregnancy going to derail Palin’s run for the VP slot? I don’t think so. I feel bad — right now — for the girl because her child and her soon-to-be husband will radically change her life. But then again, maybe she’s going to be a terrific mother and that life will be enriched beyond measure.

The Palin’s it turns out, are a family like so many others. If you have a wide circle of friends you know what they’re going through. And that’s more than you know about some other families in politics.

Does it matter? Yes, because we can relate to it.

The Economic Weather Forecast

Yes, it is early July but the weather pattern is more like August and that does not bode well for the economy.

Spurts of hot weather – temperatures well into the 90s – will occur for the next
few weeks. There’s nothing unusual about that. However there a widespread outbreak
of 100 degree heat is not in the cards, and that is unusual. There will be spotty 100
degree temperatures but not covering the entire area like we have had the past couple of
summers.

Moisture will be typically sparse. We’re into the summer dry spell and with a little luck -
and higher than normal humidity – we won’t see a significant dry-up.

But what about this August weather pattern? You may have noticed some late season
flowers are alread out. Are they sensing a change in the air? Well, the weather pattern
across the Northern Hemisphere from Asia to western Europe is very August-like.
Chilly air is already building across the North Pacific and the Arctic. Snow will be be
likely at the higher elevations of the Canadian Rockies, and the rain-snow line at
lower elevations is creeping south of the Arctic Circle. These are events that usually
do not occur until August 10 to 20.

What does it mean? It could forebode an early fall and a long winter. Economically,
a long winter would be a disaster if the price of heating fuel continues to be sky-high.

What Do Voters Want

It’s not even looming on the political horizon anymore – it’s smack-dab overhead.

The economy is crushing Iraq as the political hot button. Face it, if people can’t afford to buy things they get miserable, especially if staples such as food and fuel are satisfy appetites. The price of food is being blamed on fuel, which is certainly a huge drain on cash.

But what is driving fuel prices? Your local gas station has nothing to do with it, nor does your local oil company. The strong arm in all of this is the commodity trader. Just look at the rational behind run-ups in oil prices. The day-to-day reasons for price increases range from problems in Nigeria to the U.S. having too much oil (or gasoline) in reserve or too little. There are also fears about Iran nuking Israel or visa-versa. Or fears of any country committing any act of aggression against any other country.

Fears drive oil prices. Is that right? I don’t think so. Some how we need to get away from a speculative oil market much the way the U.S. ditched the silver standard to value the dollar.

Truth be known, the vast majority of us don’t likethe high price of gas (thanks to the world oil market) but nobody wants to take on the Goliath. We’re going to be eaten alive by oil prices and inflation is going to go through the roof, especially if Goldman Sachs and T. Boone Pickens are right and oil gushes up to $200 a barrel during the next few months.

The average person who makes a little more than enough to live on will need pay raises and companies will be hard pressed to give them. The next president is going to inherit a huge economic mess if the global oil market is not brought under control.

On the campaign trail - President Bush was heavily criticized by the Left after hurricane Katrina – and after Scott McClellan’s book came out — for not touring New Orleans on the ground right after Katrina hit. Barack Obama isn’t much different. He canceled his trip to Cedar Rapids IA citing the flooding. He should have gone to Cedar Rapids and put on the appearance of caring, showing how he handles disaster. Instead, Barack Obama has a fundraising link on his web site. He missed the boat on this one.