Les Jones

“Cash for Clunkers” suspended

Friday, July 31st, 2009 | Health Care, Politics | Permalink | 1 Comment |

This post has been updated with additional information.

The government has suspended the Cash for Clunkers program. Officially, the program had run through 20% of its four month budget in just one week, but car dealers expressed concern that the government hadn’t recognized many more sales that might empty the program’s $1 billion in funds.

Gee, a government program going over budget. Who could have guessed? Like Insty says, “Hmm. So the program ran through the money faster than they thought. I wonder how their healthcare plan will work out?”

I’m sure when the government takes over health care that Cash for Cancer won’t run out of money in one week. Probably. For instance, Hawaii’s healthcare program lasted a whole seven months before being shut down due to bankrupting cost overruns. So as long as you can get through the waiting list for cancer treatment in less than seven months you probably won’t even die.

Tags: we're from the government

CALPERS plans riskier bets to recoup losses on previous risky bets

Saturday, July 25th, 2009 | Economics | Permalink | No Comments |

New York Times - California Pension Fund Hopes Riskier Bets Will Restore Its Health:

Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.

That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge. Calpers’s real estate portfolio has tumbled 35 percent, and its private equity holdings are down 31 percent. What is more, under Mr. Dear’s predecessor, Calpers had to sell stocks in a falling market last year to fulfill calls for cash from its private equity and real estate partnerships. That led to bigger losses in its stock portfolio.

And there’s this:

Mr. Dear remains a believer. Private investments, he asserts, will over the long haul outperform stocks by three percentage points a year, and that is necessary to keep Calpers on track to returning its goal of 7.75 percent annual returns.

See Calling BS on high rates of expected return for why a 7.75% annual return - year in and year out - is unrealistic. These municipal pension fund managers and their political bosses have to pretend those returns are possible. Ootherwise they’d have to admit the pensions are woefully underfunded. California is broke and is planning cuts in basic services. They’d have to cut even more if they fully funded their massive pension funds.

Tags: california, pensions, unions, we're from the government

Please tell me the U.S. Mint isn’t this stupid

Wednesday, July 22nd, 2009 | Economics | Permalink | 4 Comments |

Need a cash advance? Don’t want to pay cash advance fees? Go to the U.S. Mint Web site and use your credit card to buy some money and have it shipped to your house free.

You can order thousands of dollars of $1 coins on your credit card at face value, and the mint will ship them to you overnight free of charge. They are treated as a purchase, not a cash advance, so not only do you not pay finance charges, but you earn airline miles or cashback rewards just like a regular purchase. You can then immediately take the coins to the bank and deposit them to start earning interest, and you don’t have to pay for them until the due date on your next credit card bill.

$1000 of coins weighs about 20 pounds. Imagine the idiocy of a country that pays UPS insured overnight shipping on multiple 20 pound boxes, plus pays credit card merchant fees, just to take a loss to get people to use its currency. Sounds like something Zimbabwe would do, huh?

At first, the shipping seems to be $4.95. However, once I added the coins to my shopping cart and entered my shipping information the shipping became free. Assuming half an ounce for each coin that’s roughly 30 pounds for 1,000. At their cheapest rate UPS would charge $17 to ship that package from Philadelphia to Tennessee. (I used Philadelphia because it’s the closest mint.)

The Mint would have to pay about $20 in credit card merchant fees to take a credit card order for $1,000. The shipping is about $17. So the Mint is losing about $37 on every order. Holy cow that’s dumb.

Tags: we're from the government

GM bailout a lousy deal for taxpayers

Wednesday, June 3rd, 2009 | Economics | Permalink | 1 Comment |

The (Scary) Math Behind the GM Taxpayer Bailout

The government effectively will get 60% of General Motors in exchange for $50 Billion in aid. This, using standard investor math, means that GM has an implied value of: 50 Billion/.60 = $83.3 Billion. Currently (or as of last Sunday) GM had 610 million shares outstanding.

That means that for the taxpayer to break-even GM shares (in the pre-bankruptcy world) would need to be worth $136.55 PER SHARE (83.3 Billion/610 Million)

The lifetime HIGH for GM is $93.62 back in April 2000 when the going was good. So good luck with that.

Everyone seems to think GM will need even more govt. cash before this is all over, so the deal just gets worse.

Tags: bailouts, gm, we're from the government

Pension Benefit Guaranty Corporation lost its shirt in stocks

Tuesday, March 31st, 2009 | Economics | Permalink | No Comments |

Boston Globe - Pension insurer shifted to stocks:

Just months before the start of last year’s stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent - and all of its stock-related investments were down 23 percent - as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

Despite its name, the agency does not necessarily guarantee the full value of a person’s pension and is not backed by the full faith and credit of the government.

Nonetheless, agency officials say that if the pension agency fails to meet its obligation, the government would come under intense political pressure to step in. That means taxpayers - including those who don’t get pensions - could be asked to pay for a bailout.

And now besides guaranteeing pensions and banks, the government is going to warranty the transmission on your Chrysler. What could possiblie go wrong?

Hat tip to Bob Krumm.

This isn’t the first time an underfunded government program with an impossible financial burden has done something this stupid. CALPERS, the California government pension fund, invested in real estate just before the crash and is down billions. And who could forget Rod Blagojevich’s Illinois pension scheme:

With pensions seriously underfunded in 2003, recently arrested and impeached Governor Rod Blagojevich rolled the dice and issued “pension obligation bonds.” The idea was that Illinois would issue debt at a cost of 5.1% and then earn 8.5% or so investing the proceeds. The plan turned into a disaster when the market tanked last year. Now short roughly $60 billion, Illinois has barely half of what it needs to cover future pension obligations.

Previously

• The Pension Benefit Guaranty Corp.

Tags: pensions, we're from the government

How’s government planning going in China?

Wednesday, February 25th, 2009 | Economics | Permalink | No Comments |

Mish - 14-year Commercial Real Estate Supply In China:

“The scale of development was unprecedented anywhere in the world,” said Rodman, a Los Angeles native who lives in Beijing, running a firm called Global Distressed Solutions. “It defied logic. It just doesn’t make sense.”

The government spent $43 billion for the Olympics, nearly three times as much as any other host city. But many of the venues proved too big, too expensive and more photogenic than practical.

The National Stadium, known as the Bird’s Nest, has only one event scheduled for this year: a performance of the opera “Turandot” on Aug. 8, the one-year anniversary of the Olympic opening ceremony. China’s leading soccer club backed out of a deal to play there, saying it would be an embarrassment to use a 91,000-seat stadium for games that ordinarily attract only 10,000 spectators.

The venue, which costs $9 million a year to maintain, is expected to be turned into a shopping mall in several years, its owners announced last month. A baseball stadium that opened last spring with an exhibition game between the Dodgers and the San Diego Padres, is being demolished. Its owner says it also will use the land for a shopping mall.

I’d laugh, but government-backed construction in U.S. has done plenty of similarly stupid things. Even here in Tennessee Knoxville’s Convention Center often sits empty and Memphis’s pyramid-shaped basketball arena may be turned into a retail complex or a church.

Tags: we're from the government