7/18/08
We read in this morning’s Wall Street Journal that Freddie Mac is considering a “major” sale of common and/or preferred stock in order to fortify its capital base. Fannie Mae, one supposes, cannot be far behind.
My initial reaction on reading this news is that whoever the lead banker is on this deal would do well to resurrect Mr. P.T. Barnum and put him on its sales force. A moment’s reflection, however, led me to conclude that it will not be the buyers of this paper that will be the suckers but, rather, we the taxpayers.
If common, preferred, or both, of the Brobdingnagian mortgage twins is sold, and the Treasury (I refuse to jump on the trendy fad of referring to Alexander Hamilton’s department as simply “Treasury.” It offends the ears and has a distinctly foppish ring to it.) does not buy a substantial piece of the offering(s), such a deal can only get done, at anything approaching a price that would achieve the ends for which the sale was designed, by certain, er, “understandings” being formulated. Effectively, the Treasury’s implicit guarantee of Freddie’s debt will become some sort of implicit guarantee of Freddie’s equity.
As usual, our public servants stand ready to use our money to salve any self inflicted financial boo-boos, especially those of the tough guy, free marketeer types who inhabit Wall Street, preach self-reliance, and contribute heavily to both parties, but mostly to self-proclaimed free market Republican types. However, the degree of alacrity with which our public servants throw our money at their friends seems to vary directly, and strongly, with the size of the friend in need.
The forced march to financial Gomorrah continues.
Friday, July 18, 2008
AND NOW A WORD FROM THE CULINARY CORNER
7/18/08
I sent the following e-mail to Chicago Tribune columnist John Kass in response to his argument, which seems to make sense at first glance, that Dunkin’ Donuts is the bargain alternative to Starbuck’s.:
7/17/08
John,
You’re way off base in arguing that Dunkin’ Donuts is a sensible alternative to Starbuck’s. Dunkin’ is itself a shameless extravagance. How much does a home brewed cup of coffee, even including a good old Styrofoam cup, cost? Less than a dime, unless one buys yuppie coffee. If one must have donuts, they can be bought at a grocery store far more cheaply than they can be bought at Dunkin’. However, one would be far better off having a bowl of cereal and a piece of fruit at home before leaving for work; such a quick and cheap breakfast is not much more expensive than an empty calorie and sleep inducing fat laden donut and is far better for you.
You have a long way to go before you join the ranks of the genuinely, and proudly, frugal, my friend. Besides, the more money, and calories and fat, you save by not going to Dunkin’, the more you can spend, and consume, at White Castle for lunch or dinner. Good thing, too; with prices at White Castle climbing, I’m beginning to regard a visit to the Porcelain Palace a bit over the top, but there is no substitute for a slider, and all my attempts to replicate the delectable gut bomb at home have come to naught.
Keep up the good work.
Mark Quinn
I sent the following e-mail to Chicago Tribune columnist John Kass in response to his argument, which seems to make sense at first glance, that Dunkin’ Donuts is the bargain alternative to Starbuck’s.:
7/17/08
John,
You’re way off base in arguing that Dunkin’ Donuts is a sensible alternative to Starbuck’s. Dunkin’ is itself a shameless extravagance. How much does a home brewed cup of coffee, even including a good old Styrofoam cup, cost? Less than a dime, unless one buys yuppie coffee. If one must have donuts, they can be bought at a grocery store far more cheaply than they can be bought at Dunkin’. However, one would be far better off having a bowl of cereal and a piece of fruit at home before leaving for work; such a quick and cheap breakfast is not much more expensive than an empty calorie and sleep inducing fat laden donut and is far better for you.
You have a long way to go before you join the ranks of the genuinely, and proudly, frugal, my friend. Besides, the more money, and calories and fat, you save by not going to Dunkin’, the more you can spend, and consume, at White Castle for lunch or dinner. Good thing, too; with prices at White Castle climbing, I’m beginning to regard a visit to the Porcelain Palace a bit over the top, but there is no substitute for a slider, and all my attempts to replicate the delectable gut bomb at home have come to naught.
Keep up the good work.
Mark Quinn
Wednesday, July 16, 2008
WATCH YOUR LANGUAGE
7/16/08
Okay, so maybe this isn’t worth a bout of febrile fulmination. Bear in mind, however, that I never need much of a reason to fulminate in a febrile fashion and that the Sun’s treatment our language is indeed a very big deal to those of us who love the language. So I sent the below letter to the estimable Naperville Sun:
7/16/08
The headline festooned across the first page of this morning’s issue of the Sun leaped out at anyone who has an appreciation for proper English usage:
“To Each Their (sic) Own”
One is used to seeing our language butchered with depressing regularity in our nation’s newspapers as even vague familiarity with the language becomes a less important qualification for a career in journalism than, say, knowledge of the latest details of Brittany Spears’ self-immolation. However, in a town that prides itself in its commitment to education, the headline “To Each Their (sic) Own” is nothing short of appalling. Does the Sun employ competent writers or editors?
Perhaps this instance of the Sun’s glaring vitiation of the language in which it purports to write arises not from a lack of facility with grammar and usage but, rather, from a slavish devotion to political correctness. But who, precisely, would be offended by the use of the proper “Her” or “His,” rather than the “Their” which so grates on the ears and sensibilities, in the above headline? If there is such a person, why is the opinion of such a cretinous self-designated victim even worthy of consideration?
We spend a lot of money on “education” in this town; to have our leading newspaper so flagrantly violate a very basic rule of English usage out of either a lack of knowledge of the craft it supposedly practices or a misplaced need to genuflect at the altar of political correctness is not helpful in achieving a return on our considerable investment.
Mark Quinn
Okay, so maybe this isn’t worth a bout of febrile fulmination. Bear in mind, however, that I never need much of a reason to fulminate in a febrile fashion and that the Sun’s treatment our language is indeed a very big deal to those of us who love the language. So I sent the below letter to the estimable Naperville Sun:
7/16/08
The headline festooned across the first page of this morning’s issue of the Sun leaped out at anyone who has an appreciation for proper English usage:
“To Each Their (sic) Own”
One is used to seeing our language butchered with depressing regularity in our nation’s newspapers as even vague familiarity with the language becomes a less important qualification for a career in journalism than, say, knowledge of the latest details of Brittany Spears’ self-immolation. However, in a town that prides itself in its commitment to education, the headline “To Each Their (sic) Own” is nothing short of appalling. Does the Sun employ competent writers or editors?
Perhaps this instance of the Sun’s glaring vitiation of the language in which it purports to write arises not from a lack of facility with grammar and usage but, rather, from a slavish devotion to political correctness. But who, precisely, would be offended by the use of the proper “Her” or “His,” rather than the “Their” which so grates on the ears and sensibilities, in the above headline? If there is such a person, why is the opinion of such a cretinous self-designated victim even worthy of consideration?
We spend a lot of money on “education” in this town; to have our leading newspaper so flagrantly violate a very basic rule of English usage out of either a lack of knowledge of the craft it supposedly practices or a misplaced need to genuflect at the altar of political correctness is not helpful in achieving a return on our considerable investment.
Mark Quinn
Tuesday, July 15, 2008
“I’M FROM THE GOVERNMENT AND I’M HERE TO HELP YOU”
7/15/08
A couple of observations arise from two articles appearing in this morning’s (i.e., 7/15/08’s) Wall Street Journal:
Observation 1:
In an article on page A14, authored by John McKinnon and James Haggerty, discussing the sources and origins of Fannie and Freddie’s woes, the Journal highlighted the 1992 legislation that created the flaccid Office of Federal Housing Enterprise Oversight (“Ofheo”) and thus, ironically, gutted any effective oversight of Fannie and Freddie. (See my 1/17/08 post for my thoughts on the regulation of these mortgage beached whales.) The article quoted the apparently erudite Thomas Stanton, a Washington lawyer and longtime Fannie and Freddie critic, on Ofheo and the current Freddie and Fannie debacle:
“I don’t think anyone had any inkling that they (sic) were doing anything but good. People hadn’t really worked out what would happen.”
What Mr. Stanton said is profound not only for what it tells us about the current mortgage problems that the Democrats and the “free market” Bushmen are using as a lever to further socialize our financial system but also for what it says about government in general. People, even scrofulous poltroons we send to Washington, do not set out to do evil, or at least do not set out to do so explicitly. But there is in Washington, as there is throughout our land, a bad case of diarrhea of the heart (or gut) and constipation of the mind. People simply do not think: they do things that they guess will somehow be beneficent but they don’t, or simply do not have the intellectual horsepower or the inclination to overcome laziness necessary to think through the consequences of their actions.
It’s admirable to use one’s heart, but it’s necessary to use one’s brain.
Observation 2:
In a page A1 article describing Free Market Hank Paulson’s plans to bail out Fannie and Freddie, Deborah Solomon and James Reddy, the article’s authors, state:
“A Republican and free-market advocate, (Paulson) has become ad activist in the mold of Clinton Treasury Secretaries Lawrence Summers and Robert Rubin. Mr. Paulson has orchestrated an agreement among banks to back shaky mortgage securities, cajoled the mortgage industry to help those in danger of foreclosure and pushed hard for the deal that culminated with the sale of collapsing Bear Stearns Cos. to J.P. Morgan Chase & Co.”
Hmm…
To paraphrase Zay N. Smith, who writes the brilliant QT column in the Chicago Sun-Times, add free-market advocates to the list of things that aren’t’ what they used to be.
A couple of observations arise from two articles appearing in this morning’s (i.e., 7/15/08’s) Wall Street Journal:
Observation 1:
In an article on page A14, authored by John McKinnon and James Haggerty, discussing the sources and origins of Fannie and Freddie’s woes, the Journal highlighted the 1992 legislation that created the flaccid Office of Federal Housing Enterprise Oversight (“Ofheo”) and thus, ironically, gutted any effective oversight of Fannie and Freddie. (See my 1/17/08 post for my thoughts on the regulation of these mortgage beached whales.) The article quoted the apparently erudite Thomas Stanton, a Washington lawyer and longtime Fannie and Freddie critic, on Ofheo and the current Freddie and Fannie debacle:
“I don’t think anyone had any inkling that they (sic) were doing anything but good. People hadn’t really worked out what would happen.”
What Mr. Stanton said is profound not only for what it tells us about the current mortgage problems that the Democrats and the “free market” Bushmen are using as a lever to further socialize our financial system but also for what it says about government in general. People, even scrofulous poltroons we send to Washington, do not set out to do evil, or at least do not set out to do so explicitly. But there is in Washington, as there is throughout our land, a bad case of diarrhea of the heart (or gut) and constipation of the mind. People simply do not think: they do things that they guess will somehow be beneficent but they don’t, or simply do not have the intellectual horsepower or the inclination to overcome laziness necessary to think through the consequences of their actions.
It’s admirable to use one’s heart, but it’s necessary to use one’s brain.
Observation 2:
In a page A1 article describing Free Market Hank Paulson’s plans to bail out Fannie and Freddie, Deborah Solomon and James Reddy, the article’s authors, state:
“A Republican and free-market advocate, (Paulson) has become ad activist in the mold of Clinton Treasury Secretaries Lawrence Summers and Robert Rubin. Mr. Paulson has orchestrated an agreement among banks to back shaky mortgage securities, cajoled the mortgage industry to help those in danger of foreclosure and pushed hard for the deal that culminated with the sale of collapsing Bear Stearns Cos. to J.P. Morgan Chase & Co.”
Hmm…
To paraphrase Zay N. Smith, who writes the brilliant QT column in the Chicago Sun-Times, add free-market advocates to the list of things that aren’t’ what they used to be.
Monday, July 14, 2008
LEST YOU THINK OBAMA IS A DIFFERENT KIND OF DEMOCRAT…
7/15/08
One could not be forgiven for suspecting that the entire “Jesse Jackson wants to cut Barack Obama’s nuts out (Sic. I know I’m an older guy, and maybe they’re making them differently nowadays, but how does one cut one’s testicles “out”? One would have thought “off” was the proper adverb, but I digress.)” controversy was completely staged, an effort to improve the Obama “brand” (or some such modern marketing gibberish) with moderate to conservative voters by highlighting the most salient of Mr. Obama’s few sensible utterances. In this case, one could suspect that the Jackson rock removal dust-up was much like the “Reverend Wright does not speak for me” flapdoodle (See the 4/30/08 Insightful Pontificator posting.): an attempt to fabricate a Sister Souljah moment for Mr. Obama.
Nonetheless, the subject matter of Mr. Jackson’s stated desire to figuratively (I (and doubtless Mr. and Mrs. Obama) hope!) castrate Mr. Obama, i.e., Mr. Obama’s perfectly sensible contention that all parents, including Black parents, ought to take their responsibilities as parents more seriously and that all of our nation’s “urban problems” do not have their origins in discrimination or a dearth of public funding, give one hope that perhaps Mr. Obama might somehow be a different kind of Democrat, even a different kind of politician, or at least might have a platform for saying things that ought to be said but that others not similarly situated cannot find the courage to say, at least in public.
However, such hopes were, if not crushed, greatly diminished when Mr. Obama appeared before the American Federation of Teachers (AFT) in my hometown in order to receive that union’s endorsement. In his speech, Mr. Obama argued that No Child Left Behind (“NCLB”) was a failed policy. He argued that it has done little besides label schools, and students, failures. No argument here. But, then, after lambasting NCLB with both aplomb and great enthusiasm, Mr. Obama promised to (Surprise!) spend more money on NCLB.
Hmm…throwing more money into failed programs. One might suppose that Mr. Obama, rather than being at all different or representing some kind of change, sounds like an old style Democrat, and a new style, if you will, Republican, after all.
One could not be forgiven for suspecting that the entire “Jesse Jackson wants to cut Barack Obama’s nuts out (Sic. I know I’m an older guy, and maybe they’re making them differently nowadays, but how does one cut one’s testicles “out”? One would have thought “off” was the proper adverb, but I digress.)” controversy was completely staged, an effort to improve the Obama “brand” (or some such modern marketing gibberish) with moderate to conservative voters by highlighting the most salient of Mr. Obama’s few sensible utterances. In this case, one could suspect that the Jackson rock removal dust-up was much like the “Reverend Wright does not speak for me” flapdoodle (See the 4/30/08 Insightful Pontificator posting.): an attempt to fabricate a Sister Souljah moment for Mr. Obama.
Nonetheless, the subject matter of Mr. Jackson’s stated desire to figuratively (I (and doubtless Mr. and Mrs. Obama) hope!) castrate Mr. Obama, i.e., Mr. Obama’s perfectly sensible contention that all parents, including Black parents, ought to take their responsibilities as parents more seriously and that all of our nation’s “urban problems” do not have their origins in discrimination or a dearth of public funding, give one hope that perhaps Mr. Obama might somehow be a different kind of Democrat, even a different kind of politician, or at least might have a platform for saying things that ought to be said but that others not similarly situated cannot find the courage to say, at least in public.
However, such hopes were, if not crushed, greatly diminished when Mr. Obama appeared before the American Federation of Teachers (AFT) in my hometown in order to receive that union’s endorsement. In his speech, Mr. Obama argued that No Child Left Behind (“NCLB”) was a failed policy. He argued that it has done little besides label schools, and students, failures. No argument here. But, then, after lambasting NCLB with both aplomb and great enthusiasm, Mr. Obama promised to (Surprise!) spend more money on NCLB.
Hmm…throwing more money into failed programs. One might suppose that Mr. Obama, rather than being at all different or representing some kind of change, sounds like an old style Democrat, and a new style, if you will, Republican, after all.
CHECK YOUR PREFIXES BEFORE LEAVING THE COUNTER
7/14/08
As loyal readers know, I have been writing about the credit crisis and the problems at Fannie and Freddie for a long time. (See, inter magna numera aliarum, the 8/31/07, 12/1/07, 1/17/08, and 1/25/08 postings on the Insightful Pontificator.) With the news this morning that the Treasury (or simply “Treasury,” as it has come to be called of late by the cognoscenti for some inexplicable reason.) will expand its line of credit to the housing agencies and might take an equity position in the “mortgage giants,” and that the Fed will lend directly to Fannie and Freddie (just in case they need it, which they won’t, we are assured, if only we can hornswoggle enough investors into backing a lame horse), reality has amazed even me. I thought that there was just a chance that I might be being too bearish when I postulated that the federal government would have to bail out Fannie and Freddie after Mr. Bush leaves the White House. It turns out that I was too bullish; the federal government (you and I) is bailing out these two beached leviathans while Mr. Bush is still in office. I am surprised; my critics must be absolutely dumbfounded.
As I have explained on numerous occasions, this is how the mortgage lending system works:
--People buy far more house than they need (or anyone needs, in many instances) and/or borrow against their newly acquired “financial asset” in order to buy diaphanous gimcracks.
--Gormless and/or facinorous Wall Street types pour copious quantities of perfume on these malodorous mortgages and sell the bastard children to other witless, fatuous Wall Street types.
--You, the taxpayer, who tries to exercise at least a modicum of restraint and good sense in your own personal financial affairs, wind up bailing out these financial players and “experts” through direct and indirect lines they are given into the treasury and through the decimation of the return on your savings that has resulted from the desperate efforts by Obsequious Ben Bernanke to bail out the Wall Street types he hopes will employ him at an astronomical salary when his tenure at the Fed is (mercifully) completed.
It’s the same old story: the responsible pay for the irresponsible.
Now I suppose that I am supposed to say something like “That having been said, Free Market Hank Paulson and Obsequious Ben Bernanke had no choice but to bail out Fannie and Freddie, after all…”
To which I say “Balderdash!”
There clearly is a choice here and the sensible choice is to let Fannie and Freddie go. Yes, I know that these mortgage monstrosities have liabilities, depending on how they are measured, $5 trillion to $8.8 trillion, and that those liabilities exceed those of the U.S. Treasury. And I know that these obligations carried the implicit guarantee of the U.S. government.
To which I say “Ya pays your money, ya takes your chances.”
People on Wall Street and/or in the money management business make astronomical amounts of money. They are paid such princely sums of spondulicks for work that should exceed merely looking at agency paper and saying “Hey, it’s agency paper. The government won’t let it default. Let’s back up the truck.” Some of this work might even involve (Perish the thought!) assessing counter-party risk. And one would think that, with all the “education” the world’s money management community is supposed to have had, its participants would be able to distinguish between the prefixes “ex” and “im” placed before “plicit” when the resulting adjective is used to modify the noun “guarantee.” Perhaps, if these “investors” were so keen on safety, they could have given up the (only a short time ago, it seems) few basis points they picked up going out of treasuries into agencies. But, no, they were yield hungry and, seemingly, satiated with their self-assurances regarding their own common sense and prudence.
Further, if “investors” take losses on their Freddie and Fannie exposure, three things are certain:
--the losses will not be total losses. They will get something, probably a rather large percentage of their investments
--the housing market will suffer, perhaps (but not definitely) severely. But so what? Markets adjust. When markets get way ahead of themselves, they must adjust. Yes, it will be painful, but it was awfully pleasurable on the way up and (wisely) no one counseled the government to step in with a little forced “real estatus interruptus.” Why is housing (and other forms of real estate) any different? Just because too many people are imprudently overinvested in it? Just because this country allocates what now appears (actually, has long appeared) to be an inordinate amount of capital to housing?
--people will be more careful when investing their, and other people’s, money.
On the other hand, if Fannie, Freddie, and every dissolute investment bank that comes down the pike are effectively guaranteed by you and me, several other things are certain
--Moral hazard will be the order of the day.
--There will be even less incentive for savings and other manifestations of financial prudence in this country.
--The inevitable correction will be worse than the one we would have experienced had our policymakers not been so eager to abandon what they insist are their free market principles, as in “I believe in the free market, but (when my friends are in trouble because they had no clue as to what they were doing)…”
--the Republic’s now seemingly inevitable trek toward its demise will be hastened. (Before you say what you want to say, remember, most of you thought I was being overly pessimistic when I predicted a Fannie/Freddie bailout.)
As loyal readers know, I have been writing about the credit crisis and the problems at Fannie and Freddie for a long time. (See, inter magna numera aliarum, the 8/31/07, 12/1/07, 1/17/08, and 1/25/08 postings on the Insightful Pontificator.) With the news this morning that the Treasury (or simply “Treasury,” as it has come to be called of late by the cognoscenti for some inexplicable reason.) will expand its line of credit to the housing agencies and might take an equity position in the “mortgage giants,” and that the Fed will lend directly to Fannie and Freddie (just in case they need it, which they won’t, we are assured, if only we can hornswoggle enough investors into backing a lame horse), reality has amazed even me. I thought that there was just a chance that I might be being too bearish when I postulated that the federal government would have to bail out Fannie and Freddie after Mr. Bush leaves the White House. It turns out that I was too bullish; the federal government (you and I) is bailing out these two beached leviathans while Mr. Bush is still in office. I am surprised; my critics must be absolutely dumbfounded.
As I have explained on numerous occasions, this is how the mortgage lending system works:
--People buy far more house than they need (or anyone needs, in many instances) and/or borrow against their newly acquired “financial asset” in order to buy diaphanous gimcracks.
--Gormless and/or facinorous Wall Street types pour copious quantities of perfume on these malodorous mortgages and sell the bastard children to other witless, fatuous Wall Street types.
--You, the taxpayer, who tries to exercise at least a modicum of restraint and good sense in your own personal financial affairs, wind up bailing out these financial players and “experts” through direct and indirect lines they are given into the treasury and through the decimation of the return on your savings that has resulted from the desperate efforts by Obsequious Ben Bernanke to bail out the Wall Street types he hopes will employ him at an astronomical salary when his tenure at the Fed is (mercifully) completed.
It’s the same old story: the responsible pay for the irresponsible.
Now I suppose that I am supposed to say something like “That having been said, Free Market Hank Paulson and Obsequious Ben Bernanke had no choice but to bail out Fannie and Freddie, after all…”
To which I say “Balderdash!”
There clearly is a choice here and the sensible choice is to let Fannie and Freddie go. Yes, I know that these mortgage monstrosities have liabilities, depending on how they are measured, $5 trillion to $8.8 trillion, and that those liabilities exceed those of the U.S. Treasury. And I know that these obligations carried the implicit guarantee of the U.S. government.
To which I say “Ya pays your money, ya takes your chances.”
People on Wall Street and/or in the money management business make astronomical amounts of money. They are paid such princely sums of spondulicks for work that should exceed merely looking at agency paper and saying “Hey, it’s agency paper. The government won’t let it default. Let’s back up the truck.” Some of this work might even involve (Perish the thought!) assessing counter-party risk. And one would think that, with all the “education” the world’s money management community is supposed to have had, its participants would be able to distinguish between the prefixes “ex” and “im” placed before “plicit” when the resulting adjective is used to modify the noun “guarantee.” Perhaps, if these “investors” were so keen on safety, they could have given up the (only a short time ago, it seems) few basis points they picked up going out of treasuries into agencies. But, no, they were yield hungry and, seemingly, satiated with their self-assurances regarding their own common sense and prudence.
Further, if “investors” take losses on their Freddie and Fannie exposure, three things are certain:
--the losses will not be total losses. They will get something, probably a rather large percentage of their investments
--the housing market will suffer, perhaps (but not definitely) severely. But so what? Markets adjust. When markets get way ahead of themselves, they must adjust. Yes, it will be painful, but it was awfully pleasurable on the way up and (wisely) no one counseled the government to step in with a little forced “real estatus interruptus.” Why is housing (and other forms of real estate) any different? Just because too many people are imprudently overinvested in it? Just because this country allocates what now appears (actually, has long appeared) to be an inordinate amount of capital to housing?
--people will be more careful when investing their, and other people’s, money.
On the other hand, if Fannie, Freddie, and every dissolute investment bank that comes down the pike are effectively guaranteed by you and me, several other things are certain
--Moral hazard will be the order of the day.
--There will be even less incentive for savings and other manifestations of financial prudence in this country.
--The inevitable correction will be worse than the one we would have experienced had our policymakers not been so eager to abandon what they insist are their free market principles, as in “I believe in the free market, but (when my friends are in trouble because they had no clue as to what they were doing)…”
--the Republic’s now seemingly inevitable trek toward its demise will be hastened. (Before you say what you want to say, remember, most of you thought I was being overly pessimistic when I predicted a Fannie/Freddie bailout.)
Thursday, July 10, 2008
WELL, AT LEAST WE’RE SELLING THEM BULL SEMEN, BRAS, AND CIGARETS
7/10/08
There has been much speculation regarding the reasons that Iran test fired some medium range, nuclear capable missiles the other day. Some say that the firing came in response to Israeli military exercises in the Mediterranean that looked like a dress rehearsal for an attack on Iranian nuclear installations. Others argue that the tests were a response to the presence of what the Iranians consider the occupation of their neighbor to the west by a hostile power bent on turning its military might in their direction next. Perhaps the test firings were years in the making and came in response to nothing.
Could it be, though, that this latest manifestation of Iranian saber rattling was an attempt to help the electoral prospects of Senator John McCain (Did you know he was a POW in Vietnam?)? Less informed readers might counter with a contention that I have surely lost my senses. Why, the Iranians would much rather have the pliable, naïve Barack Obama in the Oval Office than the stalwart, tough guy, take no prisoners John McCain (Did you know he was a POW in Vietnam?) .
More thoughtful readers realize will examine history. As the ‘90s progressed, the mullahs’ grip on Iran was loosening. A large and growing share of Iran’s population had no memory of the brutal excesses of the Shah. Moreover, these young people had little use for the religious fundamentalism of the mullahs, but instead craved modernity and the material wealth that contact with the West could help provide. Unrest grew throughout the country despite, and indeed was exacerbated by, the hebetudinous attempts of the theocracy to suppress it. In short, everything was going our way in Iran; all we had to do was wait, and a new generation would be probably not friendly, but certainly civil, toward us.
Then George Bush came along. His foreign policy, which featured demonizing Iran as a member of the “axis of evil” and invading Iran’s western neighbor, thus putting American troops on Iran’s border, gave the mullahs a rallying point. Even if the typical Iranian had no use for the Ayatollah’s successors, surely he had to support his leadership in the face of a hostile superpower threatening invasion or similar mayhem. Every regime, some might say every government, needs a whipping boy, a bogeyman, and George Bush delivered the mullahs such a rallying point on the proverbial silver platter.
But now George Bush will soon be gone. The Great Satan will not seem so satanic, and perhaps not so great, under a president who talks of diplomacy and exploring avenues of peaceful, if not cooperation, diffusion of outright hostility. Such a situation would serve to undermine the grip on power of the current Iranian leadership. But if the Great Satan were led by a guy who is fond of singing “Bomb, bomb, bomb, bomb bomb Iran” and who talks openly of military action to solve the Iranian problem, then the Iranian populace would be cowed, forced to run into the arms of their theocratic leaders for protection. John McCain (Did you know he was a POW in Vietnam?) is the perfect prescription for continued theocracy in Iran, and the Iranian leadership knows it.
Just a thought.
There has been much speculation regarding the reasons that Iran test fired some medium range, nuclear capable missiles the other day. Some say that the firing came in response to Israeli military exercises in the Mediterranean that looked like a dress rehearsal for an attack on Iranian nuclear installations. Others argue that the tests were a response to the presence of what the Iranians consider the occupation of their neighbor to the west by a hostile power bent on turning its military might in their direction next. Perhaps the test firings were years in the making and came in response to nothing.
Could it be, though, that this latest manifestation of Iranian saber rattling was an attempt to help the electoral prospects of Senator John McCain (Did you know he was a POW in Vietnam?)? Less informed readers might counter with a contention that I have surely lost my senses. Why, the Iranians would much rather have the pliable, naïve Barack Obama in the Oval Office than the stalwart, tough guy, take no prisoners John McCain (Did you know he was a POW in Vietnam?) .
More thoughtful readers realize will examine history. As the ‘90s progressed, the mullahs’ grip on Iran was loosening. A large and growing share of Iran’s population had no memory of the brutal excesses of the Shah. Moreover, these young people had little use for the religious fundamentalism of the mullahs, but instead craved modernity and the material wealth that contact with the West could help provide. Unrest grew throughout the country despite, and indeed was exacerbated by, the hebetudinous attempts of the theocracy to suppress it. In short, everything was going our way in Iran; all we had to do was wait, and a new generation would be probably not friendly, but certainly civil, toward us.
Then George Bush came along. His foreign policy, which featured demonizing Iran as a member of the “axis of evil” and invading Iran’s western neighbor, thus putting American troops on Iran’s border, gave the mullahs a rallying point. Even if the typical Iranian had no use for the Ayatollah’s successors, surely he had to support his leadership in the face of a hostile superpower threatening invasion or similar mayhem. Every regime, some might say every government, needs a whipping boy, a bogeyman, and George Bush delivered the mullahs such a rallying point on the proverbial silver platter.
But now George Bush will soon be gone. The Great Satan will not seem so satanic, and perhaps not so great, under a president who talks of diplomacy and exploring avenues of peaceful, if not cooperation, diffusion of outright hostility. Such a situation would serve to undermine the grip on power of the current Iranian leadership. But if the Great Satan were led by a guy who is fond of singing “Bomb, bomb, bomb, bomb bomb Iran” and who talks openly of military action to solve the Iranian problem, then the Iranian populace would be cowed, forced to run into the arms of their theocratic leaders for protection. John McCain (Did you know he was a POW in Vietnam?) is the perfect prescription for continued theocracy in Iran, and the Iranian leadership knows it.
Just a thought.
YEAH, THIS SUBJECT AGAIN…
7/10/08
News and talk radio are currently replete with a commercial for a major auto insurance company, the scenario of which varies slightly, but proceeds generally like this: A subject encounters a friend in a bizarre situation or accompanied by a bizarre companion or companions. In one instance, a gaggle of groupies follows a rather non-descript woman. In another, a folk singer sits in the backseat of a guy’s car warbling aural pabulum to the annoyance all around him. When asked whence the paparazzi or anachronistic crooner came, the friend replies: “I saved so much on my auto insurance that I decided to hire a (folksinger, entourage, etc., depending on the particular scenario).” If you listen to news or talk radio, you know the ad.
I realize that these ads are just a fatuous and largely failed attempt at humor. However, being I, I see a profound message in these ads. Notice that the insured never says anything like “I saved so much on auto insurance that I decided to put some money away for retirement (or save for my kid’s education, or build up my emergency nest egg, etc.)” No, it’s always some exaggeratedly ridiculous use for the money. Again, a feeble attempt at humor. But I would be willing to wager that the writers of the aforementioned commercial never considered having their insureds talking about investing or otherwise putting away the money they saved. Americans simply are incapable of saving money, and many do not even consider doing so an option. If they save on one thing, they just blow the money on something else, usually some sort of useless gimcrack that brings, at most, transitory pleasure, and then go on to complain about how they “can’t make ends meet.”
The financial consequences of a country with an utter inability to save are obvious, if concealed for the last fifteen or so years. For example, many experts compare the economic and financial situation we face today with the post real estate bubble malaise confronted by Japan in the ‘90s. However, there is a profound difference between the two situations: Japan didn’t have to import capital while we, due to our profligacy, must import our capital. Maybe that doesn’t make difference; perhaps capital is capital and knows no boundaries. I draw no comfort from such anodyne reassurances, however, and would much rather have a healthy supply of good old domestic savings when faced with a prolonged period of economic difficulty, but perhaps this attitude arises from my hopelessly dated view of the world, financial and otherwise.
There are more than financial consequences arising from the wanton profligacy of the modern American, however. I contend that there are serious moral, spiritual, and psychological causes and consequences of our inability to save. To people like me, the spending we see all around us has its basis in some sort of profound emptiness that people are trying to fill by accumulating piles of ultimately worthless geegaws in an attempt to reassure themselves that everything is, and they are, alright. Such attempts to fulfill deep-seated needs with superficial material forms of self-assurance are bound to fail, and ultimately cause people to neglect more effective, and rather obvious, solutions to our problems. To put it succinctly, excessive spending is a serious character flaw. There is indeed something satisfying, indeed noble, about aggressively saving and willfully sharing the fruits of one’s labor with those in need rather than blowing every dollar on, well, overpriced crap.
A few weeks ago, my wife and I were visiting her family on Long Island. As we were driving to a local water park (Splish-Splash in Riverhead, which I highly recommend, by the way, but not at full retail. We got our tickets at a steep discount as part of a fundraising effort by our niece’s Girl Scout troop.), we heard a report on WCBS about the recession’s and high gas prices’ forcing people to cut back on things that they had grown used to purchasing. As all these stories go, such forced frugality was portrayed as a near tragedy. But my wife, who shares my outlook on spending and saving, pointed out that, if there is a silver lining in this recession, it is that perhaps people will come to realize that they have been, er, urinating away money on useless junk for years, junk that they can easily do without. I have long contended on these pages that we are due for a recession in order to clear out financial and economic excesses. But I also agree with my wife that we are due for a recession in order to clear up personal financial excesses by forcing a reexamination of what is really important and what is clearly extraneous, and ultimately debilitating, in our lives.
Of course, my wife, like most human beings, is more optimistic than I am. When we arrived at Splish-Splash, I was waiting for the rest of our group outside the restrooms. Directly across from this particular set of restrooms was one of those silly basketball games in which the sucker forks over a couple bucks and attempts to sink a basket in order to win a worthless piece of figurative dung. I noticed that there were no takers in the ten minutes or so I waited for my kids, wife, in-laws, nieces, nephews, etc. When I happened to walk by the same “attraction” later in the day, I noticed that there were also no takers. Initially, I thought this was good, a perfect example of the forced frugality that my wife and I had discussed. But then my good sense returned; people are not peeing their money away because they have little or nothing to pee away. But when (if?) prosperity ever returns and people have a few extra bucks in their pocket, they’ll be right back up to the silly carnival games and other components of the trough, lapping up the malodorous detritus that some smart operator is willing to sell them at a grossly inflated price. It’s inevitable; this is America. Money burns not only through our pockets, but through our flesh and what remains of our sinew to our very souls.
News and talk radio are currently replete with a commercial for a major auto insurance company, the scenario of which varies slightly, but proceeds generally like this: A subject encounters a friend in a bizarre situation or accompanied by a bizarre companion or companions. In one instance, a gaggle of groupies follows a rather non-descript woman. In another, a folk singer sits in the backseat of a guy’s car warbling aural pabulum to the annoyance all around him. When asked whence the paparazzi or anachronistic crooner came, the friend replies: “I saved so much on my auto insurance that I decided to hire a (folksinger, entourage, etc., depending on the particular scenario).” If you listen to news or talk radio, you know the ad.
I realize that these ads are just a fatuous and largely failed attempt at humor. However, being I, I see a profound message in these ads. Notice that the insured never says anything like “I saved so much on auto insurance that I decided to put some money away for retirement (or save for my kid’s education, or build up my emergency nest egg, etc.)” No, it’s always some exaggeratedly ridiculous use for the money. Again, a feeble attempt at humor. But I would be willing to wager that the writers of the aforementioned commercial never considered having their insureds talking about investing or otherwise putting away the money they saved. Americans simply are incapable of saving money, and many do not even consider doing so an option. If they save on one thing, they just blow the money on something else, usually some sort of useless gimcrack that brings, at most, transitory pleasure, and then go on to complain about how they “can’t make ends meet.”
The financial consequences of a country with an utter inability to save are obvious, if concealed for the last fifteen or so years. For example, many experts compare the economic and financial situation we face today with the post real estate bubble malaise confronted by Japan in the ‘90s. However, there is a profound difference between the two situations: Japan didn’t have to import capital while we, due to our profligacy, must import our capital. Maybe that doesn’t make difference; perhaps capital is capital and knows no boundaries. I draw no comfort from such anodyne reassurances, however, and would much rather have a healthy supply of good old domestic savings when faced with a prolonged period of economic difficulty, but perhaps this attitude arises from my hopelessly dated view of the world, financial and otherwise.
There are more than financial consequences arising from the wanton profligacy of the modern American, however. I contend that there are serious moral, spiritual, and psychological causes and consequences of our inability to save. To people like me, the spending we see all around us has its basis in some sort of profound emptiness that people are trying to fill by accumulating piles of ultimately worthless geegaws in an attempt to reassure themselves that everything is, and they are, alright. Such attempts to fulfill deep-seated needs with superficial material forms of self-assurance are bound to fail, and ultimately cause people to neglect more effective, and rather obvious, solutions to our problems. To put it succinctly, excessive spending is a serious character flaw. There is indeed something satisfying, indeed noble, about aggressively saving and willfully sharing the fruits of one’s labor with those in need rather than blowing every dollar on, well, overpriced crap.
A few weeks ago, my wife and I were visiting her family on Long Island. As we were driving to a local water park (Splish-Splash in Riverhead, which I highly recommend, by the way, but not at full retail. We got our tickets at a steep discount as part of a fundraising effort by our niece’s Girl Scout troop.), we heard a report on WCBS about the recession’s and high gas prices’ forcing people to cut back on things that they had grown used to purchasing. As all these stories go, such forced frugality was portrayed as a near tragedy. But my wife, who shares my outlook on spending and saving, pointed out that, if there is a silver lining in this recession, it is that perhaps people will come to realize that they have been, er, urinating away money on useless junk for years, junk that they can easily do without. I have long contended on these pages that we are due for a recession in order to clear out financial and economic excesses. But I also agree with my wife that we are due for a recession in order to clear up personal financial excesses by forcing a reexamination of what is really important and what is clearly extraneous, and ultimately debilitating, in our lives.
Of course, my wife, like most human beings, is more optimistic than I am. When we arrived at Splish-Splash, I was waiting for the rest of our group outside the restrooms. Directly across from this particular set of restrooms was one of those silly basketball games in which the sucker forks over a couple bucks and attempts to sink a basket in order to win a worthless piece of figurative dung. I noticed that there were no takers in the ten minutes or so I waited for my kids, wife, in-laws, nieces, nephews, etc. When I happened to walk by the same “attraction” later in the day, I noticed that there were also no takers. Initially, I thought this was good, a perfect example of the forced frugality that my wife and I had discussed. But then my good sense returned; people are not peeing their money away because they have little or nothing to pee away. But when (if?) prosperity ever returns and people have a few extra bucks in their pocket, they’ll be right back up to the silly carnival games and other components of the trough, lapping up the malodorous detritus that some smart operator is willing to sell them at a grossly inflated price. It’s inevitable; this is America. Money burns not only through our pockets, but through our flesh and what remains of our sinew to our very souls.
Wednesday, July 9, 2008
(SORT OF) STRICT CONSTRUCTIONISM
7/9/08
A bipartisan study group led by none other than James Baker III, former Secretary of State and perhaps the most adept human being at turning political connections into cash, and Warren Christopher, another former Secretary of State and perpetual hanger-on and political groupie, has recommended that Congress pass legislation requiring the president to consult lawmakers before going to war. According to the proposal by Secretaries Baker and Christopher, the president should be required to inform Congress of plans to engage in any “significant armed conflict.” Congress would then have 30 days to either approve or disapprove such action.
Hmm…
Perhaps I am assuming too much here, given the propensity of “modern” politicians to ignore what they consider this quaint old anachronism, but surely Secretaries Baker and Christopher and their assorted toadies are aware of a document called the Constitution of the United States of America. Article 1, Section 8 of the aforementioned document outlines the powers of the legislation branch, and lists, among those powers:
To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water;
(Emphasis mine)
Doesn’t that about cover it? Had we not routinely ignored this wise and restrained enumeration of legislative powers, we could have avoided a lot of disasters, including Vietnam and Iraq. Rather than forming a commission that serves as an opportunity for former politicians to make and reinforce contacts with which to extract more money from the taxpayers, why not just keep things simple and return to Constitutional government?
Oh, yeah, I forgot. One of the presidential candidates proposed such radicalism this election year and was routinely dismissed as some kind of kook. He obviously got nowhere with the modern, well informed American electorate.
On a related note…
It’s interesting how self-styled “conservatives” piously proclaim their fealty to the Constitution when it suits their purposes but routinely ignore it in such minor matters as sending people off to their potential deaths at the whim of a president.
A bipartisan study group led by none other than James Baker III, former Secretary of State and perhaps the most adept human being at turning political connections into cash, and Warren Christopher, another former Secretary of State and perpetual hanger-on and political groupie, has recommended that Congress pass legislation requiring the president to consult lawmakers before going to war. According to the proposal by Secretaries Baker and Christopher, the president should be required to inform Congress of plans to engage in any “significant armed conflict.” Congress would then have 30 days to either approve or disapprove such action.
Hmm…
Perhaps I am assuming too much here, given the propensity of “modern” politicians to ignore what they consider this quaint old anachronism, but surely Secretaries Baker and Christopher and their assorted toadies are aware of a document called the Constitution of the United States of America. Article 1, Section 8 of the aforementioned document outlines the powers of the legislation branch, and lists, among those powers:
To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water;
(Emphasis mine)
Doesn’t that about cover it? Had we not routinely ignored this wise and restrained enumeration of legislative powers, we could have avoided a lot of disasters, including Vietnam and Iraq. Rather than forming a commission that serves as an opportunity for former politicians to make and reinforce contacts with which to extract more money from the taxpayers, why not just keep things simple and return to Constitutional government?
Oh, yeah, I forgot. One of the presidential candidates proposed such radicalism this election year and was routinely dismissed as some kind of kook. He obviously got nowhere with the modern, well informed American electorate.
On a related note…
It’s interesting how self-styled “conservatives” piously proclaim their fealty to the Constitution when it suits their purposes but routinely ignore it in such minor matters as sending people off to their potential deaths at the whim of a president.
Thursday, July 3, 2008
“OH YEAH, HE’S A BRIGHT KID, REALLY SHARP…”
7/3/08
Yesterday’s (i.e., 7/2/08’s) Wall Street Journal contained a heart rending front page story about the travails of investors in a hedge fund run by Mr. A.R. Thane Ritchie, 42, of nearby Wheaton, Illinois. Mr. Ritchie is the stepson of the near legendary Joe Ritchie, one of the founders of Chicago Research and Trading (“CRT”), which was bought by then Nation’s Bank, resulting in a supershot of financial adrenaline for the already loaded, and deservedly so, elder Mr. Ritchie. It seems that investors in young Mr. Ritchie’s fund are down, and down big, approximately 50%. Unable, or unwilling, to come up with the spondulicks his investors are demanding, Mr. Ritchie has severely restricted withdrawals from his fund. Some of the investors, including the family of the clearly legendary Wayne Huizenga, have taken Mr. Ritchie to court.
This story evokes several thoughts, but I will dwell on only a few.
First, it is very difficult to sympathize with people who invest in hedge funds run by guys whose most salient qualification is their ancestry. Yes, young Mr. Ritchie had some experience trading, garnered at the elder Mr. Ritchie’s firm, and had established a pretty good record. But there are plenty of people around with a degree of trading acumen at least as good as that of Mr. Ritchie, and people like the Huizengas are not throwing money at them. Perhaps those who invested with Mr. Ritchie should have done a little more research than checking out his lineage.
Second, vanity sells hedge funds as surely as it sells Jaguars. Some hedge funds are doubtless very good, but all are very expensive and, on the whole, there is little if any conclusive evidence that such funds outperform comparable, much cheaper, mutual funds. Have those who invested with Mr. Ritchie and come to regret it ever heard of an index fund? Or, lately, a decently run TIP fund? I suppose the typical hedge fund manager doesn’t want to bear the ignominy of attending a cocktail party in Greenwich, CT or Oak Brook, IL and having to admit that one is invested in a dumb old mutual fund. Much better to say that one is invested in a big time hedge fund run by, say, “a really smart guy, rowed crew at Yale, left Goldman when they didn’t make him a partner” or “Joe Ritchie’s kid…sharp, really sharp.” Oh well. Perhaps there is some solace for such sophisticated investors in the bragging disguised as complaining in which they can engage at the aforementioned cocktail parties. “Yeah, I lost millions investing with this really sharp guy. Must have had a bad year, but no one could have seen it coming. I guess I’ll have to take him to court if I get around to it. But I hear (insert name of well connected neighbor)’s kid has started a hedge fund and I can get in on that one for only a couple mill.”
Third, apparently Mr. Ritchie’s fatal error was his transformation from relatively low risk arbitrage trading to big bets in insurance, private equity, and real estate, areas in which his expertise was, er, limited. The most salient quote in the article from Mr. Ritchie was “I have a tendency to come on strong when I know I’m right.” Hmm…
I’m a little older than Mr. Ritchie and clearly not as smart as he because I haven’t known I’m right in a long, long time. In fact, the last time I’ve known I was right, I was far younger than Mr. Ritchie is today. I occasionally think I’m right, but even that happens far less than it used to. Having said all that, I am quite sure I am right in one of my approaches to investing: I never invest money with people who know they’re right, especially when they “come on strong when (they) know (they’re) right.” But, then again, I am not a well connected multi-millionaire who invests on the basis of hedge fund managers’ last names.
Yesterday’s (i.e., 7/2/08’s) Wall Street Journal contained a heart rending front page story about the travails of investors in a hedge fund run by Mr. A.R. Thane Ritchie, 42, of nearby Wheaton, Illinois. Mr. Ritchie is the stepson of the near legendary Joe Ritchie, one of the founders of Chicago Research and Trading (“CRT”), which was bought by then Nation’s Bank, resulting in a supershot of financial adrenaline for the already loaded, and deservedly so, elder Mr. Ritchie. It seems that investors in young Mr. Ritchie’s fund are down, and down big, approximately 50%. Unable, or unwilling, to come up with the spondulicks his investors are demanding, Mr. Ritchie has severely restricted withdrawals from his fund. Some of the investors, including the family of the clearly legendary Wayne Huizenga, have taken Mr. Ritchie to court.
This story evokes several thoughts, but I will dwell on only a few.
First, it is very difficult to sympathize with people who invest in hedge funds run by guys whose most salient qualification is their ancestry. Yes, young Mr. Ritchie had some experience trading, garnered at the elder Mr. Ritchie’s firm, and had established a pretty good record. But there are plenty of people around with a degree of trading acumen at least as good as that of Mr. Ritchie, and people like the Huizengas are not throwing money at them. Perhaps those who invested with Mr. Ritchie should have done a little more research than checking out his lineage.
Second, vanity sells hedge funds as surely as it sells Jaguars. Some hedge funds are doubtless very good, but all are very expensive and, on the whole, there is little if any conclusive evidence that such funds outperform comparable, much cheaper, mutual funds. Have those who invested with Mr. Ritchie and come to regret it ever heard of an index fund? Or, lately, a decently run TIP fund? I suppose the typical hedge fund manager doesn’t want to bear the ignominy of attending a cocktail party in Greenwich, CT or Oak Brook, IL and having to admit that one is invested in a dumb old mutual fund. Much better to say that one is invested in a big time hedge fund run by, say, “a really smart guy, rowed crew at Yale, left Goldman when they didn’t make him a partner” or “Joe Ritchie’s kid…sharp, really sharp.” Oh well. Perhaps there is some solace for such sophisticated investors in the bragging disguised as complaining in which they can engage at the aforementioned cocktail parties. “Yeah, I lost millions investing with this really sharp guy. Must have had a bad year, but no one could have seen it coming. I guess I’ll have to take him to court if I get around to it. But I hear (insert name of well connected neighbor)’s kid has started a hedge fund and I can get in on that one for only a couple mill.”
Third, apparently Mr. Ritchie’s fatal error was his transformation from relatively low risk arbitrage trading to big bets in insurance, private equity, and real estate, areas in which his expertise was, er, limited. The most salient quote in the article from Mr. Ritchie was “I have a tendency to come on strong when I know I’m right.” Hmm…
I’m a little older than Mr. Ritchie and clearly not as smart as he because I haven’t known I’m right in a long, long time. In fact, the last time I’ve known I was right, I was far younger than Mr. Ritchie is today. I occasionally think I’m right, but even that happens far less than it used to. Having said all that, I am quite sure I am right in one of my approaches to investing: I never invest money with people who know they’re right, especially when they “come on strong when (they) know (they’re) right.” But, then again, I am not a well connected multi-millionaire who invests on the basis of hedge fund managers’ last names.
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