Tom Hayes: CNNMoney.com gets "Cash for Clunkers" wrong

You'd expect an author at CNNMoney.com to understand the relationship between cashflow and business success.  You'd expect an editor to send this article back to re-write either for more research or more objectivity.  Here was the basis of Peter Valdes-Dapena's misguided assessment:

"...majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com"

So? This isn't news, and it misses the point of the Cash for Clunkers initiative.

Valdes-Dapena and/or his editors may think selling cars sooner rather than later is a valid reason to criticize the program, but as any businessman can tell you: success in business is about cash flow. Any retail operation needs to keep their stock turning over. At a time when the inventory was sitting idle on the lots this program provided a much needed infusion, enabling dealers to pay staff, utilities, creditors, and suppliers.

Did the Cash for Clunkers program solve the economic crisis? Of course not.  Nor was it intended to. The goal was simple: turn over inventory in one segment of the industry - to keep dealerships from failing in huge numbers before the manufacturers could recover. Save some jobs and hopefully avert a catastrophic spread of deterioration in the auto industry that would further delay economic recovery.

The article may fool a person with no entrepreneurial experience, but it reflects either a shallow grasp of money and business or a thinly-veiled attack on the government's attempt to avert a breakdown in the delivery mechanism of an industry it was actively seeking to save - without proposing any alternative that might have been even marginally effective.

The public may think "Cash for Clunkers" was as simple as just selling cars, the author obviously wants to, but the reality is much subtler. Edmunds didn't surprise anybody (except maybe CNNMoney.com staff) with the news that one of the primary effects was to accelerate the decisions and purchases:

In business, my friends, timing is everything.

 
Thomas Hayes is an entrepreneur, journalist, and political analyst who contributes regularly to a host of web sites on topics ranging from economics and politics to culture and community.

Is Tom DeLay Out Of Touch Or Just Plain Stupid?

I'm watching MSNBC's Hardball and Chris Matthews has two Republicans on his show: Michelle Wallace who played a key message-crafting role in the McCain Campaign last year, and former Representative Tom DeLay. I'm sitting here totally dumbfounded over DeLay's insistence that former President Bush was "innocent" of blame for our current economic disaster.

Indeed, PBS's Frontline has a great series on this called "The Meltdown" which places blame for our current wave of bank failures right in the lap of them-Secretary Henry Paulsen, who famously let his own idiological moorings get in the way of good policy, when he refused to put the Government in position to buy Lehman Brothers thus causing a wave of failures that extends to today. According to Frontline, Paulsen was getting advise from Republicans to let businesses fail, and that's what he did.

What Paulsen didn't count on was a wave of market failure such that on September 18th, 2009, the American Economy as we know it came close to a complete death. Paulsen was placed in a role he didn't want or agree with, making government work rather than doing nothing. He failed.

Now, here we have DeLay out there on Hardball and Chris Matthews does an at best feckless attempt at countering Tom's claim that President Bush had nothing to do with this. Meanwhile when Matthews does take him on, he resorts to a quote in the Wall Street Journal.

Give me a break.

Berkeley's Robert Reich Blog Seems To Point To Bailout Of The American Taxpayer

Berkeley Professor of Public Policy Robert Reich became famous for a book called "The Next American Frontier" where he favored a kind of American Industrial Policy while at the Kennedy School of Government at Harvard. That book, and "American Industry in International Competition" and "The New Industrial State" by John Kenneth Galbraith, plus a healthy practice of system dynamics modeling, helped to form my current economic view.


Currently, Reich serves as what he describes as an "informal advisor" to President-Elect Barack Obama.  In his blog, which I'd wish he'd break up into subject portions for linking, Reich points to the big "C" - Consumers -- as being at the heart of the economic problem. He writes:

The real problem is on the demand side of the economy.


Consumers won't or can't borrow because they're at the end of their ropes. Their incomes are dropping (one of the most sobering statistics in Friday's jobs report was the continued erosion of real median earnings), they're deeply in debt, and they're afraid of losing their jobs.


Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.


I is investment. Absent consumer spending, businesses are not going to invest.


Exports won't help much because the of the rest of the world is sliding into deep recession, too. (And as foreigners -- as well as Americans -- put their savings in dollars for safe keeping, the value of the dollar will likely continue to rise relative to other currencies. That, in turn, makes everything we might sell to the rest of the world more expensive.)


That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.


So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?


The answer to the first question is "a lot." Given the magnitude of the mess and the amount of underutilized capacity in the economy-- people who are or will soon be unemployed, those who are underemployed, factories shuttered, offices empty, trucks and containers idled -- government may have to spend $600 or $700 billion next year to reverse the downward cycle we're in.

The solution, in my view, is to give the American Taxpayer a $4,200 per-person check, each. Then form a plan to subsidize labor costs in selected export industries and rather than pick the firms, let them fill out an online application for assistance and make it so everyone knows who's applying for it and who got it. Finally, the massive infrastruture reinvestment program is part of this, too. But the idea is that the check will help American workers during this time of economic adjustment and even reach those -- like Joe The Plumber -- who can't file for unemployment insurance.

President-Elect Barack Obama's Video Adress For Saturday, February 15, 2008

Here, President-Elect Obama calls for Congress to act swiftly on economic relief for the Auto Industry.

Barack Obama's Radio Address, November 15, 2008

Get your own at Scribd or explore others:  Politics    Campaigns and Electi    radio address    Barack Obama  

Hyperinflation Here We Come:Last Gasp of a Doomed Currency

Rather than solving the problems, the government’s bailouts merely confirm my worst fears, and increase the chances for a hyper-inflationary outcome. By nationalizing Freddie and Fannie, the government has merely delayed the crisis. The borrowed time will cost us dearly, as the day of reckoning will now likely involve much steeper losses.

read more | digg story

Jobless Rates Soar-Employers Trim Jobs For 8 Months In A Row

The unemployment rate soared to a nearly five-year high in August, topping 6 percent. The unemployment rate at 6.1% is up from 5.7% in July and 4.7% a year ago.

read more | digg story

Will Obama or McCain raise taxes more?

Let’s not dither: we’re all in favor of lowering taxes and cutting federal spending, we’d all like to have more to spend on what we enjoy. McCain and his team have avoided releasing many specifics, but they rely on the old school attack that Obama will surely raise them on the middle class.

Fact check reveals: Obama will champion tax policies that will impact those who earn a quarter million dollars or more in any single year, while lowering taxes on those below $250,000 substantially. McCain will lower taxes on the top earners, and raise them for the middle-class.

Both candidates need money to fix the economy, and pay for the war Bush conducted without paying for yet, so even on the surface McCain's claim to lower taxes is, at best, the path to economic chaos in the USA.

read more | digg story

Charles E. Johnson and Tano Capital Invest $7.4 Million Into Anil Printers Limited

Tano Capital Invests $7.4 Million Into Anil Printers Limited

Charles E. Johnson and Tano Capital LLC, on behalf of the Tano India Private Equity Fund I, is pleased to announce that it has made an equity investment of INR 300 million (US $7.4 million) into India based Anil Printers Limited (“APL”). APL is a printing company that manufactures prepaid scratch cards, pin mailers, airline tickets, cargo bills, and carbon-less stationery for the telecommunications, banking, courier, and logistics industries.

Tano Capital LLC, on behalf of the Tano India Private Equity Fund I, is pleased to announce that it has made an equity investment of INR 300 million (US $7.4 million) into India based Anil Printers Limited (“APL”). APL is a printing company that manufactures prepaid scratch cards, pin mailers, airline tickets, cargo bills, and carbon-less stationery for the telecommunications, banking, courier, and logistics industries.

APL was founded by Ashokka Agarwal, who has been in the printing business for the past 25 years. APL’s clients include Reliance Telecom, Reliance Infocomm, Bharti Airtel, Hutch, Idea, BSNL, MTNL, Nu Mobile (Bhutan), State Bank of India, Corporation Bank, UTI Bank, HSBC, HDFC, Canara Bank, Bank of Baroda, Bank of India, Jet Airways and Indian Airlines.

With this investment, APL plans to manufacture smart cards and RFID labels in technical collaboration with Mühlbauer High Tech International of Germany. APL has identified opportunities for the application of smart cards and RFID technology in several areas, including driver’s licenses and national identification/security card systems such as the R.C. Book Multipurpose National Identification Card (MNIC) project.

Charles “Chuck” Johnson, Tano Capital’s Founder and Managing General Partner, said, “We are particularly excited about the strength and depth of Anil Printers management team. They have demonstrated their ability to continually adapt and reshape their core businesses in rapidly changing business environments in both up and down markets. Their impressive list of top notch clients is a solid testament to the quality of the products that they produce.”

Tano Capital, LLC is an alternative asset management firm founded in 2003 by Charles E. Johnson (formerly Co-President of Franklin Templeton Investments and CEO of Templeton Worldwide) to make private equity investments into rapidly growing private companies in India and China. Tano Capital currently has offices in Shanghai, Tianjin, Taipei, Mauritius, Mumbai, Viet Nam and San Mateo, California.

U.S. Economy Headed For Depression? Record Consumer Debt Level Points The Way

I've said this for years: the United States Credit System is the shock-absorber to economic fluxuations and when healthy guarantees constant growth in the economy and guards against a long-term recession or worse, a Depression.

But that party's coming to an end, rapidly. Take a look at these indicators presented by MarketOracle.uk: US Recession in 2007 - Third Leg of the Bear Market Likely

In 2004 I told Gary Hart, who was considering a presidential run, about this. All he could talk about was changing the tax system. Geez!