Billions in Bailouts Mean Nothing, But Your Missing Tax Rebate Just Might

It was as advertised a big fat ZERO degrees this morning. Kind of takes your motivation away when it is that cold. At least I have Monday off as a Holiday so I get a three day weekend!

Odyssey Marine Exploration (OMEX) Update
Last night was the premier episode of the Discovery Channels program titled "Treasure Quest". I liked the opening episode. As I have read a great deal about the process that OMEX uses, I knew a bit about it. It was great to get a visual on all the action and equipment.

One scene stood out strongly: While searching for the ship "Merchant Royal" the searchers were combing an area that is a high traffic zone for shipping freighters. It seemed wild that maybe 500 Million in gold may lie on the ocean bed with tons of cargo going by day and day out. There will be 14 more episodes.

So how is the stock doing? Today OMEX closed at 3.51, up 16% from the 3.00 I have it at. Not quite the pop I am expecting, but it is still early on. I like the show and the stock for the pure excitement of treasure hunting.
Full Disclosure: I own shares in OMEX.

Gold and Silver Show Some Muscle
Gold and Silver took it on the chin along with the greater market over the last week and a half. The two metals have shown great resilience as of late and had a good day today. I like it when any asset exhibits real resistance to getting pounded in a bad market.

Of course you know I am extremely bullish on the metals. With all the money being created and the rush for currencies the world over to devalue I expect gold (and to a lesser degree silver) to remain solid. Probably not spectacular, but solid. That is more than you can say for many things at this point.
Full Disclosure: I own gold miners GG and KGC.

Great Blog Comment
One of the great features of any blog is the comment section. With access to all kinds of people and all kinds of lines of thinking you can really get a ton of information. Over at The Big Picture Blog today there was a thread about all the money being poured into the banks to backstop losses. One reader left a comment that I saved to put up tonight.

As it relates to bank earnings and giving never ending cash infusions to help balance sheets:

wally Says:
January 16th, 2009 at 8:37 am
There is no reason to believe that quarterly losses will not continue for the next several quarters - or longer- at the same rate. No profitability for banks can be expected for any reason other than uninformed hope.
This is just taking future money and pouring it into the past.

A great insight that crystallizes the problem.


Billions in Bailouts Mean Nothing, But Your Missing Tax Rebate Just Might
A new CNN poll out today showed that the sampled people were against any more TARP money bailouts by the rate of 61% against. While one cannot expect Congress to do anything that their constituents want, they passed the TARP anyway, you have to wonder why people are not more angry or loudly protesting the disgusting use of taxpayer money for rescues the world over.

I have a theory that the huge numbers involved simply mean nothing to most people. I mean what does a 20 Billion dollar gift to BAC and a backstop of over 100 Billion more really mean? Nothing tangible to anybody that is for sure. The long term effects certainly will be noticed, but only slowly and over time so as not to panic anyone. As long as the TV works, McDonalds is open, and the credit cards work when swiped most people do not even care how much money is being spent.

Mismanagement on many levels is being rewarded right now. From the executives at AIG, to the bosses of BAC, to the auto manufacturers, and even dead beat home mortgage holders money is being deluged on the problems with no repercussions for those that caused all the problems. Well there is a news story tonight that might just change how readily people accept non performance and failure.

From the LA Times:

California controller to suspend tax refunds, welfare checksJohn Chiang announces that his office will suspend $3.7 billion in payments owed to Californians starting Feb. 1, as a result of the state's cash crisis. Student grants are also affected.
By Evan Halper
11:24 AM PST, January 16, 2009
Reporting from Sacramento -- State Controller John Chiang announced today that his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, as a result of the state's cash crisis.
Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.
The controller said the suspended payments could be rolled into IOUs if California still lacked sufficient cash to pay its bills come March or April.
"I take this action with great reluctance," Chiang said at a news conference in his office. But he said that without action to close the deficit, "there is no way to make it through February unscathed."
The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the aged, blind and disabled; and $13 million in grants for college students.

First off let me open by stating that this WILL NEVR HAPPEN. There is no way that California will not issue tax rebates to those that have them coming. No Way. I believe that this move is a threat being sent to two entities:
1.) The California Legislature; the threat will scare them into passing any budget with any bond issuance that is needed
2.) The US Government; the threat clearly will invoke the "systemic risk" qualifier and California will be first in a long line of state bailouts

With that out of the way, let's return to the idea of a government refusing to deliver tax rebates. For my family when I was young tax rebate season was the time of year the whole financial well being depended on. Car repairs, home repairs, and sometimes even christmas gifts were all put on hold until late February to early March awaiting the state and Federal rebates. Note: Times were tough, this is not a debate about my or any families' financial savy that they need their tax rebates, just the principal.

Now what if the state and/or the federal government said "Sorry, we need the money to avert systemic risk, so you are out of luck"? Do you think people would be as docile as they are now while trillions are being wasted bailing out failed banks and other firms? The bailout cash means nothing to most because it does not affect them personally or immediately. The lack of an expected rebate check will get their attention. I guarantee it.

One of my major issues is how fools like Ben Bernanke, Hank Paulson, Bill Gross and Paul Krugman throw money spending ideas around like it does not matter. I have written that it is easy to take billions from the "taxpayers" but near impossible to take any money away from one person. I have even challenged Bill Gross to a steel cage match so that he may learn just how hard it is to take money from someone directly. If a tax rebate freeze ever occurs there is going to be riots and violence.

I think this threat is dangerous and ill thought out. If Californians think their tax money will not be returned they may take extra exemptions to make sure they pay only at years end. This would hurt tax receipts all year and cause even more problems. The California controller John Chiang should be immediately fired for making such an irresponsible and dangerous statement. I am sure he can get a new job here in Massachusetts.

This is a big story. Huge. While I do not think it is for real (real meaning going to happen, the story is certainly true) it does open a line of thinking that needs to be addressed. What if a state refused tax rebates? What if the federal government, in the interest of "maintaining economic stability" stopped rebates as well? While they have no legal authority to do so, they have no reservations to this point about doing whatever they want anyway. The first half of TARP was viciously opposed, and it passed anyway. Not one Senator lost his/her seat due to their "yes" vote on that bill. Not one. Do you think thy will care that their voters are not going to get tax rebates? They won't if people are quiet about it. If tax rebates are ever withheld I imagine most people are not going to be quiet about it. Not quiet at all.

Friday Night Entertainment
A little mirth to get your mind on things more fun than thinking about the end of the world!

Hilarious Chart
This flowchart shows the difference what clothes a man wears and what outfit a woman wears may have on their drink selection:


Rock Blogging
Music can soothe the soul, or it can get you all riled up. Let's see what we can do!

Another great Ipod find was a song I had not heard in over 5 years. Haunting vocals and wonderful guitar rhythm. Try out Iron Maiden and "Wasting Love". Great opening verse: "Maybe one day, I'll be an honest man. Up to now, I'm doing the best I can. Long roads, Long days of sunrise to sunset. Sunrise to sunset.":


Along the lines of great hair band ballads, I have always liked the White Lion song "When the Children Cry":


Maybe I am in a slow music mood, but had this song stuck in my head. listen to Def Leppard and "Bringing on the Heartbreak":


I loved the remake of the Bob Segar classic "Turn the Page" by Metallica:


Have a good night.