Monday, August 8, 2011

The Emeperor's New Clothes

When I heard the news the weekend, I thought it is about time...  There have to be some consequences to this "spend more than we raise" or "raise less than we spend" mentality.  There would be in our personal finances, and there should be for our Society as a whole. (aka USA)

CNN S&P Downgrades U.S. Credit Rating

And of course the Administration is looking to manage the spin.

CNN Obama Official: Move "Way Off"

And the nervous investors are off and running....  Since I am a couch potato investor that stays pretty much invested all the time, I am sure this will do terrible things to my on paper net worth...  (note to self: don't look for a year or so...)  Good thing I am 15+ yrs from retirement...

CNN Sell First, Ask Questions Later

So what do you think?
  • Are you dumping your equities as fast as you can? Or staying put?
  • Is this the beginning of the end?  Or just another bump?
  • Was S&P correct in taking the action they did?
  • Were they naive like the child, or very brave to say what they did?
  • Will there be retribution against them?  What?
  • Who is to blame? The spenders?  The no tax hikers?

20 comments:

Unknown said...

I don't understand your title about the emperor's new clothes.

The market tanking again might finally motivate me to learn something about investing so I will have a clue one day when/if I inherit some money.

I am not convinced the the S&P downgrade is that big of deal. David Frum explains a lot in a very brief post the downgrade rally

I am sharing my many other great insights in blogs where they get a response :)

John said...

To start... I consider the Conservative Right and Liberal Left to be equivalent to the adults in the story. They seem to be happy going along with their peers in cheering on their respective Government officials.

It seems to be either a mindless mantra of CUT Taxes, CUT Taxes, CUT Taxes... Or SPEND , SPEND, SPEND... Very little rationale discussion, just believe US and things will get better.

Now enters S&P with a very simplistic, innocent and almost child like viewpoint. "Until you adults fix your DEBT problem, we have to change your rating..." Seems pretty simple, rationale and good comparison.

As for the relationship between the quasi debt deal, stocks tanking, S&P's down grade & the economic outlook... Only time will tell.

By the way, even if the US Bonds aren't as good of a life boat as they were a week ago. When people are drowning they will climb into the nearest one. Now, will they stay there after this mass hysteria subsides?

As for responses, sorry for the low response rate and my lack of posting. My Summer has been CRAZY...

And I am assuming my other readers are also enjoying the beautiful MN weather. I like blogging, but I love living and experiencing the outdoors. The upside is winter will be here before we know it. Then a fire place and a good keyboard will be a welcome form of relaxation.

John said...

Just an FYI... Even at this slow time of year, G2A is averaging ~20 pg views per day. (ie low but steady)

My posts and our comments must not be interesting enough to entice the other readers to share their thoughts...

They always have been a shy group...

Anonymous said...

What the S&P has recognized is that America is now a second rate nation. Fortunately, for stock market purposes, most of American business realized that long ago, and has mostly decamped from this country.

The tea party has dishonored each of us and our nation. It will take a while to recover, assuming our nation has the capacity to recover. Standard & Poor thinks we do not.

--Hiram

Anonymous said...

There is nothing stopping us from making tough choices. Basically this nation is an army with a pension system attached. What's driving the deficit is two unpaid for wars, and ever increasing health care costs. Deficits are not eliminated by saying magic words, and passing meaningless laws, they are eliminated by lowering spending and raising revenue. What does the tea party about either of these things?

Are they in favor of withdrawal from Afghanistan and Iraq, and a general downsizing of the military?

Are they in favor of a reduction in medical expenses? At tea party rallies do we see grannies in tricorn hats holding signs saying, "I will put off my hip replacement in order to reduce the national debt." Or do others say, yes, I am willing to stand in line for my check up just a little bit longer so my kids won't have the burden of paying for my health care? Maybe those folks were there and the biased cameras of the media just missed them.

--Hiram

Anonymous said...

Debt is a complex issue. By that, here at least, I mean a very specific thing, that it is the result of more than one factor, in this case revenue and spending. Debt isn't a freestanding problem, to deal with it you must deal with the two things of which it is composed.

It's a basic rule of finance that can't make cuts in areas of the budget where you do not spend money. We spend serious money, in this country on two things, healthcare and the military. The reality is, I am willing to make cuts, severe cuts in both of those areas. They will hurt. We won't be as safe as a nation. Doctors will no longer be able to afford a new Mercedes each year. But if we decide that's to be our national priority, I am willing to make those decisions, very courageously, to bring those things about.

Who will join me?

--Hiram

John said...

Hiram, I am with you !!!

John said...

Apparently we are not alone...

CNN Tax Wealthy and Deep Spending Cuts

I have not read it yet... But the title looks promising...

Unknown said...

I also agree with Hiram's willingness to make deep cuts to both defense and medicare. I am more concerned with keeping my future SS.

John, the CNN poll only reaffirms that the solutions the public agrees with- cut discretionary spending and tax the rich - are inadequate.

I have only one more boring thing to add to this discussion before I get a a life and go for a bike ride and that is this link to

a Dylan Ratigan rant. I can't say that I have a good understanding of the $ extraction he is talking about, but it seems true enough, as his idea that Obama needs step up his leadership with a more truthful explanation of the state of our econonmy and political system.

John said...

I upgraded to a nicer smart phone so I can do this while sitting outside eating lunch...

I'll check the links when I get some time with computer that has a bigger screen. Some web pgs are hard to read on a 4 incher...

Have a nice ride !!!

Anonymous said...

I am more concerned with keeping my future SS.

Social Security is much less of a problem with a much easier set of solutions. Basically, we could go along way in solving the problems there by raising the level of income at which we tax.

It's Medicare and Medicaid which are the real problems. We have a very difficult time saying that we are going to reduce the quality and availability of health care, and that we are going to insist on paying less for the care we do receive.

Critics of health care reform were very successful in framing it as an issue of freedom v. tyranny. In health care, what we have to understand is that freedom is expensive, and if our first priority is cutting costs, what we have to give up is freedom. If you aren't, then I don't think you have any standing at all to complain about the high level of spending in this country. And if you aren't willing to raise taxes for the services you demand, then complaining about the deficit is the height of hypocrisy.

--Hiram

John said...

Hiram,
I think you are a bit off here. Healthcare is a philosophical discussion of:
- Is it a right?
- Who should pay for it?

If you believe that it is privelage that should be paid for by the individual user. Then there is nothing hypocritical or inconsistent in the message.

Anonymous said...

- Is it a right?
yes
- Who should pay for it?
Everyone.

"Healthcare is a philosophical discussion"

Curious. In my experience, those little rooms off to the side where the serous health care decision are made, never seem to be furnished with copies of Plato or Aristotle. Sartre is absent as well.

--Hiram

John said...

I mentioned to a friend that discussions between folks on the Left & Right are similar to when a Muslim and a Christian sit down to talk about which is the correct religion. (I mean one of them by their own beliefs is not going to heaven...)

There is little point because their belief systems are just too different.

Thus the Left think we should become a near Socialist state because it is in their opinion "fair". (ie no hunger, no homeless, no suffering, etc) All humans have a right to food, homes, healthcare, etc no matter how foolish, lazy, greedy, unlucky, etc. It is only "fair".

And the Right say everyone should get to keep what they have earned and take care of their own, it is only "fair". No matter if they were born with a silver spoon or a rusty old defiled spoon. It is only "fair".

Thank heavens there are a bunch of Centrists / Agnostics in this discussion. To bad there aren't more.

Anonymous said...

"All humans have a right to food, homes, healthcare, etc no matter how foolish, lazy, greedy, unlucky, etc. It is only "fair"."

Never been a big fairness guy. I just don't think we have the nerve to turn people away who need health care letting them die at the emergency room door. That being the case, the question becomes what's the best way to pay for the health care, we know we will be providing anyway?

The right hardly takes care of their own. They are heirs to the ravages of time, and expect the rest of us to pick up the tab for it. What they are better at is erecting elaborate rationales that allow them to persuade themselves that nobody else is picking up the rather large bill for their illusory self reliance.

--Hiram

Unknown said...

How the political landscape looks to me is that dems (voters and politicians) are mostly center left, with a small but vocal far left. The GOP is mostly far right with a small and silenced center right. Saying the country is polarized is an incomplete picture. Things could get done when the GOP was run by moderates like Reagan.

This observation sets aside the biggest factor which is how much both parties are controlled by special interests.

John said...

So you think the the theater seats are not evenly distributed before the stage? G2A Snopes and Relativity

I am a big fan of normal distributions in nature. Regents Normal I think there are many near the avg/middle and fewer the farther out you get from the avg/middle.

The question is where do you think you are sitting? Most folks see themselves as "normal" or near the middle. Often they are incorrect....

John said...

I forgot to mention that the moderate Reagan is apparently part of why we are in this mess... Natl Debt by President

He apparently didn't believe in the balanced budget...

Unknown said...

John,

Being someone with much time on my hands I used Gallop to try and determine the distribution of people in your theater. When political ideology is used there is a (warped) bell shape curve. But that is not the whole picture. The polls related to partisan ideological leanings show increasing polarization, but also that my description of the parties is fairly accurate.

U.S. Political Ideology Stable With Conservatives Leading


What's not reflected in these polls is the general shift to the right of the entire debate, there is a concept called overton window which I won't go into.

As to where I sit, my policy ideals are fairly far left (i.e the highest tax rate and services /safety net of Denmark appeals to me), but I am also a pragmatic, more center left realist, with some ability to see and sometimes agree with the views of the other side.

As for Reagan, I was going for a touch of irony, but I do believe the large tea party wing would primary him if he were in congress for his willingness to support something like 11 tax increases.

John said...

Cool link... Though I am trying to wrap my head around a "Conservative Democrat" or a "Liberal Republican".

I am guessing each person had a very different interpretation of liberal and conservative. I wish Gallop had given the participants some hard / absolute definitions of each.

Thoughts?