Black Swan Catastrophes

What are “black swan” events  in finance and business? 

These are highly improbable events that occur despite all we do to prevent them. This reflects the fact that there are rarely any black swans to be found in nature.

So, we keep attempting to protect ourselves against future black swan-type debacles. We’re spending a fortune in corporations to do so.

The U.S. Congress, with its propensity to spend, is great at outlays. The Dodd-Frank legislation is a perfect example of over-action and resulting unintended consequences, which you can be certain, will not prevent the next black swan incident.

One objective of Dodd-Frank was to make banks smaller, not too big to fail. The result is that smaller banks cannot exist amidst the new regulation, and larger banks are getting ever-larger. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The “Greedy” Rich

The rich? Leftist politicians have a conjured picture of a fat cat, smoking a cigar with his feet on a desk, or better still, a fishing rod in his hand.

Not so. The so-called rich are usually the ones employing you, the ones who run small and large companies, with emphasis on small. After all, anyone with income over $250,000 before taxes is now considered rich. Those over $250,000 a year income are often employers. 

How many jobs do they cover? Over 50 percent.

The rich from one measurement to the next are not even the same. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Government’s Clunker Fiasco

Another basic economics lesson not taught in expensive colleges. It had to do with the administration’s past failed efforts to revive the economy by getting in enormous debt.

To name a few: Unnecessary bank bailouts, stimulus outlays that were merely slush funds for government funds, and let’s not forget giving new car buyers a $4,500 cash allowance for clunkers when buying a certain type of new car.

It was not successful for many reasons I pointed out early on:

One: The government mixed an economic stimulus concept with an environmental objective so it confused the public.

Two: Cars sold in this manner meant that none would be sold normally for a couple of years after the program terminated. The public’s appetite was temporarily stimulated but then held off from future buying.

Three: Because of the way clunkers were being disposed, the used car and parts markets were adversely affected.

If money of this kind were used for clunker cars, what about clunker washing machines, or lawn mowers, and so on? Or government funds for buying clothes? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)        

The Weak Dollar

Most folks are beginning to care about a weak dollar. They simply don’t understand it.

Too many are still certain about government being able to offer them more goodies. That’s because they are often influenced by media sound bytes when it comes to political news. It’s sports and other circuses that get too much of their real attention.

So a weak dollar that concerns whether foreigners or foreign governments buy U.S. Treasury bonds have no special importance to them.

But when they have heavy inflation because the government has to literally print money to balance the budget, they will notice. By then they will blame the wrong folks for their financial woes, taking their cue from the same faulty media sound bytes.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Media Business Ignorance and Slant

The report whenever gasoline prices at the pump hit a new high, immediately followed by news of record oil company prices is an example of ignorance and slant.

The connection is obvious and so the public remains ignorant of the fact that oil company profits average only 8 cents on a dollar of revenues.

And that the administration is holding back new drilling and refining capability.

So what else is new? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Unintended Consequences of Dodd-Frank

When liberal politicians get together and try to legislate from their hearts and secular religious beliefs, you are certain to get a hodgepodge of unintended consequences. The Dodd-Frank legislation of 2010, on which I’ve commented many times, is a perfect illustration.

Just one example I like to point out because it’s happening before our eyes; it’s an event Dodd-Frank was supposed to actually prevent.

Dodd-Frank Regulations are killing smaller banks, It’s tough enough for large banks to contend but the added costs of keeping up with regulations add to administrative costs and financial requirements that banks simply cannot afford.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)    

Inflation Ahead

With extraordinary government spending and extreme budgetary deficits, it is only a matter of time before we see frightful inflation. It may take a year or two after an economic recovery, to really show up. But it will come.

The Federal Reserve’s original primary job was not to protect against systemic financial risk, as is being proposed by the administration. but primarily to maintain the value of the currency. Not so it seems.

Since 1978 the Fed has to help enforce the Full Employment and Balanced Growth Act, also known as Humphrey-Hawkins. That conflicts with the Fed’s prime stated activity. That’s because the Act’s enforcement creates an inflating bias, not one of dollar stability.

So there is always a conflict of interest being overlooked by financial media comment. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)