GM Bailout Math - 33k Per Car Sold

Over the last six months, the government has provided bailouts for GM and GMAC totaling 19.4 billion and 13.5 billion respectively.  GM has sold 1 million cars over that 6 month period. We are providing them a bailout of $33,000 per car sold.  In other words, GM needs to get $33,000 in government assistance per car sold to stay in business.  Is the average selling price of a GM car even 33k?  This is complete nonsense.  GM is not close to a viable company and needs to fail now. The bailouts to GMAC show how weak GM is.  Without GMAC writing bad loans and leases to move cars, the situation at GM would be even worse.  Why are we bailing out an auto-finance company anyway?  There are hundred of auto finance companies out there who are still loaning money on cars.  You do not need GMAC to buy a GM.  Propping up GMAC so they can prop up GM is a joke.  This is simply a union job saving move at the expense of non-union jobs.  If Obama was honest about what was going on here, the U.S. would simply buy GM out of bankruptcy, and give the surviving company to the UAW.  That is exactly what we are doing, but under the disguise of "bankruptcy financing".  How about paying GM 25k per car to stop making them.  That would save the United States billions, and be just slightly less stupid than what we are doing now.  These numbers are simply too big for the average citizen to grasp. There have been so many billion dollar bailouts, we are getting immune to it all.  Will the mainstream Media ever step up and do a story like this?  I am sure the people would be interested in a 33K per car bailout for a company in a decades long death spiral.      

Carbon Cap and Trade Charade

The Obama Cap and Trade Tax is now out of committee and heading towards passage in both the leftist House and Senate. I doubt any Republicans will vote for it, but it may get shoved through any way. If passed, it mandates that the United States reduces energy consumption to the levels last seen in 1905 over the next 40 years. Since there were not many cars back then, no airplanes, and many people still did not have electricity it is basically a move back to the dark ages for the United States. If we are able to achieve these reductions we will no doubt be to poorest industrialized nation in the world with the lowest standard of living in 2050. Costs over the first 10 years of the program are tallied to exceed 7 trillion dollars. Gasoline and electric prices will double short term, causing the price of everything to skyrocket. People making less than $250,000 per year will face an average additional burden of $1,600 per year at the start (so much for no taxes on this group), and a much higher burden as the free permits expire. If we somehow manage to hit this goal and maintain energy use at 1905 levels, this unilateral reduction in CO2 by the United States looks to reduce the worldwide average surface temperature by a total of 0.07C over the next 100 years (based on global warming model estimates). So we are prepared to hit this collapsing economy with an additional 7 trillion dollar burden, over the next 10 years and drive ourselves into the dark ages, for a temperature change that is completely imperceptible, and well below the margin of error for any model prediction.

I wrote about the global warming scam a while back, and everything I said remains true. There is zero evidence that CO2 causes global warming outside of a few computer models that show zero skill at predicting the future. If your only evidence is models that can’t predict the future there is basically no evidence. The evidence against CO2 being a significant contributor to climate is indisputable. We have very good record of CO2 and surface temp over the last 40 years and there is simply no correlation between the two. We have crappy records that go back 100 or so years, and still no correlation. If someone thinks that a correlation between CO2 and surface temperature has been shown, please provide it in the comments. Temperature is cyclical and driven by natural forces outside of our control. To think that mankind is destroying a 5 billion year old planet though 150 years of activity is pretty crazy on the surface. The global warming hysteria started during a 30 year up trend in temperatures from around 1970 to 2000. The upward trend ended at that time, and we have been in a solid cooling trend for 7 years now. CO2 increases to the atmosphere continue unabated, yet temperatures continue to drop. Unfortunately, the Global Cooling Denialists continue on with even more and more outrageous warming claims. In the face of actual evidence that worldwide sea ice extent is at an all-time high (since we started measuring with Satellites), you still get weekly claims in the media that seas ice is melting away even faster than feared.

There has never been an actual debate on the merits of global warming claims, and there never will be one. The Global Cooling Deniers can’t win a debate on the scientific facts, so they avoid debates at all cost. They simply deny the evidence, personally attack any one who questions them, or use any other number of logical fallacies to argue their case. The facts are the globe is entering into a long-term cooling trend that will ultimately disprove global warming. Eventually the public is going to call bullshit, and let the media have it for supporting this junk science. The reputation of most of the stonewalling Global Cooling Deniers will be destroyed, and science in general will take a setback. Obama called for science to be used to set policy, but it is not being used here.

I have no doubt that if passed, Cap & Trade will be repealed in the near future by somebody with a spoonful of gray matter. Unfortunately, the folly of passing it in the first place will be a huge setback for the United States. We have held back to this point on climate change policy, and have lots of great examples of how Cap and Trade did not work in Europe, yet we still chose to follow in their footsteps. Cap and Trade also greatly weakens the security of the United States, and I think that has been underplayed. The simple fact is that Oil is an incredibly valuable resource, with a limited supply. It is so valuable that no matter what restrictions the world comes up with, it will still be used up in the next 50 or so years. If we choose to restrict our use of oil over those last 50 years, we will become poorer, while the rest of the world stockpiles it. China is already stockpiling oil and other strategic commodities and we should be doing the same. We can buy oil today at $60 a barrel and store it in the strategic reserve for later, or beg China for some oil at $400 a barrel in 50 years. We are obviously in a weaker position by not stock piling now. All of our heavy military equipment runs on oil, and when it nearly gone, those that still have will rule the world.

Worst Invention of the Decade

It’s a great thing that inventors are always looking for ways to improve our lives. Every once and a while though, somebody thinks it would be a great idea to solve a problem that does not really exist with a solution that makes the original non-existent problem worse than before, and adds a few new problems to the mix as well. It’s bad enough that somebody could come up with such a stupid idea, its worse when the idea is rolled out at great expense nearly everywhere even though it does not come close to working as intended. I present you with the worst invention of the decade, the automatic flush toilet.

I am not talking about the stand up type. Those work fine. I am talking about the sit down kind. They simply do not work right, make the problem worse, and waste twice the amount of water. I guess there was this huge problem with people dropping the kids off at the pool, and then leaving them behind for all to see. I don’t actually remember that being a huge problem. I mean common decency would force all but the sickest of individuals to pull the plug after dropping some kids off. So along comes a solution to a problem that does not exist. Let’s just put a sensor that can tell when you are in drop off mode, and then pull the plug automatically when you are done. Sounds simple right? The problem is that dropping the kids off at the pool is not as simple as that. It’s a 2 part process. First you drop the kids off, and then let’s just say that you stand up to towel off prior to leaving the pool area. So you drop the kids off, stand up to towel off, and then the plug gets pulled automatically. Bye, bye kids. But what to do with the towels? At the pools I use, there is no collection bin. You are supposed to throw them in the pool before you leave. So you toss them in and get ready to leave only to realize that there are dirty towels floating in the pool, and the plug already got pulled. Since there is no manual way to pull the plug, you need to trick the pool into thinking you are dropping the kids off again to get a fresh plug pull. Now I don’t mind dropping the kids off the first time, but it seems a bit silly to “pretend” to drop them off again, just to avoid leaving dirty towels in the pool. So you have a choice here. Leave the dirty towels behind for the next swimmer to find, or trick the pool into draining itself again by pretending to drop off some more kids. Fucking brilliant! My guess is that many people will not go through the motions a second time leaving more messes behind then the auto-drain was supposed to fix. For those that go through the motions and pretend to drop the kids off again, the pool gets drained a second time for no real reason wasting a ton of water. For all these reasons the automated flush toilet is a shoe-in for worst invention of the decade.

Stimulus Job Donkey Math

In Obama’s 100th day news conference he mentioned that the stimulus package had already “created or saved 150,000 jobs”.  As we all know by now, mainstream media is completely dead in this country. This number was never discussed or challenged by anyone.  It was like he never said it.  He did say it though, and last week some information came out about how he came up with such a number.  It’s called government stimulus job math.  I knew at the time he said this that only about 14 billion of the $770+ billion had actually been paid out, and that was 100% on Medicare.  Not sure how increasing Medicare payments lead directly to created or saved jobs, but it does not need to when you use stimulus job math.  You see there is this formula that says for every $92,000 in stimulus money spent, one job is created or saved for one year.  14 Billion spent means 150k in jobs have been created or saved.  To hit Obama’s goals for job creation and savings all he needs to do is spend the money.  It does not matter if any actual jobs are created or saved.  92k = 1 job-year by government estimates.

Now, I have a big problem with the “created or saved” language.  While you may be able to measure jobs created, jobs saved is pretty tough.  It allows them to use 92k because otherwise what they are doing would be immeasurable.  So are we getting a good deal here as taxpayers, even if one job was actually created per 92k?  Not really.  The average personal income of a fulltime worker age 25+ in the USA is 40k.  So we are spending 92k to create a 40k job.  The government skims 57% of the money right off the top and flushes it down the toilet.  Now what about the other 40k?  Is that what it really costs to create a job?  Maybe if the government is doing the creating, but how does it work in the private sector?  In the private sector, you need to look at the return on investment for hiring an additional employee.  If it costs you 40k to hire someone, and you figure they will produce 50k in additional gross profit, you might go ahead and hire them.  In a 40k/40k situation you would not.  It really just takes a nudge to get hiring to happen, and assuming it takes the entire salary amount, puts zero value on the extra gross profit you should get with a larger staff.  So an incentive in the range of 10-20k would easily be enough to get the private sector to expand.  They can’t now profitably, but if we could make it profitable by even a small amount they will start hiring.  This could have been done by dropping the business side contributions to Social Security temporarily, instead of refunding the employees SS contribution as a welfare payment like the stimulus actually does.  By my math the private sector could create 4-9 times as many jobs per stimulus dollar than the government.  Using the government to dole the money out is a complete waste of the stimulus money.

Now what about the math for jobs saved?  Spending 92k to “save” a job for one year borders on obscene.  Why not just pick up the 40k salary of someone who is about to be laid off, if the company agrees to keep them for at least one more year.  That saves 57% right there.  Again, this is bogus math.  You would not need to offer a company that much to do the same thing.  That assumes that people’s contributions to a business are worthless.  Assuming that the lay-off is happening because it is becoming slightly unprofitable to keep this person employed, you just need to make it slightly profitable to save the job.  5-10k seems like plenty of incentive to save a job year.  That’s 9-18 times more efficient than the government.

I question if the 92k figure is actually generous.  Out of the first 14 billion spent I doubt there were more than 1k in jobs created or saved based on where the cash was spent (Medicare).  With a lot of the money going to things like extending unemployment benefits and other safety nets a bunch of it will not really create or save any jobs.  For the money that is actually allocated to job programs like construction the 92k number may be good.  Lastly, if we give Obama the benefit of the doubt for a second, and assume the 150k job number is real.  That would mean that the stimulus package is creating or saving 75k jobs per month against a backdrop of 600,000+ new filings for unemployment every month.  Total numbers on unemployment are at an all-time high.  75k in jobs a month is not close to putting a dent in this crashing economy.  At least at the rate the money is being spent it will take many, many years to spend it all. 

Lucksacking My Way Through The RiverChasers

I have always done well in the Riverchasers events.  My squeaky tight play goes nicely against the grain versus all of those crazy river chasers.  I typically don’t play a lot of pots, and don’t get it in bad much as a result.  Sure, to win an MTT you are probably going to have to get it in bad a few times and get lucky. I just do not like to rely on luck for more than a couple of hands over an MTT.  Last night I just about luck sacked myself into a BBT4 seat in probably the craziest MTT I have ever played in.  It was a wild ride and not very typical for how MTTs go for me.  I got it in bad a bunch, got coolered a bunch, got lucky a bunch, and somehow found myself heads up for the title with the chip lead against HighOnPoker.  Here is a recap of some of the craziness.

For the first hour I was very card dead and was treading water.  Shortly after the first break, I managed to build my stack up to north of 6k when I pick up AQs near the button.  I called a preflop raise, and an AQx flop dropped.  We got it all in by the turn, and I was against AA.  I am now down to T790 in chips and in big trouble.  I shoved from (edit) the cutoff with J9o to try to get some chips to work with.  CrackinAA called with A9 I think, and I out flopped him.  I would then go on a mini run catching AA a couple times and quickly building my stack back up to 5k.  I would then catch KK and crack AA with it by flopping a set.  Around the second break, I had the chip lead, and HOP was actually still pretty short with just over 2k.  Hoyazo had a ton of chips, and I was thinking about how cool it would be to go heads up with Hoyazo for the seat.  When I have this many chips at this point I don’t get too crazy aggressive, but simply try to slowly build my stack as we head to the Final Table where anything can happen.

It took a very long time to burst the cash bubble and get to the FT.  Eventually I had to step up and knock somebody out.  I would get the final table about third in chips with pretty equal stacks overall.  HOP was starting to build an overall chip lead.  I was treading water with pretty weak hands, and had drifted down to 6^th in chips with 7 people left.  I am only playing for the win at this point, so I needed to be a bit more aggressive than usual.  The problem was I kept running into slightly better hands.  I picked up A7o in the BB and jammed when the SB bet 3x to T3600.  He would flip up AK and I would take a huge hit to my stack.  An orbit later I got A7o in the same situation and again the SB raised to T3600.  Again I jammed, and SB has TT.  A couple of 7s on the flop would keep me alive.  I like to jam this situation, because it can help you to get some walks later on, but I kept running into monsters.  I would pick up A7o again later on and get it all in against ATo and river a split pot.  The poker gods were clearly behind me.  HOP did the bulk of the work, and we got down to heads up pretty quickly from there.  I had about 17k in chips, while HOP was north of 100k.  I asked if he had won a seat and would be willing to chop.  I think he laughed at that point.  He was jamming every hand to try to end it and I folded through a few week hands before taking my stand with QJs.  HOP would flip over KK, and my night was over, right?  Not so fast!  The Poker gods dug me out again.  I caught a couple of big hands and rallied right back to the chip lead.  I asked again for a chop.  I know that chopping was pretty controversial in earlier BBT series, but it had been done.  I am only playing these things for the seat, and could care less about the cash prize.  I would have chopped for 1^st and gave Jordan 1^st+2^nd place prizes for the seat, which would have been something like a +$270 EV choice for him, since he already had a seat, but he declined.  I am perfectly cool with that.  After that it went downhill pretty quick.  I kept making hands that were good, but slightly worse than HOP’s and bled away my chips.  Those are the breaks.  I can’t really complain, because I really had no business being in this situation.  I simply luck sacked my way to bridesmaid in the riverchasers.  

Live From the MGM Grand Poker Room

The title is a bit misleading.  I am not live blogging from the MGM poker room right now, but I wanted to go over an interesting hand from a session Saturday night at the MGM Grand poker room.  I sat down at a 1/2 NL Holdem table and bought in for $200.  For the first 45 minutes or so I did not win any hands.  This seems to happen to me a bunch live, because I try to stick to my tight online style even when playing live.  I will play a few more speculative type drawing hands live, because you tend to get more limpers preflop, but even with that it is very easy to go an hour without sweeping a pot. So over 45 minutes I had limped several times, and had only made one actual bet which was a $10 flop bet, that I was immediately chased off.  So I basically had a weak-tight image, and was down to $170 when I pick up AKo on the button.  There was a limp or two and then an Asian lady opened to $12.  While I will always open raise with AK preflop, I don’t like re-raising with it when I am deep stacked, especially against poor MGM grand type players.  In an MTT, where you are rarely as deep as a cash game, it is often correct to go to war preflop with AKo.  This was a cash game though, and I had a decent stack, so I just called in position.  One of the limpers also called.  Flop came down Ax9h8h.  It checked to me on the button.  I made a standard $20 bet with a TPTK flop.  One fold, and then the original raiser re-raised me to $60.  FAWK!  So I started thinking about the action and what she might have.  She raised to $12 preflop (6x).  That seems like too much for AA, 99, or 88.  With AA you would not want to chase people away, and with 99 or 88 you are killing your pot odds by betting so large preflop.  Since I had an Ace, AA was pretty doubtful.  So I could fold, call, reraise, or push.  It was possible that she was on some type of fat draw using the flush or straight possibilities.  If I just called, I would be pretty pot committed.  So without much further thought I went ahead and shoved all-in on the flop with just a pair.  This is not something that I like to do, but it made sense based on the action.  She ended up calling me pretty quick, and I figured that I was dead.  You are not required to flip your cards up at MGM so I watched a couple bricks land on the turn and river.  I flipped over my pair of Aces, and she mucked her hand with a disgusted look on her face.  I swept back a nice $360 pot.  So the question is what was she holding and was my smooth call preflop shove on the flop line correct here with AK?  My guess is that she had AQ or AJ with at least one heart.  She probably figured I would have re-raised with AK preflop, so here pair of aces were good, and she had some outs to a strong hand just in case.  Any other ideas out there?  

UAW Getting What They Paid For

Obama ran on change, but all I see is business as usual.  He raised more money than any candidate in history, and now it is time to start returning the favors.  NBC, which is owned by GE, used completely biased reporting of the election cycle to get their man elected, and he has returned the favor in the form of green job incentives and cap and trade that will earn GE billions.  The UAW gives 99% of there contributions to Democrats and now they get this sweetheart deal with Chrysler.  In a lawful bankruptcy proceeding, secured creditors get paid first before the unsecured creditors.  The UAW would be at the back of the line under this arrangement and under current law and would stand to receive nothing.  If the secured creditors can't be paid back, then the Union simply can't get paid.  Well in the bankruptcy filing, the secured creditors get next to nothing and the USA not only gets nothing for the 4 billion we have already loaned them, we also are required to lend an additional 3.5 billion that will not be paid back.  We also would be agreeing to additional post bankruptcy financing.  Well I call bullshit!  Who came up with this agreement and why (where is the transparency)?  If 3.5 billion is required to get them through bankruptcy, the company is worthless.  Whoever supplies that money should get the bulk of the company, because if it was not supplied the company would cease to exist.  When we loaned them the 4 billion, it was a bridge to give them time to come up with a plan.  If the plan was not acceptable we had the right to demand immediate payment.  So the plan they come up with is to not pay us the 4 billion, have us lend an additional 3.5 billion that will not be paid back, and have us commit to additional loans in the future.  Lets just liquidate the company already.  This is simply political corruption at its worse.  The UAW helped to get Obama elected, and now he is using taxpayer money to pay them back.  If this is not the case, please explain why the United States taxpayer should accept this deal, and why an unsecured creditor ends up owning 55% of a company after bankruptcy?   

The Law of Supply and Demand

The Law of Supply and Demand operates on competitive market places.  The basic idea is that price and quantity sold are determined by the intersection of the supply and demand curves for a given market.  In practice if you have a competitive market and demand increases with everything else held steady, prices will go up, as well as quantity sold.  If demand decreases, the quantity and price will go down when everything else held constant.  It makes sense if you think about it.  If you operate in a competitive market, and you lower your prices, you will earn some additional sales at those lower prices at the expense of those who did not lower their prices.

The Obama administration seems to believe that they can defy the law of supply and demand in a competitive market.  If this is true and the law of supply and demand can be violated, the Obama plan to revive the economy can work.  However, if the law of supply and demand holds, all of the actions that are being taken to improve the economy, can only hurt.

The heart of the problem is using government spending to stimulate the economy when the government does not actually have the money on hand to spend.  If the government must borrow the money used to stimulate the economy, the act of this borrowing will hurt the economy more than the spending can possibly help.  This is because of the Law of Supply and Demand.

In fiscal 2008, the USA had a deficit of about 500 billion.  To fund government operations about 500 billion in Treasury Bonds and Bills were sold on the open market.  The government also sold Treasury Bonds and Bills to cover refinancing any outstanding bonds that were coming to maturity (We refinance rather than pay down debt).  With the recession hitting in 2008, and the reduced revenues as a result in conjunction with the 700 Billion TARP passed in 2008, the budget deficit was expected to be 1.2 trillion in fiscal 2009 pre-Obama.  It is now looking like this one-off 1.2 trillion deficit left over from Bush will be expanded to about 2 trillion under Obama, and will not be a one-off anomaly.  Trillion plus deficits continue well into the future under Obama's own budget numbers.

So last year the USA needed to borrow 500 billion plus what was required to rollover and debt that came due.  In 2009 the Government will need to borrow 2 trillion to fund the deficit spending plus any rollover of existing debt.  So the supply of T-Bills and Bonds put to market in 2009 will be about 4x as large as in 2008.  This is not a small move on the supply curve.  This is a massive shift in supply, and if the law of supply and demand holds the prices of these bonds and bills must drop by a massive amount to get them all sold.  The USA desperately needs these funds to operate, and must set the price where all 2 trillion in bonds can be sold.  Since interest rates go up as bond prices go down, this will effectively mean a massive increase in short and long term interest rates for Treasury Bonds and Bills and as a result everything else.

Now remember that the premise here is that the bond market is competitive.  A bond or bill is really just borrowing money with the promise to repay.  Competing for money to borrow are other consumers, businesses, local governments, and international governments.  The USA competing so aggressively for 2 Trillion in borrowing this year vs. 500 Billion last year will crowd out the other competing borrowers.  We will get the funds because we will pay more in interest.  Interest rates for everyone must rise or all funds for lending will just go to the U.S. government. So we currently attempt to keep short and long term rates low to help the economy, and it is not really working very well.  As soon as rates start rising an economic recovery becomes even more difficult.  Some projects can still get done in weak economy, as long as rates are low allowing for a return on investment.  A bad economy with high interest rates is an absolute disaster.

We have really just began to borrow the 2 trillion for this year.  A good portion is set to go out over the next 3 months.  Rates are already headed up and are at 2009 highs.  I am expecting rates to start accelerating upwards soon.  The banks are sitting on TARP funds but not lending. I can see them being attracted to Treasuries with high yields, and lending to the government and not into the economy.  High interest rates will inevitably lead to high inflation rates. Stagflation could well be the economic buzzword in the second half of the year.

Countless third-world countries have destroyed their currencies through similar actions and we are not immune as we follow in their footsteps.

To solve this problem government borrowing must stop.  Taxing our way out can't work because it punishes the activities that grow the economy.  The government is simply vastly over sized and must be greatly reduced.  Bailouts and cash stimulus must end immediately.  Local, State, and Federal governments must be stripped down to where they only provide basic services as outlined in the constitution.  The only path out is via the free market, and that can only happen if the government gets out of the way and stops interfering.  The nations wealth is determined by the sum of goods and services that we can produce.  The government in general is not a producer of goods or services so it is a drag on the economy.  Bigger government is a bigger drag.  The founding fathers were very aware of this.  The United States was never supposed to have a large government.  We need to get back to our roots as soon as possible.