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2008 Business News Review

Click the below link for synopses of the year's most important business stories to date: the job markets, immigration reforms and border control, income growth and inflation, the stock and bond markets, VISA's IPO, the Federal Reserve and the Treasury Department, Bear Stearns, the guilty plea of sleazebag securities lawyer Mel Weiss, and several landmark business law court decisions.

Job Markets

Thru March:

242,000 - net loss in total employment
232,000 - net loss in total W-2 employment
286,000 - net loss in total private-sector W-2 employment

Negative net job growth this calendar year mostly is a function of four things: (1) the general business cycle, (2) a much slower rate of GDP growth, (3) high rates of worker productivity (companies can do more with less), (4) extreme cost consciousness on the part of an overall business sector still tarnished by the 1997-2003 tech and telecom bubble and bust.

Immigration Reforms and Border Control

DHS exercised its power to waive environmental laws to continue with the building of the physical Southern border fence. That power was given to DHS by the former Republican Congress -- against whom millions of single-issue conservatives in 2006 cast de facto ballots, by not voting. Ironic, huh? DHS also implemented its "virtual fence" strategy in areas of the Southern border for which physical fencing is not practicable.

Various states -- most notably Oklahoma -- have been experiencing the inevitable effects of brass-knuckled state immigration law reforms: massive departures of illegal workers, shortages of unskilled labor, price hikes, and service interruptions. Local businesses and business cycles are adjusting accordingly.

Judge Neil Wake -- nominated by George W. Bush -- shot down various legal challenges to Arizona's brass-knuckled anti-illegal immigrant law.

Income Growth and Inflation

Thru February:

+ 4.56% - annual growth rate in total incomes
+ 4.03% - annual total consumer inflation

For obvious reasons the chances the media will inform the general public that incomes are growing faster than inflation nearly are the same as an inherited-wealth liberal Democrat's chances of grasping reality: zero.point.zero

Stocks and Bonds

Stocks this year have been volatile. That's a good thing -- for long-term stock investors.

So far it's been another good year for U.S. Government debt. Domestic and foreign money has flowed by the mega-billions into the safe havens of U.S. T-Bills and T-Notes.

Mortgage rates have been pretty steady and very low (by recent historical standards). Believe it or not, you still can obtain over 90% financing from wholesale lenders not even backed by Uncle Sam, at fully-amortized, 30-year fixed rates under 6.0 percent, with no points. Provided, of course, you actually {gulp} are credit worthy.

VISA

VISA went public in the largest IPO in U.S. history.

VISA is a great company. Its business model, technical barriers to entry, brand name, cash flow, overall economic moat, and its management, all are top notch.

Like all initial public offerings, however, VISA was priced too high and was oversubscribed. The shares are not in the ballpark of being cheap enough to purchase. If VISA ever were to drop to a forward P/E ratio under 14 then I'd start thinking about becoming a buyer. Until then, however, I'll admire that business from afar.

Club Fed and The Treasury

The Federal Reserve and the Treasury Department have jumped the shark.

The Fed has cut short-term rates like mad, it's "auctioned" off to big banks well over 100 billion dollars in public money, and it facilitated the de facto bailout of Bear Stearns' stupefied management. All that after it raised rates like mad from 2004-2006, despite the fact inflation was not actually a problem. Now we've got real inflationary pressures and a Fed that's acting out as though it's auditioning for a spot on one of CNBC's various screamfests.

The Treasury Department, not to be outdone, put its stamp of approval on proposed new regulations of the banking and mortgage industries -- so-called "reforms" which if enacted would cause a lot more harm than good.

Bear Stearns

Bear Stearns imploded and was purchased for pennies on the dollar.

Bear was the most aggressive player in subprime mortgages during the height of the 2002-2007 real estate boom and then bubble. The company was punished accordingly. JPMorganChase, however, which snagged Bear's book of business, got a steal of a deal. The price JPMorgan is planning to pay is less than the value of Bear's trading and investment advisory businesses.

Jailbird

As expected Mel Weiss -- former partner of incarcerated "pond scum" Democrat securities class action lawyer Bill Lerach -- pleaded guilty and will be joining his buddy in federal prison. Weiss along with Lerach and Co. over 30-plus years cost the economy countless net jobs by filing shakedown securities fraud lawsuits against corporate America. With luck additional Democrat class action lawyers soon will be rounded up and shipped off to prison.

Business Law

For the second year in a row the U.S. Supreme Court has smacked around Democrat class action lawyers like red-headed stepchildren.

The Court eliminated so-called "third party" liability for securities fraud, ruling suppliers cannot be sued allegedly for conspiring with company management to cook the books or to pump up share prices. That rationale will apply to investment banks, attorneys, accountants, vendors, etc.

The U.S. 2nd Circuit Court of Appeals this week handed the tobacco industry a huge victory. The court dismissed a class-action RICO lawsuit against Altria and other major players. For all practical purposes the legal crusade against big tobacco is over and done.

The Louisiana Supreme Court this week handed the insurance industry a gigantic victory. The court ruled in favor of insurers and against Democrat lawyers and policyholders in connection with flooding caused by Hurricane Katrina.

Speaking of Katrina, the U.S. 5th Circuit Court of Appeals ruled the U.S. Army Corps of Engineers legally was immune from lawsuits over the failure of New Orleans' retaining walls and levees. The 5th Circuit also threw out a nine-figure punitive damages award against State Farm for not paying a Katrina-related claim. For all practical purposes those rulings -- combined with the aforementioned, pro-business decision by Louisiana's state supreme court, and a prior 5th Circuit opinion declining insurance coverage for flooding -- will put an end to Katrina-derived shakedown lawsuits by Democrat lawyers and so-called "public interest" groups.


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Comments (5)

...And as usual, Senators C... (Below threshold)

...And as usual, Senators Clinton and Obama continue to act, in promised economic policies, as if John Galt was the villain of Atlas Shrugged.

Where are the destroyers?</... (Below threshold)
SteveC:

Where are the destroyers?

This insightful commentary ... (Below threshold)
philw1776:

This insightful commentary keeps me coming back to this site. Great job!

Jayson, considering how muc... (Below threshold)
Brad S:

Jayson, considering how much of a part VISA has played toward the expansive growth the US economy has had in the last two decades, you may be waiting a very long time for that P/E to go down to your liking. You'd be better off trying to buy stocks in certain financial companies that aren't in as bad of shape from this subprime mess. Companies like CapitalOne, for example.

Hooverville!!!!11!!1... (Below threshold)
John F Not Kerry:

Hooverville!!!!11!!1




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