Mish's Global Economic Trend Analysis

"Corruption on Steroids" Bell Officials Arrested, Criminal Charges Filed
HSBC Commercial Account Manager responds to "Amazing Arrogance, Gall, Chutzpa, and Unmitigated Effrontery from Berkshire Hathaway"
Alliance to Roll Back Taxes Charges Ahead
What does Petroleum Distillates usage say about the Recovery?

"Corruption on Steroids" Bell Officials Arrested, Criminal Charges Filed

Posted: 21 Sep 2010 10:50 PM PDT

I always knew this was a matter of time: Bell officials arrested as prosecutors are set to file criminal charges.

At least eight city of Bell officials were arrested Tuesday morning, a source said, as L.A. County Dist. Atty. Steve Cooley prepared to announce criminal charges in the municipal salary scandal.

Former Bell City Manager Robert Rizzo, whose high salary sparked the outrage that led to the investigations of the city, was among those arrested in the sweep. No details have been released, but a source not authorized to speak publicly about the case said that Rizzo; former Assistant City Manager Angela Spaccia; Mayor Oscar Hernandez; Councilmembers Luis Artiga, Teresa Jacobo and George Mirabal; and former Councilmembers George Cole and Victor Bello were among those arrested.

[Updated at 11:22 p.m.: Cooley filed charges against eight Bell officials Tuesday, alleging that they misappropriated $5.5 million in public funds. Rizzo has been charged with 53 counts of misappropriation of public funds and conflict of interest.

Among those arrested were former city administrator Robert Rizzo, former assistant city manager Angela Spaccia, Mayor Oscar Hernandez, councilmembers George Mirabal, Teresa Jacobo, Luis Artiga and former councilmembers George Cole and Victor Bello.

"This is corruption on steroids," Cooley said.]

Among those arrested were former city administrator Robert Rizzo, former assistant city manager Angela Spaccia, Mayor Oscar Hernandez, councilmembers George Mirabal, Teresa Jacobo, Luis Artiga and former councilmembers George Cole and Victor Bello.

"This is corruption on steroids," Cooley said.

Drop in the Bucket of Criminal Arrests that Need to Happen

When Monday's news broke, drivers honked horns and even their neighbors cheered the arrests. However, in the grand scheme of things, these arrests are but a drop in the bucket of what needs to happen.

Yes, this is indeed corruption on steroids, and unfortunately that is what it takes to get belated action. This went on for years!

Nationwide, corruption and vote buying are rampant. Officials in many cities deliberately made fiscally unsound deals with unions to get elected. If we prosecuted kickbacks, fraud, and illegal vote buying, the arrest list would be in the thousands.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

HSBC Commercial Account Manager responds to "Amazing Arrogance, Gall, Chutzpa, and Unmitigated Effrontery from Berkshire Hathaway"

Posted: 21 Sep 2010 05:20 PM PDT

I have received a huge numbers of emails in response to Amazing Arrogance, Gall, Chutzpa, and Unmitigated Effrontery from Berkshire Hathaway.

Only two people were against the sentiment I expressed, with the vast majority of responders thanking me. More than a handful thought I did not go far enough!

Here is a response from a Commercial Account Manager who disagrees with what I wrote.

Ryan Skene, Commercial Account Manager, HSBC Bank Canada, writes ...

Mish ... How about taking a rational and measured approach to your words rather than slinging mud, feces, and whatever other garbage you can get your hands on.

In a world where everyone has there hands out, I for one like the idea of everyone just sucking it up and grinding through the tough times instead of whining begging someone else to fix their problems.

Ryan Skene
Commercial Account Manager
HSBC Bank Canada
Suite 200, 321A 21st Street East
Saskatoon, Saskatchewan S7K 0C1

Mud Slinging? Really?!

I emailed Janet Tavakoli, author of Dear Mr. Buffett, one of the biggest Berkshire Hathaway supporters of all time, right after I wrote that post. I was curious about what she would have to say. Here is her response.

Mish,

I've already prepared a similar statement. It will be out shortly.

Best,
Janet

Janet Tavakoli Responds

Inquiring minds are reading Warren Buffett and Charlie Munger: Winning the Class War, Janet Tavakoli's reply to the amazing gall of Charlie Munger.

In Third World America: How Our Politicians are Abandoning the Middle Class and Betraying the American Dream, Arianna Huffington describes how Wall Street insiders used the financial crisis to bribe, coerce, and manipulate Washington into bailing them out and handing them unprecedented, unconditional windfalls.

Warren Buffett Jumped the Squid

Today's interested men defend the bailouts and subsequent absence of felony indictments. They include Warren Buffett, Chairman and CEO of Berkshire Hathaway, and Berkshire's Vice-Chairman, Charlie Munger.

Charlie Munger's War

Andrew Frye of Bloomberg News reported Charlie Munger's recent remarks to law students at the University of Michigan. Munger suggests we shouldn't be "bitching about a little bailout;" we should have wondered why the bailout wasn't even bigger.

Munger conjured the specter of Germany's Weimar Republic in an attempt to justify the bailouts: "We ended up with Adolf Hitler." ZeroHedge, home to finance's mainly masked throw downs, spoke for many (including me), when it retorted that Germany's hyperinflation was born from "wanton money printing" and set the stage for Hitler.

When it comes to bailouts that will hit middle class taxpayers most, Munger has a double standard:

"The 86 year old told the 25 million of Americans who comprise the 16.7% of the underemployed population in the country, to "suck it in and cope." Not only that, but apparently, all those who have been without a job for 99 weeks and more and no longer have recourse to insurance benefits, should "thank God for bank bailouts." Why of course he would say that: after all $26 billion worth of direct BRK investments were the recipient of over $95 billion in bailouts."

[From] ZeroHedge, September 20, 2010: Munger Tells 25 Million Americans To "Suck It In", And To "Thank God For Bank Bailouts" As BRK Benefits From $95 Billion Of TARP Funding

We bailed out banks that were the key architects of much of our national misery and currency destruction. Those living in poverty will have a much more difficult time bettering themselves, as much of the middle class sinks.

Those Bailed Out, Whine

While I too am tired of people asking for handouts, especially public unions, the gall of Charlie Munger was so intense that even perennial Berkshire Hathaway supporters like Janet Tavakoli have abandoned Warren Buffett and Charlie Munger over those remarks.

Skene's statement "I for one like the idea of everyone just sucking it up and grinding through the tough times instead of whining begging someone else to fix their problems" offers more than a hint of irony now that the broker dealers and banks have been bailed out at the expense of everyone else.

We should not be surprised to see bankers or commercial account managers, recipients of the bailouts (directly or indirectly), defend those bailouts, while telling everyone else to "suck it in and cope". After all, Skene's livelihood may have depended on it.

Those who get handouts always think they deserve them. The very same people never think anyone else does. That is precisely what is wrong with the statements of Charlie Munger, as well as the statements of Ryan Skene and his ilk, in defending them.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Alliance to Roll Back Taxes Charges Ahead

Posted: 21 Sep 2010 12:41 PM PDT

Everyone should have their eyes on a Massachusetts ballot question this year as to whether or not the state should reduce sales taxes from 6.25 percent to 3 percent. Politicians and unions have aligned in opposition, advising people to reject the proposal. Fortunately, voters are fed up and have other ideas.

54 Percent Favor Cutting Taxes

The Patriot Ledger reports Sales tax rollback wins support of 54 percent in poll

By a 10-point margin, Massachusetts voters favor slicing the state sales tax from 6.25 percent to 3 percent, according to a State House News Service poll – a ballot referendum that would chop roughly $2.4 billion from Beacon Hill coffers and has drawn opposition from all four gubernatorial candidates.

The rollback earned 54 percent support in the survey of 400 Massachusetts residents conducted at the end of August, with 44 percent against the ballot measure, known as Question 3, and 2 percent undecided. The survey has a margin of error 4.8 percent.

The Legislature and Gov. Deval Patrick raised the sales tax from 5 percent to 6.25 last year to close a multi-billion dollar budget gap. Patrick has described the prospective revenue loss from the rollback as "calamitous," while soft-pedaling answers to media inquiries about whether he would adhere to the mandate. Asked Tuesday whether Patrick would implement the rollback, communications director Kyle Sullivan said, "Yes," and referred to Patrick's previous assertions that he would "respect the will of the voters." During a Tuesday night debate, Patrick said "If the voters vote in that way, then I don't think we have any choice but to respect the will of the voters."

Republican Charles Baker, Patrick's closest rival, has said he would implement the tax cut, though he does not support it. Baker wants to bring the sales tax rate back to 5 percent, its level prior to last year's round of tax hikes.

Independent Treasurer Timothy Cahill is "concerned" with the prospect of the lost revenue, his campaign spokeswoman said last week, but would follow through with the mandate.

Measure Sponsored by the Alliance to Roll Back Taxes

Inquiring minds are reading About the Alliance to Roll Back Taxes

We're the Alliance to Roll Back Taxes, a non-partisan, grassroots campaign committee formed to put Question 3, the 2010 Massachusetts ballot initiative to Roll Back the Sales Tax to 3%, on the ballot and to give you a way to vote yourself a tax cut this November 2nd.

We represent everyday workers and taxpayers from all walks of life who believe taxes are too high and government spending is too high.

We run ballot initiatives because they are – bar none – the single most powerful tool available to voters. In fact, they are the only means currently available to cut taxes in Massachusetts (or just about anywhere). They give voters a chance to directly cut their own taxes and force overdue cuts in government spending.

Only a handful of groups have managed to put just one statewide tax cut initiative on the Massachusetts ballot in the last 20 years. We have succeeded in qualifying three ballot initiatives, all in the last 10 years, by collecting thousands of signatures statewide and meeting the requirements of six separate signature drives (two required to place each initiative on the ballot).

We're funded by individuals who make modest donations and who will get no government hand-out in return.

More than 99% of the opposition's donations come from government-funded Special Interests, i.e., paid for by your tax dollars – not from the general support of individual taxpayers and voters.

In contrast, our opponents are groups which profiteer from high taxes, high government spending, and government protections: Teachers Unions, Government Employee Unions, Government Contractor Unions and politically-connected corporations.

Our campaign was formed by co-sponsors Carla Howell, Chair, and Michael Cloud.

Carla Howell and Michael Cloud also head the Center For Small Government, a unique organization which advocates specific proposals to shrink the size, scope, authority, taxation and spending of today's Big Government.

Support the Alliance

I do not live in Massachusetts but I am sending in a donation anyway. Please Join the Alliance to Roll Back Taxes! and do the same.

It is very important to support such organizations. They are massively underfunded compared to the opposition.

About all you need to know about Question 3 (the proposition to reduce state sales tax from 6.25 percent to 3 percent) is that it is opposed by a coalition of major unions including the Massachusetts Teachers Association, the National Education Association and the Service Employees International Union, and all of the politicians who want more of your tax dollars to waste.

Public Unions and Politicians Conspire to Raise Your Taxes

Whenever unions and politicians conspire to raise your taxes, you know the taxpayer is going to get the short end of the stick. This happens because politician are willing to buy the votes of union members who vote in big blocks.

Chris Christie Leads the Way

Sadly, none of those running for Governor of Massachusetts is of the caliber of recently elected New Jersey governor Chris Christie.

The wimps in Massachusetts refuse to do what needs to be done. In contrast please consider Governor Chris Christie on Who's to Blame for Teacher Layoffs

Undoubtedly, the teachers' union and the police and fire unions will start a campaign "this will hurt the kids and services". No it won't. Any cutbacks that come from lowering taxes will be the direct responsibility of the unions who do not understand economic realities that the average taxpayer cannot afford what the unions want.

Goal of Unions is to Raise Your Taxes for Their Benefit

The goal of unions is always to raise your taxes so they get more benefits than you do.

Instead of raising taxes, it's time to cut benefits of the politicians and the public unions. Unfortunately, the political wimps in Massachusetts don't have the courage to do what's right. However, the gubernatorial candidates in Massachusetts have pledged to honor the will of the voters. Voters can and should force this issue.

Send a Message! Vote Yes on 3!

It's time to send an unmistakable message to the politicians and public unions that enough is enough. If you live in Massachusetts, please vote YES on question 3. Everyone, everywhere should support these initiatives with donations. Please send a donation to the Alliance to Roll Back Taxes.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

What does Petroleum Distillates usage say about the Recovery?

Posted: 21 Sep 2010 07:59 AM PDT

Reader Tim Wallace sent me an interesting series of charts on petroleum usage, GDP, and Housing. This post is on petroleum distillates.

Tim writes ...

Hello Mish

The following chart shows a drop in oil distillates usage stared in 2006, the same year the housing plunge started.

In my early career at Exxon I was taught to watch these numbers. Any time they fell below 0.8%, you could expect a stagnant economy, anytime below 0.5%, a recessionary economy. Negative numbers are very bad.

I used this chart to exit the market in 2008, well before the crash.

Oil Distillates Usage Decline From Peak

click on any chart for sharper image

This past summer, distillates usage was propped up with paving stimulus projects, yet we are still more than 12% down from peak usage.

That oil usage is still down this much from the prior peak in spite of those road projects is further proof there has been no intrinsic recovery, just a financial/banking recovery.

Tim

Thanks Tim.

Here are two more charts to consider.

Historic Growth Levels

2010 Week by Week vs. Peak Usage

Not Your Typical Recession or Recovery

Please consider the following chart courtesy of Dave Rosenberg's September 16, 2010, Breakfast with Dave.

In the typical recovery, GDP, new home sales, corporate earnings, retail sales, shipments, and orders are all making new highs after 33 months. Instead, none of those items are. Add oil distillates usage to the list.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Tuesday, September 21, 2010

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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