GOP Needs Positive Message on Healthcare

According to a CBS News poll, 72% of Americans and 50% of Republicans favor a government run health insurance plan. The would seem to be bad for the Republican party, whose platform is against government running any businesses.

I suspect the reason Americans appear to support government health insurance is that there are problems with the current system and the only option to fix it that they have heard is a government-run plan. The main problem with the current system is health insurance is often tied to employment. If someone gets sick, they may be afraid to change jobs because they will not be able to keep their current insurance plan and may not be able to get a comparable new policy because of their newly preexisting condition.

I propose the Republicans admit that this is a huge problem and propose a law that prevents insurers from canceling someone’s policy on account of a job change. When a company writes a policy, they would free to take into account the same risk factors they do now, but they would have to continue offering insurance as long as the insured continued to pay his bills.

Demonizing a government plan really turns me off. A government plan would be okay, and it would do something to help the poor and those who aren’t diligent about paying their bills. A positive message about a minor change that could fix what bothers people about their current insurance would be much better.

Renting Test Equipment Is Easier than You Might Think

I rented a piece of electronic test equipment this week from Electro Rent for a project I’m working on. I hadn't heard of Electro Rent until last week, when someone online referred me to them. The price was well under the typical rule-of-thumb saying that the monthly rental cost should be about 10% of the cost of buying the equipment new. The equipment arrived the next day. Once I started using it, however, I realized it didn’t have all the capabilities I needed. So I sent an e-mail yesterday afternoon to the sales person at Electro Rent saying I’d like to rent a different piece of equipment. I wondered if I could get a partial refund for the equipment I already rented and whether I would have to return what I had before we could look into renting something different.

It turns out they made it easy. Amazingly Electro Rent had the exact piece of equipment I asked about shipped to my office my office this morning, less than 24 hours after I sent an e-mail asking about different equipment, without me having to fill out any paperwork. Electro Rent will only charge for shipping and any difference in rental cost between the two pieces of equipment. It’s amazing how quick, painlessly, and inexpensively you can get a piece of test equipment.

Buffet's Comments in BRK's 2008 Annual Report

Warren Buffet’s letter to Berkshire Hathaway shareholders in the BRK annual report contains a remarkable amount of plain-language information on the financial meltdown and how it will affect the economy in the future.
I heard about the report from an IEEE article, which does a great job summarizing Buffet’s letter.

Here is a passage I liked: (emphasis added)

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

It goes on to explain how one Berkshire Hathaway subsidiary made good loans and is not in direct trouble, except for the fact it is now competing with politically-connected companies being rescued and subsidized by the government.

This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.”
[snip]
At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

Supporters of aggressive bailout measures tell us to understand that the money is not aimed at the deserving. It’s aimed at stabilizing the economy. If this situation of political connections determining business success goes on for long, it will hurt long-term growth. Before that happens, though, there will probably be a backlash. For believers in aggressive bailouts and stimuli, the measures had better work quickly before the backlash becomes widespread.

Mayor Dave and MG&E Promotes Renewable Energy

Madison was green before green was cool.




If Madison Gas and Electric can offer renewable energy, why can't any utility?

Too Many Homes

A bank destroys 16 partially built homes to end government fines. It’s too bad the government didn’t stop the fines and donate the homes to the homeless.



Our society's biggest short-term problem is we have too many places to live. It should be a good problem to have.

Stress Test House Price Predictions Right on the Money

Calculated Risk did an excellent post showing a graph of how house prices have tracked in comparison to the baseline and adverse estimates used on bank “stress testing”. Although it’s only been two months, the actual real estate prices are coming in in between the two estimates, closer to the adverse estimate.

The accuracy of the prediction (so far) highlights how much baloney is out there regarding real estate. From the NAR to many local Realtors, we’ve seen nothing but deception about the real estate market. I wondered if it was just because real estate is such an imperfect market that maybe even experts can’t work out what’s going on. It turns out they can.

If it is possible to work out future real estate prices and they are going to fall between 13% and 24%, why don’t they fall instantly? I suspect the answer is misinformation from Realtors. If everyone accepted these predictions, prices would fall instantly because there are not many people who are willing to pay 20% extra just to execute a transaction a year or two earlier. Enough people are spreading misinformation that market participants are confused as to what is going on.

I cannot explain why Realtors seem to lie more than other industry associations. The lies seem to be ones that would decrease sales volume, which is how they make their money. Maybe it’s because they know they’re at risk of becoming obsolete. Computers do some of what Realtors used to do. When you look at the fee taken by all the people involved in a real estate transaction (i.e. title company, title insurance, home inspector, loan fees, taxes) the amount the Realtors take is outrageously high.

There will always be a need for someone to help people find buyers for their property and to handle some of the administrative stuff. If Realtors want to continue this function and continue charging around 6% of sale price, they need to provide top notch help and to start being honest.

I don't mean to condemn Realtors. They have helped me in both of the two real estate transactions I have made in my life. My honest question, though, for the organization as a whole is, “Why do you guys lie so much?”

Populist Backlash Will be Against China and Inflation, Not Taxes

I've been hearing talk of a populist backlash against some of bailout measures started by President Bush and now carried on by President Obama. I would welcome a non-partisan backlash against growing government and deficit spending, but I don’t believe we'll see one. If we do have a backlash, it will be in the following areas:

• A nationalist backlash against US dependence on China – Lately they've been expressing concern about our loose monetary policy. Regardless of whether people agree with US monetary policy (or even know what monetary policy is), they might get tired of having to answer to China
• A backlash if inflation occurs – People remember the recessions of '02 and '91 more clearly than the inflation of the 70s. Inflation isn't all that bad, but since it's new it might seem scarier than a recession without inflation, which is fresher in people's minds. The higher nominal rates that come with inflation might make the housing bust more painful, as rising interest rates depress real estate prices.

If we push the fiscal and monetary stimuli levers too far, we will have these conditions and the political firestorm that comes with them.