November 15, 2010

Bill Whittle on Immigration

Filed under: Economy,Immigration,Taxes & Government — Tom @ 2:52 pm

As usual, outstanding:

One of the many great statements:

(Illegal immigration) “makes chumps out of honest, hard-working, and motivated legal immigrants.”

Also, don’t miss Whittle make mincemeat of La Raza’s claim that the Southwest belongs to Mexico.

At WEOZ: ‘GM’s IPO: Uncle Sam’s pump and dump?’

It’s here.

It will go up here at BizzyBlog early Wednesday afternoon (link won’t work until then) after the blackout expires.

The post demonstrates that GM has pushed an unusually high number of cars onto dealer lots. It “just so happens” that the company records a sale when a vehicle leaves the factory, not when the deal sells it.

I believe it has led the company to book about $1.2 billion in “sent-ahead profit” (earnings before interest and taxes) not prudently supported by its level of sales through the first ten months of this year. Evidence that the shipments to dealers have been unreasonable: As of the end of October, they’re sitting on an average 86-day supply.

It “just so happens” that the company’s financials need to look as profitable as possible in advance of its initial public offering.

So the strategy appears to be: Pump up dealer inventory before the IPO, and then dump it in 2011 to get it back to normal levels when the pressure is off, and (hopefully) when the industry will be doing so well that no one will notice the billion-dollar hit in the opposite direction. Just what you’d expect from Obama Motors.

Now That GM IPO Is Almost A Done Deal, AP Warns of Its Dangers

APheartsGM081210I guess after about a year and a half of dancing around the truth, the Associated Press decided that confession of some of the truth about Government/General Motors is good for the soul.

Conveniently, the AP’s de facto partial confession, delivered via reporter Sharon Silke Carty, comes as the success of the company’s initial public offering seems assured.

Carty’s confession consists of four reasons why investors should consider avoiding the stock once if it indeed makes it to the public markets (and yes, the original uses all caps where indicated):

Reasons to sit out GM’s initial stock offering

… the world’s most charming used car salesman couldn’t cover up major concerns hanging over GM’s initial public offering on Thursday.

… Critics say GM is speeding into its IPO before it has proved that its structural problems are fixed. Other IPOs often leave the investing public a little slap-happy: Each newly minted stock certificate could turn into the next Walmart or Apple, but it’s rare that one does.

Here are some reasons investors may want to sit this one out:


… This stock offering will only reduce the government’s stake in GM from 61 percent to 43 percent. It will take more stock offerings, staggered over the next few years, before the U.S. government is out of the car business.

For shareholders, that means GM may not always put investors first. Political priorities may trump their demands. [1]


GM admits it doesn’t have great control over its finances. It said so in a long list of potential risk factors spelled out in its stock registration statement with the Securities and Exchange Commission. [2]


The United Auto Workers union has gone from a drag on the company to a part owner. How the new relationship will play out is still unknown. [3]



  • [1] — Up until now, the press has been treating the IPO as a “See I told you so” exercise (as in, “see, the company isn’t failure, and the government’s takeover was really okay. And this IPO will leave the government as a minority owner”). Now that it’s on the verge of success, we learn this from a professor quoted by Carty: “The government is absolutely going to call the shots, even if they are below 50 percent.” Thanks, Sharon.
  • [2] — Though material weaknesses in internal control (the technical term Carty should have employed) have been present at GM for a long time, the press has rarely acknowledged their existence. Even after almost a year and a half of the government calling the aforementioned shots, many of them are still there. At most other companies, this would be treated at least as a bit of a scandal. At many, it would be cause for wholesale housecleaning.
  • [3] — The UAW will protest that their health plan owns a share of the company, not the union itself. Okay, fine. But that doesn’t change the fact that the press has as far as I’ve seen never acknowledged the drop-dead obvious conflict of interest the union has when it negotiates with GM archrival Ford (one chance missed was noted in August 2009 at NewsBusters; at BizzyBlog). Of course the untion will be tempted to bargain harder with Ford, especially if its GM and Chrysler members and their respective health plans are worried about those two companies’ viability being compromised — especially if they are seriously underperforming.
  • [4] — So “electric vehicles aren’t a savior”? Who knew? Certainly not the White House, which has been touting green cardom as a primary reason for getting and staying involved in auto company ownership.

It’s also odd that Ms. Carty managed to write a 1,700-word article about the IPO without using the word “China,” given that as of the middle of last week, GM was “in the final stage of talks to sell equity to long-time Chinese partner SAIC Motor Corp in conjunction with its landmark initial public offering.” This should be a fifth concern for investors, as that will make it three political entities (don’t forget Canada) whose primary concerns are political and not necessarily financial.

Here’s a final point to make about IPOs that the most of the establishment press has avoided like the plague: GM is simply not the type of company that would be ordinarily be considered a good IPO candidate, based on the criteria that are usually considered:

  • (For established companies) A strong record of growth, particularly growth in earnings — In GM’s case, less than one year of positive numbers wouldn’t cut it, especially since its market share is slipping. The annualized future earnings growth benchmark for companies going public is usually at least 15%-20%. Though you never want to rule it out, that doesn’t seem particularly likely in GM’s case.
  • (For start-up and early-stage enterprises) Being in an entirely new and pioneering industry in its early stages — Obviously, that’s not GM.

AP’s partial confession comes nowhere near to making up for its mostly consistent reality avoidance during the past 18 month in news stories about GM.

Cross-posted at

Economists: ‘Quantitative easing by the Fed is neither warranted nor helpful’ (with Fed response)

Filed under: Economy,Taxes & Government — Tom @ 8:18 am

Open letter and response, as carried in today’s Wall Street Journal:

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.” In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

Cliff Asness
AQR Capital

Michael J. Boskin
Stanford University
Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)

Richard X. Bove
Rochdale Securities

Charles W. Calomiris
Columbia University Graduate School of Business

Jim Chanos
Kynikos Associates

John F. Cogan
Stanford University
Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)

Niall Ferguson
Harvard University
Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas
Manhattan Institute & e21
Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant
Grant’s Interest Rate Observer

Kevin A. Hassett
American Enterprise Institute
Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog
The Hertog Foundation

Gregory Hess
Claremont McKenna College

Douglas Holtz-Eakin
Former Director, Congressional Budget Office

Seth Klarman
Baupost Group

William Kristol
Editor, The Weekly Standard

David Malpass
Former Deputy Assistant Treasury Secretary (Reagan Administration)

Ronald I. McKinnon
Stanford University

Dan Senor
Council on Foreign Relations
Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle

Amity Shales
Council on Foreign Relations
Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer
Elliott Associates

John B. Taylor
Stanford University
Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)

Peter J. Wallison
American Enterprise Institute
Former Treasury and White House Counsel (Reagan Administration)

Geoffrey Wood
Cass Business School at City University London

A spokeswoman for the Fed responded (paragraph breaks added by me):

“As the Chairman has said, the Federal Reserve has Congressionally-mandated objectives to help promote both increased employment and price stability. In light of persistently weak job creation and declining inflation, the Federal Open Market Committee’s recent actions reflect those mandates.

The Federal Reserve will regularly review its program in light of incoming information and is prepared to make adjustments as necessary. The Federal Reserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment. In particular, the Fed has made all necessary preparations and is confident that it has the tools to unwind these policies at the appropriate time.

The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.”

Positivity: Converting Anglican bishop says papal action changed the landscape

Filed under: Positivity — Tom @ 8:12 am

From Richborough, England:

Nov 14, 2010 / 06:45 pm

The Anglican Bishop of Richborough told his flock that he plans to become Catholic because Pope Benedict XVI’s apostolic constitution “completely changed the landscape” for Anglo-Catholics and he now believes that he must lead the way to union with the Universal Church.

Bishop Keith Newton of Richborough, England said in a pastoral letter to priests and people in the Richborough area that he will resign as bishop as of Dec. 31. He will not conduct any public episcopal services. This “difficult” decision followed much thought and prayer, he remarked.

“I will, in due course, be received into full communion with the Catholic Church and join the Ordinariate when one is erected in England, which I hope will happen early next year.”

Pope Benedict established the proposed Anglican Ordinariate, a special jurisdiction within the Catholic Church, in his apostolic constitution “Anglicanorum Coetibus.”

Bishop Newton explained that although the issue of the ordination of women as Anglican bishops has been an important factor in his decision, it is “not the most significant.”

Noting the “surprise” of the Pope’s action on Anglican-Catholic relations, he said that most Anglicans have prayed for union with the Catholic Church. However, this union has seemed less likely because of “the new difficulties concerning the ordination of women and other doctrinal and moral issues affecting the Anglican Communion.”

“Although we must still pray for sacramental and ecclesial unity between our Churches that now seems a much more distant hope,” Bishop Newton said. The ordinariates provide an opportunity for “visible unity” and Anglicans are able to retain “what is best in our own tradition which will enrich the Universal Church.” …

Go here for the rest of the story.