Monthly Archives: October 2011

Today in the Freemarket – 4: Whirlpool Misses Earnings

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Whirlpool misses its analyst estimated (made up) Q3 earning per share goal of $2.68 per share instead checking in at $2.35 despite sales rising 2% to $4.6 billion. Because of this, Whirlpool CEO Jeff Fettig announced the company would lay off 5,000 workers in North America and Europe.  End of year earnings estimates were also revised downward to $4.75 to $5.25.

Whirlpool is only going to make between $363 million – $401.1 million in profit for 2011, so naturally, American workers will have to suffer.

I appear to have misplaced the press release where Whirlpool’s executive team taking any pay cuts. Whirlpool’s five top paid executives make a cumulative $28.6 million a year.  But I’m sure it will turn up somewhere…..

Do No HARP – 2

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Further reading into the President’s new and improved HARP program to help troubled, underwater homeowners refinance into lower interest rate mortgages that we touched on yesterday reveals even more gooder goodness for the banks and further proof that this is a bank bailout and not a stimulus.

The first part, and this is a biggie, is that those new mortgages with their shiny new interest rates also magically convert into recourse mortgages instead of non-recourse.  That is, with a traditional mortgage today, if you default on the mortgage and the bank forecloses on your property, any deficiency between the auction price of the home and the remaining balance of the loan is eaten by the bank.

By converting these mortgages (which are already vastly underwater mind you) into recourse loans, that balance will now follow you around for all eternity or until bankruptcy court. Anyone who agrees to one of Obama’s new mortgages instead of going into foreclosure and living in the house rent free for 18 months needs to have their head examined.  Anyone who does this needs to realize that they have just signed their entire life away to the bank.

The next part is no less serious, but is more of a direct gift to the banks and only affects you as a taxpayer rather than a homeowner.

FHFA moved to protect lenders from having to buy back loans if underwriting problems are later found. “Of all the barriers, this may be the most significant,” said Gene Sperling, director of the White House National Economic Council.

Basically, the banks can keep right on going with their sloppy and fraudulent mortgage writing procedures and not suffer any consequences from their actions. When the mortgage fails, the bank doesn’t suffer, we the taxpayers do.

Thankfully, so few people will qualify for these new regulations and hopefully those who do will be told by you, dear reader, that doing this is such a terrible idea that the overall impact of Obama’s new mortgage plan on the taxpayers will be minimal.

Perry’s Optional 20% Flat Tax

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Perry unveiled his optional 20% flat tax, which keeps the mortgage and charity deductions (thus not flat), and I’m not sure I can even comment on it with a straight face.

The idea of selecting a 20% “flat” tax or use the old 60,000 page tax system is actually more absurd than Cain’s 9-9-9 plan that was ripped off from SimCity. At its core, the 20% flat tax is just a 15 point tax cut for wealthy people.

Any family filing jointly and making less than $69,000 a year AGI will end up on the old tax regulations. So there is no actual reduction of tax code. (Median family income is in the mid-40 thousand range).

At the same time, he says he wants to cut the budget by 10%, but doesn’t really say where and what he wants to cut.

It basically blows an even bigger hole in the budget and doesn’t simplify the tax code even though he is running around calling this a “Flat Tax”.

It’s the ultimate self contained flip flop.

Do No HARP

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Obama reveals a series of rule changes to help underwater homeowners.

 

WASHINGTON — Seeking to circumvent congressional opposition, President Barack Obama is promoting a series of executive branch steps aimed at jumpstarting the economy this week, beginning with new rules to make it easier for homeowners to refinance their mortgages.

The White House said changes to the two-year-old Home Affordable Refinance Program will help homeowners with little or no equity in their houses refinance by cutting the cost of doing so and removing caps to give deeply underwater borrowers access to the program. The new rules apply to homeowners with federally guaranteed mortgages who are current on their payments.

 

This is a terrible terrible idea. It’s being promoted as a stimulus when it is really another bank bailout at the expense of tax payers (on the front end) and homeowners (on the back end being conned into paying more for a property that is worth less) Refinancing an overpriced house at a lower rate is still paying too much. Many of these houses are so underwater that they will never recover the current value of their mortgages while the mortgage is still being paid on.

How off shoring jobs fuels Occupy Wall Street

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The people of Occupy Wall Street aren’t against the rich for being rich. They are against the rich for how they got rich. Most of the rich are as rich as they are today because they fired as many Americans as possible and moved the jobs over seas. I want the rich to bring back jobs to the U.S. so people can WORK and EARN a fair living.

Try and buy an American made cell phone. You can’t do it.
Try and buy American made clothes in anything other than a boutique store. You (mostly) can’t do it.
Try and buy an American made T.V., you can’t do it. There is nearly ZERO flat screen production in the U.S.
Try and buy an American made Lawn Mower: Briggs and Stratton, Tecumseh moved all of their engine manufacturing to China and India.

NONE of this stuff is being manufactured in the U.S. anymore…. but the price of lawnmowers hadn’t gone down. The price of TVs hasn’t gone down, the price of clothing hasn’t gone down…. so all that money saved by the companies by moving the jobs to China has gone to executive pockets while the wages of manufacturing laborers has fallen. In 2001, the 27″ CRT television I bought cost about $300, which is right around the same price for a 27″ basic LCD TV today. In those 10 years, Sony has closed the TV manufacturing plant in nearby New Stanton, PA and moved production overseas putting 650 people out of work and helping to continue to depress wages in the area.

Who are the True Capitalists?

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I see statements by people against Occupy Wall Street saying that without capitalism we wouldn’t have Bill Gates and Steve Jobs. (well… had). And without those two, we wouldn’t have all these good jobs around. This is a funny argument because the Occupiers aren’t against capitalism.

The reality is though, that these two men, in concordance with the rest of the I.T. industry have both created and destroyed jobs here in the U.S.. Yes there are far more computer jobs today than there were in 1980, however there are also far fewer computer manufacturing jobs. And this is where the anti-Occupy crowd’s argument falls down.

The Occupiers are looking for a fair shot at the middle class American dream. But companies like Microsoft, Apple, Dell, and HP have sent all of the manufacturing jobs overseas. The capitalist who the Occupiers should be looking to is more someone like Henry Ford.

Apple, Dell, HP, and Microsoft are guilty of off shoring jobs to the lowest common denominator so they can line their own pockets with more money. Henry Ford understood that his workers were the most loyal of his customers. He paid his line workers, an unheard of at the time, $5 a day for manufacturing work. This was more than double that of any other auto manufacturer. He also reduced the work day from 9 hours to 8 hours. This meant that he was able to run a 3rd shift instead of just 2. With these changes, he was able to turn his manufacturing process into the most efficient in the world AND at the same time create a large middle class capable of affording his own products.Steve Jobs on the other hand, pays his Chinese workers so little that the only way they have of bettering themselves is 14 hour days and they STILL cannot afford the products they produce. They live in dormitories at the plant and the work is so long and tedious that it has now become necessary to make workers sign a “No Suicide Pledge” (there were 11 suicides in the first 5 months of 2011). Steve Jobs uses the plant in China because they don’t have pesky “worker’s rights” laws to prevent this kind of treatment just so Apple can post even bigger profits. If Jobs had opened the factory in the U.S. instead of China, Apple may not have been as profitable (as a percentage) as it is today, but far more people would be able to afford its products.

And that brings up the next argument from the anti-Occupy crowed. Lower the minimum wage and eliminate workers rights laws. For example,  a McDonalds that is already properly staffed to cover the number of customers they have, adding more employees at a lower wage does nothing for the bottom line. The owner of the McDonalds doesn’t need to add employees at ANY wage if there aren’t additional customers. So what does lowering the minimum wage do? It makes the workers poorer, the owners richer, and the employment rates go unchanged. Worldwide we can already see what no minimum wage and no workers rights leads to: 11 suicides in 5 months at the Apple factory for the workers who are housed there and work 14 hour days. Henry Ford paid DOUBLE the prevailing wage to his workers and was able to make huge profits. This inspired not only devout loyalty by his employees but also the ability recruit the BEST and KEEP them. In the process he created an entirely new market to sell his products to while lowering the cost of vehicles for everyone nationwide. His workers were now able to afford houses, cars, and things we now consider basic accommodation that were luxuries back then…. like refrigeration.

Not everyone can be Doctors, Lawyers, or Computer Engineers. Those who aren’t gifted with those thinking abilities should still be able to earn a living from their labors… for that we need manufacturing jobs here. The result will be the re-birth of the lower and middle class WITHOUT the need for government assistance to just eat.

There are three things important to Capitalism: Capital, Jobs, and Consumers. The 1% has attempted to keep more capital for themselves by eliminating jobs in this country. They have off shored and outsourced every last bit of labor they can. In their shortsighted quest to inhale even more money, they have forgotten that people with jobs are also consumers, so eventually, this policy will come back to bite them in the ass.

Wanting to be part of the middle class with a good job and stable home is not some Marxist plot. The rich have tried to erase the middle class for their own gain. OWS is a response to that.

Today in “The Free Market” – 2

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Safety Regulations are bad m’kay.  Sen. Rand Paul (lunatic – KY) is opposing safety regulation proposals intended to address the gas line safety issues surrounding a natural gas pipeline in San Bruno last year that destroyed a neighborhood and killed eight people.

The Senate bill requires installation of automatic or remote-control shut-off valves on new and replaced pipelines, but Speier and California Sens. Dianne Feinstein and Barbara Boxer, both Democrats, want to require such equipment on existing pipelines, such as the one in San Bruno, because those are at the highest risk of failure.

The legislation passed the Senate Commerce Committee unanimously in May. Given the bill’s broad support, Senate Democrats had “hot-lined” it, asking each party’s caucus if anyone objected, so that it could be passed quickly by unanimous consent.

Paul has used his Senate privileges to put a hold on the Pipeline Transportation Safety Improvement Act of 2011, which blocks further action on the bill despite nearly unanimous bipartisan support in Congress for toughening federal regulations.

Sen. Paul is against the Government telling The Free Market who they can and cannot kill.