I spent a lot of time over the last day or two watching cable news and the feeling I got was that it’s over. Close up the shop because the US economy is about to enter a recession or even a depression. Even congressmen were using the dreaded ‘D” word, irresponsibly I may add. But is it really time to throw in the towel and declare the end of America as we know it? Is this just a ploy by the media to scare Americans into voting for a Messiah, who will then save the country from itself?
There is no question that the economy has some problems, namely a credit crunch, but Sec. Paulson’s plan will help relieve the crunch and open up credit flow. If you examine the economic data, we aren’t even close to the average recession. The amount of job loss pales in comparison to average job loss in recessionary times. the amount of banks that close is negligible compared to the hundreds that close during recessions. And I could go on and on. So why isn’t ‘main-street’ getting this information? Anyone notice that the usage of ‘main-street’ has taken on a life of its own?
What’s scary is the Democratic plan to save humanity. Capping salaries of private company CEO’s is not only illegal, but will scare them off from trying to purchase ‘toxic’ assets. Larry Kudlow had a brilliant point on the matter. He said, “And then there’s the ownership question. Some Democrats want Uncle Sam to take an ownership position in all the selling and purchasing banks. This is nuts. In America, this is nothing but property confiscation. It also will sharply curb buyers of the distressed assets.
You think Henry Kravis or Steve Schwarzman are gonna take a salary cap and lose an ownership share of the private-equity funds they themselves created and built? They shouldn’t and they won’t. And these funds are crucial to the new process. The only banks that will sell in this over-regulatory environment are the absolute, near-bankruptcy turkeys.”
Right on! He goes on to say that in the case of Fannie and Freddie and other companies bailed out by the government that in those cases you can feel free to pay the CEO along the lines of a high salary bureaucrat, but not the CEO of private company.
I think everyone needs to take a deep breath and get a bit of perspective. Things aren’t as bad as they are being made out to be. Pass Paulson’s plan, and allow the market to work the problems. My gut feeling is that if we do that, we are going to be in fro a bigtime economic boom.
Please see our Disclaimer HERE.
Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
April 15th, 2009 at 6:26 pm
I follow your posts for quite a long time and must tell you that your posts always prove to be of a high value and quality for readers.
July 15th, 2009 at 8:54 pm
The only way we can work out of this is to depend less on the government and work more closely with our communities. Problems like this seem to accure just by our countries own selfish acts. People don’t care about each other anymore, infact most communities in the united states are able to grow their own food, and supply enough for everyone to get by within their region. There is enough food grown in the breadbelt alone to feed the entire world for a year each year! Yet with our huge energy bill we take a lot of that and turn it into new fuel sources. Our country’s wants to material things and financial gain is what has caused some of this. Also poor planning, lack of education, and being manipulated by the media does not help. What the worst of it is, is that i’m only 20 years old and find it hard to be able to survive and further my education. I have to work a fulltime job, and yet still find a way to pay for college. If education is so important, why the hell isn’t it free? It is in most european countries, and is practically a requirement in Japan. Yet we are allowing ourselves to be ruled by the knowlegdeable.