Archives For September 2008

Check Out Ramit’s 10 Links…

September 30, 2008

Ramit over at I Will Teach You To Be Rich, has done a really nice job putting together a list of links to help people better understand the financial crisis. He was even so kind as to include this post from last week.

If you get a chance you might want to check out Ramit’s post.

Here’s a quick review of the monthly total returns for the S&P 500 Index through the September 29th close:

I’m thinking we’re going to want forget about this year!

I’ll update the Dow’s numbers tomorrow for those who are interested.


September 29, 2008

That’s the sound the S&P 500 Index and other indexes are making today:

Look Out Below!

According to the Standard & Poor’s website, at Friday’s close the S&P 500 Index was down 5.44% for the month of September. Today ALONE, it is down 5.63% (at the time of this writing)! If this pitiful performance continues through tomorrow, the S&P 500 Index will be down over 11% for the month of September!

Oh, and in case you’re interested, here’s how this September’s performance compares with past Septembers.

AFM reader, commenter, and friend, Tom, sent me a link this morning to Ross Perot’s website, I like Ross Perot because I think he truly wants what’s best for the America. While browsing his website, I watched the video on the main page. Towards the end of the video Perot was asked what his three wishes for the American Public were. This is what he said:

1. A strong, moral, ethical base where people keep their commitments, do what they say they will do. That’s what we had when I grew up during the depression.

2. A strong family unit in every home so that children get the ultimate support. Sadly, we have over a 50% divorce rate now.

3. Have the finest public schools in the world. Believe it or not, we had those during the depression. Today, our public schools rank at the bottom of the industrialized world.

Imagine what this country would look like if all three of his wishes came true!

To his list I’d like to add two of my own:

Politicians who put this country first instead of those who make promises in order to get elected.

The end of lobbying!

What about you? What would your wishes for this country be?

From Two Weeks After Ike, More Than 400 Are Still Missing, in today’s Houston Chronicle:

Gail Ettenger made her last phone call at 10:10 p.m. She was trapped in her Bolivar Peninsula bungalow with her Great Dane, Reba. A drowning cat cried outside. Her Jeep bobbed in the seawater surging around her home.

Ettenger, 58, told her friend she was reading old love letters by flashlight. “I think I really screwed up this time,” she said, according to Monroe Burks, Ettenger’s neighbor who had evacuated to Houston.

That was Friday, Sept 12. On Wednesday — 12 days later — her nearly nude body was found face down by a huge debris pile in a remote mosquito-ridden marsh in Chambers County, about 10 miles inland from where her gray beach house once stood.

Isn’t that horrible? I can only imagine the fear that must have run through this lady’s mind during the last moments of her life.

I thought about riding out Ike but changed my mind when I saw that it was moving closer to my part of Texas. I got to thinking about it and figured out that it’s just stupid to sit through a dangerous storm if you can be somewhere else. I asked myself, “What do I have to gain by staying?” NOTHING! It’s not like I’m going to be able to hold my house together as the winds tear it apart! I chickened out and I was 100 miles from the storm’s landfall!

I saw this in Thursday’s Wall Street Journal and thought it worth sharing. It’s Stephen Schwarzman, chairman of Blackstone Group, talking about how we got into this credit crisis ($):

“It’s a perfect storm. It started with Congress encouraging lending to lower-income people. You went from subprime loans being 2% of total loans in 2002 to 30% of total loans in 2006. That kind of enormous increase swept into the net people who shouldn’t have been borrowing.

Those loans were packaged into CDOs rated AAA, which led the investment-banking firms [buying them] to do little to no due diligence, and the securities were distributed throughout the world, where they started defaulting.

When they started defaulting, out of bad luck or bad judgment, we implemented fair-value accounting….You had wildly different marks for this kind of security, which led to massive write-offs by the commercial-banking and investment-banking system.

In the face of those losses…you needed to raise new equity…which came from sovereign-wealth funds, in part, which then caused political resistance to sovereign-wealth funds, who predictably have withdrawn from putting money into the system….It seemed pretty obvious that would happen. We now find ourselves with a liquidity crisis where fundamentally the cost of money for financial intermediaries [such as investment banks] is significantly in excess of their cost of lending it. So several institutions found themselves in a structurally impossible position. …Goldman reverted to a banking charter for a lower cost of funds, which today is still not low enough for the business.”

That pretty much sums it up. It’s just ironic to me how Wall Street has always talked down to average Americans and now they (Wall Street) are reeling from some very poor decision making. What the hell were they thinking?

Get this:

Under current tax laws, IRS statistics for 2006 show that 45.6 million tax filers, essentially one-third of all filers, have no tax liability after taking their credits and deductions. “For good or ill,” notes the Tax Foundation, “this is a dramatic 57 percent increase since 2000 in the number of Americans who pay no personal income taxes.”

That’s a qoute from a recent article at Don’t Mess With Taxes called “44% of US Taxpayers Could Owe $0”.

And consider the fact that in 2006 one third of filers owed no tax – there are millions more who didn’t file, most of whom would probably also owe $0 due to low incomes and tax credits.

Here’s the crazy part: According to the Tax Foundation,

“If all of the Obama tax provisions were enacted in 2009, the number of nonpayers would rise by about 16 million, to 63 million overall, or 44 percent of all tax returns. And if all of the McCain tax proposals were enacted in 2009, the number of nonpayers would rise by about 15 million, to a total of 62 million overall, or roughly 43 percent of all tax filers.”

Assuming that 6-7% of people working in America fail to file tax returns (which I think is a safe assumption, though I admit I’m pulling it out of nowhere) that means that very soon HALF of our population will owe $0 in income taxes – and the other half will be footing the bill for everybody.

Check out the very interesting article at Don’t Mess With Taxes (linked above). The author quotes Scott Hodge, who wrote the paper for the Tax Foundation, who very astutely sums it up:

“It is time for a serious public discussion of whether it is desirable to have so many Americans disconnected from the cost of government and what the consequences are of using the tax system as a vehicle for social policy.”

More from Meg at The World of Wealth