Utah Wildlife

For those who may have been on their way to Park City from Salt Lake City today, there were a lot of wildlife to view. Near the bottom of Parley's Canyon, on either side of the freeway, many elk were lazily browsing about. Along the way up Parley's Canyon were many mule deer lying under the scrub oaks. And near the top of Parley's Canyon were 4 moose, eating the tops of the oak shrubs. With all of the new fallen snow, it was easy to see the wildlife. What a remarkable place.

Ben Bernanke and the FED

Today the FED has the responsibility to decide if interest rates should be lowered or not. The good news is that whether they drop interest rates or not, we live in an incredible country; a country where the people work hard, play hard and are quite resilient.

In my mind, the FED should have dropped interest rates last fall, anticipating that the economy was slowing because of an inverse interest rate curve. The mortgage problems resulted from that reality.

The FED has an extremely difficult job. Their responsibility includes trying to out-guess our fears, hopes and dreams, as we struggle with our own capabilities and challenges.

Well, I'm an optimist. I believe that the FED should cut interest rates 50 basis points today to ensure an economic recovery. That should allow people to better manage their mortgages and stabilize the crisis at hand. My hope then would be that economic growth would move back up to a 3% real GDP rate. The challenge then will be to stabilize energy costs at lower levels. If the US dollar will stabilize and maybe improve some, with longer term interest rates moving up from better economic growth, which should help stabilize energy pricing, then maybe world economic prosperity can continue to improve.

This scenario looks like a good recipe for wealth generation to me. The challenge later on will be to see if the people of the world can sustain peace and prosperity in the face of the pride and prejudice that results from wealth generation.

The World our Children are Inheriting

I heard an interesting thought yesterday. It went something like this: Consider all of the incredible inventions of the past hundred years. Our children won't have to reinvent all of the amazing technologies that we take for granted today. They won't have to reinvent the computer, TV, semiconductor chips, nanotechnology, etc., they can simply add on to the the great inventions that now exist. That means to me that the next generation of technological advancement could be even greater than the one that we just experienced. Does that mean that as a world population, the ability or availability to enjoy life by all the people of the world can take place? Who will do the work and how do we keep from becoming idle? Is a world Utopia within our grasp, and how should it be administered? Will pride, greed, jealousy, and/or laziness derail a world of peace and prosperity? Can world peace and prosperity happen? I think it can.

James LeVoy Sorenson

This afternoon was the funeral service for one of the great men among us, James LeVoy Sorenson (Jim). He died of cancer at age 86. He accomplished many wonderful things, but his greatest joy was his family. It was so good to share in this tribute and celebration of his life.

One of my favorite sayings, which has been attributed to him, goes like this:

Gratitude determines attitude, and attitude determines altitude.

Each of his, and his wife Beverly's, eight children paid their father a wonderful tribute. The underlying thought was that Jim's children knew that he loved them, and that he loved them unconditionally. Each of them shared stories of how this love was demonstrated.

Elder Thomas S. Monson, of the First Presidency of the LDS Church, also spoke. He reminded us that the "home quickens the fondest memories of the heart" as he reflected on the comments of the children, and on the many good things that Jim did for others.

It was a wonderful service, and it was a great tribute to a man, and a family, that have touched the lives of so many for good.

The Stock Market

That was sure an interesting ride in the Stock Market yesterday; up and down about 600 points on the DJIA, and a possible reversal day to the upside. It looks like the move by the FED to drop interest rates by 75 basis points has added the positive element of confidence to consumers that the markets needed in the short-run. Technically speaking, a moving average analysis of 5 days, 9 days and 20 days would suggest that this rally could last a while in the short term. Just looking at the charts, it looks like there will be resistance at about 1400 on the S&P, and then again at about 1500 and finally at about 1576. Can we break through to new highs before the end of the year? That all depends on the many variables that must come into play, but it is sure possible under the right circumstances. What are some of the potential problems that will prevent this from happening? They include terrorism, unstable commodity prices, inflation, unstable currencies, and a lack of confidence by consumers, businesses and governments, world-wide, to efficiently work, consume and invest. I'm sure that the volatile ride in the Stock Market will continue, but the trend in the short-term appears to be up.

Vasey's Paradise, Grand Canyon

I was just reminiscing about the many trips that we have taken this time of year to Vasey's Paradise in Marble Canyon of the Grand Canyon. Here is a picture from one of those trips, looking down into the Canyon towards Vasey's Paradise. What a beautiful place. I'm in the back with my good neighbor Todd and my son Jeff.

More What-if Analysis

Now that the FED has cut short-term interest rates by 75 basis points, what needs to happen to avoid a market collapse?

We just need to have the confidence to continue to work, spend and invest.

What-if we are all guaranteed healthcare? Who pays for it and how do we avoid abusing it?

What-if we are all guaranteed a certain retirment package? Again, who pays for it and how do we insure it's long-term viability?

What-if a lot of us want to continue to be productive past age 65?

What-if the world economy can produce more than we need? What-if we save and/or invest that excess in additional productive assets? What-if the compounding mechanism multiplies that excess to prosperity beyond our wildest dreams, such that those assets can support the world population? What would we do then with our time and energy?

Then we could focus our time and energy on helping each other and on preserving the resources of our planet.

Trade Deficit and Economic Growth

It was a bit surprising to me this morning to read that EU Economic and Monetary Affairs Commissioner Joaquin Almunia was blaming the potential world-wide recession on our trade deficit. I believe that the trade deficit, a reflection of the American consumer's support of the world's goods and services, has been a key driver, and maybe the key driver, in producing the current state of world prosperity.

I applaud FED Chairman Ben Bernanke for his leadership in moving the FED Funds rate down to 3.5%. Hopefully, this will establish enough confidence in the world markets by consumers, businesses and governments to produce price stability and consistent economic growth.

My next hope is that the American people will choose wise leaders in the next election that will forge unified solutions to many of our key problems, including health-care, energy and social security.

Tax Cuts

Dear President Bush:

For a long-term effective tax cut, why not focus on reducing the price of oil, one of the great taxes on individuals and businesses?

I noticed on CNN's business website today that a commentator is asking FED Chairman Ben Bernanke to not drop interest rates. I couldn't disagree more. Another one of the greatest taxes on the American Consumer are high interest rates. Why continue to penalize those consumers with the highest propensity to consume with relatively high interest rates.

President Bush, it appears to me that the two best tax cuts that you could promote would be to reduce the taxing consequences on consumers from high oil prices and to reduce similar consequences on consumers from relatively high interest rates.

Protectionism

Today in the news, Fortune Magazine says that one of their recent surveys suggests that nearly 80% of Americans want protectionism. I hope that is not the case. Probably one of the greatest contributors to the great depression in the 1930s was protectionism. If the FED simply cut interest rates immediately by 75 basis points, I believe that enough improvement in economic activity would take place to offset the current recessionary tendancies. Granted this would begin raising 10 year Treasury rates towards 5.5%, and this would probably strengthen the dollar, which might dampen an improvement in the trade deficit. But the increased economic activity both here and abroad should offset the recessionary pressures. I believe that comparative advantage still makes everyone better off. The rest of the world will probably grow faster than us, because the rest of the world is still playing catch-up to the great economic successes that we have enjoyed.

More Ramblings on the Economy

The word "juice" the economy quickly sounds somewhat desperate to me. It seems to me that the first solution to solving our economic woes is simply to cut interest rates by another 75 basis points and get the Fed Funds rate down to where a more normal interest rate curve can develop. It probably should have been done some time ago. Then there wouldn't be such disastrous write-downs from delinquencies.

A fiscal plan of additional tax cuts always sounds like a good idea, but in the end, won't the government just have to borrow to pay for the wrong kind of tax cut? The best solution is to have a tax cut that provides enough economic growth that the returns will more than compensate for the cost of borrowing.

Is there much inflationary capital left to offset our problems of the past several years? It seems to me that we have spent a lot of our inflationary capital. We don't appear to have as much inflationary capital available to offset poor choices that we may make in the future. Along with cutting taxes for the rich, such as cutting them on dividends, it seems that we should put more money in the hands of those who have a higher propensity to spend. Doesn't that mean cutting consumption taxes? But that is heresy. Isn't it the rich that provide jobs for everyone; the so-called trickle down philosophy? Maybe in the short run, it is time to help both the rich and the poor until we get on a more solid footing.

So what is the answer? What will incentivize each of us to work and produce? Being happy and feeling good is certainly important. Success helps. Optimism works. Proper moral behavior couldn't hurt.

Maybe President Reagan's favorite scripture; the one that he had the Bible opened to each time he took the oath of office; is a good starting point. It is in 2 Chronicles 7:14, which says, "If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land."

What-if on Stocks and the Economy

It feels like it is time for a little what-if analysis on the Stock Market and on the Economy. Where will the value of the Standard and Poors 500 be at election time in 2008? What kind of returns might we expect in 2008?

What if the recession is mild, or what if we just have a slow-down? Under this scenario, a TBill rate of 3.5% and a 10 year Treasury rate of 5.5% ought to be good discount values. What if that suggests a fair P/E factor of 18 times earnings? And what if the earnings on the S&P 500 is about $104? Then a fair value of the S&P 500 come November could be on the order of 1870. That would be a 35% increase from current levels.

What would support this happening?

1. The FED needs to cut interest rates. What if they cut rates by 50-75 basis points right now?

2. From a technical perspective, the market is making a triple bottom going back to August. It has been 66 trading days since the top in October. The correction from top to bottom is over 200 points. The market appears to be oversold and ready to rally.

3. With FED support strong enough to overcome a recession, and with the market technically oversold, the market could rally to new highs, significantly above 1576 on the S&P 500.

What are the caveats?

1. High oil prices.

2. A weak dollar.

3. Continued inflationary pressure.

4. Terrorists.

5. Insufficient or inefficient fiscal and monetary stimulus.

6. A scarred and scared consumer.

Well, the answers are never easy, but it looks to me that the potential for a good return in the market this year is there.

Ramblings on The Economy

With the Michigan primary taking place today, it is interesting to me that the new catch phrase seems to be the same one that helped Bill Clinton win the Presidency: "It's the economy, stupid."

So I'd like to ask the question; why is it now the economy?

1. First of all, the stock market, a reflection of the productivity of workers, has basically gone nowhere since 2000.

2. Oil prices have skyrocketed in that same period of time from under $30 per barrel to nearly $100 per barrel.

3. Gold has skyrocketed from under $400 an ounce to over $900 an ounce.

4. Real Estate prices have skyrocketed at similar percentages as Oil and Gold.

5. The value of the dollar has dropped dramatically versus foreign currencies.

It appears that a weak dollar policy, to offset our large trade deficit, coupled with the war on terror, has caused dramatic increases in hard asset valuations.

Would not a more conventional interest rate curve, based on long-term investment returns, strengthen corporations and individuals, such that government would not need to bail out those who get punished from the volatility?

In other words, why not target the fed funds rate at about 3.5% and 10 year bonds at 5.5%, adjusting obviously as economic disruptions require it? This should complement a policy of inflation being between 1 and 2 percent and allow for a stronger dollar policy, which should help stabilize asset valuations.

Duchesne County Utah

This past week I took another drive around Duchesne County, Utah. I saw 3 bald eagles, 2 golden eagles, lots of deer and many other less exotic animals (like crows). Just east of Tabiona is a herd of domestic elk. One of the bulls was huge, with 8 points on one side and nine on the other.