Price to Earnings Ratios

John Hussman has an important article here on price to earnings ratios, in particular "forward earnings ratios," which came into vogue in the 1980s and for which there have not been adequate historical series preceding that era. 

In other words, forward earnings ratios are an innovation of the greatest bull market era in American history, and thus they are an outlier.

Follow the link for the complete story. 

"Moochelle": Michelle Obama's New Name

Given to her by none other than Rush Limbaugh:

We have a name for Michelle: "Moochelle." Mooch, mooch, Moochelle Obama. That will tick 'em off, won't it, Snerdley?  

Moochelle Obama.  You compare her with the hated Sarah Palin. Moochelle Obama keeps a personal staff of 24.  Now we know why: To administer to gynecologist friends whose fathers pass away.  Her personal staff includes a makeup artist and a hairstylist, a total annual government salary of more than $1.6 million for the personal staff of Moochelle Obama, plus their travel expenses.  Her Secret Service for security is extra on these trips.  Now, you compare and contrast that with the hate and the ridicule that is thrown at Sarah Palin who did what?  She sold the governor's jet, she dismissed the government's cook, she prepared her own meals, she returned the governor's automobile and drove her own car, she dismissed the governor's security staff, and knows how to use her own gun.  So Michelle's gynecologist, her father died.  So she needed to go to Spain to sort it all out.  All right, there you have it.  That's why.

The whole thing is here.

The Choice Wasn't "Do Bailouts" or "Do Nothing"

Barry Ritholtz provides a very succinct summary of what were the alternatives to the bailouts of 2008, and takes to task those who want to defend the bailouts as if doing nothing were the alternative.

Don't miss it here.

Boycott The Airlines: Don't Fly Until The Scanners Come Out

As Grand Rapids' Ford Airport gets its new backscatter body scanners this week, I learned that the low penetration, privacy and dose claims for these scanners have been challenged by Leon Kaufman as recently as February:

A very few dozen of zealots and madmen have led the economically and militarily most powerful nation the world has known to ... , with the use of x-ray backscatter machines, begin a great public health experiment. ... For a typical body thickness, half of the energy leaves the body on the side opposite the beam’s entrance point. ... Under “features” in the Rapiscan brochure are listed archive, save, and print. The AS&E Bodysearch permits hard-copy printing and storage of images for “file reference.”

If they are wrong about penetration and privacy, can they be wrong about dose?

And isn't it enough that we've been lied to about penetration and privacy?

Read more here.

BLACKOUT NATION

More "year of the black:" black president, Chicago Blackhawks, black beaches, and now blackouts.


Thom Patterson reports for CNN.com on the growing problem of electricity blackouts because of an aging electrical grid, now an estimated $1.5 trillion problem, at which the current administration has thrown roughly $4 billion, a drop in the bucket:

Experts on the nation's electricity system point to a frighteningly steep increase in non-disaster-related outages affecting at least 50,000 consumers.

During the past two decades, such blackouts have increased 124 percent -- up from 41 blackouts between 1991 and 1995, to 92 between 2001 and 2005, according to research at the University of Minnesota.

In the most recently analyzed data available, utilities reported 36 such outages in 2006 alone.


Read Patterson's worthwhile article here. 

The Mother of All Bailouts

Bloomberg.com had an important article in June about the Government Sponsored Enterprises in which it is estimated that they may reasonably require taxpayer bailouts of $1 trillion in coming years:

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

Unlimited bailout authority for these failed government programs was granted in December 2009. That's what prepared the way for the idea behind the rumors now that underwater mortgage balances may be reduced by the Obama administration.

Read all about it, here.

Bankers Scamming the American People Out of Hundreds of Millions of Dollars

Bloomberg.com has an interesting look inside a bank failure, describing the crimes which occur but never get prosecuted, unless you happen to be a small fry criminal:

If you were a banker, which of the following activities would be more likely to land you a quick trip to the federal penitentiary? Is it:

(a) Misrepresenting your dying bank’s financial condition in order to secure almost $300 million in TARP bailout cash and then quickly proceeding to lose it all, or

(b) Embezzling about $235,000 from your employer to support your compulsive-gambling addiction and pay off personal debts?

The correct answer, naturally, is “b.” In this country, when it comes to matters of high-finance crime and punishment, little pigs get slaughtered, while hogs get fat -- convicted Ponzi schemer Bernard Madoff being this rule’s most notable exception. ...

The large scale crimes are [m]ainly those related to overvalued loans and understated losses. ... where bank employees lied to ... auditors, intentionally delayed loan writedowns and altered documents to hide credit losses.

That's why we highlight "overvaluations" of reported assets when we report on Bank Failure Fridays, just to try to provide some perspective on the scope of the chicanery going on.

Read the complete story here.

Obama and Company: Experts at Bankruptcy

The Chicago Sun Times is reporting:

On Feb. 14, 2006, newly obtained records show, the bank [Democrat Senate hopeful Alexi Giannoulias' Broadway Bank] made a $22.75 million loan to a company called Riverside District Development LLC, whose owners, it turns out, included Rezko.

Antoin Rezko, of a Syrian Catholic family, was convicted of fraud and bribery charges in 2008 and once had close ties to Illinois Governor Rod Blagojevich, now on trial, and to President Barack Obama.

The Sun Times also reports:

According to Giannoulias . . . Riverside District Development paid off the Broadway Bank loan with money it obtained from a $27 million loan from another financial institution: Mutual Bank.

The president of Mutual, Amrish Mahajan, was also a fundraiser, like Rezko, for Blagojevich.

Mutual Bank, Harvey, IL, failed on July 31, 2009, costing the FDIC $696 million. Its assets of $1.6 billion were overvalued by $696 million, or 77%.

Broadway Bank failed April 23, 2010, costing the FDIC $394.3 million. Its assets of $1.2 billion were overstated by $494.3 million, or 70%.

Read the complete story, here.

As A Dog Returneth To His Vomit

Kimberley A. Strassel updated the Alexi Giannoulias affair in mid-July for The Wall Street Journal, highlighting the source of the Senate hopeful's personal fortunes, which ended up a bank failure in April:

Then in April federal regulators seized Broadway Bank. Records showed the bank's lending profile changed sharply after Mr. Giannoulias came on full-time in 2002. His lending department doubled down on the risky real estate loans that helped shred the housing market; Broadway piled up losses. Mr. Giannoulias prospered.

No doubt Mr. Obama can't wait to arrive on Aug. 5 to raise money for one of those, ahem, "fat cat bankers." And he'll be landing in Chicago just as the Blagojevich trial is raising uncomfortable questions about Mr. Obama's Chicago connections and his role pushing his friend Valerie Jarrett for the Senate seat. The state Democratic establishment is dutifully holding "Vote Alexi" signs, but many are bitter that the White House landed them with this guy. It won't be a pleasant visit.

Read the complete story, here.

Obamas Enrich Themselves At Your Expense, Again and Again

Andrea Tantaros for The New York Daily News has all the gory details of the latest episode, this time in Spain:

While many of us are struggling, the First Lady is spending the next few days in a five-star hotel on the chic Costa del Sol in southern Spain with 40 of her "closest friends." According to CNN, the group is expected to occupy 60 to 70 rooms, more than a third of the lodgings at the 160-room resort. Not exactly what one would call cutting back in troubled times.

Reports are calling the lodgings of  Obama's Spanish fiesta, the Hotel Villa Padierna in Marbella, "luxurious," "posh" and "a millionaires' playground." Estimated room rate per night? Up to a staggering $2,500. Method of transportation? Air Force Two.

To be clear, what the Obamas do with their money is one thing; what they do with ours is another. Transporting and housing the estimated 70 Secret Service agents who will flank the material girl will cost the taxpayers a pretty penny.

Go here for the complete story.

Justin Amash Links American Indians and Slaves With Palestinians in Occupied West Bank

From his letter to the editor of USA Today in March 2006:

The sad truth is that although not having a history of democracy bears little significance on whether a group desires, deserves or can handle freedom, people have long used it as an excuse to support the abrogation of liberty. It is the excuse that many Americans once used to justify the enslavement and oppression of indigenous people and African-Americans. It is the excuse that many people use today to justify Israel's nearly 40-year occupation of the Palestinian West Bank.

Read the complete letter here.

Justin Amash, Congressional Primary Winner, is a Christian Arab

According to this source:

Most of the candidates and elected officials we interviewed cited voter prejudice as a challenge. The only exceptions are Justin Amash, a first term Michigan House Representative who is a third generation Christian Arab, and Abdul Al-Haidous, mayor of City of Wayne. Amash is a young politician, who regularly attends an Arab American church, but who would be difficult to identify as an Arab from his looks, behavior or accent. He is elected from a district that does not have many Arab Americans and is not vocal and active on Arab American issues.

A Rival Electoral College

As we pointed out previously, the National Popular Vote Campaign is an extra-constitutional end run around the constitution's designated amendment process which seeks to replace the constitutionally prescribed electoral college with a rival process in which states agree to cast their electoral votes for the winner of the popular vote nationally.

Is this not a form of sedition, indeed a revolt, against our long-accepted "federal democracy"? Jeff Jacoby is right to style the rival proposal a "national democracy," utterly foreign to our experience.

He also rightly points out for The Boston Globe in "Massachusetts for Palin?" that the new process would have nullified the votes of Massachusetts voters by awarding their electoral college votes to Republican winners of the popular vote nationally, like Richard Nixon and George Herbert Walker Bush, when they had voted instead for liberal Democrats, like George McGovern and Michael Dukakis.

Jacoby's assessment coheres with our own:

Massachusetts is the sixth state to approve this end run around the Constitution, following Illinois, New Jersey, Hawaii, Maryland, and Washington. It is no coincidence that all six are Democratic strongholds. The movement is fueled by lingering Democratic resentment of George W. Bush, and of the Electoral College system that made him president in 2000, even though Al Gore drew more popular votes. It is a comical irony that if the compact ever goes into effect, its only practical impact in these states will be to occasionally award their presidential electors to the Republican nominees their voters reject.

But the other side of the coin is that in 2008, just two of the eleven largest states by population went Republican, and just three of the next largest ten. The situation for them in 2008 would have been just the reverse under the National Popular Vote scheme, and Republican majorities in Texas, Georgia, Tennessee, Missouri and Arizona would have seen their electoral votes cast for Obama, not McCain.

To quote a famous ex-president: "That doesn't make any sense."

THEY MUST HAVE RUN THE TAPE LIKE HELL TODAY TO BEAT THE BAD GDP NEWS

Because for all intents and purposes, the markets closed unchanged.

The first estimate of Q2 2010 GDP was released today: 2.4%. Pretty weak.

Q1 GDP was revised up to 3.7% from 2.7%. Go figure. In April the estimate was 3.2%. Then in May it was down to 3%. By June it was down to 2.7%. Now we're back up all the way to 3.7%. Who believes this stuff?!

Q4 2009 was reported today at 5%. That's down from 5.7% in April.

Worst of all, perhaps, 2009 overall was revised downward. It had been thought the economy shrank last year at 2.4%. Now the estimate is that it shrank 2.6%, despite the late surge in Q4. "The steepest drop since 1946," according to this story, which goes on to say 3% growth at least is needed just to keep up with population growth.

Look out below!

TALK OF CAESARS . . . AND OTHER SUCH LIKE

In this editorial, "Will Washington's Failures Lead To Second American Revolution?" by Mr. Christian and Mr. Robbins, the first sentence alone deserves reproduction for its grasp of the present day political reality on the ground, which is that the revolution is of Obama's making, and the reaction it has caused seeks to prevent it:

The Internet is a large-scale version of the "Committees of Correspondence" that led to the first American Revolution — and with Washington's failings now so obvious and awful, it may lead to another.

People are asking, "Is the government doing us more harm than good? Should we change what it does and the way it does it?"

Pruning the power of government begins with the imperial presidency.

Too many overreaching laws give the president too much discretion to make too many open-ended rules controlling too many aspects of our lives. There's no end to the harm an out-of-control president can do.

The rest tells you how. Don't miss it, here.

"The Constitution Recognizes That People Are Swine"

Just a little reminder today that there is a kind of hope which is justified: that misguided people can change their minds. In the old days, it was called repentance:

For the Constitution, rather than suggesting that all behave in a godlike manner, recognizes that, to the contrary, people are swine and will take any opportunity to subvert any agreement in order to pursue what they consider to be their proper interests.

To that end, the Constitution separates the power of the state into those three branches which are for most of us (I include myself) the only thing we remember from 12 years of schooling.

The Constitution, written by men with some experience of actual government, assumes that the chief executive will work to be king, the Parliament will scheme to sell off the silverware, and the judiciary will consider itself Olympian and do everything it can to much improve (destroy) the work of the other two branches. So the Constitution pits them against each other, in the attempt not to achieve stasis, but rather to allow for the constant corrections necessary to prevent one branch from getting too much power for too long.

Rather brilliant.

If you haven't read the rest of David Mamet's 2008 essay, "Why I Am No Longer A 'Brain-Dead Liberal'" in The Village Voice, you owe it to yourself to do so. Here it is.

h/t Terry Teachout@commentarymagazine.com

ANOTHER ATTEMPTED END RUN AROUND THE CONSTITUTION

People who think one state, Florida, jammed an unwanted president down the throats of the American people in the year 2000 now want to make sure this happens more frequently, but on a broader scale. If you can't beat 'em, join 'em, I guess. It's called the National Popular Vote (NPV) campaign, an innovation of recent provenance whose latest progress is in Massachusetts, reported here.

I think these people are motivated by a vendetta against George Bush. They still can't get over the guy, and it makes absolutely no difference to them that the country ratified Florida's decision in 2000 by re-electing George Bush decisively in 2004. 

Massachusetts is about to join five other states in what is really an attempted power grab for the Democrat party. I say they are a pestilence on the body politic, and it's time to stop them before more states join Illinois, New Jersey, Hawaii, Maryland, Washington and Massachusetts and attempt to sully a presidential election and throw the country into another constitutional crisis.

Imagine what would happen if enough states with 270 electoral votes got together to agree to this, and tried to force their will on the rest of us because their states individually voted to do so. Can you imagine your president elected by just 11 states? That's all it would take under their proposal: California, Texas, New York, Florida, Illinois, Pennsylvania, Ohio, Michigan, New Jersey, North Carolina and Georgia, the eleven most populous states with 271 electoral college votes in all. Do you want them deciding who your president should be?

In 2008, only Texas and Georgia went Republican, giving the Democrats 222 electoral votes. Of the next ten most populous states, Virginia, Massachusetts, Tennessee, Missouri, Washington, Indiana, Minnesota, Arizona, Maryland and Wisconsin, only Tennessee, Missouri and Arizona went Republican, giving the Democrats another 77 electoral college votes, more than enough to win.

So in any given election, just 21 of the 50 states could control the outcome of the election, with Democrats highly favored to win the White House every time, by a margin of 299 to 81 in those states. The supporters of the NPV complain that under the present arrangement where it's "winner takes all electoral votes," more or less, in 48 states, elections get determined by battleground states, where candidates actually have to compete for votes. The horror. Their solution? Eliminate the battle.

These five, and now six, states don't want to award their electoral college votes based on who won the election in their respective states, but rather to the winner of the most votes nationally, so that not only can the will of the people of their own states be subverted if necessary, but the will of other states as well, for that is what this revolution of elections would accomplish. It marginalizes the 29 states with fewer than 10 electoral votes by telling them their votes for president don't matter.

And it is easy to imagine a situation where the voters in a state are told that even though they voted for president X the electors of their state are going to vote for president Y because their state is a party to the NPV sponsored law which requires them to cast their votes for the overall winner. It is amusing to imagine electors attempting to hide behind the skirts of this law in this way and pointing the finger at voters in another state exclaiming "They made me do it!"  

The constitution is deliberately arranged as it is to protect the smaller states by population from being lorded over by the states with the larger. That is why even the smallest states have two senators, same as the largest do, to act as a counterweight to the power and interests of the larger states. That is also why changes to the constitution must be approved by states, 75% of them, not popular majorities. The NPV is an end run around this amendment process, which stands in the way of changing the electoral college system, the real enemy of the NPV. On those grounds alone it should be challenged in court as an extra-constitutional attempt to change the constitution. 

Can you imagine a country where a minority of states vote to ignore the electoral college system and try to force their president on the majority? To do so really would be to create two countries, because what the NPV campaign does in actuality is create a rival electoral college. If that isn't seditious, I don't know what is. 

Peter at Bayou Renaissance Man frames the issue helpfully:

The fourth and most worrying element of the NPV campaign, in my eyes, is that it's a blatant attempt to bypass the Constitution of the United States. The provision of an Electoral College is a federal, constitutional matter, not determined by each individual State. You'll find it in Article II, Section 1 of the Constitution, as modified by the 12th, 20th and 25th Amendments. If we want to change that (or any other) part of the Constitution, there's a mechanism provided to do so (Article 5). The NPV campaign ignores this altogether, and seeks to alter the way in which individual States allocate their electoral college votes without modifying the Constitution itself.

Appropriately quoted in the Boston Globe article, linked above, is Massachusetts Senate minority leader Richard Tisei, who says: "The thing about this that bothers me the most is it's so sneaky. This is the way that liberals do things a lot of times, very sneaky. This is sort of an end run around the Constitution."

Truer words were never spoken.

George Will, National Treasure, Font of American Wisdom

Some excerpts from his address to The CATO Institute in May:

We are not Europeans. We are not, in Orwell's phrase, a "state-broken people."

It is a principle of liberal social legislation that a program for the poor is a poor program.

[D]ependency is the agenda of the other side.

I believe that today, as has been the case for 100 years, and as will be the case for the foreseeable future, the American political argument is an argument between two Princetonians: James Madison of the class of 1771, and Thomas Woodrow Wilson of the class of 1879.

The very virtue of a constitution is that it's not changeable. It exists to prevent change, to embed certain rights so that they cannot easily be taken away.

Madison said rights pre-exist government. Wilson said government exists to dispense whatever agenda of rights suits its fancy, and to annihilate, regulate, attenuate, or dilute others.

We are going to come to a time when America is going to have to revisit Madison's Federalist Paper no. 45, and his statement, "The powers delegated by the proposed Constitution to the federal government are few and defined."

Gridlock is not an American problem, it is an American achievement!

[W]e always have more to fear from government speed than government tardiness.

We are told that one must not be a "Party of No." To "No," I say an emphatic "Yes!"

[T]he most beautiful five words in the English language are the first five words of the First Amendment, "Congress shall make no law."

The Bill of Rights is a litany of "No's."

The American people are, I think, healthier than they are given credit for. They have only one defect. They have nothing to fear, right now, but an insufficiency of their fear itself. It is time for a wholesome fear of what people with a dependency agenda are trying to do. We have few allies. We don't have Hollywood, we don't have academia, and we don't have the mainstream media. But we have two things. First, we have arithmetic. The numbers do not add up, and cannot be made to do so. Second, we have the Cato Institute. The people in this room are what the Keynesians call "a multiplier." And, for once, they are right!

Don't miss the rest at the link!

OBAMA'S LAZY CLEAN AIR AND ENERGY POLICIES

The Associated Press is reporting today "President Barack Obama wants federal workers to cut down on business travel and commuting by car as he seeks to reduce heat-trapping emissions produced by the federal government." Remarkably, the report indicates "the federal government is the largest energy consumer in the US economy," which does make sense when you consider that with 2.7 million employees, it's also the biggest employer. By using mass transit, Obama thinks emissions like CO2 can be reduced by federal commuters by 13% in the next ten years, which doesn't make much sense. The federal vehicle fleet comes to about 600,000 vehicles, so that leaves a minimum of 2.1 million federal workers who aren't all going to be fitting on the Washington Metro, the expansion plans for which involve only a million daily riders by 2030. The rest will have to take . . . the bus?

More to the point about clean air, is Obama so uninformed that he doesn't know that CO2 emissions from CNG (compressed natural gas) vehicles are nearly 40% fewer than from  conventionally powered ones? Does he realize that barely 1% of the federal fleet uses CNG (just 6,472 vehicles)? Does he know that 8-11 million vehicles worldwide use CNG, but that in the US there are only 150,000 doing so, most of which are buses? Does he know that huge deposits of shale gas in this country have been discovered in just the last few years, giving us 45 years of energy independence, if we want it? Does he know that Honda Motor Company already has quite a long history of successful production of its CNG powered Civic, sold now in several states besides California?

Has he ever looked at this map of the existing infrastructure for the US natural gas pipeline network and pondered its potential?

Every passing day proves that Obama is a man without a grip on reality, and with very little imagination.

FORWARD EARNINGS ANALYSTS ON AVERAGE 100% TOO OPTIMISTIC

Mish has a good post here citing a new study which shows that forecasts of S&P 500 companies' earnings by analysts over the last twenty-five years have been wildly and consistently off, on average too high by 100%.

He mentions five factors, not the least of which is talking their book.

Salesmen.