Sotomayor's Offensive "Latina" References

Sonia Sotomayor's most offensive comments -- and she's made -- plenty deal with her self-portrayal as a "Latina" whose Latina-ness somehow makes her superior to those less fortunate creatures known as "white males." She has made a career out of emphasizing her Puerto Rican roots. If they are truly so important to her, then why isn't she a candidate for the Puerto Rican Supreme Court. If she's not an American first, then why on earth is she seeking a lifetimes appointment in a country with more than its share of "lesser breeds without the law" (Kipling), such as Whites, Blacks, and Asians of both genders?

There is a lot more at stake for this country than whether the Republicans win in 2010 and even 2012. We won't win anything unless America finally decides what it wants to be when it grows up.

Republicans alone -- remember Arlen Specter, remember Olympia Snowe? -- are not enough. I remember a month ago when Senatorial Campaign head John Cornyn was backing Arlen Specter, then a Republican, because, well, "we generally support incumbents, blah, blah, blah." I thought at the time, John does not get it all all, does he? Then he rushed to support Charlie Crist, an Arlen-Specter in waiting.

If Republicans are just a grumpier, better tanned version of the Democrats, who needs them? If Sarah Palin were just a younger, more attractive version of McCain, which of us would be supporting her?

We have to be Americans; I prefer Audie Murphy and Katharine Jenerette and Sarah Palin types. The Republican Party will endure (remember the Whigs? Or the Federalists? Or The Bull Moose Party?) as long as it helps us support American values and great candidates (no, not "incumbents"). Arlen Specter's main problem wasn't that he was a less-than-stellar Republican; rather, it was that he was not -- and is not -- much of an American.

Those of us who believe in the real America, may end up going down -- heck, that's not unprecedented. But perhaps it would be better if we went down with guns blazing . . . rather than trolling for Hispanic voters more comfortable with waving Mexican flags than singing "God Bless America."

I just looked up one of my favorite quotes from James Madison, one of those "Founding Fathers" Sotomayor claimed to respect the other day. Gee, I wonder how she would like this quote from the man known as "the father of the Constitution":

"The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce.... The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State." (Madison, The Federalist, Number 45.)

The other day at a congressional hearing, Michelle Bachmann kept grilling Geithner about what was the constitutional authority for all the handouts, bailouts, and takeovers the government was doing. Geithner's response was to look at her as if she were from another planet.

The Bogus Stock Market Rally

We all hear (ad nauseam) that "stock market is a forward indicator," which as an observation ranges between meaning very little and being absolute BS. During the early years of the Great Depression, the stock market often "indicated" things were going to get better -- and, mostly, they got worse. Remember the old mantra called "Buy and hold." Those of us who adhered to it learned it actually meant, "Buy and hold until you go brankrupt. Then, make sure your best friend is named . . . Tim Geithner."

The people who most passionately advocate the "forward indicator" theory are those who are . . . selling stocks. The recent rally has consisted mainly of a rise in bank stocks, as well as -- one guesses -- the manufacturers of vats of red ink for sale to banks. Here's how the MotleyFool.com assesses the "recent rally."

"Admittedly, the stock market can resemble the oil markets of a year ago when oil price went steadily up with no rhyme, reason, or connection to supply and demand. (They went up because speculators sold oil This Rally Is Ridiculous "futures" to each other at stratospheric prices, until they all got onto one another's scams and prices collapsed.)

"I realize the market is a discounting machine -- with investors collectively trying to anticipate future events and price shares accordingly -- but let's face it: This rally is getting ridiculous. Wall Street is on a bender (yet again), and the shiny, happy future it seems to be looking forward to overlooks the fierce grimness of now. It's a mirage, at least in the near term. Maybe the midterm, too.

"You may be right; I may be crazy.

"Still, it's worth pondering just how much longer this particular bout of irrational exuberance might last. If the market can make it here, after all, it can make it anywhere.

Unemployment is high and poised to climb higher; GDP has famously fallen off a cliff; and the much ballyhooed news that consumer spending rose during the year's first quarter (hurrah!) evaporated on contact with even just casual analysis. January produced virtually all the quarterly gains; February was flat; and March actually saw consumer spending decline. (Boo! Hiss!)

"And yet the market has been on a tear, with the S&P 500 climbing by some 11% during the month of April alone. And guess -- just guess -- where the bulk of those gains have come from? Why, from financial stocks, of course, with the sector posting a 22% rise over the period.

Black hole sun

"This particular mirage is a mesmerizing doozey, with the likes of American Express (NYSE: AXP), Wells Fargo (NYSE: WFC), and Capital One (NYSE: COF) rocketing to gains in excess of 30% over the period.

"And this despite the fact that the black hole at the center of our financial galaxy remains, with toxic assets sucking liquidity out of the credit markets just about as fast as government largesse can pour it back in.That, however, is a temporary "solution" (right, elected officials?).

"And unless someone pulls a rabbit out of a hat soon, gallingly, it may be the banks themselves that shoot this one down.

"And why not? Our apparent willingness to prop 'em up into perpetuity has yet to be seriously challenged, which explains the financials rally. Rumors of profitability have been greatly exaggerated (thanks in part to mark-to-dream-on accounting), but when the U.S. taxpayer is your compulsory patron, it is, as the kids used to say, all good. Indeed, we might as well call it rational exuberance.

History repeats?

"With that as a backdrop, it's worth asking whether financial-stock multibaggers can be far behind, even from their currently inflated levels. Based on its closing price last Thursday, for example, seemingly beleaguered AIG (NYSE: AIG) would be a 10-bagger by returning to "just" $11 a share, a price it exceeded as recently as last September.

"Don't get me wrong: I don't believe such a rocket-shot would be warranted, at least not based on fundamentals. Indeed, I'm among those who believe that the financial sector should return to its former lack of glory, becoming a comparatively much smaller slice of the market's pie chart, complete with permanently shrunken market caps for former big boys.

"Between now and that smaller, shabbier future, though, there may be money to be made, largely by speculators betting that the financial sector will essentially become a government entitlement program -- albeit one that puts up with little of the pesky regulatory oversight that attends, say, Medicare or Social Security."

Who Caused the Economic Crisis?

Urkel Hussein celebrates his latest economic achievements.

Who caused the economic crisis that now grips our nation? The correct answer, one we really don't want to hear, is: We did. He (The Anointed One featured in the graphics above) also did his part.

Later today (Monday), I'll be writing the first of several pieces about similarities between the current economic downturn and the 1930s. If your parents or grandparents were admirers of Franklin D. Roosevelt, I regret to inform you that most of the things they told you about FDR were false. In fact, he probably did more harm than good. Scroll down to the bottom to see an example. I hope you'll return late this afternoon or this evening to see the new column.

How? By taking on (high) levels of debt that we're now finding harder and harder to pay off. We believed that something called "inflation" would allow us to pay off debts with ever-cheaper dollars. Instead, we have something called "deflation," which is having just the opposite effect, making dollars harder and harder to come by. There's no more inflation to bail you out.

On the political front, the short -- but incomplete -- answer to who caused the problem is: Bill Clinton, Barney Frank, Chris Dodd, and various other Democrats, as well as the self-aggrandizing people at Fannie Mae and Freddie Mac. All of the above insisted that lenders offer loans to people who now can't afford them.

The longer answer is that the crisis traces back to all those people -- in the public, in the government, and in the urban caverns of Wall Street -- who engaged in, or encouraged, very risky borrowing.

One such individual is a man named Tim Geithner. In the run-up to the crisis, he headed the New York branch of the Federal Reserve. He strove to keep interest rates at extremely low levels, which of course encouraged people -- from Main Street individuals to Wall Street speculators -- to go into heavy debt. Of course, low interest levels are fine, but only as long as borrowers don't over-use them.

There used to be an old nonsense game that college guys used to play on spring break drives to Florida. Here's one question: "On the stupidity scale, what's dumber -- a doorknob or a doorbell?" It turns out that the correct answer to that question is: Tim Geithner, the Treasury Secretary who now heads the IRS but didn't pay his taxes.

Let's be clear: It's certainly okay to borrow modest amounts of money, as long as the recipient has a reasonable chance of paying back the loan. However, if the person doing the borrowing can't survive an economic downturn, even a severe one, big loans are a bad idea.

As people try to put their arms around our dismal economic situation, they should start reading an important financial web site: MotleyFool.com. The writers there avoid financial jargon and "WallStreetspeak."

One MotleyFool piece I urge everyone to read is Matt Koppenheffer's provocatively titled essay: "Who Should Go to Jail?" You can find it at the following link: http://www.fool.com/investing/dividends-income/2009/03/06/who-should-go-to-jail.aspx?source=iflfollnk0000001

As you read the following material from Koppenheffer's piece, think of a line from an old song: "Those were the days my friend; we thought they'd never end." Of course, everything comes to an end.

Relatedly, as Sir Isaac Newton taught the world long ago, "What goes up must (eventually) come down." That's as true of economic rises and falls as it is of roller-coaster rides.

But who should we punish for economic malfeasance? In the words of Koppenheffer: "As the nation’s collective temper flares, we’re all beginning to consider tossing the people responsible for today's financial mess in the slammer and throwing away -- no, melting -- the key. And with our economy in disarray and major banks like Citigroup (NYSE: C) and Bank of America (NYSE: BAC) potentially on the brink of collapse, it's tough to fight that sentiment. . . .
.
"Sometimes it just doesn't matter what your IQ is, what school you went to, or what position you hold -- idiocy can creep up and slide into bed with you. Even more irresistible is an idiocy that is supported by seemingly everyone around you. 'What? Home prices never go down?' That sounds fishy, but everyone else seems to think it's true.

"Remember when your mother asked whether you'd jump off a bridge if everyone else did it? Some people, even smart ones, have been jumping off that bridge their entire lives."

Koppenheffer's point is that, in financial matters, there are some crooks -- like Bernie Madoff -- and many fools, a group that includes nearly all of us (including me). As a nation, we jumped off bridges -- by making risky investments and buying houses that are now worth less than we ever imagined.

Can Obama bail us out? Surely you jest. He isn't going to hand over his own fortune to the American people. Remember, he's living rent free in a $100 million home. The only one who can bail us out is . . . us, the taxpayers, and, of course, the foreign lenders from whom we're borrowing trillions. Somehow it doesn't seem likely that a problem generated by over-borrowing is going to be solved by . . . massive borrowing.

Why oh why did we buy a $500,000 house when we could only afford one for $400,000 or less? We did so because the "smart people" (now known as the "dumb people") told us it was a good investment. After all, in a few years wouldn't our half-million house be worth $600,000 or $700,000?

Right now, however, our $500,000 home may be worth $390,000 -- or less. The notion that home prices would not -- could not -- go down turned out to be a foolish notion. The "housing market" ended up pricing itself out of the market.

On that $500,000 home, suppose you put down $100,000 -- one-fifth of the price. Then, suppose, you took out a home equity loan (perhaps to pay off credit card debt) of $60,000. In that case, you owe a total of $460,000 on a home that's worth $390,000 (minus the real estate commission of more than $20,000). You are out a ton of money.

With economics, the word "never" (as in, "House prices will never go down") doesn't apply. It doesn't apply if you're Citigroup, or Merrill-Lynch, or AIG. It also doesn't apply if you're you, sitting nervously in a home that you can no longer afford. You're up the creek, and your creditors are holding the "paddle."

(Note: I'll be writing the rest of the week on the economy, with emphasis on what the Obama Administration should do -- but probably won't.]

More from MotleyFool.com: "My guess is that a heck of a lot of the problems that we're facing today were born of people doing dumb things. Building a financial model that assumes housing prices will never fall? Dumb. Buying a $500,000 house with 2% down and a three-year interest-only loan? Dumb. Giving a mortgage loan to somebody putting nothing down? Yup, that's dumb too."

Did FDR really lift America out of the Depression. No, he didn't.

Barack Obama talks regularly about the inspiration he receives from the presidency of Franklin Delano Roosevelt. However, when it comes to bringing the country out of an economic crisis, FDR is a very poor model. He succeeded at getting large segments of the population to revere him. He failed at solving the country's economic disaster. Consider . . .

In November , 1933, a year after FDR's election, unemployment in the U.S. was above 23%, nearly one-in-four workers. The Dow Jones Industrial average, which had gone over 380 in fall, 1929, was at a miserable 90.

What about November, 1934, two years after Roosevelt's election? Unemployment remained exactly where it had been a year earlier -- at 23%, and the Dow had moved us a measly three points -- to 93.

By July, 1935, two-and-a-half years after his election, FDR had barely put a dent in unemployment, which remained about 21%. The Dow had moved up some -- to 119 -- but it was still at a level less than one-third the high in 1929.

Frankly, much of what we learned about FDR from old family members -- and from our history books -- was incorrect. FDR remained a dashing and popular figure, but the Depression lasted all the way through Roosevelt's first two terms.