6/10/09
This morning’s Chicago Sun-Times reports that Laura Mueller-Soppart, a 2009 graduate of Walter Payton College Prep, one of our fair city’s finest magnet high schools, will forgo attending her “dream school,” Georgetown University, for financial reasons. While Georgetown turned out to be quite miserly in its offer of financial assistance, Boston’s Northeastern University offered Ms. Mueller-Soppart a “nearly full ride,” according to the paper. While she decries the whole situation as “so incredibly unfair,” she will, quite wisely, attend Northeastern. As one who has always been interested in the murky process of college admissions (See my 6/8/09 post “WE ARE LOYAL TO YOU, ILLINOIS…”), and who is growing especially interested as my children approach college, the story of Ms. Mueller-Soppart immediately attracted my attention.
Just how unfair is it to have to accept a “nearly full ride” to one of the premier universities in a town characterized by its fulsome assortment of outstanding institutions of higher learning? At least she didn’t have to bear the ignominy that so many of her classmates will have to endure: attending a (horrors!) state university. If a full ride to a place like Northeastern is unfair, I, and most of my readers, can only ask the Almighty visit such unfairness upon my offspring. But to the extent that one can argue that such a cruel fate is indeed unfair, Ms. Mueller-Soppart has learned a valuable lesson: Life is often unfair and we just have to adapt.
More important, though, one is heartened by the good sense that Ms. Mueller-Soppart has displayed. Unlike most kids her age, and, indeed, most latter day Americans, she did not, figuratively or literally, roll on the floor, kick and scream, stamp her feet and then go off and blow the $200,000 on her first choice because it was “so worth it.” It is encouraging to learn that there are at least some young people, or even some people, capable of making rational decisions. Given Ms. Mueller-Soppart apparently strong academic background and abundant good sense, she will do well at Northeastern and emerge delighted with her social/academic/extracurricular experience there, like most people who had to “settle” for their second or third choices of matriculation venues. She will also emerge, as she so astutely discerned when she asked herself
“Do I go $200,000 in the hole because so many told me Georgetown was indispensable, or do I take the full ride?”
either entirely or nearly debt free. And, given the wonderful experience she will undoubtedly have at Northeastern, she will also learn that very few things in life, including Georgetown (or Harvard, Yale, or any of the other U of Is of the east) are indispensable.
But all the news is not good news for Ms. Mueller-Soppart. One of the reasons that Georgetown was so attractive to her was that it would, according to the Sun-Times, “put her at the center of the political universe.” Apparently, then, one of her aspirations is a big policy-making job in government. Unfortunately, few people with the manifest common sense and solid judgment of young Laura Mueller-Soppart have much of a future in the upper echelons of government; she would be horribly out of place on that island of ingénues. Thus, she may have to seek honest, and potentially far more lucrative, employment in the private sector, perhaps even in the real world of entrepreneurial endeavors. She shouldn’t fear, however; she will, in all likelihood, end up delighted with that similarly cruel fate.
Wednesday, June 10, 2009
Monday, June 8, 2009
“TEACH YOUR CHILDREN WELL…”
6/8/09
Over the weekend, my 16 year old daughter and 10 year old son were watching a rerun of “I’m a Celebrity, Get Me Outta’ Hear” on MTV. Yes, apparently Americans don’t get enough cotton candy (arsenic, really) for the mind on the networks on prime time; they feel compelled to continue the copious doses of mental anesthesia during their weekend afternoons. (How much time do people have on their hands, anyway?) And, yes, my kids shouldn’t be watching such headrot, but why make it the forbidden fruit? They’re bright enough to pick this stuff out for the intellectual intestinal detritus that it is.
After watching an episode of this drivel, apparently an episode rerun from very recently, my son told me:
“Daddy, these celebs are idiots. One asked the governor’s wife why her husband was going to jail. Everyone knows that, Daddy.”
Two thoughts and one emotion (PRIDE!!!) welled up as soon as those words left my son’s lips. First, this kid is a real chip off the old block with amazing powers of discernment; what a kid! Second, this was a time to relate a profound lesson to my son, to wit:
“Mark, now you’ve learned that celebrities are not celebrities because they are smart. They are celebrities because other people are stupid.”
At the expense of breaking my arm patting myself on the back, I thought that lesson I imparted to my young son was profound enough to post on the Insightful Pontificator. You might want to share it with your offspring.
Over the weekend, my 16 year old daughter and 10 year old son were watching a rerun of “I’m a Celebrity, Get Me Outta’ Hear” on MTV. Yes, apparently Americans don’t get enough cotton candy (arsenic, really) for the mind on the networks on prime time; they feel compelled to continue the copious doses of mental anesthesia during their weekend afternoons. (How much time do people have on their hands, anyway?) And, yes, my kids shouldn’t be watching such headrot, but why make it the forbidden fruit? They’re bright enough to pick this stuff out for the intellectual intestinal detritus that it is.
After watching an episode of this drivel, apparently an episode rerun from very recently, my son told me:
“Daddy, these celebs are idiots. One asked the governor’s wife why her husband was going to jail. Everyone knows that, Daddy.”
Two thoughts and one emotion (PRIDE!!!) welled up as soon as those words left my son’s lips. First, this kid is a real chip off the old block with amazing powers of discernment; what a kid! Second, this was a time to relate a profound lesson to my son, to wit:
“Mark, now you’ve learned that celebrities are not celebrities because they are smart. They are celebrities because other people are stupid.”
At the expense of breaking my arm patting myself on the back, I thought that lesson I imparted to my young son was profound enough to post on the Insightful Pontificator. You might want to share it with your offspring.
ROGER ON THAT MISSION TO SATURN
6/8/09
According to the German Economy Ministry, venerable German carmaker and soon to be ex-GM division Opel will not enter the U.S. market after being taken over by Canadian parts (very broadly construed) maker Magna. I say “Not so fast.”
Now that Roger Penske, uber-entrepreneur of the type who made this country great, has taken over Saturn, the entire game has changed for overseas car makers wishing to enter the U.S. market. According to the terms of the purchase of Saturn by Penske Auto Group (“PAG”), Penske will take over the Saturn name, dealerships, and parts distribution operations but will take over no manufacturing operations. GM will supply Saturn with cars for the next two years, but then Saturn will become a distribution arm for other manufacturers, clearly primarily, if not exclusively, foreign automakers who want to enter the U.S. market. Reportedly, Mr. Penske has either entered into or soon will enter into an agreement with Renault with the aim of distributing cars made by Samsung, a Korean manufacturer that Renault controls, by Renault, and possibly by Nissan. No reports indicate that the Renault/Saturn deal is an exclusive one, and one doubts that the astute Mr. Penske would risk putting all his chips on one number, especially so questionable a number, at least for the U.S., as Renault. He will be looking for other products to distribute. While various Chinese manufacturers (There are scores of them.) are the most talked about candidates, Opel is the most logical. The very good Saturn Aura already rides on the same platform as Opel mid-sized sedans (along with the Saab 9-3, the Pontiac G-6, and the Chevy Malibu) and the admittedly so-so Saturn Astra is merely a rebadged, and not even renamed, Opel Astra. In fact, not that long ago, GM execs, including Bob Lutz, were considering making Saturn little more than a distribution arm for slightly tweaked Opel products so that Saturn, still looking for a mission after twenty years in business, could become GM’s latest “import fighter.” The compromise finally reached resulted in the Saturn of today, a confused agglomeration of rebadged GM domestic vehicles and rebadged Opels. The “import fighter” mission was doomed from the start, as my readers were apprised when that mission was first proposed, by the lack of manual transmissions in all but two Saturn products, and then only in a few variations thereon. How does one fight “imports” when one lacks one of the most salient features of the “imports” one is trying to fight? Import fighter indeed. But that is another issue.
Despite confusion regarding what Saturn really is, no one can accuse it of not being a valuable franchise because of the goodwill it has developed among its retail customers. Saturn dealers actually treat people like human beings, unlike an increasing number of car dealers who treat their customers as gormless marks ready for plucking. (I should relate the story of the dealer that my brother and I visited a few weeks ago. Our salesman, who had difficulty both recalling the names of his products and forming an English word, let alone an English sentence (and not because he was from Poland, Mexico, or Pakistan; he simply never seemed to have learned his native language), told us that the federal government would write us a “simulus” check for $6,000 if we bought one of his (Korean and Japanese manufactured) cars that night. But that whole story, and there is plenty more to it, will perhaps become grist for another post. For now, the Quinn Brothers can only conclude that they must look quite stupid.) While this may, in many cases, be a safe assumption, common courtesy and business sense dictates verification before one assumes one’s customer is an idiot. At any rate, Saturn has a stellar reputation for customer service and a very loyal band of customers.
With Penske in charge of Saturn, the game of selling cars in the United States has changed. In the past, entering this market required building an expensive and hard to dismantle distribution network, developing a reputation, etc. Most foreign manufacturers decided it wasn’t worth the effort, especially considering the cut-throat nature of the U.S. market and the meddlesome tendencies of the U.S. government. Now, a manufacturer who might want to break into this market with only one or two products, perhaps even with limited potential volume, has access to a distribution channel that has already done the heavy lifting and to the knowledge of one of this country’s great car guys and businessmen. There will be the hurdle of being able to produce something Roger Penske will sell, and, given his reputation and strong desire to maintain it, this hurdle may be insurmountable for many manufacturers, but certainly not for all of them. There is plenty of great product overseas that could sell, albeit perhaps in limited volume, here. Some might even be brought over here, mirabile dictu, with the transmissions the Almighty intended for them; we can only hope! The Saturn network could make such products profitable here.
With Roger Penske in charge of Saturn, lots of overseas manufacturers, including Opel, have to be reassessing their absence from the U.S. market, even if they deny such aspirations for public consumption. This could make the car business interesting despite the anticipated strident efforts of the U.S. government to make car manufacturing and marketing about as much fun as providing, say, electric power.
According to the German Economy Ministry, venerable German carmaker and soon to be ex-GM division Opel will not enter the U.S. market after being taken over by Canadian parts (very broadly construed) maker Magna. I say “Not so fast.”
Now that Roger Penske, uber-entrepreneur of the type who made this country great, has taken over Saturn, the entire game has changed for overseas car makers wishing to enter the U.S. market. According to the terms of the purchase of Saturn by Penske Auto Group (“PAG”), Penske will take over the Saturn name, dealerships, and parts distribution operations but will take over no manufacturing operations. GM will supply Saturn with cars for the next two years, but then Saturn will become a distribution arm for other manufacturers, clearly primarily, if not exclusively, foreign automakers who want to enter the U.S. market. Reportedly, Mr. Penske has either entered into or soon will enter into an agreement with Renault with the aim of distributing cars made by Samsung, a Korean manufacturer that Renault controls, by Renault, and possibly by Nissan. No reports indicate that the Renault/Saturn deal is an exclusive one, and one doubts that the astute Mr. Penske would risk putting all his chips on one number, especially so questionable a number, at least for the U.S., as Renault. He will be looking for other products to distribute. While various Chinese manufacturers (There are scores of them.) are the most talked about candidates, Opel is the most logical. The very good Saturn Aura already rides on the same platform as Opel mid-sized sedans (along with the Saab 9-3, the Pontiac G-6, and the Chevy Malibu) and the admittedly so-so Saturn Astra is merely a rebadged, and not even renamed, Opel Astra. In fact, not that long ago, GM execs, including Bob Lutz, were considering making Saturn little more than a distribution arm for slightly tweaked Opel products so that Saturn, still looking for a mission after twenty years in business, could become GM’s latest “import fighter.” The compromise finally reached resulted in the Saturn of today, a confused agglomeration of rebadged GM domestic vehicles and rebadged Opels. The “import fighter” mission was doomed from the start, as my readers were apprised when that mission was first proposed, by the lack of manual transmissions in all but two Saturn products, and then only in a few variations thereon. How does one fight “imports” when one lacks one of the most salient features of the “imports” one is trying to fight? Import fighter indeed. But that is another issue.
Despite confusion regarding what Saturn really is, no one can accuse it of not being a valuable franchise because of the goodwill it has developed among its retail customers. Saturn dealers actually treat people like human beings, unlike an increasing number of car dealers who treat their customers as gormless marks ready for plucking. (I should relate the story of the dealer that my brother and I visited a few weeks ago. Our salesman, who had difficulty both recalling the names of his products and forming an English word, let alone an English sentence (and not because he was from Poland, Mexico, or Pakistan; he simply never seemed to have learned his native language), told us that the federal government would write us a “simulus” check for $6,000 if we bought one of his (Korean and Japanese manufactured) cars that night. But that whole story, and there is plenty more to it, will perhaps become grist for another post. For now, the Quinn Brothers can only conclude that they must look quite stupid.) While this may, in many cases, be a safe assumption, common courtesy and business sense dictates verification before one assumes one’s customer is an idiot. At any rate, Saturn has a stellar reputation for customer service and a very loyal band of customers.
With Penske in charge of Saturn, the game of selling cars in the United States has changed. In the past, entering this market required building an expensive and hard to dismantle distribution network, developing a reputation, etc. Most foreign manufacturers decided it wasn’t worth the effort, especially considering the cut-throat nature of the U.S. market and the meddlesome tendencies of the U.S. government. Now, a manufacturer who might want to break into this market with only one or two products, perhaps even with limited potential volume, has access to a distribution channel that has already done the heavy lifting and to the knowledge of one of this country’s great car guys and businessmen. There will be the hurdle of being able to produce something Roger Penske will sell, and, given his reputation and strong desire to maintain it, this hurdle may be insurmountable for many manufacturers, but certainly not for all of them. There is plenty of great product overseas that could sell, albeit perhaps in limited volume, here. Some might even be brought over here, mirabile dictu, with the transmissions the Almighty intended for them; we can only hope! The Saturn network could make such products profitable here.
With Roger Penske in charge of Saturn, lots of overseas manufacturers, including Opel, have to be reassessing their absence from the U.S. market, even if they deny such aspirations for public consumption. This could make the car business interesting despite the anticipated strident efforts of the U.S. government to make car manufacturing and marketing about as much fun as providing, say, electric power.
“WE ARE LOYAL TO YOU, ILLINOIS…”
6/9/09
State Representative Mike Boland, a Democrat from East Moline, IL, has asked Illinois House Speaker Mike Madigan to hold legislative hearings on the “clout list” scandal at the University of Illinois, the system in which candidates for admission to my alma mater gained favorable treatment through (surprise!) political connections. In Illinois?! I’m shocked…shocked! Mr. Boland has also demanded that U of I President B. Joseph White and trustees who meddled in the admission process resign. The bloviating Mr. Boland says of Dr. White and the assorted trustees:
“They were trusted to protect our university. In my eyes, they failed in that regard and they should resign.”
Mr. Boland, by jumping on his soapbox in this case, joins a long list of blowhards who jump on any issue to get their names in the paper, get the attention of an apathetic electorate, and thus perhaps improve their chances of reelection by a an electorate that more and more comes to resemble Sponge Bob’s pal Patrick when it enters the voting booth, to wit “Hey, I know this guy’s name; I think I’ll vote for him.” Mr. Boland addresses none of the problems afflicting the U of I, which is at least as much my university as it is his; I don’t know if Mr. Boland is an alumnus and, even if he is, I’d be willing to compare the size of the checks I personally write to the U of I Foundation to those he personally writes, i.e., from his own account, not from public funds. Note that he calls for the resignation of none of the state legislators and other public servants who pushed “their” candidates for admission. Mr. Boland says these legislators must answer to the voters in the next election and thus will presumably have to answer for their actions that way. Thus, he bravely assumes that the highly informed and intensely interested electorate will take enough time away from “Three Men and a Boy,” “Marooned” (or whatever the latest idiotic cotton candy for the mind TV shows top the current popularity charts), and other such compelling prime time endeavors to pick up a newspaper and will endure the backbreaking mental task of remembering this scandal when legislative elections roll around in 2010. How will our brave legislators be able to face such demanding taskmasters?
Maybe the trustees should resign. I don’t know much about this particular crop of notables, but, traditionally, the post of U of I trustee is akin to the post of Professional Wrestling Commissioner of the State of Illinois (a post a friend of my dad actually held in the 1960s): a reward for loyally performing the function of political toady for many years or for a contribution strategically made, demanding little and conferring much in the way of prestige, perks, and incidental emoluments. A less circumspect observer than the Insightful Pontificator would refer to most such trustees, at least historically, as political hacks. They probably felt that bowing to pressure from the people who rewarded them their sinecures was part of their job description, or at least the price of keeping their posts. However, they should have known better, and probably should be forced to resign in order to be replaced by other hangers-on and wannabes with similar motivations and goals. This will, of course, accomplish much.
But should President White resign for bowing to pressure, if indeed he did, from people who control his ever tightening budget and are incessantly, but especially at budget time, making demands to “do me this favor”? Yes, he should have said “No!”, but this is Illinois and President White has responsibility for maintaining the academic reputation of one of the finest universities in the world on what is rapidly becoming a shoestring. To ask President White to resign as a result of the “clout list” scandal, while effectively exonerating the politicians who are constantly trying to muscle him, is a classic case of (and do I hate to use these words!) blaming the victim. (Paying Ron Zook a million a year, though…now that’s another matter.) But perhaps the worst, and most hypocritical, aspect of Mr. Boland’s plan, however, is that, if Speaker Madigan abets Mr. Boland’s grandstanding and holds the hearings Mr. Boland is demanding, those who were doing the muscling will be sitting in judgment of those whom they muscled. Only in Illinois…and maybe North Korea.
State Representative Mike Boland, a Democrat from East Moline, IL, has asked Illinois House Speaker Mike Madigan to hold legislative hearings on the “clout list” scandal at the University of Illinois, the system in which candidates for admission to my alma mater gained favorable treatment through (surprise!) political connections. In Illinois?! I’m shocked…shocked! Mr. Boland has also demanded that U of I President B. Joseph White and trustees who meddled in the admission process resign. The bloviating Mr. Boland says of Dr. White and the assorted trustees:
“They were trusted to protect our university. In my eyes, they failed in that regard and they should resign.”
Mr. Boland, by jumping on his soapbox in this case, joins a long list of blowhards who jump on any issue to get their names in the paper, get the attention of an apathetic electorate, and thus perhaps improve their chances of reelection by a an electorate that more and more comes to resemble Sponge Bob’s pal Patrick when it enters the voting booth, to wit “Hey, I know this guy’s name; I think I’ll vote for him.” Mr. Boland addresses none of the problems afflicting the U of I, which is at least as much my university as it is his; I don’t know if Mr. Boland is an alumnus and, even if he is, I’d be willing to compare the size of the checks I personally write to the U of I Foundation to those he personally writes, i.e., from his own account, not from public funds. Note that he calls for the resignation of none of the state legislators and other public servants who pushed “their” candidates for admission. Mr. Boland says these legislators must answer to the voters in the next election and thus will presumably have to answer for their actions that way. Thus, he bravely assumes that the highly informed and intensely interested electorate will take enough time away from “Three Men and a Boy,” “Marooned” (or whatever the latest idiotic cotton candy for the mind TV shows top the current popularity charts), and other such compelling prime time endeavors to pick up a newspaper and will endure the backbreaking mental task of remembering this scandal when legislative elections roll around in 2010. How will our brave legislators be able to face such demanding taskmasters?
Maybe the trustees should resign. I don’t know much about this particular crop of notables, but, traditionally, the post of U of I trustee is akin to the post of Professional Wrestling Commissioner of the State of Illinois (a post a friend of my dad actually held in the 1960s): a reward for loyally performing the function of political toady for many years or for a contribution strategically made, demanding little and conferring much in the way of prestige, perks, and incidental emoluments. A less circumspect observer than the Insightful Pontificator would refer to most such trustees, at least historically, as political hacks. They probably felt that bowing to pressure from the people who rewarded them their sinecures was part of their job description, or at least the price of keeping their posts. However, they should have known better, and probably should be forced to resign in order to be replaced by other hangers-on and wannabes with similar motivations and goals. This will, of course, accomplish much.
But should President White resign for bowing to pressure, if indeed he did, from people who control his ever tightening budget and are incessantly, but especially at budget time, making demands to “do me this favor”? Yes, he should have said “No!”, but this is Illinois and President White has responsibility for maintaining the academic reputation of one of the finest universities in the world on what is rapidly becoming a shoestring. To ask President White to resign as a result of the “clout list” scandal, while effectively exonerating the politicians who are constantly trying to muscle him, is a classic case of (and do I hate to use these words!) blaming the victim. (Paying Ron Zook a million a year, though…now that’s another matter.) But perhaps the worst, and most hypocritical, aspect of Mr. Boland’s plan, however, is that, if Speaker Madigan abets Mr. Boland’s grandstanding and holds the hearings Mr. Boland is demanding, those who were doing the muscling will be sitting in judgment of those whom they muscled. Only in Illinois…and maybe North Korea.
Thursday, June 4, 2009
A TALE OF TWO MORE COUNTRIES
6/4/09
This morning’s Wall Street Journal reported that Mr. Najib Abdul Razak, who is both prime minister and finance minister of Asian Tiger Malaysia, has been discussing with Chinese authorities the possibility of conducting trade between these two countries in the Chinese yuan and in the Malaysian ringgit rather than in the dollar, currently the currency in which Malaysian-Chinese, and most world, trade is transacted. These two Far Eastern economic giants are considering this titanic move because both Mr. Najib and his Chinese colleagues are concerned about the debasement of our currency that constitutes the Bush/Obama financial/dollar policy. As Mr. Najib put it:
“What worries us is that the (U.S. budget) deficit is being financed by printing more money. That is what is happening. The Treasury of the United States is printing more notes.”
Mr. Najib is either factually wrong in that last sentence or is very cleverly pointing out that he knows who is really in charge of monetary policy of the United States. I’m betting on the latter. (Perhaps Mr. Najib has been speaking with Angela Merkel; see yesterday’s post “A TALE OF TWO COUNTRIES.”) But even if the former is true, the substance of his comment is absolutely correct: we are turbocharging our printing presses over here to the detriment of a lot of parties, perhaps especially to those long a lot of debt denominated in dollars, like the Malaysians and the Chinese.
American “experts” (Presumably, we are talking about experts in monetary and currency policy, not experts in the latest lurid, or just outright inane, exploits of the stars of, say, “Sex in the City,” “Desperate Housewives,” or “American Idol,” generally the type of expertise normally associated with present day Americans.) dismiss the notion of a serious threat to the dollar’s position as the global benchmark for trade. These experts point out that, right now, it is difficult to trade yuan outside of China. This is true, but please note the words “right now,” especially the word “right.”
Three thoughts come to mind:
First, the attitude displayed by the aforementioned American “experts” reminds me of a story my neighbor recently told me. This story is sufficiently long lived and popular that most of you have probably heard it in some form or another, especially if you have attended business school, or even taken a business class, in the last, oh, thirty years or so. It is sometimes dismissed as apocryphal, but it is not.
It seems that my neighbor’s dad was working at one of the Big 3 car companies back in the late ‘60s and early ‘70s. At that time, visitors from Japan would occasionally visit automobile assembly and other manufacturing plants of the Big 3. These visitors would act like the stereotypical Japanese, taking endless pictures and asking many, and very good, questions. The guys working at the plants, both on the line and in the offices, were, out of earshot, dismissive, if not outright derisive, toward their visitors. They were Japanese, foreigners, after all. What did they know? They made junky cars and would never catch up to us in manufacturing capability. We all know the rest of the story, and the currency “experts” are taking the same attitude toward challenges to the dollar that those car guys of yore took toward challenges to our car industry.
Second, the U.S. Treasury and the Fed ought to thank the good Lord each night for the emergence of the euro. Given the post-war German attitude toward monetary policy, and the recent comments of Chancellor Angela Merkel and monetary authorities in Germany (Again, see yesterday’s post “A TALE OF TWO COUNTRIES.”), the dollar might have a very serious challenger for international currency benchmark if the deutschemark were still alive today. (Yes, I know, I know; Germany is too small, it’s too socialistic, it’s too dependent on us for defense. The euro might “some day” be a serious competitor, but the deutschemark never stood a chance…just like that goofy sounding company, what’s its name? TYE OH DUH, or something strange like that.) However, this competitor’s having left the building does not mean a new, potentially stronger, challenger will not arise, and do so very soon.
Third, while the Pontificator was not designed, and was never intended, to make specific investment recommendations, I have liked gold for a while now, as I have liked oil. (See my 6/3/09 post, “…UP FROM THE GROUND COME A BUBBLIN’ CRUDE…”, written when USO was at $27.96; USO is $37.69 as I write this.) I seem to like gold more every day, and especially on those days when Obsequious Ben Bernanke and/or Preppy Timmy Geithner opine on financial/monetary policy, and most especially when those “experts’” thoughts are easily contrasted with roughly contemporaneous ruminations from adults like Ms. Merkel or Mr. Najib. I have been manifesting this enthusiasm for gold by buying the ETF symbol GLD and relatively long (as late as January, 2010 and looking to go out longer) call options thereon. I manifest my continuing enthusiasm for oil by buying call options on the ETF symbol USO; buying USO itself results in having to delay filing one’s taxes, and potential tax complications, while one waits for a K-1 from USO, since USO is technically a limited partnership. No such problem exists for GLD.
Current prices:
GLD $96.10
USO $37.69
This morning’s Wall Street Journal reported that Mr. Najib Abdul Razak, who is both prime minister and finance minister of Asian Tiger Malaysia, has been discussing with Chinese authorities the possibility of conducting trade between these two countries in the Chinese yuan and in the Malaysian ringgit rather than in the dollar, currently the currency in which Malaysian-Chinese, and most world, trade is transacted. These two Far Eastern economic giants are considering this titanic move because both Mr. Najib and his Chinese colleagues are concerned about the debasement of our currency that constitutes the Bush/Obama financial/dollar policy. As Mr. Najib put it:
“What worries us is that the (U.S. budget) deficit is being financed by printing more money. That is what is happening. The Treasury of the United States is printing more notes.”
Mr. Najib is either factually wrong in that last sentence or is very cleverly pointing out that he knows who is really in charge of monetary policy of the United States. I’m betting on the latter. (Perhaps Mr. Najib has been speaking with Angela Merkel; see yesterday’s post “A TALE OF TWO COUNTRIES.”) But even if the former is true, the substance of his comment is absolutely correct: we are turbocharging our printing presses over here to the detriment of a lot of parties, perhaps especially to those long a lot of debt denominated in dollars, like the Malaysians and the Chinese.
American “experts” (Presumably, we are talking about experts in monetary and currency policy, not experts in the latest lurid, or just outright inane, exploits of the stars of, say, “Sex in the City,” “Desperate Housewives,” or “American Idol,” generally the type of expertise normally associated with present day Americans.) dismiss the notion of a serious threat to the dollar’s position as the global benchmark for trade. These experts point out that, right now, it is difficult to trade yuan outside of China. This is true, but please note the words “right now,” especially the word “right.”
Three thoughts come to mind:
First, the attitude displayed by the aforementioned American “experts” reminds me of a story my neighbor recently told me. This story is sufficiently long lived and popular that most of you have probably heard it in some form or another, especially if you have attended business school, or even taken a business class, in the last, oh, thirty years or so. It is sometimes dismissed as apocryphal, but it is not.
It seems that my neighbor’s dad was working at one of the Big 3 car companies back in the late ‘60s and early ‘70s. At that time, visitors from Japan would occasionally visit automobile assembly and other manufacturing plants of the Big 3. These visitors would act like the stereotypical Japanese, taking endless pictures and asking many, and very good, questions. The guys working at the plants, both on the line and in the offices, were, out of earshot, dismissive, if not outright derisive, toward their visitors. They were Japanese, foreigners, after all. What did they know? They made junky cars and would never catch up to us in manufacturing capability. We all know the rest of the story, and the currency “experts” are taking the same attitude toward challenges to the dollar that those car guys of yore took toward challenges to our car industry.
Second, the U.S. Treasury and the Fed ought to thank the good Lord each night for the emergence of the euro. Given the post-war German attitude toward monetary policy, and the recent comments of Chancellor Angela Merkel and monetary authorities in Germany (Again, see yesterday’s post “A TALE OF TWO COUNTRIES.”), the dollar might have a very serious challenger for international currency benchmark if the deutschemark were still alive today. (Yes, I know, I know; Germany is too small, it’s too socialistic, it’s too dependent on us for defense. The euro might “some day” be a serious competitor, but the deutschemark never stood a chance…just like that goofy sounding company, what’s its name? TYE OH DUH, or something strange like that.) However, this competitor’s having left the building does not mean a new, potentially stronger, challenger will not arise, and do so very soon.
Third, while the Pontificator was not designed, and was never intended, to make specific investment recommendations, I have liked gold for a while now, as I have liked oil. (See my 6/3/09 post, “…UP FROM THE GROUND COME A BUBBLIN’ CRUDE…”, written when USO was at $27.96; USO is $37.69 as I write this.) I seem to like gold more every day, and especially on those days when Obsequious Ben Bernanke and/or Preppy Timmy Geithner opine on financial/monetary policy, and most especially when those “experts’” thoughts are easily contrasted with roughly contemporaneous ruminations from adults like Ms. Merkel or Mr. Najib. I have been manifesting this enthusiasm for gold by buying the ETF symbol GLD and relatively long (as late as January, 2010 and looking to go out longer) call options thereon. I manifest my continuing enthusiasm for oil by buying call options on the ETF symbol USO; buying USO itself results in having to delay filing one’s taxes, and potential tax complications, while one waits for a K-1 from USO, since USO is technically a limited partnership. No such problem exists for GLD.
Current prices:
GLD $96.10
USO $37.69
Wednesday, June 3, 2009
A TALE OF TWO COUNTRIES
6/3/09
Obsequious Ben Bernanke, appearing today before the House Budget Committee, has let loose with two whoppers of brobdingnagian proportions. First, Mr. Bernanke stated that the Fed “will not monetize” the federal budget deficit. In what world can that can be a true statement? The Fed is buying government securities at a clip not seen in our country’s history. The Fed is buying long term treasuries, apparently in an attempt, so far utterly failing, to flatten the yield curve, for the first time in years and with a degree of enthusiasm that makes the woman on the Progessive.com insurance commercials look like the picture of insouciance. By very definition, the Fed is monetizing the deficit, and doing it to a heretofore unwitnessed degree.
Perhaps we can attribute even an iota of truth to Mr. Bernanke’s denial of monetizing the government’s debt by concentrating on tense, as in the Fed will not monetize the deficit, not that it has not monetized the deficit. For this attribution to be valid, however, one would have to conclude that Mr. Bernanke has been taking English lessons from Bill Clinton or is signaling a sudden policy change. The former is highly unlikely; Bernanke isn’t cool enough to hang out with Mr. Clinton, though one suspects he would like to be, hence forth the moniker I have attached to Obsequious Ben. The latter, while we can always hope, is even more unlikely.
The second of Mr. Bernanke’s failed sockdolagers is that the Fed was “involved very unwillingly” in the bailouts that have characterized the Bush/Obama administration’s approach to “capitalism” and “free markets.” Unwillingly? The Fed’s balance sheet has expanded by a factor of greater than three over the last year due to the too numerous to tally bailouts in which it has involved itself and the attendant and aforementioned monetizing of the deficit. “Unwillingly?” How does Mr. Bernanke behave when engaging in an activity willingly?
Meanwhile, across the Atlantic, yesterday saw German Chancellor Angela Merkel engaging in a very unGermanic activity: criticizing central banks. In a speech in Berlin, Mrs. Merkel asserted:
“I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line. (As something of a wordsmith, I admire the subtle backhandedness of that dig at the BOE.--MQ) We must return together to an independent (Emphasis MQ’s) central bank policy and to a policy of reason, otherwise we will be in exactly the same situation in ten years’ time.”
Lest you think Ms. Merkel’s comments were merely an instance of Germany’s historic xenophobia once again rearing its head, she also said that the ECB “bowed somewhat to international pressure” when it decided to buy $85 billion in corporate bonds, a step even the Fed has yet to take if one narrowly construes the definition of “corporate bonds.”
On May 12, Jurgen Stark, a German citizen on the ECB council, started this round of Teutonic criticism of the current state of central banking, warning that loose monetary policy of the type we are now seeing has helped build asset bubbles in the past.
Two observations are merited. First, while it is surprising that it is the Germans who are criticizing the central banks, the direction, if you will, of their criticism is not at all surprising. The Germans have some, in the great tides of history, relatively recent experience with the type of monetary policy Ben Bernanke, with the full complicity and encouragement of the Bush/Obama administration, has been conducting in the United States. So while it is a surprise that Germans, and German politicians, are criticizing world central banks, it is not at all unexpected that they would be criticizing the banks for being so loose.
Second, while our Fed seems to be spending half its time figuring out ways to put a supercharger on the printing press and the other half kowtowing to the political demands of the laughingly financially and economically obtuse solons on the Hill and in the Bush/Obama administration, the German chancellor and monetary authorities are urging more restrained monetary growth and a return to central bank independence. We import a lot of labor in our once great nation; perhaps we ought to consider importing some leadership.
Obsequious Ben Bernanke, appearing today before the House Budget Committee, has let loose with two whoppers of brobdingnagian proportions. First, Mr. Bernanke stated that the Fed “will not monetize” the federal budget deficit. In what world can that can be a true statement? The Fed is buying government securities at a clip not seen in our country’s history. The Fed is buying long term treasuries, apparently in an attempt, so far utterly failing, to flatten the yield curve, for the first time in years and with a degree of enthusiasm that makes the woman on the Progessive.com insurance commercials look like the picture of insouciance. By very definition, the Fed is monetizing the deficit, and doing it to a heretofore unwitnessed degree.
Perhaps we can attribute even an iota of truth to Mr. Bernanke’s denial of monetizing the government’s debt by concentrating on tense, as in the Fed will not monetize the deficit, not that it has not monetized the deficit. For this attribution to be valid, however, one would have to conclude that Mr. Bernanke has been taking English lessons from Bill Clinton or is signaling a sudden policy change. The former is highly unlikely; Bernanke isn’t cool enough to hang out with Mr. Clinton, though one suspects he would like to be, hence forth the moniker I have attached to Obsequious Ben. The latter, while we can always hope, is even more unlikely.
The second of Mr. Bernanke’s failed sockdolagers is that the Fed was “involved very unwillingly” in the bailouts that have characterized the Bush/Obama administration’s approach to “capitalism” and “free markets.” Unwillingly? The Fed’s balance sheet has expanded by a factor of greater than three over the last year due to the too numerous to tally bailouts in which it has involved itself and the attendant and aforementioned monetizing of the deficit. “Unwillingly?” How does Mr. Bernanke behave when engaging in an activity willingly?
Meanwhile, across the Atlantic, yesterday saw German Chancellor Angela Merkel engaging in a very unGermanic activity: criticizing central banks. In a speech in Berlin, Mrs. Merkel asserted:
“I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line. (As something of a wordsmith, I admire the subtle backhandedness of that dig at the BOE.--MQ) We must return together to an independent (Emphasis MQ’s) central bank policy and to a policy of reason, otherwise we will be in exactly the same situation in ten years’ time.”
Lest you think Ms. Merkel’s comments were merely an instance of Germany’s historic xenophobia once again rearing its head, she also said that the ECB “bowed somewhat to international pressure” when it decided to buy $85 billion in corporate bonds, a step even the Fed has yet to take if one narrowly construes the definition of “corporate bonds.”
On May 12, Jurgen Stark, a German citizen on the ECB council, started this round of Teutonic criticism of the current state of central banking, warning that loose monetary policy of the type we are now seeing has helped build asset bubbles in the past.
Two observations are merited. First, while it is surprising that it is the Germans who are criticizing the central banks, the direction, if you will, of their criticism is not at all surprising. The Germans have some, in the great tides of history, relatively recent experience with the type of monetary policy Ben Bernanke, with the full complicity and encouragement of the Bush/Obama administration, has been conducting in the United States. So while it is a surprise that Germans, and German politicians, are criticizing world central banks, it is not at all unexpected that they would be criticizing the banks for being so loose.
Second, while our Fed seems to be spending half its time figuring out ways to put a supercharger on the printing press and the other half kowtowing to the political demands of the laughingly financially and economically obtuse solons on the Hill and in the Bush/Obama administration, the German chancellor and monetary authorities are urging more restrained monetary growth and a return to central bank independence. We import a lot of labor in our once great nation; perhaps we ought to consider importing some leadership.
Monday, June 1, 2009
“I’M A LUMBERJACK AND I’M OKAY…”
6/1/09
Today’s Chicago Sun-Times reports that a Mr. Willie Whitaker of the 11200 block of Lothair Avenue in the beautiful (too weak a word, I know) Morgan Park neighborhood on the south side of Chicago has, in the Chicago vernacular, pulled a Mr. T. Mr. Whitaker has cut down 15 trees on his property. One was at least 175 years old, judging from the rings on the stumps. Many, if not most, were of similar vintage. Mr. Whitaker’s backyard, which slopes toward the legendary Longwood Drive, was a point of pride and admiration in the neighborhood long before Mr. Whitaker lived there, as at least one reader of the Insightful Pontificator, who grew up on Mr. Whitaker’s block, can especially attest.
As one neighbor pointed out, “It’s such a shocking thing. It took 100 years for some of these trees to grow, and now they’re gone in ten minutes.” When confronted by reporters, Mr. Whitaker said “They’re my trees. They didn’t pay for the trees. My trees are going to be cut.” This statement was made, one must point out, after the trees had been cut.
Most people would describe Mr. Whitaker’s actions as obnoxious, and I, having grown up about a mile, as the crow flies, from what another neighbor described as that small forest in Mr. Whitaker’s backyard, a forest rendered especially unusual by its being situated in the city of Chicago on private property, would agree. Some would describe Mr. Whitaker’s Paul Bunyan imitation as tragic, but that is probably too strong a word, given the many genuinely ghastly tragedies being perpetrated every day throughout our troubled world. And, after all, as Mr. Whitaker points out, those are his trees.
Hmm…
Undoubtedly I am taking liberties here because I know nothing about Mr. Whitaker’s finances. But what if those are Mr. Whitaker’s trees in name only, and/or won’t be his trees much longer? Isn’t it possible that, given the state of the economy and the rampant loose lending that has had its way with the real estate market over the last several years, Mr. Whitaker might end up owning that house only for a very short time, that the house may very well end up in the hands of his lender in relatively short order? While his cutting down his trees would be offensive enough, both to the neighbors and to the environment, wouldn’t that travesty be compounded if it turns out that they were Mr. Whitaker trees for only a figurative heartbeat?
Or…
Another possibility comes to mind. What if Mr. Whitaker conducted this hideous stunt because the property would no longer be his? When some people learn that their property is about to go through foreclosure, they trash the place by committing all manner of unseemly, even dyspeptic, damage to the property, some of which is not appropriate for a family blog. But most of those sophomoric, albeit costly, high jinks are short lived, of little long term consequence. But cutting down trees that were on the property long before the woodsman wannabe lived there and would have been there long after he was forgotten, thereby eliminating a key selling point of the property? That would really stick it in the lenders’ collective eyes, and would give the figurative finger to all those neighbors who could actually afford their homes and genuinely enjoy living in the neighborhood, at least partially because of their proximity to such a wonderful patch of forest.
Again, I am probably overstepping here; for all I know, Mr. Whitaker could be an eccentric billionaire who simply hates forests and prefers the stark beauty of a chewed up lawn littered with stumps to the lush greenery of small private forest and, as a hobby, buys up properties to further his vision of bucolic beauty. Or he could simply suffer from allergies, as Mr. T. claimed when he performed his eponymous, and similar, dastardly deed in Lake Forest. Perhaps Mr. Whitaker’s action was perfectly innocent and is no reflection on either Mr. Whitaker’s character, neighborliness, or financial situation. But this one hits close to home, which makes it easier to imagine some rather nefarious motivations.
Today’s Chicago Sun-Times reports that a Mr. Willie Whitaker of the 11200 block of Lothair Avenue in the beautiful (too weak a word, I know) Morgan Park neighborhood on the south side of Chicago has, in the Chicago vernacular, pulled a Mr. T. Mr. Whitaker has cut down 15 trees on his property. One was at least 175 years old, judging from the rings on the stumps. Many, if not most, were of similar vintage. Mr. Whitaker’s backyard, which slopes toward the legendary Longwood Drive, was a point of pride and admiration in the neighborhood long before Mr. Whitaker lived there, as at least one reader of the Insightful Pontificator, who grew up on Mr. Whitaker’s block, can especially attest.
As one neighbor pointed out, “It’s such a shocking thing. It took 100 years for some of these trees to grow, and now they’re gone in ten minutes.” When confronted by reporters, Mr. Whitaker said “They’re my trees. They didn’t pay for the trees. My trees are going to be cut.” This statement was made, one must point out, after the trees had been cut.
Most people would describe Mr. Whitaker’s actions as obnoxious, and I, having grown up about a mile, as the crow flies, from what another neighbor described as that small forest in Mr. Whitaker’s backyard, a forest rendered especially unusual by its being situated in the city of Chicago on private property, would agree. Some would describe Mr. Whitaker’s Paul Bunyan imitation as tragic, but that is probably too strong a word, given the many genuinely ghastly tragedies being perpetrated every day throughout our troubled world. And, after all, as Mr. Whitaker points out, those are his trees.
Hmm…
Undoubtedly I am taking liberties here because I know nothing about Mr. Whitaker’s finances. But what if those are Mr. Whitaker’s trees in name only, and/or won’t be his trees much longer? Isn’t it possible that, given the state of the economy and the rampant loose lending that has had its way with the real estate market over the last several years, Mr. Whitaker might end up owning that house only for a very short time, that the house may very well end up in the hands of his lender in relatively short order? While his cutting down his trees would be offensive enough, both to the neighbors and to the environment, wouldn’t that travesty be compounded if it turns out that they were Mr. Whitaker trees for only a figurative heartbeat?
Or…
Another possibility comes to mind. What if Mr. Whitaker conducted this hideous stunt because the property would no longer be his? When some people learn that their property is about to go through foreclosure, they trash the place by committing all manner of unseemly, even dyspeptic, damage to the property, some of which is not appropriate for a family blog. But most of those sophomoric, albeit costly, high jinks are short lived, of little long term consequence. But cutting down trees that were on the property long before the woodsman wannabe lived there and would have been there long after he was forgotten, thereby eliminating a key selling point of the property? That would really stick it in the lenders’ collective eyes, and would give the figurative finger to all those neighbors who could actually afford their homes and genuinely enjoy living in the neighborhood, at least partially because of their proximity to such a wonderful patch of forest.
Again, I am probably overstepping here; for all I know, Mr. Whitaker could be an eccentric billionaire who simply hates forests and prefers the stark beauty of a chewed up lawn littered with stumps to the lush greenery of small private forest and, as a hobby, buys up properties to further his vision of bucolic beauty. Or he could simply suffer from allergies, as Mr. T. claimed when he performed his eponymous, and similar, dastardly deed in Lake Forest. Perhaps Mr. Whitaker’s action was perfectly innocent and is no reflection on either Mr. Whitaker’s character, neighborliness, or financial situation. But this one hits close to home, which makes it easier to imagine some rather nefarious motivations.
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