North London Is Burning

I love a good riot. I think they make more compelling television than normal news. If this feed is still working, you can watch the live happenings on Sky News.

So what happened? What has caused the people to strike back at the police and now the media? Well, a young man was killed by the police earlier today. The Sun provides some nice background information:

Suspected gangster Mark Duggan, 29, fired a handgun at an armed cop, whose life was saved when the bullet hit his radio.

The officer returned fire with his Heckler & Koch MP5 sub-machine gun - blasting dad-of-five Duggan twice in the face before slumping to the ground.

There's more information about why he was being followed in that article.

It started off as a peaceful protest:

"It wasn't like this before," said one woman standing close to one of the two burned-out police cars. "It started out as a peaceful demonstration. The police shot a guy here last week and they lied about what happened. They said he pulled a gun but he wouldn't have done that with armed police. They shot him so badly that his mother could not recognise him."

But has exploded into a full out riot. There's a double decker bus on fire. It's a quite unbelievable sight.

Hails of bottles and bricks were intermittently thrown at police from side streets as reinforcements arrived. Rioters also aimed fireworks at police. At one stage, four firework rockets were shot at a line of horses, prompting a charge and a nearby crowd to disperse in panic.

Needless to say, I'll be watching Sky News for the rest of the evening.

Michelle Bachmann Overdrive

The WSJ had an interesting front page piece on Michelle Bachmann. For the most part, it focuses on her positives:

But here in Iowa, the tough rhetoric is sheathed in a soft presentation. Ms. Bachmann hugs, dances and offers girl talk on the campaign trail—"That's a rockin' shirt!"—as if baking her steely conservatism into a warm apple pie.

But it also, highlights some of her faults as well:

"I found out real fast that the Michele I knew publicly is not the behind-the-scenes Michele," said Ron Carey, who was hired as Ms. Bachmann's staff chief last year and says he quit less than six months later. Mr. Carey said that Ms. Bachmann was consumed with getting herself on television and seemed indifferent to the task of tending to her district, a view expressed by more than half a dozen other former aides.

While she may appeal to many socially conservatively individuals:

Ms. Bachmann's supporters say they are energized by her stances against abortion rights, gay marriage and government bailouts.

She clearly lacks the experience to be commander-in-chief.

Furthermore, her interests seem to be driven more by personal ambition than anything else. That's what bothers me with politicians more than anything else. I think this part is a good example:

For months, Mr. Carey said, the staff tried to get Ms. Bachmann to stop saying in speeches that Mr. Obama had added more to the federal debt load than all other presidents combined. "It was simply not true, and yet I could never get her to drop that line," he said.

You can't stretch the truth to win votes in my book. I understand speaking negatively about the opposing party's leader because it does help rally your constituency and supporters, but lying is simply not something I support at all.

I don't know how the Republican race is going to play out. I'm concerned that we will have another election where the best candidate to lead our country will not be in the race. No one in the race thus far has really inspired confidence in me.

Song Of The Day: Miss You By Rolling Stones

The Other Side

Quite recently, in the eye of this debt deal, President Obama has been lambasting oil companies and other corporations for avoiding taxes through loop holes:

He also goes after corporate jet owners. It's been going on like a broken record. I get why he wants them to be burdened with more taxes, considering they can probably afford it, but I don't know if it's "fair" or "equitable."

Nobody wants to pay taxes because they have no say into what the way that government is going to spend it. Government is inefficient both with layers of bureaucracy and wasteful programs such as Medicare, Welfare, and now ObamaCare. I'm not saying these programs aren't necessary, but rather that these programs aren't efficient.

On the other end of the spectrum, you have Republicans like Paul Ryan, who have consistently criticized the Democrats' irresponsible spending habits. Ryan was extremely pleased with the spending caps put on by the new debt deal:

But that did not stop him from writing a scathing op-ed in the WSJ regarding Obama's budget inadequacies:

Since then he has offered a lot of rhetoric but no real plan to avoid a spending-driven debt crisis. His speeches and press conferences are no substitutes for actual budgets with specific numbers and independently verified projections of future deficits and debt. Meanwhile, it has been over two years since the Democrat-controlled Senate passed any budget at all. This is a historic failure to fulfill one of the most basic responsibilities of governing.

The necessity of controlling federal spending is better illustrated by these graphs:

Needless to say, this problem isn't going to go away. In fact, it's only going to get worse unless we find a solution to this problem. ObamaCare was unnecessary bloated program that compounds the already horrible spending practices of our government.

When you have government handouts with lax rules, people are going to take them. Why wouldn't you want free money? If you can get it, why not? It's costing governments millions of dollars as a result.

To illustrate this problem, I'll use the Michigan Bridge Card program as an example. This program had very lax rules, so many people, in particular, students took advantage of this program. Although their parents were paying for their school and housing, they used the fact that they had zero income to get these cards and to get free groceries. As a result, the state had to make tighter regulations (From MLive):

"We're ready to extend a helping hand to any citizen who is truly in need — including college students who care for young children and are taking the right steps toward becoming self-sufficient," said Maura D. Corrigan, Michigan Department of Human Services director. "Those who don't meet federal guidelines won't be able to take advantage of what is meant to be a temporary safety net program."

It turns out that certain government programs have the same type of loopholes as the corporate tax loopholes that Obama has so vehemently argued to close. The whole system is creating a sort of reverse incentivization to work less and get more for the government. That's not a driver for growth, that's not a driver for productivity, that's not a driver for innovation. You have to wonder whether part of the reason the unemployment rate is so high is because the benefits of being on unemployment is so good. Now Obama wants to lengthen unemployment benefits again:

A top goal for Obama and congressional Democrats is to extend both unemployment insurance and a payroll tax break. These measures were enacted at the beginning of the year. Obama could not achieve those extensions in the budget deal with Congress.

I understand why we have unemployment insurance, but at what point are we going to cut this off? If we keep extending these benefits, why should anyone try to get employment? Where is the incentive to work?

Right now, we have more benefits offered to people than ever before, yet we sit at 9.2% unemployment. It's hard to say the economy is struggling when companies' earnings are generally beating estimates. Part of this might be from job cuts, but even with these stronger earnings, companies like Cisco and Merck are still cutting jobs.

Closing corporate loopholes are just going to cut into these companies' profits. The time honored solution to increasing costs is job cuts. This will only serve to exacerbate the problem. I'm not saying that these loop holes should not be closed, but closing them now might not be the best solution.

The first response for these companies will be to protect their profits and margins in their shareholders' best interests. You have a difference between what Obama thinks sounds reasonable and what will actually happen. We are already in risk of another economic recession. It is important to wait until the economy shows real signs of health before taking constrictive measures like increased taxes.

In the meantime, you should incentivize people to get back in the work force. The extension of unemployment allows people to take their time getting back into the field and pick and choose jobs. Jobs should not be something that people should be picky about right now. The government is shouldering a burden of costs that it needs to pass on to the private sector. As a result, they need to push people to get jobs and remove the uncertainty of future taxes.

In doing so, the government will alleviate the pressure of future costs on companies, while providing a sense of urgency at the bottom of the work force to be more aggressive in the labor markets.

Whereas the threat of taxes casts uncertainties over the overall economy, incentivizing the job market has the opposite effect. With more people employed and less people claiming benefits, you're automatically going to see a shift in revenues and costs. If you tighten up the loopholes or the ease with which people can get other government benefits in order to reduce unnecessary government handouts, you will see savings there too.

The best way to economic recovery and solving this debt crisis is not through taxes, but the other side. We are spending way too much on all of these programs. We need tighten up the restrictions of these programs and provide incentives for growth. The government isn't going to spend its way out of this recession, but rather, they are going to stunt a potential recovery with these backwards measures.

I would urge President Obama to take measures that actually work rather than to get into the weary debate on revenues versus spending cuts. His best path to reelection in 2012 is not by playing party lines, but rather by making a strong effort to right this country's economy and to make positive strides on the issue of debt.

The Super Horse

Horse Racing hasn't had a Triple Crown winner since Affirmed in 1978. While I will contest that there's nothing like a Triple Crown race, the fact of the matter is that horse racing as a sport has been suffering in the US.

Well, we might have found the answer. Jess Jackson has decided to breed Rachel Alexandra and Curlin. These two horses have won a combined three Horse of the Year titles. With those genetics, people are hoping that we will have a Super foal on our hands. I sure hope so because the sport needs an exciting horse.

The Budget Debate

There has been a general societal movement towards greater savings in the post-financial crisis period. Households and firms are saving more than they used to due to the weakened economy. Government has been faced with the choice of stimulating economic growth or confronting the budget deficit. To date, it has tried to spur the economy through low interest rates and increased spending. However, now, the big issue has become the budget deficit. Legislation to cut spending on both the local and national stage has been met with scrutiny and protests. The alternative to cutting spending would be to increase revenues through revised taxation. Republicans and Democrats disagree on this issue fundamentally, which has spurred the debate. Both sides have preached rhetoric attacking the American people’s fears about the job market. The problem with these two issues, cutting the budget deficit and creating jobs, is that may conflict with one another. Cutting spending directly addresses budgetary issues, but may hinder a recovering economy. Attempting to stimulate the economy and increase tax revenue through tax code revision might not address either issue. Cutting spending seems like the best way to tackle the budget deficit, but it is important to keep in mind what is being cut such that economic recovery is not negatively affected.

To understand why the GOP is so concerned with the budget deficit, it is important to understand the underlying economics. While it may seem counterintuitive to say it could have a negative impact on output, government spending can be bad when the government is increasing the national debt. First, increased government spending through increases in output and money demand increases the overall domestic interest rate, which can have a negative impact on consumption, investment, and net exports. Secondly, increasing the national debt through the deficit increases the size of interest payments on that debt. Recently, we have seen countries like Greece and Ireland seek bailouts because of the amount of debt they faced due to mounting debts. The GOP seeks to avoid that sort of situation by reducing government spending. It might be more important to decide what to cut rather than to unleash an all out assault on spending.

Wisconsin has come under the public eye both because of their attempts to pass legislation to cut spending as well as the heated reaction the legislation has received from unions. The key part of the legislation, which Republicans are having trouble passing because the Democrats have boycotted the vote, seeks to increase cost sharing of healthcare and pensions between government and government employees. These savings to government from increasing cost sharing would potentially save 5,500 state jobs and 5,000 local jobs. Private companies have already employed this type of cost sharing plan, so it makes sense for government to do this as well, particularly in Wisconsin where public employees enjoy higher salaries than their private counterparts. Why should government both provide better salaries and full benefits when private employers are not facing the same costs? It is not an efficient use of government funds to provide more than what the market dictates. While the pending issue is the limitation of collective bargaining, the spending cuts in this bill are in line with how government should target spending cuts. Government should try to make its spending more efficient while not hurting jobs.

The Wisconsin legislation gives us insight on the debate between Republicans and Democrats on the national level. After the House passed a $61 billion cut in government spending, Republican House Speaker, John Boehner, said, “we will not stop here in our efforts to cut spending, not when we’re broke and Washington’s spending binge is making it harder to create jobs.” In response, House democratic leader, Nancy Pelosi, disagrees “the Republican spending bill destroys jobs and their reaction is, ‘so be it.’” The key here is to understand what spending is being cut. In Wisconsin, they want to make spending cuts through cost sharing, taking measures similar to private enterprise and saving government jobs. The concern from Democrats is that spending cuts will slash program funding instituted to create jobs. Whoever is right in this regard is dependent on what the spending cuts actually intend to cut. The Democrats seem more intent on tackling the jobs issue than the budget problem.

The Democrats do not seem to have a definitive response to the budget issue, but certain actions that the Democrats are preaching could both help stimulate the economy and indirectly address the budget issue. In his State of the Union speech, Obama preached the need to revise corporate tax code, particularly in closing loopholes. The US corporate tax rate of 35 percent is amongst the highest in the world, but some companies pay much less than that. Obama hopes to simplify the code to lowering the rate, but making sure all companies pay the same rate. He believes this can be done without increasing the deficit. While it might not stimulate investment from these companies, it would resolve a key issue concerning these companies.

Many companies are currently cash rich, but are choosing to issue debt. Much of this money is overseas, so to bring this cash over, these corporations would be subject to the corporate tax. Since interest rates are low, companies are issuing cheap debt rather than bringing over foreign earnings. Companies would rather use foreign earnings to invest in lower yielding foreign assets, borrow money, or even not invest in a potentially profitable project in the US with foreign earnings all because of the tax rate. This is hurting investment in the US and taking away jobs. Whether a lower corporate tax rate would stimulate corporations to bring their foreign earnings into the US remains to be seen, but it is clear that the current corporate rate is discouraging companies from bringing over foreign earnings. This could have significant implications on tax revenues.

The financial crisis and the recession have caused a notable decline in tax revenues. Tax revenues are down nearly $400 billion since 2007, and corporate tax income is down $175 billion over the same period. This is not due a change in the tax code because President Obama has maintained the tax status quo, recently extending the Bush tax cuts. The big difference, however, is that the unemployment rate has risen significantly, meaning less people have jobs, and therefore, there is less income to be taxed. They also had less money to consume, hurting companies’ revenues and their incomes that they could be taxed upon. If simplifying the corporate tax code can spur investment in the US and create jobs, it would help reverse this trend. Unfortunately, there is no definitive effect from taking such measures. Changing the tax code does not mean that companies will invest, thus creating jobs and increasing tax revenues. It does not tackle the deficit problem head on like cutting spending.

Both Republicans and Democrats will debate this issue because they think they know what is best for the country. While the budget deficit is of significant concern, it is further complicated by the recession and the need to create new jobs. Cutting spending is complicated because it can save jobs by making government spending more efficient, but it can also cut programs that would create new jobs. However, it guarantees to tackle the issue head on. Hoping that spending and changing the corporate tax rate will stimulate job growth and tax revenues is not a certainty. In deciding a compromise, Democrats and Republicans must decide what measures will have the most positive impact on the economy.

The Grammys Fashion

Normally, I don't fuck with fashion, but watching The Grammys last night has set me off.

Look at the above picture. When did it become fashionable to look weird? When was it acceptable to come out looking like an alien dinosaur baby freak? When was it okay to wear christmas decorations as a dress? And what the hell is Nicky Minaj wearing?

Are we in a time where it's more important to make a statement than exhibit class, style, and sexiness? I remember back in my day, Jennifer Lopez wore this dress and it was sexy.

Is that the most clean conservative dress ever? No. The colors are kind of garish, but the style was risque. She was pushing standards and flaunting what her mama gave her. That was the main purpose of award show fashion. To find new ways to flaunt your body. Instead, it's about drawing attention to yourself wearing these outrageous costumes.

I mean let's be truthful, it's working. People are talking about these artists today. Though, it's not for what it should be: their music. They're not talking about how beautiful some of them are, but rather how crazy they must have been to wear what they did.

But what do I know about fashion? May be I'm just old school. May be I'm just that old man who doesn't appreciate these things. I just think these women are drawing attention to themselves like attention whores rather than for their music. That's what The Grammys are supposed to be celebrating right?

My One Problem with The Godfather

The Godfather is perhaps the all time greatest movie. It's perfect on almost every scale. It has everything you would want from a great movie: a great cast, great acting, great soundtrack, great story, violence, sex, I could go on and on.

My one problem with the movie is Lucy Mancini. She's not hot. Sonny is supposed to cheat on his wife with Lucy? Are we really supposed to believe that? This has been my one qualm with the movie. The casting of Lucy was not done well.

The Future of Coal

Recently, Alpha Natural Resources (ANR) acquired Massey Energy Co. (MEE) in a deal that has significant implications in the coal market. This capped an interesting week in the world of coal which saw Rio Tinto’s offer to take over Riversdale backed, Mobil-Exxon predicting natural gas to overtake coal by 2020, and Chevron getting out of coal all together. These news events signal a mixed outlook on the future of coal with some companies looking at alternative resources whereas others are looking to strengthen their position in the coal market. Looking at all these events, it is possible to get an outlook for the future of the coal market.

The Massey Acquisition
Regardless of what the future is, coal is a significant resource today, since it has many uses. Coal has various grades which contribute to its different uses. It is a significant source of electricity; 40 percent of the world’s electricity production comes from coal. The world’s two biggest economies, China and the United States, both consume a large portion of coal for electricity. There is a strong demand for the resource. Coal is also used in the blast furnace for smelting iron, another important mineral commodity to industrialized nations. Furthermore, since coal can be liquefied into gasoline or diesel, it is seen as a backstop technology to limit price escalation in the oil market.

The acquisition of Massey by Alpha Natural Resouces brings America’s third and fourth largest coal producers together. Under the terms of the agreement, Massey stockholders will receive 1.025 shares of ANR stock and $10 for each stock of Massey Common. This represents a 21% premium on Massey’s share price, but the deal should see ANR, with its 5 billion tons in reserves, become the US’s second largest coal producer, leapfrogging Arch Coal, and the third largest producer of coal in the world. The cash and stock deal is valued at $7.1 billion and should help ANR become a significant player in the metallurgical coal market.

Because metallurgical coal is a factor of production for industrial, manufacturing, and steel industries, the deal should put Alpha Natural Resources in a strong position. With emerging markets, like India, China, and Brazil, the demand for steel and other goods should be high. This should help sustain the demand for coal. ANR is putting themselves in a strategically solid position.

Riversdale Takeover
Rio Tinto is one of the world’s largest mining and resources companies, so an attempt to acquire a coal mining company should not be a huge surprise. The large majority of Rio’s coal operations are geared towards thermal coal. With its bauxite refinement and iron ore production, it makes sense for Rio to acquire a company whose resources can contribute directly towards another subsidiary’s factor of production. Perhaps more significant, however, is that magnitude of the resources they are acquiring.

Not only is Rio making an attempt to shift much of its coal holdings from thermal to coking, but they are also adding greatly to their potential production. As of 2008, Rio only produced 153,111 tonnes of coal. The Riversdale acquisition could substantially increase the production numbers, so not only is Rio getting more coking coal resources, but they are increasing their stake in coal mining. This, however, is by no means a done deal.

Just like Rio, there are two steelmakers, who are substantial holdings of Riversdale, with interests in coking coal. India’s Tata Steel owns 24.2 percent and Brazil’s CSN owns 16.29 percent. While the board representative from Tata backed the offer, Riversdale has made it clear that this does not mean that Tata Steel will sell it share of Riversdale. Obtaining Riversdale would be a strategic coup by Rio, both finding a resource to help itself and taking away a resource from a competitor.

Mobil-Exxon Prediction and Chevron’s Exit
Exxon-Mobil has made a bold call by suggesting that natural gas consumption will overtake coal by 2020. To put that in perspective, the International Energy Agency does not see that happening until 2035. As preposterous as it sounds, there is a method to Mobil-Exxon’s madness as trends in the market suggest that they may just be right.

Cheap prices have not discouraged exploration and production companies from raising supply, but the key to gas’s role in the future will be dependent on demand. The thought is that natural gas will make its leap in the power generation market. This sector accounts for 34 percent of US gas demand. While coal dominates this category, tightening environmental regulations could push power companies towards natural gas because it is a much more efficient source of energy. The shift away from coal seems to already taking hold.

Chevron Corp announced that it will be leaving the coal industry, stating that clean coal technology is too far away. This relates directly to Mobil-Exxon’s prediction that companies will look for cleaner energy sources. Clean coal technologies are technological developments aimed at reducing the environmental impact of goal energy generation. Since coal is one of the leading causes of climate change, there has been an initiative in the industry to find ways to limit the environmental impact. Although Chevron only produced 10 million tons of coal last year, it is significant that the energy giant is leaving the industry.

The Future of Coal
The coal market as a whole will be sustained so long as there is a demand from steel, manufacturing, and other industrial industries. However, coal as a source for electricity production might have a less certain future. With growing regulatory burdens, the demand for clean coal technology is at an all time high. How viable is clean coal technology? How long will it take for these technologies to develop? How much more efficient will these technologies be?

These lingering uncertainties must be sorted out in the near future for coal to survive as a source for electricity production. If these technologies do not make substantial reductions in the environmental impact or take too long to develop, these companies will look at alternative sources that are more efficient and less harmful the environment. This will have a spiral effect on the price and supply of coal because as demand goes elsewhere, prices will drop making the extraction of coal reserves uneconomic. A price drop would have a precipituous effect, not just on these coal companies, but the many miners who would lose their jobs.

All of these news events, in a way, suggest this trend away from coal as a source of electricity production. Both of the takeover/mergers seem to be motivated by a desire to further a stake in the coking coal industry that is tied with the steel, manufacturing, and industrial industries. The moves would help the companies strengthen their position in those markets. Exxon-Mobil's shunning of the coal industry and Chevron's departure from the coal industry is an indicator of what the future of the industry might hold.

Update: Egypt

Visit msnbc.com for breaking news, world news, and news about the economy

Tracy Morgan Is Ridiculous

The title of the post and the video speaks for itself. Whenever Tracy Morgan appears on anything, it's must watch television.

Protests in Photos

Big Picture Protests in the Middle East:

This is Worth Watching

Al Jazeera English: Live Stream - Watch Now - Al Jazeera English

Roundball Rock

The original Roundball Rock:

We Awarded The World Cup To This Country?

Really FIFA? Really IOC?

You may have heard how critical I was of the decision when it was made in early December. One of the criticisms of the Russian bid was safety concerns. Russia is hosting two important world events in the next 8 years. How has this happened?

When you have events like this:

But Monday's bombing, which killed 35 people and wounded more than 150, highlighted the persistence of terror attacks in the Russian heartland. Terrorists have struck the capital twice in the past 10 months, breaking a relative lull in attacks there that had lasted for several years.

You're going to put the world's people in the line of fire? I'm not saying that there will be a terrorist attack or a suicide bombing during the games, I hope there isn't one. But why take the risk?

These games are a time where we take a break from the rivalries and the fighting to contest them on the fields, the tracks, the swimming pools. The games are a time of peace. It is up to the host nation to maintain the peace. We've seen the consequences of a lack of peace in the past, in Munich 1972. Who is to say something similar cannot happen in a country where these kinds of events occur regularly?

Oh, that's right...money in your pocket is what's important. Corruption in sport is the worst. I hate it. It's absolutely ridiculous that Russia got the 2018 World Cup when safety was the number one issue and Qatar got the 2022 World Cup which they may move to winter because of weather concerns. It's particularly ridiculous when they beat the likes of England:

Events like these really annoy me because they show a lack of attention. These type of things need to be prevented, not just in Russia, but through out the world. I know that you can just as easily walk into a US airport. May be there should be further securities to prevent these measures. Airport are high capita areas and easy targets as a result. I know flying is a hassle, but what's the cost of a human life?