of monopolies

The following are the basic data points from the PostCrescent.com article about the Outagamie County Airport “making itself competitive.”

• Airport revenues growing at 1% per annum.

•  Airport’s expenses are growing at 8%-11%  per annum. (Do the math…)

•  Airport borrows $3 million in bonds to become its own refueling monopoly. (I’ll add, after putting the regulatory squeeze on competition with an ’06 Ordinance.)

Reporter concludes the article, and I quote: “The purchase has no direct impact on county taxpayers because the airport generates its own revenues.”

I needed a good laugh this morning.

Greece is the word

I remember last Thanksgiving talking with the family back in Iowa about the Greece debt situation. It had just started to bubble to people’s attention, but at that point it wasn’t a “problem.”  It was just a reminder that we weren’t out of the woods yet in terms of unwinding the credit excesses around the world.

Today, finally, the equity markets are acting as if they are tangentially aware of Greece. (In the world of investing, equity takes a hit before creditors.  Therefore if the creditors are nervous, shouldn’t the shareholders be too?)  The rating agencies cut Greece’s sovereign debt to ‘junk’ (below investment grade) and downgraded Portugal. Who’s next?  Spain? Ireland? Italy?  The list goes on…  California? Municipalities?  Pension funds?  Is there a reason Germans are starting to check the serial number prefix on their Euro currency bills before accepting them as a tender?

Action plan:

1) Always invest knowing where the exits are.

2) Understand the Austrian Business Cycle Theory. (Start with Mises.org.)

3) Accept the fact that we’ve been through credit deflations before. They are not cured by new legislation. In fact, meddling always makes them worse and extends and exacerbates the pain.

more “boom and bust” cycles coming

Here’s a quick video from my buddy Aaron Task interviewing Lakshman Achuthan, on why buy and hold is dead.  There are more more “boom and bust” cycles coming.  Those of us who adhere to the Austrian, free market school of economics, understand this as well.

He addresses the symptoms that as more debt is piled on the economy, the subsequent economic recoveries get weaker and weaker from the debt load.  It’s not a “Bush” or “Obama” political management issue.  It’s a decades long trend, that doesn’t end well once we enter debt saturation.

another AIG bailout?

If the weary taxpayers have to pour more money into AIG (or, more accurately, AIG’s counterparties) to bailout Greek shareholders of Greek banks owning Greek debt, then I predict a run on pitchforks at the hardware store.

Denninger’s commentary here.

Original German article in F.A.Z. linked here.

Translation to English here.

Democracy has been diluted

Linked here is an extraordinarily interesting CSPAN commentary & Q&A with Janet Tavakoli.

auto-economic-asphyxiation

Retail sales fell last month, despite the “cash for clunkers” taxpayer transfer to the auto companies.  As it turns out — don’t tell Washington this and burst their bubble — but when poor people (that drive old cars) sign up for a boatload of consumer debt on a rapidly depreciating new clunker and a new monthly payment, they don’t actually run to the mall right away to spend like mad.

Austerity is the new ‘in.’  But now that Congress has shifted the demand curve back to present, expect a vacuum-collapse in auto sales now that the layer of demand is instantly removed.

Before they get too far with the “cash for house clunkers” program, recall that something like 30% of Americans would sell their house if they could get a good price.  That’s a heck of a price overhang and pending supply.  Do the world a favor and laugh out loud whenever someone on the TV or in polite company says, “Housing prices are coming back.”

Bill O’Neil interview @ Investors.com IBD TV

“Investor’s Business Daily” founder Bill O’Neil provides an insightful interview on KOA radio earlier last week. Here’s the link if you need browsing background-sound.

http://www.investors.com/MediaCenter/default.aspx?mediaID=482737

The three key take-aways are that 1) he believes a new secular bull market began in March; 2) tune out Wall Street noise and predictions from the overeducated talking head. Discern what the facts of the market tell you;  3) entrepreneurial America will thrive, regardless of Washington’s follies.

Son of Stimulus, error

Now that the political classes and leeches are clamoring for another stimulus, now is as good a time as any to dissuade you from this nonsense.

The “Economy” is often discussed as a detached entity that can be controlled, poked, prodded, studied, enhanced, depressed, and manipulated at will.   In reality, the “Economy” is you and me.  That’s it.  What’s good for you and me is good for the Economy.  The converse is true.  What’s bad for you and me is bad for the Economy.

Now let me ask you this:  is your household and neighborhood suffering because you are not spending more than you have each month?  Or are things a bit tight now because you, your neighbors, or your company already spent more than was available, and now you’re tightening your belts because of that prior excess?  If the latter is the case — and it is– then how is spending more and more of the money that you don’t have going to ‘cure’ the problem. It won’t.

Spending more won’t. Saving will.

Mish: Long Term Buy and Hold Is Still Bad Advice

Savvy Mish relates another analytical post, and with the miracle of the internet, I’ll repost here for your edification.

Mish’s Global Economic Trend Analysis.

JPMorgan $29 Billion WaMu Windfall Turned Bad Loans Into Income – Bloomberg.com

JPMorgan $29 Billion WaMu Windfall Turned Bad Loans Into Income – Bloomberg.com.

 

Needless to say, all those pundits that heaped scorn and wrath on “mark to market” write-downs seem eerily silent when banks do the opposite.