Good evening. The economy continues to flounder along. The initial new claims number came out today from the Labor Department and it was higher than expected. It actually increased. I didn't hear much from the spin doctors but apparently Wall Street shrugged it off as the market rose due to some positive earnings news. But I didn't want to discuss this as I have in previous posts. The big news was two announcements, one from the pay czar and one from the Fed Chairman about executive compensation.
While I am an adovacate of capitalism and the free market, it is hard to argue that compensation shouldn't be limited by the government for firms that take taxpayer money to bail them out. I just can't win that argument. I am concerned though about the pay limitations that the Fed wants to put on the nation's banks. Bonuses would be subject to the government's discretion. Compensation has been a seeping wound for many many years. The compensation of the higher echelon of executives have been outstripping the common worker exponentially over the last several decades. There are many arguments pro and con about how much somebody, particularly a CEO, is paid. I think policymakers are trying to take advantage of the current crisis by hamstringing the banks from paying high performers that create the wealth and strong stock prices that benefit many people. As a former commercial banker, bonuses for management were driven by company performance and personal performance. The overriding kicker was credit quality, or in other words if you took too many risks and had questionable loans, your bonus would be adjusted. While it seemed arbitrary at the time, the system worked. The current crisis started with the real estate market and some pretty bad actors. All of the United States's banks, probably about 8,000 of them were not all bad bankers. Of the ones that were, they either were shut down, acquired or will be. We need to take a breath before we overregulate our banks. Let's keep our eye on the problems of easy credit and lack of enforcement.
Thursday, October 22, 2009
Thursday, September 17, 2009
State of the Economy
Good morning everyone. Understandably from my last post, I took a bit of a hiatus from my postings to the blog. After digesting the news of the last month or so and watching the shenanigans on Capitol Hill, I am ready to get back in the saddle.
The other day, Fed Chairman Ben Bernanke made some positive comments about the economy. The quote that I saw was that the recession was likely over. Just like I heard the comment about "green shoots", I am very skeptical of course. To his credit, he did caution about a recovery being slow (or moderate) and 2010 would be not a stupendous year.
Every week, the Labor Department issues reports on the job market. This morning, jobless claims data came out. 545,000 people filed initial unemployment claims last week. The week before it was 557,000 people. The economists had forecasted a higher number and you'll see the spin doctors in force today saying the economy is improving. Look harder into those stories and the data. The data that gets buried is the fact that people that are still on unemployment is 6.23 million people. The other thing that I don't think is reported is the people that ran out of benefits or decided to give up. The last check on the unemployment rate was about 9.7% of the labor force.
Another lovely measure came out today, the housing starts number. The data showed a 1.5% jump in housing starts. Again, look at the numbers. Most of that jump was multi-family homes. While that is a positive sign, historically about 80% of housing starts is single family homes and that number declined.
Jobs and housing continue to struggle. The wonder of living in today's world is that we have many alternative sources for information and don't need to rely on three media outlets and newspapers. What I have learned (the hard way in some cases) is that you need to continue to read the whole story not just the headline. Before people dance in the streets thinking that the economy has recovered, think again. Once the number of unemployment moves down and that initial claims number continues to fall, then we can start slapping each other on the backs. Stay strong!
The other day, Fed Chairman Ben Bernanke made some positive comments about the economy. The quote that I saw was that the recession was likely over. Just like I heard the comment about "green shoots", I am very skeptical of course. To his credit, he did caution about a recovery being slow (or moderate) and 2010 would be not a stupendous year.
Every week, the Labor Department issues reports on the job market. This morning, jobless claims data came out. 545,000 people filed initial unemployment claims last week. The week before it was 557,000 people. The economists had forecasted a higher number and you'll see the spin doctors in force today saying the economy is improving. Look harder into those stories and the data. The data that gets buried is the fact that people that are still on unemployment is 6.23 million people. The other thing that I don't think is reported is the people that ran out of benefits or decided to give up. The last check on the unemployment rate was about 9.7% of the labor force.
Another lovely measure came out today, the housing starts number. The data showed a 1.5% jump in housing starts. Again, look at the numbers. Most of that jump was multi-family homes. While that is a positive sign, historically about 80% of housing starts is single family homes and that number declined.
Jobs and housing continue to struggle. The wonder of living in today's world is that we have many alternative sources for information and don't need to rely on three media outlets and newspapers. What I have learned (the hard way in some cases) is that you need to continue to read the whole story not just the headline. Before people dance in the streets thinking that the economy has recovered, think again. Once the number of unemployment moves down and that initial claims number continues to fall, then we can start slapping each other on the backs. Stay strong!
Monday, August 3, 2009
Mom and the Health Care System
In mid- 2002, we were basking in the glow of our recent wedding and pending arrival of our first child. Soon thereafter, Mom finally decided to start complaining about her pains in her stomach. Those pains were two football sized tumors on her ovaries. Mom was diagnosed with Stage 3 ovarian cancer. At that point on, I began to learn intimately about the healthcare system in the United States.
Mom had a 5 hour surgery in the fall of 2002 to remove the tumors but the surgeon at the University of Florida-Shands Center told us that this wasn't the end of the cancer. After Mom underwent chemotherapy in the months that followed, the cancer was beaten for now. Well, we always knew it would come back. Sure enough in 2004, it spread to her colon. Yes, another battery of tests and surgery at Citrus Memorial in Inverness to remove the cancerous legions. Then another large tumor was found in her brain. In 2005, yet another series of tests and then surgery at George Washington Hospital to remove the tumor (which was malignant). Mom never complained and took every opportunity to spread her good humor with her caregivers.
In 2007, the cancer spread back into her brain and she endured another battery of tests and then radiation. Later in the year, we learned that the tumors grew and the oncologist told us there was nothing more to be done. Yet, Mom kept her chin up and lived each day as it was her last. Sadly, Mom's last day was Sunday on a warm, rainy morning in her nursing home bed in Warrenton, VA.
During this painful time, we watched her savings eaten away by the mounting medical bills. Medicare paid for a large amount but only 80% of the costs. Her secondary insurer, United would only pick up the cost if she paid a huge deductible. I witnessed first hand the professionalism and compassion of all the doctors, nurses and just plain old volunteers. They welcomed Mom's view on life and it gave them a bright spot in their day. The doctors and nurses were clearly overworked and carried themselves through on limited time for their own families. It was overwhelming to see the amount of the bills that came in during this time. I gained a perspective on both sides of the health care reform issue first hand. "Why can't Mom get that drug?" I would ask but she would get some other lesser known or less efficient drug. When her pain would go away because of one of her prescriptions, we were thankful. We realized that a lot of R&D, money and resources went into that drug to get it to the market. We also knew that there were another 9 or so drugs that didn't make it to that stage. I also knew that the younger generation who has less health issues were paying the premiums so my Mom could be kept alive and keep her treated so she could see her grandkids. Lastly, the continuous interactions between Mom and her caregivers were important and never driven by what she could afford. The goal was always on what would be done to help her.
As we get deeper and deeper into debate about the health care reform bill, the costs, criticisms of the current system and positions, let's remember that the current health system while it has its problems, it does have tremendous benefits. We were able to have Mom with us for another 6+ years but the lack of a cure for cancer robbed us of her wonderful presence for an unknown amount of years.
Cheers.
Mom had a 5 hour surgery in the fall of 2002 to remove the tumors but the surgeon at the University of Florida-Shands Center told us that this wasn't the end of the cancer. After Mom underwent chemotherapy in the months that followed, the cancer was beaten for now. Well, we always knew it would come back. Sure enough in 2004, it spread to her colon. Yes, another battery of tests and surgery at Citrus Memorial in Inverness to remove the cancerous legions. Then another large tumor was found in her brain. In 2005, yet another series of tests and then surgery at George Washington Hospital to remove the tumor (which was malignant). Mom never complained and took every opportunity to spread her good humor with her caregivers.
In 2007, the cancer spread back into her brain and she endured another battery of tests and then radiation. Later in the year, we learned that the tumors grew and the oncologist told us there was nothing more to be done. Yet, Mom kept her chin up and lived each day as it was her last. Sadly, Mom's last day was Sunday on a warm, rainy morning in her nursing home bed in Warrenton, VA.
During this painful time, we watched her savings eaten away by the mounting medical bills. Medicare paid for a large amount but only 80% of the costs. Her secondary insurer, United would only pick up the cost if she paid a huge deductible. I witnessed first hand the professionalism and compassion of all the doctors, nurses and just plain old volunteers. They welcomed Mom's view on life and it gave them a bright spot in their day. The doctors and nurses were clearly overworked and carried themselves through on limited time for their own families. It was overwhelming to see the amount of the bills that came in during this time. I gained a perspective on both sides of the health care reform issue first hand. "Why can't Mom get that drug?" I would ask but she would get some other lesser known or less efficient drug. When her pain would go away because of one of her prescriptions, we were thankful. We realized that a lot of R&D, money and resources went into that drug to get it to the market. We also knew that there were another 9 or so drugs that didn't make it to that stage. I also knew that the younger generation who has less health issues were paying the premiums so my Mom could be kept alive and keep her treated so she could see her grandkids. Lastly, the continuous interactions between Mom and her caregivers were important and never driven by what she could afford. The goal was always on what would be done to help her.
As we get deeper and deeper into debate about the health care reform bill, the costs, criticisms of the current system and positions, let's remember that the current health system while it has its problems, it does have tremendous benefits. We were able to have Mom with us for another 6+ years but the lack of a cure for cancer robbed us of her wonderful presence for an unknown amount of years.
Cheers.
Friday, July 31, 2009
What the heck is GDP?
Today, the Commerce Department released its report on the second quarter (Apr-Jun) gross domestic product. According to their numbers, the US economy contracted at a 1% clip (on an annual basis). In the first quarter, GDP contracted at 6.4%. A big improvement? Hmm, let's get past the headline. First and foremost, what is gross domestic product and can I buy it in my local supermarket.
GDP is one of the more widely measured and monitored calculations around the world. It measures the final value of goods and services produced by a country in a year. For you formula geeks, its private consumption + investment + government spending + (export-import). Now for you fans of my blog, you'll remember that consumer spending (consumption) makes up 2/3rds of the economy. Well for Q2, consumer spending fell by1.2%. With that fall, where was the improvement in the rest of the formula? Investment which measures what businesses buy for equipment and other investment in the business fell by 8.9%. Investment also measures what you and I do with buying a new or existing home fell by (yikes) 29.3%. Now, exports fell only by 7% (vs. 29% last quarter). The culprit there? That is the falling dollar making our goods cheaper for foreign buyers.
If I haven't bored you to death yet, the coup de grace, government spending was the stalwart in the quarter. Yes, our beloved government spending its stimulus money to prop up the economy. Some would say that if they didn't intervene we could be looking at a really bad quarter. I say that if the stimulus had more infrastructure spending and more of it spent in this year vs. next, we could be looking ok. We can argue about the spending in that stimulus program another time as there are many stories of waste as we speak (NEA - porn spending).
The government spending appears to have masked a really bad economy and a falling US dollar. While the headline would have you believe that the GDP result as better than expected, look deeper folks. Look deeper into any headline you read now. The spin doctors are out in force these days, making bad news look like honey. Have a good weekend! Cheers.
GDP is one of the more widely measured and monitored calculations around the world. It measures the final value of goods and services produced by a country in a year. For you formula geeks, its private consumption + investment + government spending + (export-import). Now for you fans of my blog, you'll remember that consumer spending (consumption) makes up 2/3rds of the economy. Well for Q2, consumer spending fell by1.2%. With that fall, where was the improvement in the rest of the formula? Investment which measures what businesses buy for equipment and other investment in the business fell by 8.9%. Investment also measures what you and I do with buying a new or existing home fell by (yikes) 29.3%. Now, exports fell only by 7% (vs. 29% last quarter). The culprit there? That is the falling dollar making our goods cheaper for foreign buyers.
If I haven't bored you to death yet, the coup de grace, government spending was the stalwart in the quarter. Yes, our beloved government spending its stimulus money to prop up the economy. Some would say that if they didn't intervene we could be looking at a really bad quarter. I say that if the stimulus had more infrastructure spending and more of it spent in this year vs. next, we could be looking ok. We can argue about the spending in that stimulus program another time as there are many stories of waste as we speak (NEA - porn spending).
The government spending appears to have masked a really bad economy and a falling US dollar. While the headline would have you believe that the GDP result as better than expected, look deeper folks. Look deeper into any headline you read now. The spin doctors are out in force these days, making bad news look like honey. Have a good weekend! Cheers.
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