Bill Maher And His Braindead Megaphone

January 30, 2012 By Leave a Comment

 

I enjoy Bill Maher, host of HBO’s weekly roundtable, Real Time with Bill Maher.  Granted, I find his standup act magnificently unfunny.  But he’s an entertaining guy who (usually) has interesting things to say about the world.  His New Rules segment is often hilarious and his desire to bring together competing views for debate resonates with me.  Being a fellow atheist, I particularly enjoy his witty – and very fierce – takedowns of organized religion.  And I like the fact that he operates in fearless fashion, flying plenty close to the sun with his social commentary.  His political incorrectness makes him appear to exist outside of the media mainstream.  This is all very refreshing to me.

However, there are a number of things that have grown increasingly bothersome with Maher.  First is the guy’s breathtaking arrogance.  At first, I found this attribute charming.  After all, it’s almost a prerequisite for agent provocateurs, which is very much what Maher strives to be.  But watching him get annoyed at his audience for not laughing at his extremely unfunny jokes is annoying.  If you ever disagree with him, you’re not only wrong but you’re stupid.  And when his guests punch back at him, he clearly gets his feathers ruffled.  It’s never fun when someone can dish it out but not take it back.  Some self-effacement – or simple open-mindedness – would help immensely in Maher’s case.

Second is his intense partisanship.  For someone who strikes me as perfectly capable of independent thought, he toes the liberal line with the best of them.  In fact, I can’t think of a single issue where Maher deviates from the liberal playbook.  Given his feistiness, it would be fun to watch him disagree with his own party from time to time.  And I’m pretty sure it would add to his legitimacy as a commentator.  Instead, the guy is a walking billboard for all causes liberal.

This is loosely related to my third gripe, which is that I lose significant love for the man when he takes on the financial topics of the day.  Not only does he tend to speak with authority on topics about which he clearly knows very little (more on that later), but he exhibits a degree of hypocrisy that unfortunately has come to characterize much of Hollywood.  That is, Maher spends a fair amount of time on his show demeaning wealth accumulation and lamenting the inequality that exists today.  This most often involves wholesale bashing of everything tied to Wall Street as well as the obligatory complaint about how CEOs make multiples more than their average employees.  In Maher’s case, this is coming from a single man with a net worth of $15-$25 million (per various Google estimates) who lives in a 6,000 square foot home in a 2.5-acre Beverly Hills compound.  (I’d love to know what he makes relative to an HBO stagehand and whether he thinks that multiple is justified.)  Ever the environmentalist, his financial hypocrisy is compounded by the fact that he owns two cars and – at least occasionally – flies private (as Ann Coulter cleverly pointed out on one of his shows).

As many liberals who haven’t made their fortunes in finance do, Maher implicitly draws a distinction between well-earned riches and ill-earned ones.  Apparently, by their calculus, it’s perfectly cool for actors and comedians to make millions of dollars.  It might also be OK if you make computers.  Or are a politician.  But if you work in finance and happen to have made a lot of money doing it, you are immediately assumed less worthy of your money.  In their world, some types of income are better earned than others.  Apparently, robbing disappointed moviegoers of $20+ (or $50+ in the case of Maher’s standup) and hours of their time in the quest of padding their own pockets is totally legit.  But going to business school and becoming well-versed in the vagaries of corporate finance is not.

Maybe it’s cool in an aloof kind of way to willfully embrace their cognitive dissonance.  Or maybe there’s an insecurity that belies their apparent doublethink, something Drew Carey once summed up nicely:

Hollywood people are filled with guilt: white guilt, liberal guilt, money guilt. They feel bad that they’re so rich, they feel they don’t work that much for all that money – and they don’t, for the amount of money they make.

Which brings me to the crux of my post.  During his New Rules conclusion last week, Maher decided to take sanctimonious aim at Mitt Romney.  As can be seen in the above clip, Maher attempted to take Romney to task for his moneymaking past at Bain Capital.  Specifically, he seemed most concerned with how Romney made his money rather than the fact that he made any at all.  Maher led off the diatribe with the following:

You know, venture capitalists are not creators.  They’re businessmen who find weak companies and prey on them.

What Maher – and his staff of writers – did in this segment was demonstrate an ignorance of basic finance.  It’s not just worrisome that Maher apparently gets paid to spread untruths.  It’s also dangerous because I’m guessing that the many in his audience (which must number in the millions) took his statement as gospel and repeated it to their friends and coworkers, creating an echo chamber that spouts ignorance on the topic of venture capitalism.

By the way, I was already annoyed before we got to this point in his show.  Previously in his New Rules segment, Maher featured Apple, Ford, and Disney as examples of companies started by people who created products, “something they made besides money”.  This, according to Maher, stood in stark contrast to Romney and his Bain colleagues, whose professional goals in life are to perform the economic equivalent of rape and pillage.  Let’s ignore the fact that Maher, as a comedian, also doesn’t make anything tangible for a living – and that 99.9% of all entrepreneurs are in the game to make money (Jobs, Ford, and Disney included) – and focus instead on the fundamental misunderstanding of venture capitalism that Maher displayed.

His first mistake was a knee-jerk one that many liberal pundits commit, which is to automatically assume that private equity is the manifestation of economic evil.  In reality, private equity (broadly-defined) plays a critical role in capitalism.  Not being an expert on the topic, I’ll defer instead to someone who is for a better explanation of private equity’s role.  Below is a quote from Jonathan Macey, professor of corporate finance at Yale Law School, from a recent WSJ OpEd in which he lamented the attacks on private equity in the Republican primaries:

This is anticapitalist claptrap. Private-equity firms make significant investments in companies, mainly U.S. companies. Most of their investments are in companies that underperform industry peers. Frequently these firms are on the brink of failure. Because private-equity firms are, by definition, equity investors, they make money only if they improve the performance of their companies. Private equity is last in line to be paid in case of insolvency. Private-equity firms don’t make a profit unless their companies can meet their obligations to workers and other creditors. The companies in which private-equity investors are able to turn a profit generally grow, rather than shrink. This is because the preferred “exit strategy” by which private-equity firms profit is to take the private companies in which they invest and enable them to go public and sell shares that will help the company grow even stronger. As for turnaround success stories, Continental Airlines, Orbitz and Snapple have all benefitted at some time from private-equity investment.

Maher’s second mistake lay in his failure to understand what it means to be a venture capitalist.  By labeling Romney and his colleagues as venture capitalists, Maher conflated venture capitalism with private equity writ large.  In reality, venture capitalism is a subset of private equity in the same way that a journalist belongs to the broader category of “writer”.  Included under the umbrella of private equity are several strategies, including leveraged buyouts (“LBOs”), distressed investing, growth (or acceleration) capital, and venture capital. To give Maher and his liberal peers the benefit of the doubt, we can assume that the private equity practice they disdain is the much-maligned LBO.  Among other things, the practice involves using a company’s assets as collateral to borrow large sums of money in order to effect a buyout.  Once in control, private equity firms generally seek to improve the financial performance of the acquired company, which often includes significant restructuring as companies rationalize their business models.  This can involve the shutdown of entire business units and the loss of jobs.  Some might call this callous and unfair.  Others might say such creative destruction forces companies to adapt or die in the face of escalating competition, leaving those left standing much better suited for survival.  Whatever the case, automatically assuming that all such transactions are bad for society is intellectually lazy.  LBOs can have outcomes both good (Harley-Davidson, Viacom) and bad (Regal Cinemas, Federated Department Stores).  And, sadly, it does allow room for certain financial reengineering that can lead to ill-gotten gains for some.  But the practice plays a necessary role in capitalism.  If it didn’t, it wouldn’t exist, for capitalism is among the most lethal and efficient self-correcting forces on the planet.

But let’s chat more about what it is that venture capitalism actually does.  In a nutshell, it provides young, cash-strapped companies with the funding needed to realize their visions.  So while they might not create anything tangible per se, venture capitalists most certainly provide the funding needed for companies to go out and make things.  Say, for example, a young programming whizkid (we’ll call him Mark) comes up with an idea to revolutionize social networking and needs money to support his new website.  Mark might go to a venture capital firm, someone like Accel Partners, and pitch his idea with the hope that it likes what he has to say and is willing to back him.  Maybe Accel gives the young Mark $12 million to make his dream a reality in exchange for an equity stake in his venture.  And maybe, seven years later, his idea becomes a $100 billion IPO that sees both Mark and Accel grow fabulously rich.  That, my friends, is the most successful venture capital story ever told.

Funnily enough, some of Maher’s own examples help refute his argument.  In its early days, Apple benefited greatly from the funding provided by venture capital firm Sequoia Capital (whose credits also include companies like Google,  Electronic Arts, Funny or Die, LinkedIn, and YouTube, to name a few).  Walt Disney was able to cobble together enough friends and family money to form the company that would go on to bring us Mickey Mouse and Snow White.  While Disney didn’t benefit directly from venture capitalism in its early days, the company did come to appreciate the beneficence of the practice since it now has its own venture capital unit, Steamboat Ventures.  Henry Ford didn’t rely on formal venture capital in founding Ford Motor Compnay, but he did succeed with the help of a handful of “angel investors” who provided him with the necessary capital to build his Model T.  (Note: Angel investors are basically venture capitalists who operate in more independent fashion on a smaller and less formal basis).

You see, venture capitalism is just one example of how Wall Street performs a crucial role in our society.  Sure, there are terrible misdeeds and injustices that occur, as with any industry.  But there isn’t a more effective form of capital formation and allocation on the planet.

For someone so enamored with reason in his vehement anti-religiosity, Maher can be maddeningly unreasonable when it comes to all matters economic.  I can understand why you get that with the likes of MSNBC, a company that, as a matter of existential necessity, chose to follow Fox News down the rabbit hole of overt bias.  But I’ve come to expect better from Maher, so consider me disappointed.

By the way, it’s worth noting that, while at Bain Capital, Mitt Romney was involved not just in straight LBO deals but also venture and growth capital ones, including with companies like Staples and Domino’s Pizza.

Filed Under: Comedy, Finance, Media, TV Tagged With: , , ,

Occupy Hollywood

October 24, 2011 By Leave a Comment

Interesting piece by Frank Bruni in today’s NY Times, which takes to task the uncomfortable hypocrisy on display when (insanely) rich entertainers consort with the Occupy Wall Street (OWS) crowd.  Though it strikes an inherently sympathetic chord for the OWS movement, I appreciated the article’s larger point: That many of the well-to-do musicians and actors lending their support (e.g., Michael Moore, Kanye West, Susan Sarandon, Alec Baldwin, etc.) are quite guilty of the “crime” that lies at the heart of the protests, which is that of benefitting from massive inequality in economic outcomes (i.e. income disparity) and/or helping to feed the machine that perpetuates said inequalities (i.e. corporations).

Entertainers are members of the well-connected economic elite against which Occupy Wall Street ostensibly rages, whether or not they want to see themselves that way. True, they’re not bundling mortgages, and they often have their extravagantly beating hearts in the right place. Many donate generously to charity. Many do remarkable good. But they nonetheless make oodles of money for themselves and for major corporations with lavishly compensated executives: the corporations that bankroll and distribute their television shows, movies, record albums and concert tours; the corporations that peddle the clothing, electronics and ever-so-important cosmetics and styling products that entertainers are paid so handsomely to model and endorse.

On a somewhat related tangent, it’s a slippery slope when one makes value judgments on the income of others and/or how those with money choose to spend it (assuming such wealth is not ill-gotten).  When it comes to this, Michael Moore is a hypocrite of monumental proportions, and it is equal parts sad and maddening to see so many on the left fall prey to the man’s totally insincere and self-serving machinations.  When I saw Moore conduct a capitalism-bashing interview from Zuccotti Park with hoards of OWS supporters behind him, I wanted to jump through the screen and slap some sense into the throng.  Don’t they realize that his presence there is part of a promotional calculus that serves to brandish Moore’s self-fashioned image as a populist?  When in reality the man is a populist only to the extent that it facilitates his ability to be a capitalist (i.e., make more money)? Side note: According to most reports, Moore’s estimated net worth is $50 million, which comfortably places him within the top 1% of Americans singled out by OWS as the enemy.

When I think of Michael Moore and his ilk, with all their faux (or simply misguided) anti-capitalist pulpit-pounding, I can’t help but be reminded of the corrupt politician from Martin Scorsese’s Gangs of New York whose populist rhetoric – which underpinned his own political survival – helped fuel the fire of revolt.  And when that mob succumbed to a violent inertia, it visited upon that politician – sequestered away in his opulent mansion – its own form of fiery “justice”.  Taken to its logical conclusion, what did that politician expect would happen when protest fueled by populist passion reached its fever pitch?

I’m a firm believer in the notion that economics does a pretty good job of explaining pretty much everything.  And though the OWS crowd has some legitimate complaints (e.g. corruption in politics), most of the systemic ills it seeks to address have long existed without much concern.  But for the fact that unemployment remains stubbornly high and wage growth has been stagnant for a decade (on average), OWS would simply not exist.  The reality is as sad as it is simple: A lot of people are struggling to make ends meet and most of them don’t see much reason for hope.  In such times, it’s easy to bash Wall Street and global financiers because Washington and the media need a convenient scapegoat (for needs of diversion and villainy, respectively).  But at the end of the day, income disparity exists across the industry spectrum, and Wall Street certainly doesn’t own a monopoly on ridiculous pay packages (see Silicon Valley, the NBA/NFL/MLB, and Hollywood for a few other examples).  What Moore et al. fail to recognize is that they in many ways personify the “evil” that has become the system and should therefore be careful what they wish for.  After all, as The Economist reminded us this week, “Populist anger, especially if it has no coherent agenda, can go anywhere in times of want.”

Filed Under: Finance, Media, Politics Tagged With: , , ,

Who Should Feel Worse – A UBS Shareholder Or A U.S. Taxpayer?

September 30, 2011 By 1 Comment

Much of life is relative to me, which is to say that I enjoy measuring things in comparative fashion so as to provide a proper perspective.  For example, my morning runs often see me pass a homeless couple camped out underneath a Lakeshore Drive underpass.  No matter how groggy or pained I am on those runs, the mere sight of this couple helps to minimize my perceived plight.  And when the Mrs. and I would occasionally lament the struggles of our expatriate posting in Tokyo, I’d often resort to the refrain of, “Oh well, things could be worse.  For example, at least I don’t work for the State Department where our relocation options could include places like Baghdad or Kabul.”  That’s admittedly a bit of a stretch, but the practice of contextualizing brings with it myriad psychological benefits.

Naturally, this little habit of mine causes me to view news headlines with a certain sense of curiosity.  This is perhaps best illustrated by my response to the news that (yet another) rogue trader had brought considerable misfortune to his employer.  In this particular case, a UBS trader apparently managed to rack up $2.3 billion in “unauthorized” losses for his firm, an act of financial subterfuge the eventually felled his firm’s CEO.  That’s obviously a magnitude of loss that deserves plenty of attention (both internally and externally).  And it just so happens to come at a time when the global financial system is having its fair share of problems.  But in an era defined by President Obama’s “soak the rich” class warfare rhetoric, the sense of schadenfreude in the media’s coverage of the affair is disconcerting.  Especially since there are other stories of profligate behavior and/or fiscal mismanagement that, in my mind, deserve much more attention than a random rogue trader.

For example, lost in the hoopla surrounding the UBS debacle was the case of the missing $6.6 billion in cold hard cash in Iraq.  Of course, everyone knows the massive money pit that Iraq and Afghanistan have represented for a country as financially strapped as ours ($4 trillion and counting).  But the most blatant display of fiscal carelessness for me has been the story of C-130 Hercules cargo planes that were loaded with shrink-wrapped bricks of $100 bills and flown to Iraq for eventual disbursement to…um…well, it appears nobody knows exactly who got the money.  Indeed, of the $12 billion or so that was transported to Iraq in such fashion (ostensibly for reconstruction purposes), almost half of it has up and disappeared like a fart in the wind.

This is admittedly an extreme example of how our hard-earned tax dollars are being wasted, but it serves as a reminder of the severe mismanagement of resources that can occur within the halls of government.  Moreover, it represents the largest theft of funds in national history yet has received very little airtime relative to the UBS story.  So I ask, where is the greater feeling of being wronged – as a UBS shareholder or as a U.S. taxpayer?

Filed Under: Finance, Japan, Politics, Travel Tagged With: , , ,

Quote Of The Day

September 22, 2011 By 3 Comments

From Francisco’s “Money Speech” in the Ayn Rand classic, Atlas Shrugged.  Apropos to the moment:

When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.

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Becker On Buffett

September 4, 2011 By Leave a Comment

As a (mediocre) student of the markets, I admire Warren Buffett.  The man is among the most successful and thoughtful practitioners in the history of finance.  However, his latest diatribes pertaining to the “rich” paying their “fair share” in taxes (quotations used because defining both terms requires a large degree of subjectivity) have me hot under the collar.  While Buffett whines that he and his super rich contemporaries pay too little in the form of income taxes, he fails to elaborate on his own tax machinations that enable him to pay such low rates.  The way he recognizes income as CEO of Berkshire Hathaway quite clearly allows him to take advantage of a system he claims to want to fix.  Plus, his calls for higher estate taxes is a wonderful example of hypocrisy, coming from a man who has donated the lion’s share of his monstrous net worth to charity (therefore allowing him to avoid such taxes, not to mention enjoying the deductions associated therewith).

I certainly don’t begrudge Buffett’s decision to donate his wealth to charity (and convince many of his similarly-situated peers to do the same).  But it begs the question of why he didn’t donate all that money to the government instead.  After all, we are all free as U.S. citizens to donate money directly to our Treasury to help pay down our country’s debt.  However, judging by the roughly $2 million in contributions this year, most of us choose to take the Buffett route and divert our resources to more accountable and efficient causes, which Gary Becker of the University of Chicago pondered in a recent blog post:

Warren Buffett has persuaded 68 other billionaires to follow his example and promise to give at least half their wealth to charities. But why hasn’t Buffett proposed also that the very rich make large gifts to the federal government to offset what he considers ridiculously low taxes on their incomes and wealth? My guess is that he and the others who pledged to give away their wealth to charity would have little confidence in how the government would spend such gifts. Buffett, for example, is giving most of his wealth to the Gates Foundation, not to the federal government, and is relying on how this foundation will spend his vast gift. Given this reluctance to make large gifts to the federal government, why should anyone have confidence that the federal government will spend additional tax revenue in a sensible way?

So as he calls for higher taxes on himself and his ilk during our nation’s time of need, Buffett has simultaneously chosen to divert his massive wealth away from the government through both savvy navigation of the tax code and targeted charitable giving.  That’s what I call voting with your feet!

Filed Under: Finance, Politics Tagged With: , ,

Good Stuff From Today’s NY Times

July 18, 2011 By Leave a Comment

On the power of suggestion:

The old gimmick — buy one, get one free — has been expanded to include some pricing equations worthy of Isaac Newton, or at least of middle-school math class. Using buying patterns detected from loyalty cards, receipts and other research, grocery chains are searching for the multiples sweet spot…Grocery stores have always offered deals, of course. But grocery chain executives say that in this economy, with people visiting stores less frequently, spending less per trip and sticking to their shopping lists more closely, the competition to offer compelling deals is stronger than ever.

On FIFA, one of the world’s most corrupt governing bodies:

The titans of international soccer are used to pampering. Motorcades. Police escorts. Five-star hotels. Lavish dinners. Cash allowances of $500 a day, and an additional $250 for their wives or girlfriends.  The 24 members of the executive committee of FIFA — the association that governs the global game and organizes the World Cup — form an elite all-men’s club, reaping annual salaries and bonuses of up to $300,000 in addition to their various perks. For that, they are asked to do little more than show up for a few private meetings each year to discuss rules, sanctions and legal issues and, most important, to eventually vote on which country will host the quadrennial championship.

On how economists are just as useless as politicians in the current debt ceiling debate:

Economists agree that federal borrowing must be reduced, but they do not agree about the proper mix of tax increases and spending cuts. Basic considerations, like the impact of higher taxes on saving and investment, remain the subjects of wide-ranging disagreements despite decades of intensive research…Washington no longer suffers from a dearth of “one-handed” economists, as Harry S. Truman famously lamented. The problem now is that experts are lined up behind every political position, in part because the decisions are not purely economic. The value of defense or education or justice extends beyond dollars and cents.

Filed Under: Finance, Politics, Sports Tagged With: , , ,

Amex Just Made Me An Offer I Can’t Refuse

June 15, 2011 By Leave a Comment

I received the below offer from American Express today:

The Membership Rewards® program from American Express wants to hear from you and other American Express® Cardmembers as it seeks participants for an online community of 500 consumers throughout the United States. For the first 500 members who qualify and join this private, online community, we expect that you’ll spend 5-15 minutes per week discussing a wide variety of topics including the Membership Rewards program and more. In appreciation for your feedback, you may qualify to receive gift certificates and will have the opportunity to interact with other Cardmembers.

What a lovely idea!  I’ve been dying to interact with other Amex cardholders ever since I became a member.  Just the other day I was mentioning to Lizzi how I wished I could speak with someone who understood me in a monetary sense.  I’d therefore welcome the opportunity to dedicate 5-15 minutes of my time each week to interact with 500 random people on the fascinating topic of membership rewards.  Especially if I might qualify to receive gift certificates of undisclosed amounts!

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Hayek Versus Keynes: A Macroeconomic Rap Anthem

November 23, 2010 By Leave a Comment

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Grey Skills And The Art Of The Chinese Interview

November 16, 2010 By Leave a Comment

The funny folks over at Dealbreaker recently spotted an interesting article in the South China Morning Post that highlighted the growing importance of  ”grey skills” for Chinese job applicants.  Apparently, grey skills involve the ability to binge drink, play mahjong, and other irrelevant and sometimes body-destroying capabilities.  The pic above shows a couple of job seekers whose most recent round of interviews involved what I’m guessing was either egregious amounts of booze or a battle to the death for that last job spot.

h/t JJ for the scoop.

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Quantitative Easing Explained

November 16, 2010 By Leave a Comment

This is great stuff.

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The Economics Of Seinfeld

October 27, 2010 By Leave a Comment

Combining one of the greatest sitcoms of all time with the dismal science is pure gold (“That’s gold, Jerry, gold!“).  If you don’t believe me, check out yadayadayadaecon.com, where the economically-inclined and Seinfeld-savvy could easily waste an hour perusing the various economic principles underlying many of the show’s episodes.  Below are a couple examples to whet your appetite.

On collusion and cartels, from The Foundation episode in Season 8:

Kramer brags to Jerry that he’s taken up Karate and is dominating his dojo. Jerry discovers that Kramer is in a class of 6-year-old children. Kramer beats up on all of the kids, but at the end of the episode they decide to stop competing with one another and band together to form a force capable of dominating Kramer.

On barriers to entry and monopoly power, from The Soup Nazi episode in Season 7:

The Soup Nazi makes delicious soup—so good there’s always a line outside his shop. He refuses service to Elaine, and by a stroke of luck she comes across his stash of soup recipes. She visits his shop and informs him that his soup monopoly is broken, while waving his recipes in his face. Also in this clip, George gets charged $2 for a roll that everyone else gets for free. This example of price discrimination shows that in order to charge different customers different prices, you must have market power.

On opportunity cost, scarcity, and trade-offs, from The Sponge episode in Season 7:

Elaine’s birth control sponge has been pulled off the market, and she’s carefully hoarding her stash. So is the man she’s dating “spongeworthy?” If she uses a sponge for him, she won’t have it if a better opportunity comes along.

On complements and substitutes, from The Switch episode in Season 6:

Jerry is dating a girl but really wants to date her roommate. George suggests that the only way to make the switch is to propose a menage a trois to his current girlfriend, which will turn her off and her roommate on. Jerry follows through on George’s plan, and finds that both girls are “into it.” But Jerry can’t follow through—and George can’t believe it. To Jerry, the roommates are substitutes; to George, they are complements.

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Be Afraid. Be Very Afraid.

October 25, 2010 By Leave a Comment

The latest plea for fiscal responsibility from the Citizens Against Government Waste.  Creative and effective, I must say.

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Read Some Interesting Stats Today

October 16, 2010 By Leave a Comment

Neither here nor there but some food for thought:

  • The unemployment rate among Americans with college degrees: 4.3%
  • The unemployment rate among Americans without college degrees: Over 15%
  • 75% of Chinese companies are state-owned enterprises.
  • The consumer represents 71% of the U.S. economy.  In China, it’s just 35%.
  • Between 2008 and 2014 (budgeted), the U.S. added $6 trillion in national debt.  It took 200 years to reach the first $6 trillion.
  • 60% of U.S. debt obligations mature in three years and only 10% is considered long-term (due in 10+ years).

And about all that “offshoring” that has unions throwing conniption fits:

  • Average wage in China: $1/hour
  • Average wage in the U.S.: $30/hour
  • Average wage in Germany” $50/hour

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    Filed Under: Finance, Misc.

    Onward Christian Moguls

    October 8, 2010 By Leave a Comment

    The intersection of business and religion is a topic that has long fascinated me, and a friend’s recent note nudged me into some new brainstorms on the subject.  It’s way too early to offer anything interesting on the matter, but at least we were treated to a fun piece from Maureen Dowd this week that described her experience at one of those ridiculous Get Motivated! seminars:

    But I stayed in the church of capitalism…the sports arena featured some weird counterprogramming: famous men who once were considered prospects for president, now buck-raking and giving a patina of legitimacy to carnival barkers pushing quick-cash schemes bathed in Biblical inspiration and patriotism.

    Thousands of people mired in the new Age of Anxiety turned hopeful eyes to the parade…waiting for that one elusive diamond of advice that could change their lives.

    …at Get Motivated!, the seminar organizers entice audience members to sign up for more seminars that, for a fee, will teach them the secrets of cashing in on stocks, real estate and the Internet.

    I came away with one important new insight about getting rich quick: An easy way to do it is to dole out fortune-cookie maxims at get-rich-quick seminars.

     

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    Capitalism 4.0

    September 30, 2010 By Leave a Comment

    I read one of the more interesting economically-oriented OpEds in quite some time the other day.  In a recent NY Times piece, economist Anatole Kaletsky described the new world order that arose following the 2008 financial crisis and how it marks the ushering in of an economical model that will see private enterprise and government grow increasingly intertwined.  Though my knee-jerk reaction is to recoil in horror at his underlying thesis, Kaletsky (I’m afraid) makes a rather convincing argument.

    Market fundamentalists who feel that government interference with free markets is anathema should be reminded that, by today’s dogmatic standards, Ronald Reagan is one of the great manipulators of all time. He presided over two of the biggest currency interventions in history: the Plaza agreement, which devalued the dollar in 1985, and theLouvre accord of 1987, which brought this devaluation to an end.

    The fact is that the rules of global capitalism have changed irrevocably since Lehman Brothers collapsed two years ago — and if the United States refuses to accept this, it will find its global leadership slipping away. The near collapse of the financial system was an “Emperor’s New Clothes” moment of revelation.

    In this climate, the market fundamentalism now represented by the Tea Party, based on instinctive aversion to government and a faith that “the market is always right,” is a global laughingstock. Yet more moderate figures from both parties largely hold the same view…Outside America, however, a strong conviction now exists that some new version of global capitalism must evolve to replace what the economist John Williamson coined the “Washington consensus.”

    For those interested in learning more, Kaletsky is the author of a book called Capitalism 4.0, which basically takes a look at capitalism’s historical arch and explains how the next step in its evolution will see a cozier and more overt public-private partnership (clearly a nod to a certain rising power in Asia).  I’m certainly not yet willing to crown China’s economic model a rousing success – to be sure, it’s got a long ways to go – but I must say that Kaletsky gives us free market ideologues plenty to chew on.

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    Filed Under: Books, Finance Tagged With: ,

    Thom Yorke Won’t Let Me Study

    September 18, 2010 By Leave a Comment

    I woke up this morning humming the tune of Radiohead’s “Sulk”.  I have no idea how the song got in my head.  All I know it that it’s from the band’s very splendid album The Bends, which I haven’t listened to in months.  So as I pondered which background music would accompany my afternoon of studying (I’ve got yet another securities exam on Wednesday), I decided to stick with the day’s theme and give Radiohead’s incomparable Kid A another listen.  I figured the album’s dark undertones would perfectly complement my mood.  And why not listen to one of the greatest albums of the last decade while incurring yet more finance-related brain damage?

    As is often the case, I was easily distracted during my Yorke-inspired study session, and my first daydream was sparked while taking in the song “How To Completely Disappear” (sadly, that’s track number four on the album, so I didn’t make it far before getting sidetracked).  This song is one of the more hauntingly beautiful tunes I’ve ever heard.  And every time I give it a listen, I’m strangely yet inevitably overcome by the unsettling thought that this would be precisely the song that I would play if I ever decided to kill myself.  Yeah, I know.  That’s pretty weird.  But it’s exactly what I think about each time I hear it.  I just can’t help my twisted self!

    Naturally, this got me thinking about the entire album and how brilliantly manic it is.  Which, of course, led me to another tangent, this time recalling Chuck Klosterman’s crazy-but-super-cool theory about how Thom Yorke may have managed to predict the attacks of September 11th with Kid A.  For those curious about the theory, or simply interested in some great writing about all things music and pop culture, I highly recommend that you give his book Killing Yourself To Live a read.  For those not so keen, here’s a taste of where he went with his theory in the book:

    The first song on Kid A paints the Manhattan skyline at 8:00 A.M. on Tuesday morning; the song is titled “Everything in Its Right Place.” People woke up that day “sucking on a lemon,” because that’s what life normally feels like on the Manhattan subway; the city is a beautiful, sour, sarcastic place. We soon move onto song two, which is the title track. It is the sound of woozy, ephemeral normalcy. It is the sound of Jonny Greenwood playing an Ondes Martenot, an instrument best remembered for its use in the Star Trek theme song. You can imagine humans walking to work, riding elevators, getting off the C train and the 3 train, and thinking about a future that will be a lot like the present, only better. The term KID A is Yorke’s moniker for the first cloned human, which he (only half jokingly) suspects may already exist. The consciously misguided message is this: Science is the answer. Technology solves everything, because technology is invulnerable. And this is what almost everyone in America thought around 8:30 A.M. But something happens three and a half minutes into “Kid A”. It suddenly doesn’t feel right, and you don’t exactly know why. This is followed by track three, “The National Anthem”

    This is when the first plane slams into the north tower at 470 mph.

    “The National Anthem” sounds a bit like a Morphine song. It’s a completley different direction from the first two songs on KID A, and it’s confusing; it’s chaotic. “What’s going on?,” the lyrics ask. “What’s going on?” It gets crazier and crazier, until the second plane hits the second tower (at 9:03 A.M. in reality and at 3:42 in the song). For a moment, things are somber. But then it gets more anarchic. (Reader’s Note: You might want to consider playing KID A right about now, since I’m not always so good at explaining shit like this). Which leads into track four, “How to Disappear Completely.” This is the point where it feels like the world is possibly ending. People try to convince themselves that they are not there. People keep repeating: “This isn’t happening”. People are “floating” (read: falling) to the earth. We are told of strobe lights and blown speakers; there are fireworks and hurricanes. This is a song about being burned alive and jumping out of windows, and this is a song about having to watch those things happen. And it’s followed by an instrumental piece without melody (“Treefingers”), because what can you say when skyscrapers collapse? All you can do is stare at them with your hand over your mouth.

    Time passes. It’s afternoon. KID A’s side two, if you have it on vinyl. Action is replaced by thought. The song is “Optimistic, ” a word that becomes more meaningful in its absence. It has lyrics about Ground Zero (“vultures circle the dead”), and it offers a glimpse into how Al Qaeda members think Americans perceive international diplomacy (“the big fish eat the little ones, the big fish eat the little ones/Not my problem, give me some”). Track seven, “In Limbo” is about how the United States has been shaken out of its fantasy, with “nowhere to hide,” finding only “trap doors that open, I spiral down”……

    Pretty crazy/cool/weird, eh?  This is the type of stuff that I’d rather have occupy my mind.  Not the various methods used to benchmark the performance of private equity funds.  By the way, speaking of the song “Optimistic”, it’s got a really cool ending.  I love songs whose endings either turn super intense or go off on random but totally awesome tangents.  The grandest example of this is the piano exit of Derek and the Dominos’ Layla, used to perfection by Martin Scorsese in Goodfellas.  Beyond “Optimistic”, Radiohead has a couple more gems of this genre, including the aforementioned “Sulk” as well as “Black Star” and “Fake Plastic Trees”.

    Ugh…I could go on but the fun must end here.  Having tackled the nuances of private equity, the agenda now calls for a visit to the wild world of commodities.  And away…we…go.

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    Filed Under: Books, Finance, Movies, Music Tagged With: , , , , , ,

    Easy Money, Hard Truths

    May 28, 2010 By 1 Comment

    In what is becoming an annual tradition, David Einhorn gave another solid speech at this year’s Ira Sohn Conference.  Lucky for us – the curious public – he provided an abridged version of his chat as an OpEd in today’s NY Times.  It’s a worthwhile read for anyone interested in the state of our political and economic world.  Better yet, the folks over at DealBreaker managed to score a copy of the entire speech, which elaborates on the more poignant issues and takes sharper aim at our political leadership, evidenced by the very fine quote below:

    Politicians value staying in office more than they value the long-term health of the country.

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    Filed Under: Finance, Politics Tagged With: ,

    Unfair Taxation

    April 27, 2010 By 1 Comment

    I read a couple tidbits recently that ruffled my fiscally-conservative feathers.  First, roughly 150,000 California residents are responsible for over 50% of that state’s total income tax receipts.  Put another way, with 38 million people, California forces 0.4% of its population to foot more than 50% of its tax bill.  Second, approximately 47% of U.S. households will pay no federal income taxes for the 2009 tax year.  Zip, zero, nada.

    Meanwhile, our deficit is massive and getting massive…r, our government is huge and getting huge…r, and our political class is just as spineless and corrupt as it’s always been.  And since we know our government is incapable of cutting spending, the overall level of taxation on the poor schmucks who actually pay taxes will be going up, up, up!  Yippeee!!

    In related news, more and more American citizens living abroad are giving up their citizenship in a bid to escape the long arm of the IRS.  For those who don’t know, the U.S. is the only industrialized country in the world that taxes its citizens on income earned abroad.  Many of those expatriates are understandably perturbed by the notion that they are paying for services they don’t even use.  And perhaps more troublesome is the fact that those taxes are set to go nowhere but up.  Consequently, 743 American citizens bid Uncle Sam adieu last year, which compared to just 243 renunciations in 2008.  Granted, that number pales in comparison to the estimated 5.2 million Americans living abroad, but one has to imagine that the trend doesn’t appear to be a favorable one.

    Filed Under: Finance, Politics Tagged With: , ,

    Shaking Off The Cobwebs

    April 26, 2010 By 3 Comments

    A friend sent me a note the other day lamenting the death of Eddyfication, which he referred to as “the blog who knew too much”.  Being reminded that I once had a blog was revelation enough, but knowing that my silence is robbing my friends – not to mention the whole of humanity – of such an insightful voice (tongue wedged firmly in cheek) was simply too much to bear.

    So I’m now officially back in the saddle and hoping rather sincerely that I stay that way for the foreseeable future.  The reality is that I’ve been extremely busy these past six weeks or so.  Between work, school, and various other extracurriculars, I’ve quite simply been preoccupied with a host of more pressing issues (some of which may or may not involve exploding volcanoes and imploding countries).

    Indeed, much has happened since we last spoke.  While the EU found itself soaked in Greek debt, I found myself knee-deep in Greeks of another sort; namely, lambdas, alphas, betas, vegas, thetas, and epsilons.  This is partly a school reference, to which I offer the following advice to my readers:  If you ever see me taking a position of operational management at any company on the planet, you should drop everything that instant, raise money for a short-selling fund, and put all of your capital to work shorting the unfortunate company that gave me such authority.  For it is clear that the company itself is a terrible judge of talent, which in itself is a red flag.  Moreover, I will be sure to destroy value in a remarkable way in my new role, resulting in a decent payday for the presciently bearish among us.

    We also saw James Cameron get robbed by the academy of a best director award at this year’s Oscars.  While I very much enjoyed The Hurt Locker and could understand why it may be deserving of best picture, the best director snub of Cameron was totally inexcusable.  You can’t spend ten years of your life inventing new technology to totally transform and remake the movie-going experience – and smash box office records with the final product (inflation-adjusted arguments aside) – and not be deemed worthy of the goods by the movie gods.  You just can’t.

    And we saw Tiger Woods emerge from his dark pool of remorse to stage a fairly impressive comeback at The Masters.  Of course, he reverted to his usual unpleasant self with a couple of potty-mouthed outbursts during the tournament, which he later addressed by reminding us that he wasn’t perfect (thanks for the heads-up).  Nonetheless, while I’ve never been a fan of Tiger the person, I’m quite happy as an avid sports fan to have one of the planet’s best athletes back in action doing what he does best.  And I wouldn’t be American if I weren’t a sucker for a good comeback story.

    Speaking of athletes I suspect are hard to like on a personal level, the Ben Roethlisberger fiasco has been fun to watch.  Not only has it confirmed that guys who look like meatheads typically behave like ones, but it also appears to have elevated the notion that character counts when it comes to team sports.  The most prominent evidence of the Big Ben fallout was the inexplicable decision by the Denver Broncos to draft Tim Tebow in the first round of last week’s NFL draft, well ahead of a more technically capable quarterback in Jimmy Clausen.  Indeed, Clausen had been tabbed by some observers as a top ten talent yet he didn’t go off the board until the Carolina Panthers exercised mercy with the 48th pick.  I’ll forgive for a moment Tebow’s obnoxious religiosity and concede that he strikes me as a good guy: he’s a hard-working, battle-hardened winner that clearly commands the respect of his teammates.  Clausen, on the other hand, is quite clearly a dick, something he announced with a bullhorn when he committed to ND at the College Football Hall of Fame way back when.  Being the diehard Irish fan that I am, I’ve followed closely Clausen’s career and am quite familiar with his childish antics on the field and his overbearing, ever-present family.  I also know that he is one helluva QB and am quite certain he will show well in the NFL.  He has a good arm, is extremely accurate, is a gritty competitor, and has a high football IQ.  Clearly, such potential wasn’t enough when it mattered most (i.e. on payday), something that I suspect relates to questions surrounding Clausen’s maturity and leadership skills.

    As a tangent, I wonder if analysts like Todd McShay – who roundly criticized Clausen’s intangibles throughout the pre-draft assessment period – could ever be sued for defamation.  I mean, if Clausen goes on to have a great career as an NFL QB (thus proving McShay wrong), could he go back and sue McShay for influencing NFL managements and causing his draft stock to fall so precipitously, robbing him of tens of millions of dollars in potential earnings?  Hmmm….

    Meanwhile, the uninformed and hypocritical masses have set their sights on Goldman (I have no idea what happened and whether anyone is guilty of anything, I just like to marvel at the astounding ignorance demonstrated by the mass media in its coverage of the issue and I wonder when someone will sue the U.S. government for its own Fannie and Freddie shenanigans); Ahmedinejad was recently seen smiling and shaking hands with Robert Mugabe in Zimbabwe (birds of a feather…); Sarah Palin is being paid millions of dollars to, of all things, write(!) and speak(!!); Glenn Beck remains as commercial and crazy as ever; MTV has rolled out a new Fresh Meat series; American Idol is in full swing; South Park is at the top of its game; Keith Olbermann is still angry; and everyone’s favorite megalomaniacal midget just torpedoed a South Korean warship (providing a wonderful real-time study in game theory).

    I’ve got plenty of material, dear friends!

    Filed Under: Finance, Misc., Movies, Personal, Politics, Sports

    What Happened to Jimmy Johnson?

    February 23, 2010 By Leave a Comment

    I hold a special place in my heart for Jimmy Johnson.  Not only did the man lead my Cowboys to three Super Bowl titles, but he also has one of the finest helmet-head hairdos of all time.  Such sentiments explain why I am utterly destroyed by his latest efforts to capitalize on his one-time celebrity.

    Exhibit A is his new turn as celebrity pitchman for Extenze, a “male enhancement” supplement.  Merely serving as a well-known endorser for such a product basically writes its own jokes, but I can’t tell whether I’m more horrified by his agreeing to do this or by the fact that he throws like a girl.  Check out the cheesy football toss at the end of his “pitch”.  That, my friend, is not the form of a football coaching legend.  I’m guessing he didn’t provide Troy Aikman with much in the way of mechanic QB guidance during his Cowboy years.

    Exhibit B is his role as celebrity endorser of a trading scam – er, scheme – called BetterTrades.  Admittedly, I know very little about the actual specifics of this company and its product, but everything about this program strikes me as disingenuous and fake, right down to the casting.  For example, the advertisement posted below shows Erica Shaffer being introduced as a “financial reporter”.  In reality, she’s a lightly-employed actress seeking a paying gig, putting her in the same boat as Jimmy Johnson and his cohorts.  And I love that the founder’s name is Freddie Rick, a name that would’ve been well-suited for Ricky Bobby’s nemesis in Talladega Nights.  Not only does Mr. Rick have no formal training in the world of finance (he is a former Marine sniper, which is actually kinda cool), but he got his start with this business while teaching others about investing as a “love offering” at various churches.  That’s just perfect!  Of course a church crowd would make for good hunting when it comes to snake oil like this!  And it helps explain why a survey of his audience shows a crowd that could easily be mistaken for that at an average tent revival.

    Anyone who knows anything about investing knows that consistent success in the market isn’t something that can be easily bottled and sold in mass market fashion.  Sure, it is possible to rather consistently profit from some forms of high frequency trading, but this isn’t something that is easily digestible for the average investor.  There are scores of PhD’s in the market fine-tuning complex trading algorithms geared specifically towards arbitraging away the inefficiencies that a system like BetterTrades is theoretically designed to exploit.  And these statistical arbitrageurs have billions of dollars to put to work, exponentially decreasing the odds that a 71-year old pensioner looking to double his $1000 in savings can gain any sort of meaningful edge by attending a seminar.

    It is my strong suspicion that these guys are aggressive sellers of hope, not providers of true insight into wealth creation.  Just as religious leaders have done for centuries, they prey on insecurity, uncertainty, and ignorance to spread a nonsensical – and profit-seeking – message.  Indeed, a quick glance at the company’s management team reveals a squad much better geared towards fundraising/hoodwinking than complicated financial analysis.  And a quick Google search combining “BetterTrades” and “scam” or “fraud” will return a wealth of not-so-kind customer testimonials.

    More obvious should be the notion that, were Mr. Rick to truly crack the profit-making code, motivated self-interest would suggest that he would want to monopolize that precious knowledge to make himself fabulously wealthy.  That is, if you know the secret sauce, why would you advertise that to the world?  Why not just use it exclusively to enrich yourself beyond imagination?  Or, you could devise some cockamamy scheme to milk your fellow churchgoers of millions of dollars for worthless advice and make yourself ridiculously wealthy that way.  Whatever works!

    What a shame that Jimmy Johnson, a man who was once a childhood idol of mine, now finds himself in such dire financial straits that he must sacrifice his credibility on the altar of the slimy, quick-pay infomercial.

    Filed Under: Finance, Religion, Sports Tagged With: , , ,

    Blessing In Disguise

    November 8, 2009 By Leave a Comment

    I’m one of those people who didn’t really want Chicago to win its Olympic bid and so took the loss as a stroke of good luck.  Sure it’s a bad thing whenever the U.S. loses an international competition of that sort, but the reality is that hosting an Olympics isn’t really all it’s cut out to be.  Besides gaining a bit of extra panache, it’s hard to identify any sustainable tangible benefits for the host city.  Instead, while city recognition may indeed get a bit of a pop, which is likely better suited for emerging cities looking to make a statement, the host city is most often saddled with an extraordinary amount of debt.  And the venues built with that debt often fall into disrepair thanks to years of underuse, begging the question of whether there was any worth to it all in the first place.  This WSJ article on the financial albatross that has become China’s Bird’s Nest stadium sums the issue up rather nicely.

    Filed Under: Finance, Sports

    The Conscience Of A Capitalist

    October 5, 2009 By Leave a Comment

    This weekend’s WSJ interview featured John Mackey, founder and CEO of Whole Foods.  It was an interesting chat that included topics like healthy eating, unions, government profligacy, and, of course, health-care reform.  It’s refreshing to hear things from a business owner’s perspective, something that gets lost in all the noise of the day.  He made one point along those lines that I found particularly impactful:

    ‘Before I started my business, my political philosophy was that business is evil and government is good.  I think I just breathed it in with the culture.  Businesses, they’re selfish because they’re trying to make money…Once you start meeting a payroll you have a little different attitude about those things.’  This insight explains why he thinks it’s a shame that so few elected officials have ever run a business.  ‘Most are lawyers,’ he says, ‘which is why Washington treats companies like cash dispensers.’

    Filed Under: Finance, Politics

    A View Of Our Economic Future

    October 2, 2009 By Leave a Comment

    167517.full

    Filed Under: Finance

    Time To Get Learned

    September 29, 2009 By 3 Comments

    Have you ever heard of the island nation of Palau?  I hadn’t either until a friend of mine told me he was heading there for vacation.  I consulted Wikipedia to learn more about the place and came away with the following interesting tidbits:

    • It’s one of the youngest (independence gained in 1994) and least populated (20,000 people) countries in the world.
    • It’s located 2000 miles south of Tokyo and 500 miles east of the Philippines.
    • Hobbits may have once lived there.
    • It served as the location for the reality TV show Survivor twice.

    Interested in learning about how indebted our world has become?  Check out the Global Debt Comparison over at The Economist for some sobering insights into our monetary condition that are updated real-time.  As of this writing, total global public debt was roughly $35.1 trillion.  And counting.  Public debt as a percentage of GDP in the U.S. was 48.2%, which compares favorably with nations like Japan (185.4%), Greece (98.2%) and France (74.9%) but unfavorably to countries like Australia (17.2%) and China (17.9%).  Move the clock ahead to 2011 and our level jumps to 66.4%.  Doh!  Oh well, at least it’s still not near as bad as Japan (205%!!!).

    Filed Under: Finance, Misc.

    The Japanese Take On Failure

    September 9, 2009 By Leave a Comment

    Read an interesting article yesterday about the stifling role shame can play in the Japanese economy.  It also does a good job of describing why I sometimes refer to Japan as a socialist country, a notion that may grow more overt with the recent DPJ victory.

    In Japan…failure traditionally carries a deeper stigma, an enduring shame that limits the appetite for risk, in the view of many of the nation’s cultural observers. This makes the Japanese far less comfortable with choices that increase the prospect of failure, even if they promise greater potential gains.

    Filed Under: Finance, Japan, Politics

    Playing WTF? With Japanese Politics

    September 5, 2009 By Leave a Comment

    As I alluded to in my Irish season preview, the wife of the new Japanese prime minister, Miyuki Hatoyama, holds some very bizarre beliefs.  Not only does she believe that she’s been flown to Venus on an alien ship, but she also claims to have known Tom Cruise in a previous life (he was Japanese, of course) and to regularly  “eat the sun”.  Plus, she considers herself a “life composer” and has written a book entitled Very Strange Things I’ve Encountered.

    These revelations come on the back of a piece that Prime Minister Hatoyama wrote in advance of his party’s inevitable election victory last week.  In the piece, Mr. Hatoyama basically argued that Japan would be better served by turning its back on globalization and turning even more insular as it looks to generate social harmony.

    If we look back on the changes in Japanese society that have occurred since the end of the cold war, I believe it is no exaggeration to say that the global economy has damaged traditional economic activities and destroyed local communities.

    Clearly, Mr. Hatoyama either doesn’t quite understand the nuances of international trade or he’s intentionally (and blissfully) ignorant to the obvious benefits of globalization as he tries to play to his political base (note his Democratic Party of Japan is decidedly leftist, this for a country that is already heaps more socialist than China).  Someone should remind Mr. Hatoyama that the only reason Japan currently ranks as the second-wealthiest country in the world is because it mastered an export-led manufacturing model that turned out to be wildly successful.  Such a model would’ve failed miserably in the absence of globalization.  Plain and simple.  Think about the success companies like Toyota, Honda, Canon and Sony have achieved over the years, and now try to imagine such successes in the absence of an ability to export those companies’ products overseas thanks to a globally competitive marketplace.  And now try to imagine the millions of Japanese jobs indirectly and directly supported by those companies (factory workers eat at restaurants which buy food from vendors who buy food from farmers and so on).

    So not only does Hatoyama seem to embrace an economic theory devoid of reason, but he’s also married to a woman who appears more than slightly off-kilter (one’s choice in a spouse surely speaks volumes).  After years of ineptitude, it doesn’t look like Japan has any reason to believe its political leadership will turn the corner and start making sense anytime soon.

    Filed Under: Finance, Japan, Politics

    Headline Of The Day

    September 3, 2009 By Leave a Comment

    Per CNN:

    SEC Investigation: We missed Madoff.

    Ya think?

    Filed Under: Finance, Media

    The Case Against Bernanke: Part II

    August 26, 2009 By Leave a Comment

    Joining such esteemed contemporaries like myself, Morgan Stanley’s Stephen Roach also takes issue with Fed Chairman Ben Bernanke’s reappointment, which he wrote about in today’s Financial Times.  Though I disagree with some of his gripes – namely, Bernanke’s market libertarianism (an oxymoron in the context of the Fed if you ask me) – I applaud the crux of his rationale.

    While America’s head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing programme, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s. It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.

    Filed Under: Finance

    B Double

    August 12, 2009 By Leave a Comment

    The WSJ reported today that economists overwhelmingly agree that Fed Chairman Ben Bernanke should be reappointed.  This proves yet again the tendency of underperformers in various professions – particularly high profile ones – to enjoy undeserved longevity in their jobs.  Sure, some could say Bernanke’s actions have (thus far) helped stave off a revisit of the Great Depression (to which I ask for how long and at what cost?).  But the reality is that he was among those atop the economic totem pole who oversaw the mess we forged for ourselves in the first place.  As the American Prospect rightly asks: Isn’t missing an $8 trillion housing bubble a mistake?

    The [WSJ] article never once mentions Bernanke’s error in allowing the housing bubble to grow to a size where its collapse would inevitably produce a disastrous downturn. Bernanke completely ignored the bubble first as a Fed governor from 2002 to 2005, then as head of President Bush’s Council of Economic Advisors until he took over as Fed chair in January of 2006, and in his tenure as Fed chair until the collapse of the bubble brought on the downturn.

    It would be difficult to imagine a more catastrophic mistake by an economic policymaker than missing such an enormous economic behavior. There are few people in any job who have ever committed such an enormous error. Yet, the WSJ never even mentions it. (Obviously another example of the soft bigotry of low expectations for economic policymakers.)

    Filed Under: Finance

    Top Ten Things You Didn’t Know About The Penny

    August 3, 2009 By Leave a Comment

    Did you know that it actually costs 1.4 cents to make a penny?  Or that about 1,000 pennies are made per second?  Visit Time for some more fun tidbits about that ubiquitous little coin.

    (Aside: Japan’s version of the penny is a silver plastic thing that not only is worthless but feels that way too.  At least the penny has some heft to it!).

    Filed Under: Finance, Japan, Misc.

    Holy Shish Kabob!

    June 30, 2009 By Leave a Comment

    The NY Post reports today that American Idol’s Simon Cowell is currently renegotiating his contract with Fox.  His current contract – which pays a whopping $36 million per year – is due to expire soon.  And Simon wants to up the ante.  By how much, you ask?  Oh, just by a hundo or so.  That’s all.  Yep, Simon is about to ink an extension that will pay him upwards of $144 million per year to retain his seat on the judges panel.  Yet another reminder that I’m in the wrong business, a reality made more striking by the fact that I’m in agreement with Simon’s observations roughly 95% of the time.  This can only mean that I too should be getting paid that amount to judge a talent show.  Right?

    Meanwhile, the average American household is saddled with roughly $9000 in credit card debt.  Tootles!

    Filed Under: Finance, TV

    The Peril Of “Buy American”

    June 3, 2009 By Leave a Comment

    I usually go to the WSJ for sound economic analysis, as slanted as that publication may be.  But, lo and behold, it appears the folks over at the NY Times have managed to come down on the right side of the “buy American” issue.

    But as states and municipalities start spending stimulus money, the idea is starting to look as counterproductive as it should have looked from the beginning. It is sparking conflict with American allies and, rather than supporting employment at home, the “Buy American” effort could ultimately cost American jobs.

    Of course, anyone with a modicum of economic schooling could see how little sense the provision made from a competitiveness perspective.  Indeed, this was a shameful political ploy of the highest order, as myopic and self-centered politicians looked to curry favor with their constituencies by appearing to protect their livelihoods.  Instead, it provided yet further evidence of how near-sighted – and ignorant – politicians can be.  And how screwed we are if unions continue to grow in influence while the government strengthens its grip on the American economy.

    Filed Under: Finance, Politics

    Noodle This

    May 21, 2009 By 1 Comment

    If the United States were a country in Europe, it would not be allowed to join the euro.  With a deficit of $1.75 trillion forecast for this fiscal year, our debt/GDP ratio is about 13%, well above the 3% mandated by the European Union for its euro members.  That’s what I would call less than ideal.

    Filed Under: Finance, Politics

    Thinking Outside The Box

    May 11, 2009 By Leave a Comment

    In what some may call a desperate (and tasteless) effort to boost sales, a Chinese real estate company has hooked up with a matchmaking agency to throw in a wife to go along with that brand new condo.  Sleazy or brilliant?  You decide.  I’m not really sure what to make of it all…I currently find myself stuck somewhere between impressed and utterly bewildered.  All I know is that with a nation chock-full of budding entrepreneurs, we can expect similar moments of “inspiration” for decades to come.  Anyone who has visited the mainland can attest to the fact that the Chinese – despite whatever form the official government may take – practice a form of economics that is best described as capitalism on steroids.

    Filed Under: Finance, Politics

    RIP Portfolio

    April 28, 2009 By Leave a Comment

    In a sad though not entirely shocking development, Condé Nast Portfolio is being shuttered.  For newsies like me, particularly those of us of the financial persuasion, this is a disappointing development.  I was a frequent visitor to the magazine’s website and the few hardcopies I got my hands on were, in my view, very well done.  I’d characterize the print edition as a combination of GQ, The Economist and Vanity Fair.  In other words, it was right up my alley

    Oh well.  I guess this is what you get when you launch a $100 million publication into the teeth of a full-blown recession that causes ad spending to go the way of housing prices.  At least some solace can be found in the fact that Michael Lewis wrote what was arguably the magazine’s best piece, and since he doesn’t lack for platforms we’ll still hear plenty from him.

    Filed Under: Finance, Media
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