Friday, October 24, 2008
Elk Season
I will be in Oregon for the next week or so stalking the elusive Spike Elk. I will be mobile blogging here: http://sinnersaremuchmorefun.blogspot.com/ whenever I have service enough to send pics and posts. I will be in Oregon for the election but will be out of the woods by next Sunday so I'll try to post more here after that.
Thursday, October 23, 2008
Tuesday, October 21, 2008
A Note on Growth
Just an update to my previous post addressing Robert Skidelsky's article, if we had followed his beloved Keynesian economic model and experienced the stable 3.2percent growth he is so enamored with... The Dow would be in the mud 3000s today. How would your retirement account look then?
Monday, October 20, 2008
The John Kerry of the Republican Party
When the Democrats have a veto proof super majority just remember that the Republican party did this to you.
Wednesday, October 15, 2008
Dead Economics Rearing it's Ugly Head
Robert Skidelsky supposes in the Washington Post yesterday that economist John Maynard Keynes' economic theories would aptly have predicted the current financial crisis, and ostensibly prevented it. Skidelsky couldn't be more wrong nor more misguided. It's not a mystery that as a Keynes biographer Skidelsky would take this opportunity to hawk the Keynesian ideology but he does so with an obvious lack of understanding of both the effects of Keynesian economics nor the theories he claims to debunk.
He writes:
"...what is in even shorter supply than credit is an economic theory to explain why this financial tsunami occurred, and what its consequences might be. Over the past 30 years, economists have devoted their intellectual energy to proving that such disasters cannot happen. The market system accurately prices all trades at each moment in time. Greed, ignorance, euphoria, panic, herd behavior, predation, financial skulduggery and politics -- the forces that drive boom-bust cycles -- only exist off the balance sheet of their models."
The forces to which he is referring can be summed up in one phrase, the title of one of Ludwig Von Mises' seminal works Human Action, and to suggest that Keynes discovered some magical theory for predicting human action is more than misleading. Keynes as we can recall has been shown the architect and follower of a school of economics long since discredited as the type of policy that made the Great Depression last as long as it did. Keynes in fact advocated the kind of price manipulation that led us to the situation we are in today.
Skidelsky further writes:
"It held that governments should vary taxes and spending to offset any tendency for inflation to rise or productivity to fall. And for roughly 25 years -- from 1950 to 1975 -- they did. The developed world grew at an average annual rate of 3.2 percent without a business cycle, with very moderate inflation, and without the benefit of the huge rewards now deemed necessary to keep executives properly incentivized."
Bold times to reference until you considering the fact that such growth is modest at best when compared to a skyrocketing workforce and massive post war productivity. While inflation was stable during that time period it is important to understand that most of the inflation our economy was creating was exported along with the goods and services we sold to other nations whose infrastructures were recovering from the physical effects of a war we did not see on our soil.
"Plagued by inflation, governments around the world took up Friedman's monetarism, which maintained that inflation was due to governments' printing too much money. Central banks were made independent (the Fed already was) and were given the single task of keeping prices stable. Moreover, financial innovation in increasingly deregulated markets was said to make investment less and less risky"
While Friedman did advocate the policies that the FED has used to manage deflation. It's important though to understand that Friedman's monetarism was an answer to the failings of the Keynesian model, not simply an opposing viewpoint but an attempt to fix the failings within his framework. And further that it was not the absence of market manipulation simply manipulation through monetary policy and not fiscal policy. Suggesting that returning to Keynes from Friedman is like returning to the horse and buggy to improve vehicle fuel economy. Keynes didn't oppose market manipulation in fact he loved it, he simply believed in manipulation through the other end of the IS-LM framework. Keynes wanted to manipulate the market through the government's fiscal policy (government taxes and expenditures). That's an important distinction to make when you examine Congress' roll in creating lending policy and in it's encouragement and backing of Fannie May and Freddie Mac. We are in this situation in large part because of the kind of management that Keynes advocated.
"The price level is not a leading, but a lagging, indicator. Asset bubbles can coexist with a stable price level, even while the rest of the economy is starting to slide into depression."
Price is in fact a much more tuned indicator than Skidelsky suggests and while correct that it is not a leading indicator it is the first indicator in a market where it is properly allowed to do it's important job. Price, for instance would and did predict the current crises. The price of homes and mortgages took a drastic and unrealistic upturn while becoming inexplicably dissected from it's usual bedfellow; the rental price indexes. When home prices became separated drastically from rental prices it was an all too obvious indicator of things to come and free market economists have been screaming about it for years now.
He quotes Keynes
"Money, he argued, was being switched from production to speculation. The rich were getting very much richer, while the incomes of the rest were stagnating. "Profit inflation," fueled by collateralized debt, coexisted with an "income deflation.""
And here while he isn't entirely wrong about the events that occurred it is beyond obscene to suggest that the economy of the 1920's with years of prolonged negative growth, resembles the positive growth we have seen even this year in times of turmoil. What's more is that it's clearly not the same kind of "speculation" dissected from production when our economy is booming with production in a great many sectors. While it's true that wages have stagnated recently it's not in the neighborhood of the kind of stagnation that Keynes saw and responded to.
Skidelsky is correct that the most modern economic models do not predict with great accuracy things like what we have seen this year in our economy. That is as we expect because math has a very tough time predicting the very important elements of a person's full (not just financial) self interest, nor the choices that people will make when given the opportunity. Skidelsky is wrong however to suggest that Keynesian models would have predicted this; unless taken as such a vague suggestion that in 'this kind of market instability exists'. What's more important is to note that under Keynesian market management growth, prosperity, and market innovation are greatly stifled by fiscal policy constantly, and with only the vague hope of preventing the short moments of market instability that naturally occur. Regulatory market manipulation, the likes of which Keynes advocated contributed untold force to the current economic situation in this country and only the market and it's vast ability to re-connect prices with their intended properties of communication and incentive, will restore order.
The answer is not simply a return to one form of market manipulation over another. The answer is to implement policies that allow markets to experience the natural adjustments that occur when prices are out of equilibrium with real value. The Austrian model suggests just that. In the theories of F.A. Hayek and Ludwig Von Mises we would see not only the prediction Skidelsky wishes for but also the acceptance that in the long run the market will ebb and flow, prices will inflate and deflate, naturally in order to maintain proper and efficient relationships between producers, consumers, workers, employers and investors.
The problem Mr. Skidelski isn't the wrong manipulation, it is that manipulation is wrong.
He writes:
"...what is in even shorter supply than credit is an economic theory to explain why this financial tsunami occurred, and what its consequences might be. Over the past 30 years, economists have devoted their intellectual energy to proving that such disasters cannot happen. The market system accurately prices all trades at each moment in time. Greed, ignorance, euphoria, panic, herd behavior, predation, financial skulduggery and politics -- the forces that drive boom-bust cycles -- only exist off the balance sheet of their models."
The forces to which he is referring can be summed up in one phrase, the title of one of Ludwig Von Mises' seminal works Human Action, and to suggest that Keynes discovered some magical theory for predicting human action is more than misleading. Keynes as we can recall has been shown the architect and follower of a school of economics long since discredited as the type of policy that made the Great Depression last as long as it did. Keynes in fact advocated the kind of price manipulation that led us to the situation we are in today.
Skidelsky further writes:
"It held that governments should vary taxes and spending to offset any tendency for inflation to rise or productivity to fall. And for roughly 25 years -- from 1950 to 1975 -- they did. The developed world grew at an average annual rate of 3.2 percent without a business cycle, with very moderate inflation, and without the benefit of the huge rewards now deemed necessary to keep executives properly incentivized."
Bold times to reference until you considering the fact that such growth is modest at best when compared to a skyrocketing workforce and massive post war productivity. While inflation was stable during that time period it is important to understand that most of the inflation our economy was creating was exported along with the goods and services we sold to other nations whose infrastructures were recovering from the physical effects of a war we did not see on our soil.
"Plagued by inflation, governments around the world took up Friedman's monetarism, which maintained that inflation was due to governments' printing too much money. Central banks were made independent (the Fed already was) and were given the single task of keeping prices stable. Moreover, financial innovation in increasingly deregulated markets was said to make investment less and less risky"
While Friedman did advocate the policies that the FED has used to manage deflation. It's important though to understand that Friedman's monetarism was an answer to the failings of the Keynesian model, not simply an opposing viewpoint but an attempt to fix the failings within his framework. And further that it was not the absence of market manipulation simply manipulation through monetary policy and not fiscal policy. Suggesting that returning to Keynes from Friedman is like returning to the horse and buggy to improve vehicle fuel economy. Keynes didn't oppose market manipulation in fact he loved it, he simply believed in manipulation through the other end of the IS-LM framework. Keynes wanted to manipulate the market through the government's fiscal policy (government taxes and expenditures). That's an important distinction to make when you examine Congress' roll in creating lending policy and in it's encouragement and backing of Fannie May and Freddie Mac. We are in this situation in large part because of the kind of management that Keynes advocated.
"The price level is not a leading, but a lagging, indicator. Asset bubbles can coexist with a stable price level, even while the rest of the economy is starting to slide into depression."
Price is in fact a much more tuned indicator than Skidelsky suggests and while correct that it is not a leading indicator it is the first indicator in a market where it is properly allowed to do it's important job. Price, for instance would and did predict the current crises. The price of homes and mortgages took a drastic and unrealistic upturn while becoming inexplicably dissected from it's usual bedfellow; the rental price indexes. When home prices became separated drastically from rental prices it was an all too obvious indicator of things to come and free market economists have been screaming about it for years now.
He quotes Keynes
"Money, he argued, was being switched from production to speculation. The rich were getting very much richer, while the incomes of the rest were stagnating. "Profit inflation," fueled by collateralized debt, coexisted with an "income deflation.""
And here while he isn't entirely wrong about the events that occurred it is beyond obscene to suggest that the economy of the 1920's with years of prolonged negative growth, resembles the positive growth we have seen even this year in times of turmoil. What's more is that it's clearly not the same kind of "speculation" dissected from production when our economy is booming with production in a great many sectors. While it's true that wages have stagnated recently it's not in the neighborhood of the kind of stagnation that Keynes saw and responded to.
Skidelsky is correct that the most modern economic models do not predict with great accuracy things like what we have seen this year in our economy. That is as we expect because math has a very tough time predicting the very important elements of a person's full (not just financial) self interest, nor the choices that people will make when given the opportunity. Skidelsky is wrong however to suggest that Keynesian models would have predicted this; unless taken as such a vague suggestion that in 'this kind of market instability exists'. What's more important is to note that under Keynesian market management growth, prosperity, and market innovation are greatly stifled by fiscal policy constantly, and with only the vague hope of preventing the short moments of market instability that naturally occur. Regulatory market manipulation, the likes of which Keynes advocated contributed untold force to the current economic situation in this country and only the market and it's vast ability to re-connect prices with their intended properties of communication and incentive, will restore order.
The answer is not simply a return to one form of market manipulation over another. The answer is to implement policies that allow markets to experience the natural adjustments that occur when prices are out of equilibrium with real value. The Austrian model suggests just that. In the theories of F.A. Hayek and Ludwig Von Mises we would see not only the prediction Skidelsky wishes for but also the acceptance that in the long run the market will ebb and flow, prices will inflate and deflate, naturally in order to maintain proper and efficient relationships between producers, consumers, workers, employers and investors.
The problem Mr. Skidelski isn't the wrong manipulation, it is that manipulation is wrong.
Monday, October 13, 2008
On Paul Krugman
Peter J. Boettke discusses just some of the reasons the choice of Paul Krugman for the Nobel Prize in Economics is a terrible idea.
The Worst News Yet
PAUL KRUGMAN WINS THE NOBEL PRIZE?
This bodes very poorly for the future of our society. Paul Krugman writes an Op-Ed column for the New York Times, has taught at Yale, MIT and is currently a professor at Princeton. He's also a commie.
In his recent book The Conscience of a Liberal he writes;
"My generation grew up in a nation of strong democratic values and broadly shared prosperity. But both those values and that shared prosperity have been slipping away.
"We can reverse that trend. Political and economic reform turned the oligarchic America of the Gilded Age, a place of vast inequality, bigotry, and corruption, into the imperfect but far better society of the postwar era. The challenge now is to do again what the New Deal did: to create institutions that will support and sustain a decent society."
Are you kidding me? The Nobel Prize for a man who advocates a return to the socialist economic policies that the economics world widely regards as the very thing that kept us in the Great Depression for so long? A man alive during our time, who can actually watch the failure of entitlement ideology like Social Security and still advocates a return to that kind of policy?
Paul Krugman just last night applauded the EU for massive bank nationalizations. This is stupider than when the Nobel went to Gore for learning to use Power-Point.
This bodes very poorly for the future of our society. Paul Krugman writes an Op-Ed column for the New York Times, has taught at Yale, MIT and is currently a professor at Princeton. He's also a commie.
In his recent book The Conscience of a Liberal he writes;
"My generation grew up in a nation of strong democratic values and broadly shared prosperity. But both those values and that shared prosperity have been slipping away.
"We can reverse that trend. Political and economic reform turned the oligarchic America of the Gilded Age, a place of vast inequality, bigotry, and corruption, into the imperfect but far better society of the postwar era. The challenge now is to do again what the New Deal did: to create institutions that will support and sustain a decent society."
Are you kidding me? The Nobel Prize for a man who advocates a return to the socialist economic policies that the economics world widely regards as the very thing that kept us in the Great Depression for so long? A man alive during our time, who can actually watch the failure of entitlement ideology like Social Security and still advocates a return to that kind of policy?
Paul Krugman just last night applauded the EU for massive bank nationalizations. This is stupider than when the Nobel went to Gore for learning to use Power-Point.
Tuesday, October 07, 2008
SNL is Sometimes Balanced
Of course when you watch the re-edited version on NBC's website you'll notice that certain parts including a personal interaction between a subprime lender's wife and Nance Pelosi have been edited out. NBC claims that the skit has been edited for 'legal reasons' but that doesn't stand up. It's clear the skit has been edited to lessen the implication that the Democrats in congress were personally involved with the beneficiaries of the inequitable profits in the failing mortgage market. Also removed was the title for the mortgage subprime lenders calling them "people who deserve to be shot". Which is an understandably irresponsible thing to put on tv and likely was removed to assuage the risk of litigation against NBC should subprime lenders actually be shot by disgruntled citizens.
What Do We Do Now
Alright I've railed against the bailout quite a bit and I have tried to shed a little light on how we ended up in this mess in the first place. So to recap I have presented exactly dick for useful information for the average person and for their future. Sure maybe I have had a positive impact on how you might vote against the scummy dirtbags that voted to piss away your money, but as of now I have presented next to no real advice.
So here it is.
DONT PANIC...
In case I wasn't clear I'll repeat
DONT PANIC...
Alright now that I know you have ignored that advice here's a little more. If you absolutely need complete liquidity in the next five years, if you will completely divest yourself of your stock portfolio due to some overwhelming liquidity need, then get out of the stock market right now. I'm not arriving at this decision by myself, in fact I may have been swayed by Jim Cramer. Cramer has to be smarting in part due to his massive public attempt to draw attention to this impending financial crisis in August of last year. It must be the hardest time to find out you were completely right.
With that said and out there, if you do not need to completely liquidate your portfolio in the next five years, DO NOT PANIC. Stay right where you are and take a very long hard look at the holdings in your portfolio. If you own stock in the specific institutions that are going bankrupt, you will likely lose money. If you have high risk venture capital in your portfolio you will probably lose money. Now is the time to pay very close attention to the stable choices in your portfolio and reinforce them. If you own stock in well established, long standing companies with substantial physical resources, stay put, do not bail on those investments. If anything pull together liquid capital and standby to move into markets where the index driven market fears have driven prices to unusual lows but where balance sheets remain intact. This can be the best opportunity for substantive growth in your investment based income you will ever see if you have the time, the patience and the fortitude to ride this out.
Remember if the worst fears come true, which they wont, then it doesn't matter what you do with your money. If they don't come true, which they won't, then the best thing to do is find shelter in long term stable investments, with companies that have real property. Don't invest in companies that make money by moving money, don't by shares in your bank. Soon we will see lows that we haven't seen in years and that's the right time to buy good strong companies. If you do own high risk stocks in financial institutions, take a very long hard look at them and if you need to take a loss to get out before they fall apart then do it, but by all means do not put the cash under your mattress, there are plenty of good companies with a history of weathering storms to shift into at a lower cost than you might ever see again.
As for Congress, we have a bailout allocation and while I'm going to continue to call for their resignations for this massive socialist takeover, now is the time for forward thinking. What do we do now, not last week, but this week? The FED is out of control and needs to be reigned in and while I don't trust a United States Congressman and further than I can throw him, the Congress is the only body in a position to implement some oversight into our currency policy. There's no time like the present. We must find a way to tie the FED's currency decisions to the market in order to prevent bubbles like this in the future. Next, and I am completely stealing this idea from Cramer, if we are going to spend $700b at a time buying these bad assets, then the government needs to renegotiate them one by one and find acceptable terms to keep people paying them off, and then needs to involve private businesses in buying the rebuilt mortgages for a fair price. There is room for the market to actually grow with this new process and if we let private business participate we may yet see an overall gain from it. I doubt highly the balance sheet at government program level will turn a profit here, but they may at least be able to break even while pumping positive growth into the economy. So while I oppose buying the debt in the first place, the government has the unique ability to bend the rules, adjust the value of the mortgages and resell them at real value instead of panic value. Lets all sit back and see if that's what they do. And pay attention this program will need to be revoked at some point. We pass this garbage and then forget about it, we need to keep tight watch over it. Remember the income tax was originally designed to pay back debt from the Spanish American War. I'm not sure but I think we payed that back, but the tax is still going strong.
The next step, and one that congress should take seriously in it's lame duck session in November is to restructure the lending laws to allow institutions to implement any form of lending discrimination they see fit and let the market pick which banks get the loans. Work to find a way to make sense of bundled debt and if any new regulation is required, let it be that risk assessment criteria must be included with each individual debt bundle when it is resold.
And finally we need to make damned sure that Washington feels in it's pockets the hard hitting disapproval of their constituents. If you can't vote for your sitting Congressman's opponent because his party or policy disagrees with your ideology then by all means under vote the slot. Cast a ballot and don't mark a choice in that race. If you can vote for a third party, do it. If your Congressman or Senator made the right choice in this case, call them and let them know, then vote for them in Nov. We may not shift the outcome of the election cycle drastically this year with this effort, but we can shift the debate and we can get them running scared.
And by all means...
DONT PANIC
So here it is.
DONT PANIC...
In case I wasn't clear I'll repeat
DONT PANIC...
Alright now that I know you have ignored that advice here's a little more. If you absolutely need complete liquidity in the next five years, if you will completely divest yourself of your stock portfolio due to some overwhelming liquidity need, then get out of the stock market right now. I'm not arriving at this decision by myself, in fact I may have been swayed by Jim Cramer. Cramer has to be smarting in part due to his massive public attempt to draw attention to this impending financial crisis in August of last year. It must be the hardest time to find out you were completely right.
With that said and out there, if you do not need to completely liquidate your portfolio in the next five years, DO NOT PANIC. Stay right where you are and take a very long hard look at the holdings in your portfolio. If you own stock in the specific institutions that are going bankrupt, you will likely lose money. If you have high risk venture capital in your portfolio you will probably lose money. Now is the time to pay very close attention to the stable choices in your portfolio and reinforce them. If you own stock in well established, long standing companies with substantial physical resources, stay put, do not bail on those investments. If anything pull together liquid capital and standby to move into markets where the index driven market fears have driven prices to unusual lows but where balance sheets remain intact. This can be the best opportunity for substantive growth in your investment based income you will ever see if you have the time, the patience and the fortitude to ride this out.
Remember if the worst fears come true, which they wont, then it doesn't matter what you do with your money. If they don't come true, which they won't, then the best thing to do is find shelter in long term stable investments, with companies that have real property. Don't invest in companies that make money by moving money, don't by shares in your bank. Soon we will see lows that we haven't seen in years and that's the right time to buy good strong companies. If you do own high risk stocks in financial institutions, take a very long hard look at them and if you need to take a loss to get out before they fall apart then do it, but by all means do not put the cash under your mattress, there are plenty of good companies with a history of weathering storms to shift into at a lower cost than you might ever see again.
As for Congress, we have a bailout allocation and while I'm going to continue to call for their resignations for this massive socialist takeover, now is the time for forward thinking. What do we do now, not last week, but this week? The FED is out of control and needs to be reigned in and while I don't trust a United States Congressman and further than I can throw him, the Congress is the only body in a position to implement some oversight into our currency policy. There's no time like the present. We must find a way to tie the FED's currency decisions to the market in order to prevent bubbles like this in the future. Next, and I am completely stealing this idea from Cramer, if we are going to spend $700b at a time buying these bad assets, then the government needs to renegotiate them one by one and find acceptable terms to keep people paying them off, and then needs to involve private businesses in buying the rebuilt mortgages for a fair price. There is room for the market to actually grow with this new process and if we let private business participate we may yet see an overall gain from it. I doubt highly the balance sheet at government program level will turn a profit here, but they may at least be able to break even while pumping positive growth into the economy. So while I oppose buying the debt in the first place, the government has the unique ability to bend the rules, adjust the value of the mortgages and resell them at real value instead of panic value. Lets all sit back and see if that's what they do. And pay attention this program will need to be revoked at some point. We pass this garbage and then forget about it, we need to keep tight watch over it. Remember the income tax was originally designed to pay back debt from the Spanish American War. I'm not sure but I think we payed that back, but the tax is still going strong.
The next step, and one that congress should take seriously in it's lame duck session in November is to restructure the lending laws to allow institutions to implement any form of lending discrimination they see fit and let the market pick which banks get the loans. Work to find a way to make sense of bundled debt and if any new regulation is required, let it be that risk assessment criteria must be included with each individual debt bundle when it is resold.
And finally we need to make damned sure that Washington feels in it's pockets the hard hitting disapproval of their constituents. If you can't vote for your sitting Congressman's opponent because his party or policy disagrees with your ideology then by all means under vote the slot. Cast a ballot and don't mark a choice in that race. If you can vote for a third party, do it. If your Congressman or Senator made the right choice in this case, call them and let them know, then vote for them in Nov. We may not shift the outcome of the election cycle drastically this year with this effort, but we can shift the debate and we can get them running scared.
And by all means...
DONT PANIC
Monday, October 06, 2008
Drowned By the Anchor
Some people have been asking me of late why it is that such a small portion of the Mortgage market falling into default can bring down the entire economy. I'm not an economics genius but I know a few and am more than willing to henpeck their ideas in order to make my analysis of the situation seem more reasonable than it might have in the first place. I don't have a PHD but I assume that the shameless rape of another person's ideas in order make to make yours seem more plausible, if only by the manipulation of context and syntax, is the highest road to intellectual development. The same is most certainly true of religious zealotry and I can't imagine that higher education and the church differ all that much in their methods.
So I will attempt to make sense of how a relatively small shift in one area of the market can inject the kind of issues we've seen this month. The answer is not drastic shifts in actual money as one might imagine being necessary. The answer is quite reasonably uncertainty. The stock market and most other forms of trade based solely on the movement of money and not real goods, is simply like most markets a place for the exchange of risk from one source to another. Risk is the central theme of it all and is the means by which fortunes are made on Wall Street. For example if I have a company and want to try and make it bigger and better I need to invest money into it, if I invest all my own money I get all the profit but also take all the risk should my endeavor fail. If I offer a percentage of the business up for sale in the form of stock (or any number of other forms) I allow the business to be propped up on another person's money, in exchange for them sharing the risk, they also share in the possible profit. The end result is a positive one for the most part as a well examined risk is one that can be worth taking for the investor and the needed capital can be the thing that makes my business successful for both me and my investors. The problem is that when external factors to that arrangement constrain one or both parties from examining the risk they are buying, then the unknown risks make investment scary and scared investors don't invest.
To bring this into our mortgage 'crisis' scenario think of it this way; Fannie and Freddie by urging and by regulation sent a message to the lending community that they were willing to purchase any debt no matter how high the risk, as long as that debt contained the right quantity of people fitting the right physical description. That of course being an address in the poorest, least fortunate neighborhoods. In order to make the sales of these high risk assets worth while up the food chain, they had to be bundled with large quantities of low risk loans. When bundled together and sold over and over again from one lending institution to another the street level risk gets lost in a pile of numbers that average with other numbers repeatedly. The influx of loose cash on the housing market drove prices up as one would imagine. One of the things about the housing industry is that it has historically been a safe place to invest money for moderate growth over any period of time. In this case a drastic increase in capital without a corresponding increase in wages, meant that people were buying beyond their means. Functionally what we saw was a price increase driven solely by an increase in the number of people participating in the real estate market, not by actual economic growth or prosperity. All of this predicated on 'guarantees' issued by government backed lending institutions to buy all this higher risk debt.
But we know this already because you and I have a television or a radio and haven't heard anything but this for weeks.
But it's not a huge quantity of default. Sure a ton of people have loans that will be larger than the actual value of their homes for a very long time, but most are still making payments on those loans. Why then is the disaster afoot? It's simple really, the bundling of those high risk loans with other loans throughout the market and the sale of those bundled products repeatedly throughout the market have taken away any simple method for assessing the risk in any individual package of debt. With no firm way to assess risk there's no way to set a scale for acceptable loss, there is no way to set a fair price for sale. No one knows which packages of debt have the most high risk debt and which have the least. Nobody buys uncertain risk at a reasonable price. So thousands upon thousands of good loans are on the market for way below market price and people still aren't buying. Banks who responsibly wish to protect the real assets of their depositors are hesitant to lend money to other banks on the basis of the wild level of uncertainty in their real assets.
Bluntly, you can't see from the outside of these packages if there's more anchor than boat and nobody wants to take the risk. When people aren't willing to take risks businesses stop working.
How the government thinks they have any better shot at picking out the bad risk than the financial institutions holding the packages is beyond me.
Or maybe I'm reading everything wrong.
So I will attempt to make sense of how a relatively small shift in one area of the market can inject the kind of issues we've seen this month. The answer is not drastic shifts in actual money as one might imagine being necessary. The answer is quite reasonably uncertainty. The stock market and most other forms of trade based solely on the movement of money and not real goods, is simply like most markets a place for the exchange of risk from one source to another. Risk is the central theme of it all and is the means by which fortunes are made on Wall Street. For example if I have a company and want to try and make it bigger and better I need to invest money into it, if I invest all my own money I get all the profit but also take all the risk should my endeavor fail. If I offer a percentage of the business up for sale in the form of stock (or any number of other forms) I allow the business to be propped up on another person's money, in exchange for them sharing the risk, they also share in the possible profit. The end result is a positive one for the most part as a well examined risk is one that can be worth taking for the investor and the needed capital can be the thing that makes my business successful for both me and my investors. The problem is that when external factors to that arrangement constrain one or both parties from examining the risk they are buying, then the unknown risks make investment scary and scared investors don't invest.
To bring this into our mortgage 'crisis' scenario think of it this way; Fannie and Freddie by urging and by regulation sent a message to the lending community that they were willing to purchase any debt no matter how high the risk, as long as that debt contained the right quantity of people fitting the right physical description. That of course being an address in the poorest, least fortunate neighborhoods. In order to make the sales of these high risk assets worth while up the food chain, they had to be bundled with large quantities of low risk loans. When bundled together and sold over and over again from one lending institution to another the street level risk gets lost in a pile of numbers that average with other numbers repeatedly. The influx of loose cash on the housing market drove prices up as one would imagine. One of the things about the housing industry is that it has historically been a safe place to invest money for moderate growth over any period of time. In this case a drastic increase in capital without a corresponding increase in wages, meant that people were buying beyond their means. Functionally what we saw was a price increase driven solely by an increase in the number of people participating in the real estate market, not by actual economic growth or prosperity. All of this predicated on 'guarantees' issued by government backed lending institutions to buy all this higher risk debt.
But we know this already because you and I have a television or a radio and haven't heard anything but this for weeks.
But it's not a huge quantity of default. Sure a ton of people have loans that will be larger than the actual value of their homes for a very long time, but most are still making payments on those loans. Why then is the disaster afoot? It's simple really, the bundling of those high risk loans with other loans throughout the market and the sale of those bundled products repeatedly throughout the market have taken away any simple method for assessing the risk in any individual package of debt. With no firm way to assess risk there's no way to set a scale for acceptable loss, there is no way to set a fair price for sale. No one knows which packages of debt have the most high risk debt and which have the least. Nobody buys uncertain risk at a reasonable price. So thousands upon thousands of good loans are on the market for way below market price and people still aren't buying. Banks who responsibly wish to protect the real assets of their depositors are hesitant to lend money to other banks on the basis of the wild level of uncertainty in their real assets.
Bluntly, you can't see from the outside of these packages if there's more anchor than boat and nobody wants to take the risk. When people aren't willing to take risks businesses stop working.
How the government thinks they have any better shot at picking out the bad risk than the financial institutions holding the packages is beyond me.
Or maybe I'm reading everything wrong.
Saturday, October 04, 2008
October Surprise?
Biden on the way out?
In private a month or so ago I predicted a scenario when things got desperate enough for the Obama campaign that Senator Biden would suddenly have a tragedy in the family that took him out of the race and the only acceptable replacement would be Hillary. At the time I made that prediction Obama's post convention numbers were nothing like they should be considering trends and historical averages. Most of that was due to the Palin addition to McCain's camp. Today it was announced that Biden would be missing some stops including a rally in Virginia due to the terminal nature of his mother-in-law's current condition. Comment pools in online news sources are starting to grow momentum for the idea that this is the time to swap VP choices. I just don't see it.
When I made that prediction the conditions were a moment of desperation, and Biden presenting a serious lag on the campaign. Right now that's not the case and while I'm sure Obama kicked himself several times for his 'safe' VP choice I seriously doubt that a 7 point lead and a strong momentum in swing states is the time to make that change. I doubt highly that Hillary would accept the offer if the campaign wasn't in a very weak position (making her look like the D's shining hero). And I doubt very highly that the chosen family emergency would be the passing of an elderly in-law.
I could be wrong and this might be the shift that takes ol' Joe out of the picture, but I just don't see it. If at the end of the month numbers for Obama have plummeted drastically then I'll return to the point but if sometime this week there's an announcement, count me in the wrong column.
As for right now I'm still busy trying to figure out who is hurt more by the passing of the wildly unpopular, pork filled, bloated embarrassment of a 'bailout' package that caused a drop, yes a DROP in the stock market. I know my Congressman and longtime family friend will get two less votes this election because of his choice to back socialism over the free market and free people.
In private a month or so ago I predicted a scenario when things got desperate enough for the Obama campaign that Senator Biden would suddenly have a tragedy in the family that took him out of the race and the only acceptable replacement would be Hillary. At the time I made that prediction Obama's post convention numbers were nothing like they should be considering trends and historical averages. Most of that was due to the Palin addition to McCain's camp. Today it was announced that Biden would be missing some stops including a rally in Virginia due to the terminal nature of his mother-in-law's current condition. Comment pools in online news sources are starting to grow momentum for the idea that this is the time to swap VP choices. I just don't see it.
When I made that prediction the conditions were a moment of desperation, and Biden presenting a serious lag on the campaign. Right now that's not the case and while I'm sure Obama kicked himself several times for his 'safe' VP choice I seriously doubt that a 7 point lead and a strong momentum in swing states is the time to make that change. I doubt highly that Hillary would accept the offer if the campaign wasn't in a very weak position (making her look like the D's shining hero). And I doubt very highly that the chosen family emergency would be the passing of an elderly in-law.
I could be wrong and this might be the shift that takes ol' Joe out of the picture, but I just don't see it. If at the end of the month numbers for Obama have plummeted drastically then I'll return to the point but if sometime this week there's an announcement, count me in the wrong column.
As for right now I'm still busy trying to figure out who is hurt more by the passing of the wildly unpopular, pork filled, bloated embarrassment of a 'bailout' package that caused a drop, yes a DROP in the stock market. I know my Congressman and longtime family friend will get two less votes this election because of his choice to back socialism over the free market and free people.
Friday, October 03, 2008
VP Debate
I'm not going to spend a ton of time on the debate. I don't find them to be crazy interesting. They are, for the most part, barely able to make any positive progress and serve only as mine-fields for those involved. In terms of influence over poling information and trends, sure they have some. But it's hard to point to any debate moment in recent history where we actually learned something about a candidate's policy.
With that in mind I will say that Gov. Palin and Sen. Biden both conducted themselves with a relatively high level of respectability. I could spend a ton of time dealing with all the times Sen. Biden stretched the truth in his answers but the pundits will do it for me. I could also spend a ton of time talking about how badly it must have hurt him to backtrack on comments he has made about Obama and his policies, but again there are plenty of voices to do that for me.
Gov. Palin registers a clear and measurable success in this debate as she has presented herself as having all the qualifications that people accuse her of lacking and lacking all the negative qualities people accuse her of having. That said, Joe Biden has 30 years of experience promoting bad ideas in the US Senate, and tonight he eloquently and professionally expressed his next round of bad ideas. Gov. Palin has only a small legislative record to draw on and only some of those ideas are terrible. Biden draws on his extensive experience to ably control portions of the debate, and while I think on strict debate terms he might edge out a victory, I think in the fight for public opinion he remains a boring communist.
With that in mind I will say that Gov. Palin and Sen. Biden both conducted themselves with a relatively high level of respectability. I could spend a ton of time dealing with all the times Sen. Biden stretched the truth in his answers but the pundits will do it for me. I could also spend a ton of time talking about how badly it must have hurt him to backtrack on comments he has made about Obama and his policies, but again there are plenty of voices to do that for me.
Gov. Palin registers a clear and measurable success in this debate as she has presented herself as having all the qualifications that people accuse her of lacking and lacking all the negative qualities people accuse her of having. That said, Joe Biden has 30 years of experience promoting bad ideas in the US Senate, and tonight he eloquently and professionally expressed his next round of bad ideas. Gov. Palin has only a small legislative record to draw on and only some of those ideas are terrible. Biden draws on his extensive experience to ably control portions of the debate, and while I think on strict debate terms he might edge out a victory, I think in the fight for public opinion he remains a boring communist.
Monday, September 29, 2008
No Socialism Today Thanks!
The American people sent congress a message this week and Congress tried something it's never tried before. They listened. A bloated $700b bailout bill was defeated this morning by the United States House of Representatives. I'm not sure of the specifics but I believe this is the first time the House has ever said no to spending of any kind.
The FED of course responded with $630b worth of it's inflated fake money to ensure 'liquidity' in this time of 'crisis'. Or so the press who apparently love Henry Paulson more than they love even Barack Obama, would have you believe.
Of course I don't think we've heard the last of this issue on the House floor. There will be another bill, and it will look a little different. It may be safe to say that come November it's not a closed ballgame anymore for House seats. This is a game changer for the Republicans at least. Some 90+ so called Blue-Dog D's have taken a step towards protecting their seats and I'll have to take some time to analyze the voting records to see who still sits on an uneven perch when the dust settles. But R's who were in vulnerable seats in this heated and very D' heavy election season have made a major sweep in their own defense and their opponents will only have their party emblem to tie them to the issue, no protest vote on record to save them.
I don't see how the D's can let Nancy Pelosi remain in her seat after the election as she has taken every hope and dream the D's ever had and flushed them down the toilet of the last two years. After all she turned a clear electoral mandate into the least popular congress ever and then couldn't even wrangle her own party to help pass what she thought was the most important legislation of our time.
Reports had Pelosi composing the actual language of the bill behind closed doors, going so far as to take blackberry's away from her staff so that the actual language and contents of the bill would remain a mystery until the very last minute. Perhaps that's not the kind of secrecy that the Unites States needs within it's lawmaking body.
On negative for the public about a failure to pass this bloated socialism in the House is that we don't get to see this morning how the two Senators in the Presidential race would vote. I think we know from the rhetoric this week that even though only 28 percent of the public wanted the bill, both candidates were emphatically in favor of it.
It's odd mojo for me to see the leader of the Democratic House jumping so wholeheartedly behind a bailout proposed and designed by the former CEO of Goldman Sachs, and a Bush appointed Treasury Secretary, all while trying to blame the entire financial situation on the Bush financial team... When I see a bus in flames heading for the train-tracks I don't think 'hey let's jump on board'. Unless of course the bus isn't really on fire, and there aren't really any train tracks, but if I hop on the bus with the crazy guy driving, maybe I'll get to drive a bus. I do like buses.
The FED of course responded with $630b worth of it's inflated fake money to ensure 'liquidity' in this time of 'crisis'. Or so the press who apparently love Henry Paulson more than they love even Barack Obama, would have you believe.
Of course I don't think we've heard the last of this issue on the House floor. There will be another bill, and it will look a little different. It may be safe to say that come November it's not a closed ballgame anymore for House seats. This is a game changer for the Republicans at least. Some 90+ so called Blue-Dog D's have taken a step towards protecting their seats and I'll have to take some time to analyze the voting records to see who still sits on an uneven perch when the dust settles. But R's who were in vulnerable seats in this heated and very D' heavy election season have made a major sweep in their own defense and their opponents will only have their party emblem to tie them to the issue, no protest vote on record to save them.
I don't see how the D's can let Nancy Pelosi remain in her seat after the election as she has taken every hope and dream the D's ever had and flushed them down the toilet of the last two years. After all she turned a clear electoral mandate into the least popular congress ever and then couldn't even wrangle her own party to help pass what she thought was the most important legislation of our time.
Reports had Pelosi composing the actual language of the bill behind closed doors, going so far as to take blackberry's away from her staff so that the actual language and contents of the bill would remain a mystery until the very last minute. Perhaps that's not the kind of secrecy that the Unites States needs within it's lawmaking body.
On negative for the public about a failure to pass this bloated socialism in the House is that we don't get to see this morning how the two Senators in the Presidential race would vote. I think we know from the rhetoric this week that even though only 28 percent of the public wanted the bill, both candidates were emphatically in favor of it.
It's odd mojo for me to see the leader of the Democratic House jumping so wholeheartedly behind a bailout proposed and designed by the former CEO of Goldman Sachs, and a Bush appointed Treasury Secretary, all while trying to blame the entire financial situation on the Bush financial team... When I see a bus in flames heading for the train-tracks I don't think 'hey let's jump on board'. Unless of course the bus isn't really on fire, and there aren't really any train tracks, but if I hop on the bus with the crazy guy driving, maybe I'll get to drive a bus. I do like buses.
Friday, September 26, 2008
To Own a Home in the State of Nature
Why isn't anyone anywhere looking at the fact that housing prices were becoming irrationally, and unreasonably high in the first place?
In 1995 Bill Clinton and the 104th congress pushed through legislation altering the Community Reinvestment Act, in essence to promote more home ownership in what were considered to be overlooked, poorer and often minority neighborhoods. A1992 Federal Reserve Bank study on lending determined that a disproportionately small number of minorities were being approved for loans. The first instinct of Washington politicians was not that we as a country needed to address the potential issue that a disproportionately large number of minorities in America were needlessly poor and had bad credit; no the response was predictably that the banking industries method's for calculating lending risk were hopelessly outdated and wildly racist. The result was well over a decade of public policy aimed at forcing lending institutions to adopt low income and high risk neighborhoods. In order to maintain a favorable ranking with the Federal Government (a CRA ranking as came to be called) lenders had to comply or face fines, loan penalties and major roadblocks in deals like mergers and acquisitions. In order to assuage the risk that banks knew existed while complying with federal regulations and HUD policy, banks did two main things. The first was to offer mortgages at variable interest rates in order to ensure that if the cost of federal loans went up they wouldn't lose money. These adjustable rate mortgages (ARMs) meant that they could offer reasonable rates to attract high risk borrowers, as long as the FED did the same, but then they could raise rates to cover potential losses when FED rates rose. This as a banker seems like a reasonable idea until you factor in massively inflated home prices (due to too much lending) and stagnating wages.
The second thing the banking institutions did was to package extremely risky debt with extremely safe debt and sell it to larger lending institutions under the average overall risk ratings. The problem with this is of course that risk factors on main street are easier to observe in person than they are from thousands of miles away based only on a few numbers. The Federal Government added to this lending trend with the heavy the handed promotion of HUD's government backed lending institutions like Fannie May and Freddie Mac. These government backed lenders worked hard, and were encouraged by the Federal Government to promote and purchase as many of these complicated risk balanced debt packages as they could acquire. In essence the government was creating a giant banking competitor with a virtual guarantee that drove the market to deeply invest in these debt packages with no real understanding of the street level risk. There's no way the market can, by itself, escape a predatory competitor as large and unwieldy as the Federal Government and the government systems within which banks are required to operate. The result when coupled with the low interest rates and loose lending policy in a post 9/11 panic economy, is not simply the collapse of the system we are seeing now, but the precipitation of this collapse by the drastic and unrealistic increase of home prices. Take a look at every aspect of the housing market, from sales to renovation, over the last ten years and you will see the bloody opportunistic profiteering that can only occur in unrealistically sharp market increases. Entire cable TV channels sprung up over night, devoted to flipping houses in what many believed was a magically growing housing market. Prices just couldn't seem to stop multiplying.
The problem is that more and more people, responsible workers, middle class families, and careful investors went looking for that first home and saw a market that had vastly out-priced their stagnating wages, and had inflated beyond the means of their hard earned savings. What had begun as a program to promote increased lending to high risk mortgagees became the only game in town with home prices soaring to astronomical levels.
To put it another way, bad mortgages and bad mortgagees are and have been preventing responsible savers and wage earners from paying the right price for a home. When too many people move into a market with money no one should have lent them, and when at the urging of the government they overextend their reach, they compete with people who live responsibly and who do not overextend their reach. Hard working middle class Americans have been bamboozled by the entire length of this process, not just this end of it. And when we use tax dollars that come from the middle (and yes the wealthy) classes to 'bail out' these institutions, we are in actuality punishing the same people who are already being punished by higher home prices. Whats more the punishment comes in the interest of saving a system that will continue to lend irresponsibly to the segment of the population who, for better or worse, doesn't pay much if any income taxes and who will continue to buy beyond their means.
It's time for the banking industry to take it's own knocks, to tighten it's own policy, and to make the kind of guarantees that investors need to put actual capital into shoring up these ugly debts. Loans from the government can only serve to increase liquidity in these organizations which will only allow them the time they need to sell off what good assets they have left at more appropriate prices. These loans will not make good debt out of bad, and they will not save dying institutions. Every investor knows that you don't make money buying bad debt, but you do make money buying stock in a good company in times of misfortune. Private investment and sensible lending policy is the only recipe' for success in a situation like this.
A better use of the Federal Government's time and money would be to address why we are a country that isn't friendly to the businesses that would hire the poor and less fortunate. To the market, people are not races they are resources. If we foster private business in this nation, we will encourage businesses to take advantage of every available resource. A person with a good job, in a strong community is a responsible lending choice. There is no way to turn an irresponsible lending choice into a responsible lending choice simply by making them a loan recipient. And there is no way to turn a bad lending choice into a good lending choice by shifting the cost of those choices onto the middle class which is already stretched by unrealistically high home prices. This is a time not to look to the government, or the giant government protected corporations. This is a time to look at private business, and encourage it's growth and prosperity, because in that prosperity lies the answers to our 'credit crisis'. The answer isn't more fake money from Washington, and more loose lending on 'main street'. The answer isn't more taxation on the working people of this nation. The answer isn't simply $700b in 'liquidity'. The answer is capital, and that only comes from work. Work comes from jobs, and jobs don't come from Uncle Sam.
In 1995 Bill Clinton and the 104th congress pushed through legislation altering the Community Reinvestment Act, in essence to promote more home ownership in what were considered to be overlooked, poorer and often minority neighborhoods. A1992 Federal Reserve Bank study on lending determined that a disproportionately small number of minorities were being approved for loans. The first instinct of Washington politicians was not that we as a country needed to address the potential issue that a disproportionately large number of minorities in America were needlessly poor and had bad credit; no the response was predictably that the banking industries method's for calculating lending risk were hopelessly outdated and wildly racist. The result was well over a decade of public policy aimed at forcing lending institutions to adopt low income and high risk neighborhoods. In order to maintain a favorable ranking with the Federal Government (a CRA ranking as came to be called) lenders had to comply or face fines, loan penalties and major roadblocks in deals like mergers and acquisitions. In order to assuage the risk that banks knew existed while complying with federal regulations and HUD policy, banks did two main things. The first was to offer mortgages at variable interest rates in order to ensure that if the cost of federal loans went up they wouldn't lose money. These adjustable rate mortgages (ARMs) meant that they could offer reasonable rates to attract high risk borrowers, as long as the FED did the same, but then they could raise rates to cover potential losses when FED rates rose. This as a banker seems like a reasonable idea until you factor in massively inflated home prices (due to too much lending) and stagnating wages.
The second thing the banking institutions did was to package extremely risky debt with extremely safe debt and sell it to larger lending institutions under the average overall risk ratings. The problem with this is of course that risk factors on main street are easier to observe in person than they are from thousands of miles away based only on a few numbers. The Federal Government added to this lending trend with the heavy the handed promotion of HUD's government backed lending institutions like Fannie May and Freddie Mac. These government backed lenders worked hard, and were encouraged by the Federal Government to promote and purchase as many of these complicated risk balanced debt packages as they could acquire. In essence the government was creating a giant banking competitor with a virtual guarantee that drove the market to deeply invest in these debt packages with no real understanding of the street level risk. There's no way the market can, by itself, escape a predatory competitor as large and unwieldy as the Federal Government and the government systems within which banks are required to operate. The result when coupled with the low interest rates and loose lending policy in a post 9/11 panic economy, is not simply the collapse of the system we are seeing now, but the precipitation of this collapse by the drastic and unrealistic increase of home prices. Take a look at every aspect of the housing market, from sales to renovation, over the last ten years and you will see the bloody opportunistic profiteering that can only occur in unrealistically sharp market increases. Entire cable TV channels sprung up over night, devoted to flipping houses in what many believed was a magically growing housing market. Prices just couldn't seem to stop multiplying.
The problem is that more and more people, responsible workers, middle class families, and careful investors went looking for that first home and saw a market that had vastly out-priced their stagnating wages, and had inflated beyond the means of their hard earned savings. What had begun as a program to promote increased lending to high risk mortgagees became the only game in town with home prices soaring to astronomical levels.
To put it another way, bad mortgages and bad mortgagees are and have been preventing responsible savers and wage earners from paying the right price for a home. When too many people move into a market with money no one should have lent them, and when at the urging of the government they overextend their reach, they compete with people who live responsibly and who do not overextend their reach. Hard working middle class Americans have been bamboozled by the entire length of this process, not just this end of it. And when we use tax dollars that come from the middle (and yes the wealthy) classes to 'bail out' these institutions, we are in actuality punishing the same people who are already being punished by higher home prices. Whats more the punishment comes in the interest of saving a system that will continue to lend irresponsibly to the segment of the population who, for better or worse, doesn't pay much if any income taxes and who will continue to buy beyond their means.
It's time for the banking industry to take it's own knocks, to tighten it's own policy, and to make the kind of guarantees that investors need to put actual capital into shoring up these ugly debts. Loans from the government can only serve to increase liquidity in these organizations which will only allow them the time they need to sell off what good assets they have left at more appropriate prices. These loans will not make good debt out of bad, and they will not save dying institutions. Every investor knows that you don't make money buying bad debt, but you do make money buying stock in a good company in times of misfortune. Private investment and sensible lending policy is the only recipe' for success in a situation like this.
A better use of the Federal Government's time and money would be to address why we are a country that isn't friendly to the businesses that would hire the poor and less fortunate. To the market, people are not races they are resources. If we foster private business in this nation, we will encourage businesses to take advantage of every available resource. A person with a good job, in a strong community is a responsible lending choice. There is no way to turn an irresponsible lending choice into a responsible lending choice simply by making them a loan recipient. And there is no way to turn a bad lending choice into a good lending choice by shifting the cost of those choices onto the middle class which is already stretched by unrealistically high home prices. This is a time not to look to the government, or the giant government protected corporations. This is a time to look at private business, and encourage it's growth and prosperity, because in that prosperity lies the answers to our 'credit crisis'. The answer isn't more fake money from Washington, and more loose lending on 'main street'. The answer isn't more taxation on the working people of this nation. The answer isn't simply $700b in 'liquidity'. The answer is capital, and that only comes from work. Work comes from jobs, and jobs don't come from Uncle Sam.
Thursday, September 25, 2008
Electoral "Math"
Thanks to Real Clear Politics for the electoral map tool. Go there and create your own map if you like.
This is where I see the race for President right now. I base this analysis on a group of polls from a number of different sources and of course a whole bunch of sciencey stuff I like to call 'wild ass guessing' (it's a technical term you might not understand).
Right now I put Ohio, Virginia, and North Carolina in the Toss Up category. I still think all three of these states will end up in the McCain camp for several reasons but the numbers don't support that as of yet. I don't buy the Bradley Effect argument for most of the country but in these states I feel it may have enough of an impact to cover the margin. I also think Bradley will have an effect on Michigan but I just don't think it's enough to make a difference there. Some put Michigan still in play but in my opinion that's just blustering and this state will go D' as it usually does. With this mental math McCain has to keep all the pink states or he's lost the game. If Obama keeps the blue states and all his leaners he only has to turn one volatile state to take the ballgame. I'd keep my eyes on New Hampshire for some Obama attention in the coming weeks. If you pay attention to spending on both sides it seems like Pennsylvania is the proving ground. Traditionally a blue state McCain's numbers here have been the best an R has seen in recent memory. He's still a long shot but he's outspending Obama by a third there and has seen a slight polling lead more than once. A win in Penn and Ohio would deliver the White House for McCain barring a whole bunch of upset.
As of right now I'd say election night lawyers will be flooding into all the really close states with the above mentioned getting heavy attention as well as NV, FL, and possibly Colorado.
Remember though there's a ton of campaigning left to go, and much of the undecided vote is still up for grabs in these states. The events of this afternoon and the rest of this week, as well as the debate activities can have a tremendous effect on fence sitters as well as 'get out the vote' activities on both sides. Also lets not rule out the third party vote, as close races can be upset by the smallest margin there.
This is where I see the race for President right now. I base this analysis on a group of polls from a number of different sources and of course a whole bunch of sciencey stuff I like to call 'wild ass guessing' (it's a technical term you might not understand).
Right now I put Ohio, Virginia, and North Carolina in the Toss Up category. I still think all three of these states will end up in the McCain camp for several reasons but the numbers don't support that as of yet. I don't buy the Bradley Effect argument for most of the country but in these states I feel it may have enough of an impact to cover the margin. I also think Bradley will have an effect on Michigan but I just don't think it's enough to make a difference there. Some put Michigan still in play but in my opinion that's just blustering and this state will go D' as it usually does. With this mental math McCain has to keep all the pink states or he's lost the game. If Obama keeps the blue states and all his leaners he only has to turn one volatile state to take the ballgame. I'd keep my eyes on New Hampshire for some Obama attention in the coming weeks. If you pay attention to spending on both sides it seems like Pennsylvania is the proving ground. Traditionally a blue state McCain's numbers here have been the best an R has seen in recent memory. He's still a long shot but he's outspending Obama by a third there and has seen a slight polling lead more than once. A win in Penn and Ohio would deliver the White House for McCain barring a whole bunch of upset.
As of right now I'd say election night lawyers will be flooding into all the really close states with the above mentioned getting heavy attention as well as NV, FL, and possibly Colorado.
Remember though there's a ton of campaigning left to go, and much of the undecided vote is still up for grabs in these states. The events of this afternoon and the rest of this week, as well as the debate activities can have a tremendous effect on fence sitters as well as 'get out the vote' activities on both sides. Also lets not rule out the third party vote, as close races can be upset by the smallest margin there.
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