Not a whole heck of a lot to report but wanted to get one more post in before we roll the calendar over.
Spent Christmas in Houston and looks like we missed out on some truly nasty weather up here in Chicago. I have no doubt that we'll have plenty of more chances to experience horrible weather over the next 2-3 months. Our nice and relaxing time in Houston was brought to a grinding halt when we were informed on Saturday that a pipe had burst in our building and the garage was being flooded. Fortunately (for us, not the developer) it was the rear half of the building that was affected and our car was parked at Midway, so from a damage perspective we were fine. It did mean, however, that we had the distinct pleasure of returning home to no running water. After some headaches dealing with our not-at-all efficient developer we finally got water restored last night ~7:00. Good times.
Weather was decent in Houston. Got up into the 70s most days but rained a lot. I was excited to have a chance to get outside and run again for the first time in over 6 weeks. I was real good and ran the first 5 days I was there but then took Christmas day off and somehow never made it back out again. Nothing too much else exciting to report from the trip. Worked at the pizza place a bit, finished a couple books, and saw a couple movies: The Curious Case of Benjamin Button and Bedtime Stories. Benjamin Button I would classify as a good movie that I just didn't like very much. Everything about it is well done (acting, writing, directing) but it just can't escape the fact that the story is inherently depressing and in the end that makes it not a lot of fun to watch. Bedtime Stories was about what you'd expect it to be (i.e. pretty stupid but moderately entertaining); only saw it because we took our nieces and nephews to see it and when you can get 4 kids (from ages 4 to 13) to all agree on the same movie that is the movie you are seeing.
Since we got back I also went out and saw The Wrestler, which I thought was excellent. Ironic that it was just about as depressing as Benjamin Button but somehow I liked it a lot more. Maybe it's because it was an hour shorter or maybe it's just because I am quite familiar with what happens to has-been (or never were) wrestlers and thus I knew more what to expect. Mickey Rourke does indeed turn in an Oscar-worthy performance and you can't help but think that he put a lot of himself into the role. Evan Rachel Wood is also very good in a small role. I've only seen her in this and Across the Universe but I've been impressed by her and wouldn't be surprised to see her really take off in the next couple years.
The Bears? Blah . . . Only silver lining is that tickets to the game were going for so much money that I avoided having the displeasure of witnessing the season-ending loss in person. I am however, excited about Illini basketball and the Big Ten conference season opening today, as well as the Blackhawks Winter Classic and all the bowl games on New Year's Day.
Well, I think that does it for me for 2008. I'm working on a couple of more weighty posts that hopefully will be enjoyable and stimulate some good discussion. Hope everyone had a Merry Christmas, has a Happy New Year, and I will see you in '09!
Tuesday, December 30, 2008
Wednesday, December 17, 2008
Double Feature
OK, one more thought on Bernie Madoff and then I'll let it go (for now). Is it just me or does he look like he could be Harry Shearer's brother?
Bernie Madoff 
Harry ShearerIn other news, I got out last night and saw a double-feature of two really good films: Frost/Nixon and Slumdog Millionaire.
For the benefit of those unfamiliar with these films, Frost/Nixon is a fictionalized recount of the interview of Richard Nixon by David Frost 3 years after Nixon resigned from office and the circumstances leading up to it. It is famous because it was in these interviews that Nixon finally admitted to being part of a coverup and that he let the American people down. Here the story is largely told from Frost's perspective, and I think that is the correct choice. Frost was viewed as basically the Jerry Springer of his day (or, at best, the David Letterman). Someone who could be entertaining but was not given serious credibility for having the journalistic chops to pin down someone like Nixon and force him to answer the tough questions. In fact, that's pretty much the reason he was granted the interview. He offered Nixon $600,000 (much from his own personal accounts) and was seen as someone who would toss softballs all night and allow Nixon to start to repair his image. Frost, on the other hand, sees this as an opportunity to prove that he has what it takes to be taken seriously and (he hopes) will springboard his career back to success in America. This type of approach makes us realize that there is a lot on the line for Frost here too. Had the film focused on Nixon's point of view, why would we care about some hack journalist asking him questions? Whatever your opinion on Nixon, you have to admit that he's a fascinating, enduring figure whose legend just seems to grow with time. One of the great ironies of the film is that many of the characters talk about how one of the worst outcomes of the interview would be if Nixon was somehow able to exonerate himself. The interviews did not do that, and I wouldn't argue that the film does either, but it's certainly succesful at turning Nixon into a sympathetic (if never really likable) figure. In the end, it doesn't argue that people should forgive Richard Nixon for his crimes, but that they should understand that he definitely did not "get away with them." One of the lines in the film (which, incidentally, Nixon never actually said) is "no one can know what it's like to resign the Presidency of the United States." And that's the key. I can't think of another person in history that has fallen so far, and had to live with that fact for 20 more years. To have been the most powerful man in the world and then been reduced to the point where you will never just be "former President Richard Nixon"; always "disgraced former President Richard Nixon."
A quick word on Frank Langella's performance. He doesn't really look like Nixon, and he only passably sounds like him. Nevertheless, he IS him. From his mannerisms, to his walk, to his style of speech, to the way he fills up a room and just exudes power, he really is the embodiment of the man. If you have never understood why Nixon was so hard to pin down during interviews and investigations, I can guarantee that you will understand after you see this film.
Don't want to sleight Slumdog Millionaire, which I also thought was very good, but I don't have a whole lot to say about it. It's really a conventional rags-to-riches/love story set in a very unconventional setting (Mumbai, India) and told in a fairly unique way. It's about a "slumdog" (i.e. poor boy from the ghettos) that is one question away from becoming a millionaire on the Indian version of "Who Wants to Be a Millionaire". He is suspected of cheating because how could someone from such a background know all these answers? The remainder of the story is told in a series of flashbacks as he takes us through his life and we learn how he acquired his knowledge. Ultimately, it's a skillfully made if rather conventional story. Definitely worth seeing though, if only to see some great shots of a foreign country that haven't really been seen before by US audiences. Be warned that much of the movie is subtitled.
Monday, December 15, 2008
May(doff)day
First of all, it is Monday afternoon and as of right now we still have good old Blago as our governor so, sadly, it looks like I was wrong about that one. I'm still hoping for a quick resolution, but am preparing myself for this thing to drag out for weeks and possibly months.
I also awoke today to see that some dude named Bernie Madoff is perhaps the greatest magician of our time: he apparently made $50 billion disappear overnight. Before we get to the specifics, there is something that irks me. The four articles about this that I saw today had the following headlines: "Stocks Edge Lower as Madoff Victim List Grows", "Alleged Madoff Fraud Victims Include Big Banks, Super Rich", "List of Madoff's Victims Keep Growing, Likely to Extend Beyond Clients", and "How to Get Money Back from Bernie Madoff." So, basically, a lot of information about who has been affected and to what extent, but next to nothing about what actually happened. I think it's yet another example of our ADD media. Apparently they broke the story of what Madoff did on Saturday and so if you missed it - too bad; they're moving on. In that respect, maybe Blagoyevich is on to something here. He's gambling that we don't care enough to continually keep following this story and will eventually just forget about it. And he might be right. But I digress. . .
Fortunately, I got a good summary from the Economist:
"Details are still emerging, but Mr. Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr. Madoff to admit that his coffers were empty - bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked."
Some other details that I found interesting:
"The affair has - like the subprime-mortgage debacle - exposed a stunning lack of due dilligence. Droves of investors who should have known better tossed in billions, preferring to keep their fingers crossed rather than ask awkward questions of a firm whose investment strategy was vague and opaque. Even within his own group, Mr. Madoff's money-management business was a black box; no one but he had full access to the accounts. As a broker-dealer, it was able to clear its own trades, a privilege that should give pause for thought. Worse, questions had been hanging over the operation since the mid-1990s. Some institutional investors have long steered clear of Mr. Madoff, unable to understand how he spun his gold, or uneasy that his books were audited by a tiny, three-person accounting firm."
I bolded the parts I found most interesting. Being able to clear your own trades is just a complete lack of a fundamental control. You can get away with that if your operation is heavily audited, but I think it's pretty obvious that a $50 billion portfolio is way too big for a 3-person accounting firm to handle. Even so, if they had performed their job adequately they would have uncovered this scheme long ago. One of the most basic steps in auditing investments is to pick a sample of securities and observe that they are physically present onsite or in a safety deposit box offsite. I'm sure that this accounting firm will soon be out of business if they are not already. I am quite curious if they have professional liability insurance (as most audit firms do) and if so how much they had and who is on the hook for that.
Two months ago, Christy and I went to see a play called The Voysey Inheritance. Here's a quick summary of the plot:
"Misappropriation of client funds...fraudulent speculation on the Stock Market...deceit...lies ...and an intricate cover up. When young Edward Voysey discovers that the family's wealth has been built on three generations of deceit and theft he must choose between confessing all and ruining the clients that have unwittingly trusted the firm, or continuing the deceit in the hope of righting the wrongs that the firm's clients have unwittingly been subjected to. So the scene is set for an intriguing examination of ethics - and their absence - in the world of high finance."
Hmm, sounds a bit familiar no? The best part is that this play was written in 1905. Technology has grown by leaps and bounds since then, but it seems that financial swindels are often still barely above the sophistication level of 3 Card Monty.
It's also a vivid reminder of the fact that the "con" in "con man" is short for confidence. A good con man doesn't take your money; you give it to him because he's somehow managed to convince you that he's got your best interests in mind, or at least that you both share a common interest. And no matter what the final dollar amount ends up being here, the real damage will be consumers enduring yet another blow to their confidence in the finance industry. As they say about roaches in your house, "by the time you see one, it means you've got 1000." People are likely to start pulling more and more money out of their accounts out of fear and that's going to 1) cause the markets to fall further and 2) expose more criminals who are currently perpetrating similar schemes. The combination is likely to have a postive feedback loop effect, and that can be a very dangerous thing. Whatever the underlying reasons for a financial crisis, nothing gets better until trust is restored. People have to trust that they will still have a job next week before they will make major purchases. Banks have to trust a company's or consumer's income statements before they will lend them money. Right now nobody trusts anybody, and this is actually where greed is the enemy of capitalism. In the capitalist model, a nation of greedy pigs with an unquenchable need for consumption is good for society as a whole, but a nation of greedy misers who horde all they have is not.
It's hard to see the silver lining in all this, but I still believe it's there. There are still a whole lot of well run firms with profitbale, enduring business models and they will end up coming through this fine. I am also hopeful that the exposure of all these systemic problems will let us make some badly needed reforms in a way that is just not possible during the good times. Sometimes you just need to demolish the house and start over again instead of patching up every leak. Of course, that doesn't make it any more pleasant for the owners of the house (i.e. us), particularly when we are still inside the house as it's being demolished around us!
I also awoke today to see that some dude named Bernie Madoff is perhaps the greatest magician of our time: he apparently made $50 billion disappear overnight. Before we get to the specifics, there is something that irks me. The four articles about this that I saw today had the following headlines: "Stocks Edge Lower as Madoff Victim List Grows", "Alleged Madoff Fraud Victims Include Big Banks, Super Rich", "List of Madoff's Victims Keep Growing, Likely to Extend Beyond Clients", and "How to Get Money Back from Bernie Madoff." So, basically, a lot of information about who has been affected and to what extent, but next to nothing about what actually happened. I think it's yet another example of our ADD media. Apparently they broke the story of what Madoff did on Saturday and so if you missed it - too bad; they're moving on. In that respect, maybe Blagoyevich is on to something here. He's gambling that we don't care enough to continually keep following this story and will eventually just forget about it. And he might be right. But I digress. . .
Fortunately, I got a good summary from the Economist:
"Details are still emerging, but Mr. Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr. Madoff to admit that his coffers were empty - bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked."
Some other details that I found interesting:
"The affair has - like the subprime-mortgage debacle - exposed a stunning lack of due dilligence. Droves of investors who should have known better tossed in billions, preferring to keep their fingers crossed rather than ask awkward questions of a firm whose investment strategy was vague and opaque. Even within his own group, Mr. Madoff's money-management business was a black box; no one but he had full access to the accounts. As a broker-dealer, it was able to clear its own trades, a privilege that should give pause for thought. Worse, questions had been hanging over the operation since the mid-1990s. Some institutional investors have long steered clear of Mr. Madoff, unable to understand how he spun his gold, or uneasy that his books were audited by a tiny, three-person accounting firm."
I bolded the parts I found most interesting. Being able to clear your own trades is just a complete lack of a fundamental control. You can get away with that if your operation is heavily audited, but I think it's pretty obvious that a $50 billion portfolio is way too big for a 3-person accounting firm to handle. Even so, if they had performed their job adequately they would have uncovered this scheme long ago. One of the most basic steps in auditing investments is to pick a sample of securities and observe that they are physically present onsite or in a safety deposit box offsite. I'm sure that this accounting firm will soon be out of business if they are not already. I am quite curious if they have professional liability insurance (as most audit firms do) and if so how much they had and who is on the hook for that.
Two months ago, Christy and I went to see a play called The Voysey Inheritance. Here's a quick summary of the plot:
"Misappropriation of client funds...fraudulent speculation on the Stock Market...deceit...lies ...and an intricate cover up. When young Edward Voysey discovers that the family's wealth has been built on three generations of deceit and theft he must choose between confessing all and ruining the clients that have unwittingly trusted the firm, or continuing the deceit in the hope of righting the wrongs that the firm's clients have unwittingly been subjected to. So the scene is set for an intriguing examination of ethics - and their absence - in the world of high finance."
Hmm, sounds a bit familiar no? The best part is that this play was written in 1905. Technology has grown by leaps and bounds since then, but it seems that financial swindels are often still barely above the sophistication level of 3 Card Monty.
It's also a vivid reminder of the fact that the "con" in "con man" is short for confidence. A good con man doesn't take your money; you give it to him because he's somehow managed to convince you that he's got your best interests in mind, or at least that you both share a common interest. And no matter what the final dollar amount ends up being here, the real damage will be consumers enduring yet another blow to their confidence in the finance industry. As they say about roaches in your house, "by the time you see one, it means you've got 1000." People are likely to start pulling more and more money out of their accounts out of fear and that's going to 1) cause the markets to fall further and 2) expose more criminals who are currently perpetrating similar schemes. The combination is likely to have a postive feedback loop effect, and that can be a very dangerous thing. Whatever the underlying reasons for a financial crisis, nothing gets better until trust is restored. People have to trust that they will still have a job next week before they will make major purchases. Banks have to trust a company's or consumer's income statements before they will lend them money. Right now nobody trusts anybody, and this is actually where greed is the enemy of capitalism. In the capitalist model, a nation of greedy pigs with an unquenchable need for consumption is good for society as a whole, but a nation of greedy misers who horde all they have is not.
It's hard to see the silver lining in all this, but I still believe it's there. There are still a whole lot of well run firms with profitbale, enduring business models and they will end up coming through this fine. I am also hopeful that the exposure of all these systemic problems will let us make some badly needed reforms in a way that is just not possible during the good times. Sometimes you just need to demolish the house and start over again instead of patching up every leak. Of course, that doesn't make it any more pleasant for the owners of the house (i.e. us), particularly when we are still inside the house as it's being demolished around us!
Thursday, December 11, 2008
Blag-OY-VEH-evich (sorry, all the good puns are already taken)
So the masses (ok, 2 people) have been clamoring (ok, wondering) if I was going to do a post about our esteemed public servant Mr. Blagoje(bleep). Initially, I didn't have a whole lot to say about it. Most of the time when a public official gets caught (as in the cases of Sen. Craig and Sen. Stevens) there's at least some form of semi-plausible story where they might, just maybe, be innocent. That's when it's a good time to get together and try and separate the known facts from the speculation and figure out where the "truth" lies. That certainly does not appear to be the case here. As Nixon can tell you (or could of until 1994) it's real hard to weasel out of your own voice on tape. Speaking of Nixon, Hot Roddy might have a chance to surpass him in the category of "highest concentration of expletives in a career and life ruining recording." Something he can hang his hat on as he (hopefully) rots in his cell next to his predecessor.
For those who may not have read a ton about it, let's take a look at the "highlights":
"I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain. You hear what I’m saying. And if I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself."
[The Senate seat is] "a (bleeping) valuable thing, you just don’t give it away for nothing."
"I’ve got this thing and it’s (bleeping) golden, and, uh, uh, I’m just not giving it up for (bleeping) nothing. I’m not gonna do it. And, and I can always use it. I can parachute me there."
On Obama's preferred candidate: "they’re not willing to give me anything except appreciation. (bleep) them."
There's also a lot of good stuff with him trying to shake down the CFO of a children's hospital for a $50k contribution and him threatening to hold up the Cubs sale if the Trib board didn't fire some editors that were critical of him.
So, anyway, all that's out there and I think it's pretty cut and dry. And while I am disgusted and saddened by it I am also not naive and I can't be completely stunned by the revelation that we have a very crooked politician on our hands.
But what I am absolutely astonished by is the news that he apparently has no plans of resigning. I am assuming that he will be planning to use the R Kelly "that's not me on the tape" defense. That will prove to be exceedingly more difficult for him though, as he's up against a court-approved wiretap by federal agents and not a grainy video on the web.
Perhaps I shouldn't be that astonished, though. As I mentioned in the comments to my last post, we're talking about a guy trying to auction off probably the highest-profile appointment in the country right now, knowing that he's already under investigation for his Rezko affiliation, in a job where his predecessor left in disgrace and is currently rotting in jail. In that context, this latest act of arrogance or stupidity (I'm still not sure which it is) represents the model of consistency.
Actually, more than anything else I think it's delusion. This is obviously a guy who basically must feel like he's Bear Stearns (i.e. too big to fail). The level of self-denial that allows this man to actually believe that he has a chance of conducting "business as usual" for the remainder of his term is such that I honestly believe he may now have a good case to plead innocence by reason of insanity when he's eventually put on trial.
Ultimately, though, it won't really matter. There is an ever-increasing crowd of people lining up at the guillotine to have a whack. It's a race between the IL attorney general, Lisa Madigan, getting to the IL supreme court to declare him unfit for office, and the state legislature getting down to impeach him. I'm sure that somewhere on the internet there has been a betting line established.
My guess is that by end of day tomorrow he will "do the right thing" and resign. It's just taking some more time for those around him to pierce the fog of invincibility he thinks he has. One way or the other, I think we'll be welcoming in Gov. Quinn by early next week. Once Blago goes to jail that will make 4 of our last 8 governors who have followed that route. Here's hoping that Gov. Quinn can take us back under the 50% line!
Surprise loser in all of this: George Ryan. If he ever had a chance of having the rest of his sentence commuted, it is gone now.
Surprise winner in all of this: Elliot Spitzer. Congratulations Elliot! You are now just the 2nd most disgraced governor of 2008!
For those who may not have read a ton about it, let's take a look at the "highlights":
"I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain. You hear what I’m saying. And if I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself."
[The Senate seat is] "a (bleeping) valuable thing, you just don’t give it away for nothing."
"I’ve got this thing and it’s (bleeping) golden, and, uh, uh, I’m just not giving it up for (bleeping) nothing. I’m not gonna do it. And, and I can always use it. I can parachute me there."
On Obama's preferred candidate: "they’re not willing to give me anything except appreciation. (bleep) them."
There's also a lot of good stuff with him trying to shake down the CFO of a children's hospital for a $50k contribution and him threatening to hold up the Cubs sale if the Trib board didn't fire some editors that were critical of him.
So, anyway, all that's out there and I think it's pretty cut and dry. And while I am disgusted and saddened by it I am also not naive and I can't be completely stunned by the revelation that we have a very crooked politician on our hands.
But what I am absolutely astonished by is the news that he apparently has no plans of resigning. I am assuming that he will be planning to use the R Kelly "that's not me on the tape" defense. That will prove to be exceedingly more difficult for him though, as he's up against a court-approved wiretap by federal agents and not a grainy video on the web.
Perhaps I shouldn't be that astonished, though. As I mentioned in the comments to my last post, we're talking about a guy trying to auction off probably the highest-profile appointment in the country right now, knowing that he's already under investigation for his Rezko affiliation, in a job where his predecessor left in disgrace and is currently rotting in jail. In that context, this latest act of arrogance or stupidity (I'm still not sure which it is) represents the model of consistency.
Actually, more than anything else I think it's delusion. This is obviously a guy who basically must feel like he's Bear Stearns (i.e. too big to fail). The level of self-denial that allows this man to actually believe that he has a chance of conducting "business as usual" for the remainder of his term is such that I honestly believe he may now have a good case to plead innocence by reason of insanity when he's eventually put on trial.
Ultimately, though, it won't really matter. There is an ever-increasing crowd of people lining up at the guillotine to have a whack. It's a race between the IL attorney general, Lisa Madigan, getting to the IL supreme court to declare him unfit for office, and the state legislature getting down to impeach him. I'm sure that somewhere on the internet there has been a betting line established.
My guess is that by end of day tomorrow he will "do the right thing" and resign. It's just taking some more time for those around him to pierce the fog of invincibility he thinks he has. One way or the other, I think we'll be welcoming in Gov. Quinn by early next week. Once Blago goes to jail that will make 4 of our last 8 governors who have followed that route. Here's hoping that Gov. Quinn can take us back under the 50% line!
Surprise loser in all of this: George Ryan. If he ever had a chance of having the rest of his sentence commuted, it is gone now.
Surprise winner in all of this: Elliot Spitzer. Congratulations Elliot! You are now just the 2nd most disgraced governor of 2008!
Thursday, December 04, 2008
So, uh, yeah . . .
Wow, 3 weeks since my last update. I knew it had been a while but I didn't realize that I'd slacked quite this bad. It certainly hasn't been due to me being busy - I had all of last week off. More along the lines of I haven't had a whole lot to say.
I talked about doing a long post on the auto bailout, but after having a couple hour-long conversations with various people about it I got a little burned out on the topic and don't really want to go too much in depth on it. The long-short of it is that on principle I am against it. The auto industry is not merely going through a liquidity crisis like a lot of other businesses are. They have been struggling and burning through cash at an almost unimaginable rate for the better part of 2 decades now. They simply were able to get away with it as long as credit was so easy. However, as I have oft repeated, I am a pragmatist and I recognize the extremely detrimental effect (both economically and psychologically) that letting the Big 3 go under would have on the labor market and the country as a whole right now, so I won't be that upset if some form of bailout ends up being authorised. The main problem is that I don't want this to open the floodgates for all struggling industries to parade through Washington with their hands out. For that reason, I will only be really upset if money is given without any form of punitive stipulation, such as the removal of the current management. One of the arguments I've heard from the auto company reps is "why was it a good idea to bail out Wall Street but now it's a bad idea to bail out the auto industry?" That's just a terrible argument. If you are asking for money, you have to make the case why it's a good idea to give it to you, and not basically say "well you made this mistake once, so how about you just keep on making it?" Regardless of what happens, the Big 3 are going to need to do some major restructuring if they want to survive. They are simply carrying way too much debt to ever be profitable with their business model. Even with the dramatic reduction of benefits set to take effect in 2010, they will need to find a way to turn some of their creditors into equity holders or all they will be doing is delaying the inevitable. As they say, when you jump off the top of the 80th floor for 79 stories you can feel like you're flying.
And, as a final point, having all of the CEOs flying up to Capitol Hill on private jets was just idiocy. I know that it's a relatively minor thing, but it just shows complete lack of foresight on their part. It's like a guy going out to beg while he's wearing an Armani suit. And really I blame their respective PR departments. Each company has teams of people that are dedicated only to upholding the company's image. How can it be that not one of them stood up and said "Um, think about how this is going to look."? If truly no one did, that doesn't speak very highly of the level of talent in the organization. And if someone did and was shot down, that doesn't speak very highly of the decision making process. But then again what do you expect from a company who said in the mid-90s that hybrid cars would never be economically viable?
Finally finished Warren Buffett's book, and I still can't recommend it enough for anyone with even a passing interest in business. As my next "educational read" I've started to read Contours of the World Economy, which is a series of essays that analyzes the economies of the major empires and civilizations from the Romans on. So far it's pretty good, although quite dry. But I've read that it's used as a textbook in some college macro-economics classes, so I guess that's to be expected.
Hope that everyone had a good Thanksgiving! I'll try not to make it another 3 weeks before my next update.
I talked about doing a long post on the auto bailout, but after having a couple hour-long conversations with various people about it I got a little burned out on the topic and don't really want to go too much in depth on it. The long-short of it is that on principle I am against it. The auto industry is not merely going through a liquidity crisis like a lot of other businesses are. They have been struggling and burning through cash at an almost unimaginable rate for the better part of 2 decades now. They simply were able to get away with it as long as credit was so easy. However, as I have oft repeated, I am a pragmatist and I recognize the extremely detrimental effect (both economically and psychologically) that letting the Big 3 go under would have on the labor market and the country as a whole right now, so I won't be that upset if some form of bailout ends up being authorised. The main problem is that I don't want this to open the floodgates for all struggling industries to parade through Washington with their hands out. For that reason, I will only be really upset if money is given without any form of punitive stipulation, such as the removal of the current management. One of the arguments I've heard from the auto company reps is "why was it a good idea to bail out Wall Street but now it's a bad idea to bail out the auto industry?" That's just a terrible argument. If you are asking for money, you have to make the case why it's a good idea to give it to you, and not basically say "well you made this mistake once, so how about you just keep on making it?" Regardless of what happens, the Big 3 are going to need to do some major restructuring if they want to survive. They are simply carrying way too much debt to ever be profitable with their business model. Even with the dramatic reduction of benefits set to take effect in 2010, they will need to find a way to turn some of their creditors into equity holders or all they will be doing is delaying the inevitable. As they say, when you jump off the top of the 80th floor for 79 stories you can feel like you're flying.
And, as a final point, having all of the CEOs flying up to Capitol Hill on private jets was just idiocy. I know that it's a relatively minor thing, but it just shows complete lack of foresight on their part. It's like a guy going out to beg while he's wearing an Armani suit. And really I blame their respective PR departments. Each company has teams of people that are dedicated only to upholding the company's image. How can it be that not one of them stood up and said "Um, think about how this is going to look."? If truly no one did, that doesn't speak very highly of the level of talent in the organization. And if someone did and was shot down, that doesn't speak very highly of the decision making process. But then again what do you expect from a company who said in the mid-90s that hybrid cars would never be economically viable?
Finally finished Warren Buffett's book, and I still can't recommend it enough for anyone with even a passing interest in business. As my next "educational read" I've started to read Contours of the World Economy, which is a series of essays that analyzes the economies of the major empires and civilizations from the Romans on. So far it's pretty good, although quite dry. But I've read that it's used as a textbook in some college macro-economics classes, so I guess that's to be expected.
Hope that everyone had a good Thanksgiving! I'll try not to make it another 3 weeks before my next update.
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