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AIG Bonuses Outrage… Who to blame?

AIG

It has been recently reported that AIG has paid a significant amount of the bailout money received from the US government as bonuses to executives and trading partners.

Obama and his administration seem surprised about this and many in the media have been angered by AIG for paying the money. I believe that AIG has an obligation to uphold the contracts as long as it’s a going concern. If AIG was to go into bankruptcy then the contracts could be voided.

The US government shouldn’t have bailed them out in the first place and let them go into bankruptcy where at that point the government could have chosen to salvage the assets then without any threat of being sued over the contracts or even better other insurance agencies could have purchased the assets through bankruptcy procedings.

Again, a contract is a contract that must be upheld as long as both parties are alive. Even if AIG was purchased by another firm, the purchasing firm would need to honor the contracts as when you buy business you are not only buying the assets but the liabilities as well. I imagine this is why no one wants to buy companies like GM because they have more liabilities than assets… essentially someone would need to be paid to take GM off their hands, a very bad situation to be in.

A local example of this problem with contracts here in Burlington… when Clavelle was in office city employees were promised a certain return on their retirement funds at the peak of the market in 2000 as if it was never going to slow down or pull back. The problem is these were contracts and the city still has to honor them as bad as they may be. The schools have the same problems with their teacher’s salarly/benefits contracts.

Who is to blame? With the AIG situation, the company should be allowed to setup whatever pay/bonus structure they wish. However, they should also face the consequences when it doesn’t work out. The market was already punishing them for their mistakes and rewarding other firms that made better decisions.

However, the government got in the way and decided to reward AIG for their mistakes instead. The government, when deciding to purchase a 80% stake in AIG, should have analyzed the assets and liabilities of which they should have been made aware of this problem with the bonus contracts. If they bother to look, that was there fault and they should face the scrutiny of the tax payers. If they knew about them and were ok with it then they are an accomplice in this whole deal of wasting taxpayer money. Which is it complicity or stupidity?

Vermont Legislative Pay: Is it too low or too high?

Yesterday, I heard some discussion on the Charlie and Ernie show regarding legislative pay. It seems that many people are under the impression that the pay is low and that it shouldn’t be cut like other state employees that are making more than $60,000/year. The argument is that legislative pay is only $625.36/week or $11,256 for 18 weeks or $7.93/hour.

However, you need to factor in the allowances. They get reimbursed for their gas and then they get allowances for meals and rooms, which I believe they keep even if they don’t use for those purposes.

I don’t think many people in the private sector get reimbursed for commuting costs. I don’t know anyone that does.

Just the food and room allowances alone are an extra $735/week, if they are in session 5 days a week, not even including the gas reimbursements.

So, if you combined the pay plus allowances that would be $1,360.36/week or $70,738.72/year, with allowances for commuting at $38,220 alone. Do you know anyone who gets an extra $38,220/year just for traveling back and forth to work within the state?  Someone living in Montpelier or nearby definately doesn’t need travel allowances.

So if the legislature is in session for 18 weeks, this puts the actual legislative pay at about $24,486.48. This is for only 18 weeks of work… not bad at all, sounds like very good compensation to me if these figures are correct, what do you think?

Please note, the numbers I used for these calculations were pulled from the AP article: Vt. House votes down legislative pay cut

Digsby Review IM’s, email and social networking in one App!

For the last couple days I’ve been trying a different instant messager called Digsby. So far, I’m quite impressed. For years now I’ve been using Trillian to consolidate all my different IM accounts into one messager such as Yahoo IM, AIM, ICQ, etc. and Trillian has worked quite well for this.

However, Digsby goes a step further and includes most emails (which Trillian does too), but also popular social networking tools such as Facebook, Myspace, Twitter and LinkedIn.

You can even manage your email and social networking accounts within Digsby.

Digsby also saves a copy of all your chats if you like right on your computer for easy archiving.

Oh, and you can embed the Digsby Widget on your web site to allow visitors to chat directly with you from your site. You can also customize the widget to fit the look of your web site as you can see to the right.

If you have a bunch of IM, social networking, and email accounts, you should give Digsby a try. Download Digsby.

Ron Paul Talks About the Economy on Morning Joe 1-27-09

In the video below, Ron Paul speaks about the bailouts and how it’s taking a bad situation and making it worse by adding fuel to the fire. You have companies that have performed poorly with assets they have been entrusted and in doing so the government is rewarding them by taking assets from those who have performed well to give to the underperfomers and some how that will make things better. It just doen’t make sense.

If the government insists on giving money away to stimulate the economy or fix a particular industry why not give it to the consumer in terms of a tax break or stimulus? For example, if they want to help auto sales, give a tax break or stimulus to all consumers who buy a car and then let the consumer decide which car companies they wish to support. However, this isn’t really necessary as the car companies that are doing things right don’t need a bailout.

A Politically Correct Holiday Greeting…

I just got the following “holiday” greeting in my email.  Enjoy…

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Best wishes for an environmentally conscious, socially responsible, low stress, non-addictive, gender neutral, winter solstice holiday, practiced within the most joyous traditions of the religious persuasion of your choice, but with respect for the religious persuasion of others who choose to practice their own religion as well as those who choose not to practice a religion at all;

Additionally, a fiscally successful, personally fulfilling, and medically uncomplicated recognition of the generally accepted calendar year 2009, but not without due respect for the calendars of choice of other cultures whose contributions have helped make our society great, without regard to the race, creed, color, religious, or sexual preferences of the wishes.

(Disclaimer: This greeting is subject to clarification or withdrawal. It implies no promise by the wisher to actually implement any of the wishes for her/himself or others and no responsibility for any unintended emotional stress these greetings may bring to those not caught up in the holiday spirit.)

Having that been said, I’ll stick with the traditional….. “My wishes are for you and yours to have a

MERRY CHRISTMAS
and a
HAPPY NEW YEAR !!!!!!

NY Governor Paterson Proposes Soft Drink “Obesity Tax”

Pepsi

As if there aren’t enough taxes, you could soon be paying more for soda.

In an effort to close the $15 billion state budget gap, New York Governor David Paterson is calling for a 15 percent tax on soft drinks.

If you drink diet, you’re okay. The tax would only be imposed on regular, non-diet soft drinks.

The logic: it could generate more than $400 million while helping to curve obesity.

For that reason some public health advocates support the soda tax, hoping it will lead to healthier choices.

Full Article

The first thing I thought when I heard this story, was why just non diet soda? Aren’t there many different things that could be deemed unhealthy in excess? Why not non-lean meat, non low-sodium corn or soups, or non whole wheat bread? The list could be endless. Of course what people consider healthy is debatable. I live a mostly low carb lifestyle… however, there are many that believe in the low-fat lifestyle. Then if you are highly athletic you are able to consume a lot more carbs and fats than non athletic people. Perhaps a tax on non-athletic people is in order.

As a Libertarian, I obviously don’t support any tax on people specifically to modify their behavior. The real reason for the proposed tax is to help the city’s budget. Cigarette smokers have been targeted by government mandated taxes for years with the reasoning that cigarette smokers cause a higher level of burdens on the healthcare system. However, why aren’t these funds set aside to provide healthcare just for cigarette smokers if this is the case? Are they planning on setting aside the non diet soda taxes for just non diet soda drinkers? Of course not. The funds would most likely go into a general fund to fund whatever the government chooses.

I think the real issue too is people who consume healthcare services, but don’t pay for them. This group of people is often usually on some form of government assistance for food. Wouldn’t it be easier and fairer to simply not allow taxpayer money to be spent on unhealthy foods? I know that a good portion of the food provided by food shelves are fairly nutritious… why not have all people on assistance get their food there if they want the assistance, then they would be eating healthier.

Also, health insurance should be based on lifestyle choices. For example, here in Vermont we have community rating, which means that everyone pays the same rate as others without any increases or decreases in premiums for lifestyle choices. That doesn’t seem right to me. Why does someone who does nothing to try to moderate their diet or does no exercise and is 100 pounds overweight pay the same premium as someone who monitors their weight daily and does 30 mins of exercise a day… or why should someone who engages in risky sports such as down-hill skiing pay the same rate as someone that doesn’t do any risky sports? My wife and I don’t currently have health insurance… when we did, we didn’t think much about our health, as it wasn’t a concern when you have full health coverage. However, since we lost our insurance, it became a major factor. Since losing our insurance we have significantly modified our diets, exercised almost everyday and reduced my weight from 250 pounds to 180 pounds. I’m not sure if this would have happened if we hadn’t lost our insurance. I would imagine I would done the same if the health insurance premium would be cut in half… it would be a huge incentive. The point is that offering a significant incentive (that is voluntary), is a much better, fairer way to get people to modify their behavior rather than through forced taxes, which don’t usually even directly benefit the person being taxed.

Fed Cuts Interest Rate, Inflation, and the Next Bubble

Fed Cuts Interest Rate - Inflation

The Federal Reserve on Tuesday cut its target for overnight interest rates to zero to 0.25 percent, bringing it closer to unconventional action to lift the economy out of a year-long recession.

“The message is they’re instituting quantitative easing on a fairly large scale,” said Doug Roberts, chief investment strategist at Channel Capital Research.com.

Full Story

Not only is fed making the dollar free to borrow with the fed rate going to zero the fed is now directly participating in the market by buying securities such as government debt, mortgages, commercial loans, even stocks. Wow! They really want to force their dollars into the market any way possible. It’s funny that they are issuing dollars, which is basically US debt, to buy government debt.

What the fed is doing here is setting up the groundwork for the next great bubble. Remember, it was easy money that got us in the mess in the first place and the government forcing banks to make home loans to people that had little ability to pay for them. As long as the fed can continue to keep printing, there will continue to be larger and larger booms and busts. All the market needs now is confidence of the people. When you combine confidence with all the cash sitting on the sidelines and the money that the fed is flowing into the market plus the $1 trillion that Obama wants to spend once he’s in office… we will have the next great bubble begin to form, unless the fed pulls the money back out fast enough, but their will be great pressure on them to leave it alone and Bernanke does not have the reputation of being a fan of a strong dollar. However, with everything in the market, there are winners and losers.

Some of the winners in this case will be US manufacturers, banks, US exporters and people that owe a bunch in US dollars. The biggest losers will be people with their savings in cash and people on fixed income. The more dollars the fed pumps into the market, the riskier it is to keep your savings all in cash, as inflation will return eventually and the prices of everything we buy will skyrocket, such as fuel, metals, wheat, corn, etc. It would be better to put some of it into non-depreciating assets that have real value (if you haven’t already), such as high quality stocks, silver, gold, real estate, etc., especially at current prices. You have to be defensive against the Fed’s actions.

Looking for a good local opportunity? I recently picked up some shares of Merchant’s Bank (MBVT). They are based here in Vermont. They will benefit from the free money they can borrow and then resell, they pay a great dividend (around 5.56% as of today) and they didn’t have exposure to the sub prime mortgages. I got some shares at $18/share. Trading has been a little volatile lately. I’m looking to get more between the $17-$19 range.

Bill of Rights Day

Bill of Rights Day

The Bill of Rights came into effect on December 15 of 1791. Be sure to remember them and how much they should mean to you and be sure to hold candidates accountable to them.

The United States Bill of Rights…

Article I

After the first enumeration required by the first article of the Constitution, there shall be one representative for every thirty thousand, until the number shall amount to one hundred, after which the proportion shall be so regulated by Congress, that there shall be not less than one hundred representatives, nor less than one representative for every forty thousand persons, until the number of representatives shall amount to two hundred; after which the proportion shall be so regulated by Congress, that there shall be not less than two hundred representatives, nor more than one representative for every fifty thousand persons.

Article II
No law varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

Article III
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Article IV
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

Article V
No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

Article VI
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Article VII
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Article VIII
In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.

Article IX
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

Article X
Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

Article XI
The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Article XII
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Thanksgiving: a Celebration of Free Markets Over Socialism?

Happy Thanksgiving!Some time ago I first heard about the article The Great Thanksgiving Hoax by Richard J. Maybury. It describes how Thanksgiving is really a celebration of free markets and private property over socialism, which had caused much famine and fraud throughout the colonies. You most likely never heard about this if you went to public schools… I know I never did. Check it out and feel free to posts your thoughts in the comments.

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I think that during these tough economic times it’s more important than ever that we use holidays like Thanksgiving to reflect on how good we really have it as a society despite the doom and gloom you hear in the news. If you still have a roof over your head and food on the table it’s not that bad. It may feel worse than it really is as we are coming down from an economy that had grown so much that we took it for granted.

When I look around I see people that have so much abundance and I think that people are just not used to less, but for the media to compare what we are going through to the Depression seems absurd.

However, I think the recovery is much dependent on the people and their response to it. If the people really believe that we are going into a Depression like in the 30s, then they will make it so. However, if the people decide to have confidence in themselves, their communities and move on, we can recover much faster. The government putting all this money in the market and bailing people out will only work if people put the money to use. While I don’t agree with the government’s involvement as I believe the long-term effects will be bad for certain people, I do believe that the money could lead to a short term recovery if the banks and business community have the confidence to put it to use.

Anyways, I hope everyone has a great Thanksgiving day and remember to be thankfull for what you hav and more importantly the people you have in your life and focus less on what you may have lost or what you don’t have. You’ll feel a lot better for it.

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