Yard Work, Troubled Assets, Bankruptcy and Energy

I often mention that I live in Pittsburgh. Well, the truth is that I live in a leafy suburb of Pittsburgh. I grew up in the Steel City. But when I got married I moved to the suburbs to be near my wife.

Life in the Leafy Suburbs

There is a problem with living in a leafy suburb. When autumn rolls around, the leaves turn brown and fall off the trees. So you have to deal with cleaning up the yard. And after being away in South Africa for two weeks, I sure had a lot of dead leaves in my yard. Thus did I spend time the other day, working like a man on a chain gang — totin’, liftin’ and haulin’.

There I was, raking leaves and dragging them down to the front curb. From curb side, the local municipality has a dump truck with a big sucking machine (the “suck truck”) that scoops up the leaves and takes them to some place called “away” — wherever that is.

And then this guy drives up in a pickup truck and says, “Hey sir, are you the owner?”

I acknowledged that I was the owner, and the man said “I need work. Could I help you clean your yard for a couple hours and you could just pay me?”

The guy seemed OK, and I had a heck of a lot of yard work to accomplish. So I figured I’d hire him for a couple of hours and get the work done faster. Thus did Mike — my casual employee — and I clean up the area around my house.

As we worked, Mike and I talked. Mike is 45 years old. He’s a high school graduate. He served in the Navy (See? I knew he was OK.) After the Navy he worked at a manufacturing job, from which he was laid off in the early 1990s. Then he worked in a warehouse, which closed in the mid-1990s. Then he worked as a mechanic, until his employer went bankrupt in 2000. Then he drove a truck and hauled freight, until that fell through last year after his major customer moved operations out of the country.

“It’s the story of my life,” said Mike. “I’ll work someplace for a couple of years. Then the economy changes or there’s a business setback, and I’m out on my butt.”

Doing Jobs That Americans Won’t Do

Now Mike drives around leafy suburbs. He looks for people who might need help with cleaning up around their house. Mike’s wife is a cashier at Target, “so she’s got the real job in my house.” Mike has settled down to where he lives in the world of cash, earning a few dollars here and there.

“Y’know,” said Mike, “George Bush said that we need more immigrants here in the U.S. because ‘they do jobs that Americans won’t do.’ What the hell was he thinking when he said that? Here I am. I can strip a diesel engine down to the last nut and washer. And I’m cruising neighborhoods looking for yard-work. Heck, I was born in Pittsburgh. I served my country and I’m no immigrant. But I can’t tell you the kinds of crappy jobs I’ve done just to pull a couple of bucks out of the economy for me and my family.”

“We’re All Immigrants Now”

Mike continued. “I don’t see it getting much better for people like me. That’s for sure. And now all the big banks and big businesses are laying people off too. Everybody’s losing their retirement funds. I guess we’re all immigrants now.”

Where Do We Go from Here?

So where do we go from here? At least Mike can strip a diesel engine down to the last nut and washer. Are we all destined to become — as Mike so delicately put it — “immigrants.”

Call me quaint — even old-fashioned — but I’m proud to be an American. It’s just that I don’t like this “immigrant” sort of governance that has evolved within the U.S. We have too many family political dynasties, taking care of their old friends from way back — if you know what I mean.

Really, it seems like every political administration of recent vintage has had people from Goldman Sachs (GS) hiring other people from Goldman Sachs to bail out more people at Goldman Sachs.

Yes, it may be paranoia at work. I confess that I think along these lines quite often. But it has been especially prominent in recent days, as Treasury Secretary Hank Paulson — a former Goldman man — comes up with new and different versions of the Wall Street and banking bailout plan.

First Congress authorized $700 billion — quite a bit more than the entire Department of Defense budget — for some sort of “troubled asset relief plan (TARP).” (Nobody ever really explained it to my satisfaction. Somehow we were going to throw money at a very big problem and fix it.) Then the money flowed like rainwater to Wall Street and a bunch of banks. Then the banks and Wall Street houses continued to pay their insiders’ big salaries and bonuses. And the banks have not exactly been lending into the economy. Meanwhile nobody has been buying up any of those so-called “troubled assets.” So for $700 billion, we are not getting any results. And there’s little or no accountability.

Then Sec. Paulson comes along and says that the TARP money really doesn’t have to be used to buy “troubled assets.” He says we’ll use it for other things instead.

But wait a minute. It would be like Congress authorizing funds for the Navy to buy a new aircraft carrier (actually, 100 new aircraft carriers for $700 billion), and then the Secretary of Defense saying, “No, we won’t use the money to buy aircraft carriers. We’ll use it to pay big salaries and bonuses to defense industry executives.” How long do you think that a charade like that could go on?

Let’s go back to the beginning. Did it ever make any sense for the U.S. Treasury to buy up “troubled assets” — whatever those are and however one might value them? And does it make any sense for the Treasury to just hand out funds to banks and bankers? Like I said, call me quaint or old-fashioned, but of course not.

Until we meet again,
Byron W. King

Source: Americans as Immigrant Workers in America

The chart you’re looking at compares the South African rand’s performance (versus the U.S. dollar) and the iShares MSCI South Africa ETF (EZA). This is what’s called an inverse correlation. When the rand becomes inflated, South African companies don’t perform well.

The opposite is also true: When the rand gains in strength versus the U.S. dollar, South African companies perform better.

Over the past couple months we’ve seen exactly that. The interesting thing is South Africa is in the midst of a power crisis. In fact, many of its mining companies are scared they won’t have enough power to produce things like gold and platinum.

With aging power plants and failing infrastructure, South Africa needs an injection of investment cash into its power sector. And while its economy technically maintains a budget surplus, it’s constantly battling things like unemployment and poverty.

In short, a commodities bull run, with gold and platinum prices soaring, won’t mean much to the resource-rich country if it doesn’t have the power to produce them — or if the workers wage strikes against low wages and immigrant workers.

My take? Without some positive news on the situation soon, expect the EZA to drop back, and the rand to inflate a bit more. Here’s some numbers: EZA could drop to $110 and the rand versus the U.S. dollar could fall to a ratio of 7:1.

S.R. Nunnally

Editor, Taipan Trader

P.S. The US dollar has been rising in India and Pakistan, too… So sharply that one might expect a bit of a backlash here. Check out the chart, and see for yourself.

9 out of 10 Winners for 1,043%!

This cutting-edge service just nailed 9 winning picks out of 10 tries… for total gains of 1,043%. And if you don’t mind profiting at other investors’ expense, you could get in on gains like this, and you could even pocket a quick 424% in the next 12 weeks.

Follow this link for all the details…

Source: The Dollar IS Rising… In South Africa, That Is