Well my “Great Recession” portfolio has now doubled in value. Meanwhile I read one stock market “analyst” who said that this is a silly season for the markets with people buying financial shares that are either overvalued or have no value. He went on to point out the “silliest” strocks to buy. You guessed it, he named the main ones in my portfolio - BankAmerca, Citibank,Fannie Mae and Freddie Mac. So you pay your money and take your choice. I remain with the rapidly recovering financial shares.

Nouriel Roubini is the New York University professor who predicted the collapse of our financial system, as early as 2007, that led to the “Great Recession” in late 2008-early 2009 and in the process earned the name, “Doctor Doom.” In a recent article he now says that the free-fall in the economy has ended. I said this had happened in April of this year. So score one for Roubini, the collapse of the financial system, and score one for Cecchini, we hit bottom in the second quarter of this year.

Roubini now warns that the present recovery will be “U” shaped instead of “V” shaped, i.e. the recovery will not be as rapid as many say, rather it will take longer for our economy to recover. He even warns that we could even see a “W” shaped recession in which, after a brief spell of upward movement, the economy takes a nose dive again.

One of the reasons he says the recovery is weak is that, “the financial system … is still severely damaged.” He obviously did not read the front page of the paper in which his article appeared. A story there reports that the US Government earned large fees from banks that used the TARP program and who have already repaid all the funds they took last fall. Even more revealing, the Fed’s shares in the one bank still on the plan, Citibank, have netted Uncle Sam a $11 billion paper profit in the last few weeks. These banks also passed the famous “stress test” administered to them earlier this year.

Roubini’s more troubling prediction, the “W” shaped recession, rests on what he calls the dilemna facing the Feds. If the Feds raise taxes and/or cut spending to cover the massive deficits they are running, they could cause a second drop. However, if they maintain the large deficits, they will eventually drive interest rates up, thereby frustrating recovery and causing a second drop.

Well Roubini missed the “bottoming out” of the recession, so one should be leary of his predictions of where the economy will go now. He is still convinced that the “toxic assets” are a major drag on the overall economy. His conviction comes from his still sharp devaluation of these assets to the depressed value of collateral property. However, since the home market has bottomed and prices are now moving up again, Roubini and his ilk are now focusing on the value of commercial property, where such terms as “subprime mortgages” and “negative equity” are not relevant. Here one looks at occupancy rates and they are indeed down.

Well I say that the recovery is well underway and the now ending third quarter will be even better than the second quarter of this year. The recovery, led by the Feds spending, will be a “V” and we will not have a “W.” Moreover, the Feds stimulus will be replaced by a renewal of the “securitized debt” market that provided the largest single increase in credit in history.

Watch this space.

Yukio Hatoyama, the leader of Japan’s opposition Democrat Party equates globalization to US dominance of the world in an article in the New YorK Times. He calls for Japan to form a closer alliance with other countries in its “sphere of being,” a rather thinly veiled reference to the Japanese Empire’s “Greater East Asia Co-Prospertiy Sphere,” to counter US hegemony. His appeal to latent Japanese resentment of America and long lost visions of being the dominent society in the Far East is aimed at energizing his political supporters in this weekend’s elections in Japan. The smart money is on his party tossing the ruling party out in a landslide upset.

I was surprised that this article was not festooned with Hatoyama standing in front of the Japanese naval ensign, a rising sun radiating power throughout the empire, wearing a head bank saying, “Banzai.” Yes, demogoguery is expected in elections and this is a fine example.

But I am not interested in Japanese elections other than to note that that country’s slow recovery form the Great Recession is a major factor. No, I am interested in his attack on globalization per se.

I find it a bit disingenuous for a Japanese politician to dis the very thing that has allowed his country to prosper in the post WWII era. Japan’s economic success is squarely based on its dealings with the entire globe, not its domestic economy. No other country has benefitted more from our increasingly interdependent world. To cry out against globalization in Japan is like a child protesting motherhood.

I also object to his suggestion that globalization is a development foisted on the rest of the world by an America seeking to keep other nations in its thrall. Globalization rests on one basic truth, the people of the world want the best products and services, at the best price possible. This simple idea has served to bring down barriers to trade and investment throughout the world. No wall can prevent the world’s population from acquiring what they want, when they want, and at the cheapest price. One could argue that the “Iron Curtain” ultimately fell victim to this demand. The visions of propsperity in the West undermined the strict control of the East.

Perhaps even more important, globalization has served to overcome poverty in much of the formerly poor countries of the world, including India and China, that alone hold one-third of the world’s population of 7 billion. Trade, not aid is more than a slogan, it is the formula that has allowed poor countries to catch up with the wealthier countries. China did not perform its massive economic transformation from a poor country to one that will overtake Japan soon as the world’s second largest economy through foreign assistance. It did it by engaging whole hog in the global economy. Ditto for India which had to shed its autarkic policies to enter the global economy.

In my book, railing against globalization is to deny the reality that the countries that have shed poverty and joined the ranks of the wealthier nations have done so by linking themselves more closely to those wealthier countries. Not by appealing to xenophobic sentiments.

That is if you have been following my investment advice since last fall. The portfolio of shares I have bought since the Feds began their successful effort to rescue our financial system from almost certain ruin has grown by 50%. You will recall that I have been urging readers to take advantage of fire sale prices for real estate and stocks since last fall. Well the housing market has taken a slight turn up and for Florida promises to be back to normal in the peak winter season. (Unlike the rest of the country, where spring is the peak season for home sales, winter is the best time in Florida, when people are buying vacation and retirement homes.)

I have specifically suggested investing in Fannie Mae and Freddie Mac whose share prices have almost doubled in the last week. I also talked about buying shares in Allied Irish Bank, the largest bank in Ireland, that was almost “nationalized,” because of its “toxic asset” exposure. Its shares have doubled in value in two weeks. Bank of America has seen its shares increase in value steadily. My only non-financial buy, Loews Casinos, has also doubled in three weeks. The only poor performer in my “Great Recession” portfolio has been Citibank that moves along on a flat trajectory.

While the really good bargains are gone, there are still some great buys. Fannie Mae and Freddie Mac are still great choices. Look for the financial institutions that have been brutally devalued because of “toxic” assets.

You might want to test General Motors, which has recovered so much, it is putting off selling its European holdings, Opel and Vauxhall. General Motors is now in a joint venture with Russia’s largest car maker, owns the third largest car maker in South Korea and is in a joint venture with a Chinese company that is the largest car maker in that country. All three ventures share the same position, they are in the most rapidly growing car markets in the world.

As for a final suggestion, do buy property now before the prices start to rise more rapidly. Again, look for “short sales” where the lender is willing to take a loss to rid his books of the property.

I thought we had gotten passed the confused idea that property is the asset of securitized debt. No, the asset is the debt itself, not the collateral. But here is an article from the UK criticizing Irish Finance Minister Lenihan for valuing securitized debt held by troubled banks at their, “long term economic value.” The writer says he should be getting much lower prices in this, “fire sale of property assets.”

I guess we better take another look at debt as an asset. The typical auto purchase involves a substantial loan with the buyer maybe paying 10% down and financing the rest. The day the auto leaves the lot it loses about one-third its value. If one considers the auto as the value of the loan, the loan has lost just short of one third of its value. But no, the loan is still worth its maturity or long term value, i.e. the balance due, times interest rate, times total payments to be made, minus defaults. A student loan has no collateral so, under the collateral is the value test, the loan is worthless. Ditto credit card debt. But all of these loans have also been bundled into debt instruments sold to investors. Again, the asset is the loan or debt, not the collateral.

The theory of collateralized debt is that failure to pay means forfeit of the collateral. Thus many see the actual value of the loan as the forfeit value. As home prices decline, the collateral on mortgages declines in value. But that does not change the value of the debt itself, it is still balance due, times interest rate, times payments to be made, less foreclosures. No, the collateral is not used as a a value for the loan, but as an incentive for the borrower to repay the loan. To put it bluntly, you pay so you do not lose your home.

Those who have erroneously devalued securitized debt to the depressed values of the underlying collateral justify their error by saying that, if the collateral loses value, the borrower will not repay. However, this has not happened to anywhere the levels envisioned by the panic driven evaluators. The foreclosure rate, while higher than average, has never exceeded 3% of all mortgages.

And why do people in the main still pay on mortgages on homes whose values may now be less than the balance due on the mortgage? I will answer with a question, why do people still pay loans on autos that are clearly worth less than the loan? Why do people still pay on student loans that have no collateral value? Why do people still pay credit card debt on goods and services long gone or used up?

Get real, people pay their debts because there is a whole body of law enforcing repayment and becuase they want to be able to obtain credit in the future. We pay our debts because we want to incur more debt. We pay our mortgages because we want to buy another home in the future. To say that people will not repay a mortgage because the home is no longer worth as much, or less than, the debt incurred to buy it is to question the entire basis for our credit system. We pay our debts because they are our debts.

So the proper valuation of securitized debts is the debt itself, not the collateral. The Irish Finance Minister is entirely correct in valuing securitized debt the government will buy at its, “long term economic value.” But then I am sure there will continue to be many who fail to understand that the asset of securitized debt is the debt itself.

A friend of mine has a sign saying, “War Is Not The Answer,” in his front yard. He, along with millions of other Americans, voted for President Obama because of this sentiment. Obama promised to end the war in Iraq. But here he is building a bigger war in Afghanistan. He justifies it by saying we have to root out the bad guys that are still hanging around the barren mountains of that country. He is intent on getting “Benny Laden” and his gang.

Isn’t it time to take a serious look at how we use war to achieve our goals? In what I call a brilliant exercise the US war machine toppled the Taliban government in Afghanistan in 2002 by getting the Afghans themselves to do the job. Yes, war lords carried the freight and in return solidified their control over their de facto fiefdoms. But the Taliban were gone.

In some respects it parallels the first Gulf War in which we used overwhelming force to free Kuwait. The brilliance in that case is that we achieved our goal and then pulled out. No time or money spent in trying to build a new nation, just rescue an independent country from a 19th Century land grab.

The main problem with Iraq is that we stayed too long. George Bush actually believed we could create a new “shining democracy” on the Tigrus. We should have taken a lesson from the first Gulf War and left after knocking out Saddam’s military. Yes, there would have been internal stife, but nothing we have done since then has lessened that strife. We have to learn to leave sorting out the new order to the people who have to live with that order.

I now see President Obama attempting to build a strong democracy in Afghanistan, free of the Taliban and other potential threats. Here we are once more trying to impose a new order on another land through our military. Sounds familiar, you bet.

The stock market gets it but not the bulk of economic soothsayers. The “Great Recession of 2009″ is over and we are on the road to recovery. I did read one comment that called this recession the worse since the early 1980’s, quite a major change from comparing it to the “Great Depression.”

I cited 2 April 2009 as the date the situation turned around. That was when we dropped the “mark to market” rules that were hamstringing our financial institutions. Since then we have been on a slow, but sure, return to business as normal. Even our friends in Europe and Asia are rebounding. So what now?

As I have noted, we learned that “securitzed debt” produced the greatest increase in available credit, ever. However, our failure to understand it adequately led to the panic devaluations that damn near destroyed our financial system. We are still having trouble coming to terms with this innovative device, but we are already using it again in substantial amounts. The remaining problem is for the Obama team to come up with rules and regulations that give greater transparency to, and control over, this new key element of our economy. We have learned more about this credit source and how to manage it, but we need the new rules too.

Unemployment remains a nagging problem. As I have stated repeatedly, we need the President’s stimulus plan to be enacted rapidly and completely. With unemployment at near 10% and industrial capacity utilization at historically low levels, there is no danger that this massive infusion of government funds will spark inflation. Given the desperate straits of many state and local governments, the plan managers may want to channel more of this fund through their coffers.

While I have pointed out that the unintended result has been to make the Federal Government the largest single shareholder in the private sector and thereby give it even more control over the economy, I see another unintended result. It may be that this sorry experience has served to widen the divide between the rich and the rest of us.

Just prior to the panic mainstream America was enjoying a major leap in individual wealth generated by a booming housing market. Practically every Tom, Dick and Harry was using the equity in his home to buy second and third homes or other assets, thereby increasing his paper wealth. Those who did not participate directly in the property market, also benefitted when their portfolio investments grew rapidly, spurred by their holdings of “securitized debt” instruments. This paper wealth was translated into cash or even more borrowing. So while wages were not growing rapidly, individual wealth was. All this new found wealth took a nose dive during the panic and we now find our individual wealth severely depleted. Many are turning to saving money to rebuild their wealth position. Others, such as myself, are turning to the stock market.

No matter what we do, however, the panic has caused “Joe Middleclass” to lose substantial wealth. I am not so sure that the rich were equally hurt. Sure, they took major losses, but they had larger cushions. I believe there is fertile soil for a “liberal” or “progressive” economic thinker to explore whether the “Great Recession of 2009″ left the middle class further behind the rich, or if we all came out with equal loss.

We are still very concerned with the high unemployment rate in the USA. President Obama’s stimulus plan has helped change the situation, but not enough nor soon enough.

Beside the concern about unemployment, many worry about an aging population, with fewer working people paying the freight for more and more on Medicare and Social Security. They see instead of 10 in the work force paying for one retiree, a future in which 3 or 4 workers pay for each retiree. What this view conveniently overlooks is that it is the economy that pays for the retirees, not the individual worker. If 3 or 4 workers in the future produce as much as 10 workers today, then the burden caused by each retiree will be no more.

How can this be, you ask? Well one should remember that at the beginning of the 20th Century about half the US work force was engaged in agriculture producing enough to feed our population and more. By the end of the century less than 2% of the US work force was engaged in agriculture and still producing enough to feed us and a substantial share of the rest of the world. In other words, it took only one farm worker to do the job of 50. The amount of food was still the same, in fact it was more.

In 1960, at the height of manufacturing as a share of the work force, some 26% of the US work force was in the manufacturing industry. By the year 2002 this fell to less than 13%. But manufacturing output actually increased.

Of course all this is due to increased productivity of workers. Fewer workers can now provide sufficient food and other goods for the population. Add to this the current concern that we are consuming too much by virtue of massive new sources of easy credit, and one could argue that we should lower, not raise, the retirement age, since fewer people working can more than take care of all of us.

But this denies an essential feature of American society, your job, and implied income, establishes your position in our society. We Americans are the only people on earth who ask first, when meeting someone new, “What do you do?” No other people ask this on being introduced to a new person. As I always put it, while we have the most mobile society in the world, where one can instantly go up or down, it is also the most crass, since it hinges on how much money you are making. Anywhere else your rank in the social pecking order rests on other factors, who were your parents, where were you educated, what talents do you have, what is your religion, if you have one, where are you from and so on.

Now I exaggerate a bit here since these other factors also play a part in fixing your social status in America, but your job and income are the key factors. It also explains why so many Americans question the usefullness of their children exploring endless fields of study in school that appear to have no relationship to getting a job. They have a hard time accepting the idea of education for the sake of education alone.

All this means that if you have no job in the USA, you are a social “nobody.” Being employed takes on more meaning than simply earning your keep. And that is why we put more emphasis on jobs than perhaps any other people.

So what happened to those people no longer needed by agriculture and industry? Thank God they found jobs in the service sector, which now employs about 85% of the work force, and are able to maintain a position in American society.

The dilemna for America is how is our society going to survive when we do get to a future where few people have to work to provide all we want? We have already seen that this is true for agriculture and industry. How much longer can we prop up the underlying foundation of our society by inventing new services or by stimulating excessive demand with imaginative new sources of credit?

Yes, I make mistakes. I said economic news was being once more relegated to space between articles on food and the comics. But there they were, the front page, early page articles,and several opinion pieces dealing with economic topics in the latest edition of the International Herald.

President Obama’s full court press for a health bill had full coverage. And as I have stated in my last two blogs, it is the cost of health care that is generating all the press. No one disputes the quality or effectiveness of the care itself.

And there was Henry Kissinger on the Op-Ed page trying desperately to discuss seminal change in the world economic order in political terms and concepts. Hard to break habits acquired over a lifetime.

Finally there was many people’s economic guru Warren Buffett nervously fretting about rampant Federal Government deficit spending eventually leading to a bigger problem than the exploded credit bubble. Buffett frankly allows, as I have done repeatedly, that massive Federal spending - TARP, TAFL, Sitmulus Program, acquiring Fannie Mae and GM, investing in banks and such - saved the economy from certain ruin. He pays tribute to the key officials of the Bush and Obama administrations who managed to stave off economic collapse as I have also done.

But Buffett fears that all this deficit spending will lead to inflation and worse. He cries that our national debt, compared to our GDP, has grown too fast, However, he admits that it is still smaller than the ratio for such countries as Japan and Germany. In fact we have a long way to go to catch up to other major economies in amassing central government debt. Even our Federal deficit, expressed as a percentage of GDP, is less than most other major economies.

Another Buffett worry is that foreigners, especially the Chinese, may opt to put their excess dollars into buying US shares and companies and real estate, instead of Treasury bills. However, as someone who sells US property to foreigners, I would welcome additional buyers.

Buffett then warns that, even if domestic investors were to buy $500 billion in Treasury bills, there would still be a shortfall of $900 billion needed for Federal deficit spending. He conventiently overlooks the record for the last year in which private US investors have left the private sector to put their trillions of dollars, not billions, in T bills.

Buffett winds up saying that Uncle Sam will have to resort to keeping the money printing presses working overtime to provide the financing the Feds will need. Well, the Feds have no intention of retiring our National Debt. They will simply rollover the debt ad infinitum while adding to the pile as they go along.

Well I may be wrong in predicting an early departure of economic news from being front and center in the world’s media, but in this case I am pleased to see that I have been wrong.

President Obama is taking lots of heat over his health care proposal. One very vocal group opposed to it is those on Medicare, such as I. The summary comment is that we seniors fear that Obama will cut Medicare to cover those not having insurance. And the fact is that his plan does do this.

About 11 million Medicare recipients have taken on the Advantage Care program. In this program an insurer agrees to provide all the benefits you get from Medicare, with a big savings. Under Medicare the recipient is required to pay 20% of most medical bills and Uncle Sam picks up 80%. The Advantage plan pays all the cost, i.e. the member does not have to pay 20%. Advantage plans also offer features not offered by Medicare, such as emergency medical attention when abroad, the reason I have it. Advantage plans also provide more drug benefits and other services such as preventive care services than does Medicare. They also cover some of your dental care costs.

Now for the cost. Medicare pays a flat rate for each person enrolled in an Advantage plan, so much per month and, try as I have to find out how much is paid, I have not been able to find the exact payment, so suspect it varies from place to place according to local costs. But the cost is clear to Medicare, for a flat rate payment, Medicare passes off all responsibility for caring for those Medicare recipients enrolled in Advantage Care plans to the insurance company offering the plan. For the regular Medicare recipient Medicare is responsible for 80% of the recipient’s health costs, without a limit. In other words, for the Advantage Care enrollee, Medicare has a clear and fixed cost. For the regular Medicare recipients, Medicare has an endless exposure.

Sounds like a great program and that is why I and 11 million others use it. Well here is the rub. President Obama will do away with the Advantage Care program in his new health care proposal. So much for him promising us that we can keep our current health care program. There are 11 million who will lose theirs.

Obama does offer a rationale for cutting the Advantage Care plan. He says it costs too much, more than what is needed to provide the services rendered. His calculation comes from a failure to understand what insurance means. Insurance means to cover an unforeseen event. The flat rate paid for each Medicare recipient in an Advantage Care plan is an insurance premium. It may or may not be used to pay for services provided to a specific Advantage Care recipient, but it will pay for all services rendered to all members as necessary. So while paying say $3000 a year to cover Leo Cecchini may or may not be needed to pay for my personal care, it is used to pay for all members’ care. If I do not use any medical services, Obama’s bean counters say they have paid $3000 for no care rendered. I leave it to the reader to see the obvious case of cutting off your hand to spite your face.

No surprise that Medicare recipients suspect the President wants to pay for covering those who do not now have health insurance by cutting Medicare coverage. Ending the Advantage Care plan is a clear signal that that is exactly what will happen.