CapitalistMarks

Charity vs greed

Posted on 30. Jan, 2009 by scott.

It strikes me that one of the biggest causes of this awful recession, and perhaps depression?( if our government does not get working primarily on unemployment and confidence and not just social issues and pork), is greed.?

Corporations, and by extension their executives and ceo’s, just got carried away (Even they mostly admit that).? They saw too many opportunities for lining their own pockets instead of paying attention to what they were really being paid to do–i.e. increase value for their shareholders and maintain jobs for their employees.? They cared more about their own future than that of those they should have been reporting to.?

Now you can say that the treasury dept., and the FDIC, and the?S.E.C. and any number of other government agencies dropped the ball, but the fact is that no amount of economicregulation is going to stop creative and greedy people from doing what they do.? Albeit, an honest and dedicated government couldn’t hurt it is really up to those that make decisions.

Obama got it right when he said?that? the $18 billion bonuses paid to financial executives in 2007 was shameful.? But it was a whole lot more too, it was at least immoral and it might have been illegal (don’t they have an absolute fiduciary duty to shareholders?).?

Who is going to watch the chickens if all the farmer’s dogs are playing with the wolves?

We are really in one heck of a mess in this country today.? Every week brings further information about obscene losses?from banks and financial institutions and revelations about more greed from executives.?

Where does it end?? Can we bail out these ‘evil-doers’ every time another bucket load of losses?is thrown at us?? Don’t think so.?

Some (and probably a bunch) of the corporations run by ‘evil-doers’ are just going to have to fail.? Some shareholders (who have their own culpability, especially since the lion’s share of them … don’t you like the metaphor?…are mutual funds and institutional investors who managed ‘our’ money and should have been paying more attention) are just going to have to pay the ultimate price.?

Let ‘em lose everything.?? Seems that here again, Adam Smith was right.? Let the market adjust as needed (sorry John Meynard Keynes).?

So what happens???A few big banks fail (the government picks our/your losses up to $500,000) and all the real estate that would hit the market at heavily discounted prices would sure help home sales for first time buyers!

It’s the leaders that caused this.? The ceo’s have to accept the blame . . . along with their top tier of executives.

What does it take to get good leaders?? Education? Sure.? Experience? Probably.? Selfish drive?? Heck no!!?? It takes integrity–moral strength.

We need men and women of integrity and courage in every executive office of every corporation in the land.? Washington D.C.?too.? Sounds biblical, but it would work,?I promise you.?

Lincoln had it right.? In his 1st inaugural address he said ” intelligence, patriotism, Christianity, and a firm reliance on Him, who had never yet forsaken this favored land, are still competent to adjust, in the best way, all our present difficulty.”?

That goes even more today than it did in 1861.

Let’s focus on the Christianity part of Lincoln’s address.? But it could just as easily be Judaism or Islam since?the Tanakh and the Q’uran also teach the same lesson ( its just that I’m more familiar with Christianity, though I’ve studied the others too).? The lesson there is that charity (the Greek word in the original?New?Testament was ‘agape’ which is really cool and??means powerful love for others) is paramount.? We all, particularly our leaders, have to think of others? first.?? Stop being selfish (that goes for you and?me too)?everything else will come along with that.?

Charity breeds self-respect and success, as well as intelligence, patriotism and a firm reliance on ‘Him who has never forsaken this favored land.’? Man, that lincoln was a cool guy, they even named some logs for him? (and I used to make some great cabins with them as a kid).

Kick out any leader who lacks charity.? Kick out any leader who is greedy.? Do it with our votes.? For politicians or for ceo’s.? none of them can be where they are with out a clear vote from the electorate or the shareholders.

Take control!

Charity vs greed.? The choice is easy.

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thanks to??maha-online? for the flickr photo.

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How to fix government! Part deux.

Posted on 27. Jan, 2009 by scott.

I’ve already pontificated on term limits.? Today is part II of the government problem (and of course the solution).

I read in the paper this morning that lobbyists spents $3.3 BILLION in 2008.? That money went to influence our elected leaders.? Two issues jump out at me here, and?I have to add that either of these trump any possible reasons for allowing paid lobbyist to even visit Washington, D.C.?let alone exert any kind of influence there.? Who elected those high paid dudes (or dudettes) ?to have an impact on our lives?

?This is a freakin’ democracy!! by the people, for the people and all that.? Not by the rich (those who can afford to influence by hiring lobbyists) and for the rich.? Jeez louise, how dumb can we (the electorate) be to allow this?????

Back to the 2 issues.

First, there is the matter of the $3.3 billion.? now that doesn’t sound like a lot today when our government uses several trillion $$ of OUR money to try (notice it is conditional) and fix economic problems caused primarily by those companies that our paying for the lobbyists.? The likes of?fannie and freddie and others of their ilk . . . i.e. just about every bank and financial company out there . . . as well as automakers and peanut butter makers (hate it when?I get salmonella)? . . . and mortgage bankers and . . . gosh?I guess every company with overpaid and underpermforming CEO’s out there.? Does that leave anyone out?? Don’t think so!? oh, yeah –?I forgot, it left out you and me!

What if those companies kept the $3.3 billion and returned it to shareholders??What if they spent it on R&D to make better and safer products (ah, there is the peanut butter thing again), or to increase pay for the average worker (you know, those who work 40 hour weeks for a tiny fraction of what their bosses make while they are golfing or cruisin’ in their private jets), or to contribute to health care for workers, or . . . gosh just about anything …. EXCEPT?LOBBYING!!

Second.? Why should only those with money be allowed to influence elected officials?? But there is even a bigger issue here.? NO ONE . . . repeat NO ONE, should be allowed, permitted or encouraged to influence votes or decisions of any kind except for the individuals that put the greedy bums (I’m not angry . . . just think about what YOU could do with part of that $3.3 BILLION) in office.? Hey, the only ones who should be allowed to influence, in any way shape or form (I think that is legal language but?I am not sure even though?I spent a very?frustrating week in law school) ?elected officials should be the electors . . . that is you and me again.? One person — one vote.? Not one million dollars — one vote.? Are you seeing a trend here?? It is a simple issue of the rich getting richer and the middle class getting middler and the poor getting poorer because they have no infuence.

So change this offensive and impure process.? Legislate, adjudicate, and pontificate (legalese again?)?– or whatever it takes to simply STOP it!? Dead in its tracks.? Right now.? Write, email, phone and even visit in person . . . let our elected officials know that NO lobbying will be allowed.? None.? Nadda. Null.

In conclusion my friends (no closing argument here . . . just the solution) paid lobbyist’s should be jailed because the practice (well,?I guess it isn’t practice anymore because they have it down to science) should be against the law.? But that won’t happen until?WE make it happen.

Its up to you.? And me.? Us.? Make it illegal.? Federally.? Stateally (in every state). Countyally (in every county) and cityally (in every city).?? forgive the legalese again.

Lobbying should be against the law EVERYWHERE in a democratic society.

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The good, the bad and the sad.

Posted on 26. Jan, 2009 by scott.

?Economists all over the country are promoting a government bailout of homeowners who can?t afford their mortgages.? What do you think?? Should we reward consumers who get in over their head?? Should we treat people who bought more home than they should have as victims?

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Does anyone win in a world where bad decisions are rewarded?? Yikes, I guess we all do.? At least the bigwigs can blast their stockholders and the owners of their debt and still get to fly ultra-class in their fancy private jets with caviar snacks and Coke in a bottle and get annual bonuses in the millions of $ even when their company stock collapses under the weight of huge loses they caused.?

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Jezz, where is the justice???

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But, the fact is we can?t reward everyone who made bad decisions and that goes double for home owners.? Hey, if you are in over your head then get out.? Sell.? Buy a home you can afford.? But don?t put the burden of your error on me and the rest of us who worked hard and paid mortgages for years and still live in modest and comfortable homes (at least to us).? There is an answer and I’m not the only one who thinks the government is barking up the wrong tree.? There are lots of blogs out there about his that you can check out, but one has a story of abuse that really strikes a chord.? It is by Eric Ames and is worth reading.

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So, what do we do?? I?ll tell you with an example.? This is a micro tale about a macro problem and you have to realize that all the numbers get multiplied my millions or billions in the real economy.

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Lets say there are a thousand homes out there where the mortgages can?t be paid.? Let?s say that the average mortgage is $175,000 (CNBC today said that is the average home price in the U.S. now).? The total mortgage value is then $175,000,000.? The problem is that 10% of the owners can?t pay.? So $1,750,000 or 100 homes are in trouble.? And lets say that they are in over their head by 20%?– so that is?$350,000.?

DON?T bail the owners out at a taxpayer cost of that $350,000!?? Let the market (banks?etc.)?deal with it and we all benefit ? even the owners who are in over their heads.

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Here?s how.

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First the taxpayers don?t pick up another $350,000 obligation (remember to multiply that by millions or billions!!).

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Second, the owners tell the banks (or fannie and Freddie– but you get the idea)? that they are going to walk–unless the bank negotiates with them.? Now the bank has a choice.? They can lower the mortgage value and/or the interest rate to a point where the owner can afford it (that 20%) and the writeoff ?the bank will take is less than the cost of going through a risky foreclosure and sometime (who knows when) selling the house (probably for less than the net mortgage they now own less costs of foreclosure and selling).?? Hey, even convert to a 40 year mortgage to make some of the loss back.? (Think of the variety of options)

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If the owner and bank can work out a deal then they both win.?

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If they can?t work out a deal they both win.?

Here?s why.

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The owner walks away and finds a house that they can afford.? There are lots of?homes out there (CNBC also informed us that there is a 9 month supply of homes for sale ? does it sound like?sellers and banks are willing to make a deal right now?).? By the way the mortgage rates are near all-time lows so the house the ousted homeowner?buys will have even lower monthly costs.? Or in the event they can?t find a house they rent until they can.? That is the way self-reliance and personal financial responsibility works.? It is how we learn . . . from our mistakes.? Turn the page and move one.? Worst case:? the buyer has learned a lesson.? Best case:? they find a house just as nice as their old one?for less money . . . maybe even the house they left (after the bank cuts the price and lowers the interest rate so it is newly affordable) of course there would be the cost and hassle of moving out and then in?horrible to think about. But, hey, they were willing to take the risk.?

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What about the bank(or whoever)?? Well, they save the money of a foreclosure (see above) and that is usually a bundle.? Plus at worst they take over a house and put it?on the market at a much lower price.? Sure the house sells (whenever it does) for less money and the bank will have to take a write-off, but it is a lot less than if they had gone the foreclosure route and then tried to sell it.?

That?s the way corporate finance and responsibility works (or should).? Worst case: the bank loses some money.? Best case: the bank loses some money (and the loan officer and his boss get fired).? But, hey they were willing to take the risk.

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Let the market handle it President Obama.? Or else, if you are going to put millions in the pockets of those who made bad financial mistakes then make sure you give the same amount to those who chose well (do it in the way of a homeowners rebate).

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Yeah.

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The good, the bad and the sad.?? That?s life.? Live with it!

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thanks to leo-seta for the photo from flikr

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Hope!

Posted on 20. Jan, 2009 by scott.

Today was indeed historic.? Imagine the President of our United States is a man whose father was born in Kenya and his wife’s great-grandfather was a slave.? Incredibly President Obama was born to a Muslim father, and yet he is a devout Christian.? This fine (further accolades must be held in abeyance for at least 2 or 3 more years) man was a good attorney who gravitated to helping the oppressed and poor.? Just a few years ago he was a virtual unknown.? He has two wonderfully normal daughters and a wife with professional and personal credentials?to shame nearly every other first lady in recent memory.? That alone should keep him grounded . . . a really good thing.?

But, ‘wait-if you believe right now you get this one time only, act in the next twenty minutes bonus’:? I’ve seen pictures of this President donating time to help the poor, shopping for?groceries, playing basketball (THE manly sport), walking on the?beach, and smiling –?wow what a smile!? Send in you?order now.??A double order, biggie sized, of HOPE!

I expect significant changes in the Whitehouse, and the?Executive branch of our goverrnment in general.??I know he wants to affect real worthwhile change in Washington and?I hope he can (like finding a way to limit ALL other elected officials to?a few terms . . . a common theme you will hear from me).?

Sadly the prior administration?has left the President with problems and realities that will make? his job?very difficult.? Theformer guys?managed to trash any HOPE.??? The realities of our?economy will limit his capacity to provide government assistance to?the needy (financially, economically, healthally, educationally, combatally, politically?. . . .).

Oh boy, does he have a challenge ahead.? But, there is HOPE.

Hey, people in Kenya celebrated, Arabs and Muslims?are excited that he?likely understands their?beliefs and?HOPE ?more than any previous President.??Europeans danced in the street, and generally everyone?I know or have seen on?TV has HOPE as a result of his election.? They want and expect a different and better America than they have seen for 8 seemingly long, dark years.

Sure, the market?(stock not vegetables) crashed today.? However, CNBC informed us, thank heavens, that the market?declines 72% of the time on?inaguration days.? Truthfully the market probably won’t get the Obama?bounce that so many expected.? Nothing happens?( predictably) when our?incredibly unpopular Congress gets involved.? That means that the President’s plan for economic stimulus and change in government will not be approved soon.?

Think about it.? The market (here?I speak of the millions who buy and sell securities and bonds) can’t react positively until there is good news and an improvement in the two things that the government HAS to focus on (I started?pleading for this in?August to the students in?a college macro economics class?I taught . . . so?I am not coming to this party late, and I am?certain others have recognized this too), and that is lowering unemployment, and improving?consumer (say citizen here) confidence.? Just those two things.? Nothing else extraneous, just those two things.? Focus on them, Mr.??President, honored (boy that is hard to write) Congress — and then you will give the rest of us real HOPE.

While many are expectant, and even more are HOPEful we have to be realistic.? It will take many weeks, perhaps months,?for the President to get his advisors and administrators approved by Congres and put to work.? The sooner the better, but don’t expect Congress?to be intelligent?about it (they are too dang politicized and concerned about their high-paying,?live and retire on easy-street jobs to?do that).?

So, reality is that change (if it comes) will take time?(and sadly lots of it).?

That leaves us with only one thing:? HOPE!? hope doesn’t float . . . it has to be paddles to stay afloat.? Give us a paddle Congress.

Don’t let go of it.? The more of us that share HOPE, the more our leaders will start to realize their?jobs might just?be dependent upon?reviving our?HOPE.? Holy mackeral, that would be something., wouldn’t it??

So HOPE.

And pass along HOPE.

And don’t give up your HOPE.

Spread the word.

HOPE!?

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thanks to jurvetson for the picture from flikr

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How to see the problem?

Posted on 15. Jan, 2009 by scott.

The economy is ‘officially’ in the toilet (well?a toilet anyway).? It is far too late to place blame although there is plenty of fodder for THAT fire!?

So far:??We have had fed (reserve that is) action greater than ever before — ah, the pristine nature of 0% rates, treasury action (oh my gosh is Paulson still at the helm?) in the form of opening up the currency printing presses, FDIC action to secure deposits, Whitehouse action in the form of pointing blame at anyone but the Executive branch, Congressional action such as contentious opposition to any suggestions from?’that’ Whitehouse . . . and yet the ‘wall still comes crumblin’ down.’?

Here is a perfect example of why we need term limits.? All the guys (and gals) in the categories above find ways to look out for themselves (what? is congress really getting a raise in the midst of this downturn?) and ignore the obvious.? They are worse than talking heads.? They are talking … ?(well just think of another less intellectual part of the anatomy).

All ya gotta do?dudes (that is a?congenial term usually reserved for witless teens — how fitting here)???is open your eyes!!?

America is the greatest consumer economy in the history of the Universe.? Consumption drives our economy.? Anything that greases the wheels of consumption WILL grow the economy.??That is?given and accepted by virtually all economists.?

But . . ?where do the dudes ?I’m talking about ‘lead’ in attempting?to dig ourselves out of this (w)hole mess?

The answer is too obvious for the economic and political ‘genuises to really grasp.? it is right there in front of you — dudes! do something, anything, to motivate, encourage, stimulate and give confidence to . . . THE CONSUMERS!? and do it at once . . . immediately . . . yesterday . . . today . . . and tomorrow!? Stop arguing , discussing and talking.? Try something novel, like actually doing something.

Forget any so called stimuli that will benefit businesses, large or small, or that are intended to?put money in the pockets of individuals (or institutions) that won’t spend it right away.? Forget projects (pet or otherwise) that will take months or years?to implement.? Stop thinking about saving corrupt, inefficient, bloated financial (or manufacturing etc.) corporations that are clearly NOT going to help the problem — and are harming our national heritage of increasing efficiency.

Put the all money and all the effort in doing TWO things and those TWO things only!!? (1) — create jobs now?? (2) — increase confidence now.?

That’s it folks.? Don’t waste time or money on ANYTHING that doesn’t immediately have an impact on those TWO things!

I’m not being paid to work this out but there are solutions that fit the TWO things above.? Read them and open your eyes you knuckleheads!?

Focus only on the TWO things above.? Anything else is worthless and wasted.

Open your eyes! Focus! Open your eyes! Focus! Open your eyes! Focus! Open you . . . . etc. etc. etc. . . .

thanks to focalpunkt at flikr for the photo

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Did he say trillions?

Posted on 07. Jan, 2009 by scott.

Today our?new President advised us that we can expect several years of trillion dollar plus deficits.

To whom do we owe this disaster?? Who has been running this country for the last few years?? Do we have a decider?? Oops?I guess we do and therein lies the problem.?

A decider without the capacity to be?an analyzer is no decider at all.

This is not a propitious beginning to a positive change that has been promised for our country.

So, we turn the page and don’t blame anyone but . . . we gotta start now and not with 2-3 years of trillion $ deficits.? Let?GM go, let Chrysler go, let Citibank go . . . and on and on.? They failed us, we didn’t fail them.? We can’t support them.?

It will be an awful year anyway might as well clean house and get rid of the failures.? Look for success stories, don’t dwell on the dross.

For capitalism to?work it requires success at least 51% of the time.? If management can’t do it then let them go and start over.??Clean out the toxic waste of subprime and cdr’s (credit default swaps for the uninitiated).? Lets start over from scratch.? That would be real change and a beacon to the rest of the world.? The change agenda is needed, just do it right.

Hope you are reading Mr. Pres. elect!

thanks to bobster1985 at flickr for the photo!

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Bye bye ‘08 . . . ‘09 can’t be worse!

Posted on 31. Dec, 2008 by scott.

With a degree in economics and an MBA I?can’t help but follow the markets (stock not grocery) . . . and ‘08 has been a black hole for investors of almost all persuasions.? I’ve agonized through it.? but there is hope on the horizon.

The market is a discounter of future expectations . . . some say 6 months others as much as 24 months in the future.? I?am of the ?6-12 month persuasion.

Why the hope?

To start, some bad marks for the adminstration this year relative to markets.? Paulson and Bernanke were slow to wake up and slower still on the uptake with regards to how to fix the problem(s).? But the hope is in the broad brush approach.? With trillions thrown at the problems from many governments and confidence at an all time low things can’t get much worse, for long.? Hence the suggestion that it is time to start picking up the pieces and make some $$$.

Not gonna find me making stock picks but?I can tell you that?I really believe 2009 will be a ‘rocker’ in the market.?

Here are some of the reasons why.?1– much lower oil prices that are being followed (at an ever quickening pace) by? (2) — lower commodity prices (think corn, wheat, steel, chicken, eggs — or which ever comes first) and a whole bunch more.? Then (3) confidence will rise and Madoff will get what is coming to him.?

Spring will bring warm temps and some really good opportunities . . . entreprenuers need to think ahead and be prepared.? America is about to take the lead again!!? The new adminstration will (4) work at?making friends, not enemies, and the world will take notice.? ‘Buy American’ will become vogue again.

You can hold my feet to the fire on this but here is what I predict for 2009.? The dow will reach 12,000 at some point, the nasdaq 2400, and the s&p 1,200.? There is a lot of pent up demand for things people don’t have the confidence to buy now . . . but they will within 6 months of Obama taking office.? I?didn’t vote for him (and not Mccain either) ?but change is usually good and?BHO gives the impression of intelligence and concern (something woefully missing for the last 8 years).

Sure we face a grundle of problems but capitalism has been on hold for over a year and in the toilet for the last 6 months.? It will rise again with a vengeance as Chavez and Putin and that knucklehead in Iran realize they bet on the? twice losing horse of socialism and complete gov’t control (and of course perpetualy high oil prices).?

Specific details don’t tell the whole story this early in the game.? But, come back to me in a year and chew me a new one if I’m wrong.?? Still,?don’t bet the farm on it for a few months.? ‘09 is going to be interesting, historical and fun (‘08 was all of that except?the fun part–unless you are a masochist).

This seems a serious and seriously imprudent direction to predict, but?I mean it all.? And don’t think?I lack a sense of humor . . . heck?I voted for bush in ‘00 . . . what’s funnier than that?

As my daughter is fond of saying, “whatever!”?

Yet, be wise, be funny, be cautious, be optimistic and be yourself, then you are all but? guaranteed to have a?GREAT 2009!!!

thanks to *clairity* at flikr for the photo

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