Posts filed under 'The Rigorist'
Buying Good Intentions
[Editors Note]: What follows is the last contribution I received from my blogging partner The Rigorist from back last September. Perfectionist that he is, he requested that it not be published until he had worked on it some more. Since he has been away from the blog for some time now, and his comments have become timely once again in light of the impending Geithner TARP part 2, I am publishing this article now. Rigorist, if you’re out there, accept my apologies for moving forward without you. To my readers, feel free to comment but understand that I can’t speak for the author.
From the desk of The Rigorist
September, 2008
Since my last post, I have been trying to find a way to address the “Bailout” illustratively. Searching past the wailing and the warnings of impending doom, I have been reading other people’s attempts to do the same thing, to describe the elements and the mechanics and the issues to the deliberately uninformed. It is the deliberately uninformed who present the challenge. Their attempts fail and I shall do no better.
To those that embrace Capitalism, and understand it as a human right as fundamental as speech and faith, explanations are easy. The existence and nature of such things as money, contract, and insurance do not fundamentally contradict the rest of their view of the world. The complexity of the mechanics of Fannie Mae and Freddie Mac can be made simple. The issues can be argued from one side or the other.
But to those who find Capitalism hard to accept because it is predatory, or unfair, these things must not be understood. Their worldview doesn’t permit them.
It was a friend of mine, David, who showed me a way.
What the government is buying in the “Bailout” — brace yourself — is other people’s good intentions. I am terribly serious, and this description is terrifyingly accurate. President Bush, Secretary Paulson, Federal Reserve Chairman Bernanke, and, hopefully, minorities in both houses of Congress are proposing to pay $700 billion for other people’s good intentions in order to mitigate a forthcoming recession.
A good intention is an element a liberal can understand whereas contract or loan or debt give them problems because the creditor is being uncharitable when demanding payment. Usually, there is no trouble in buying someone’s good intention. If someone has the good intention to give me $120 (thousand) in a year or two, any problem I have with buying that good intention for, say, $100 (thousand) is solved by giving me partial ownership in something I think is valuable.
What has happened is Fannie Mae has bought all whole bunch of other people’s good intentions, who unfortunately are having trouble. What has made this a crisis is that Fannie Mae screwed up in evaluating the value of the thing they got part ownership of. She’s a trusting soul, full of hope
What Freddie Mac does for a living is take bets that people like Fannie Mae will screw up just like Fannie Mae did. Yes, Freddie Mac is a professional gambler. He’s not one of those “gaming” weenies that put up casinos in Las Vegas, either. Freddie Mac is hard-core.
Well, Freddie Mac hasn’t been hard-core enough. He now finds himself in possession of a whole lot of good intentions and partial ownership in things that aren’t particularly valuable.
So, what is being proposed is that Uncle Sam ( the federal government ), who is a close relative of Freddie Mac, will buy — paying full price no less – all those good intentions — of people who can’t make good on them — and partial ownerships — of things that really aren’t very valuable.
AIG is a gambler just like Freddie Mac, but the good intentions he got are actually pretty good, and the partial ownerships are in things that are valuable. He’s just looking for a loan until payday, but nobody is in a hurry to loan a gambler money especially when he isn’t family.
People think Uncle Sam can afford this because he’s got a money printing press. He’s not a counterfeiter, but he might as well be for the effect this deal will have. It’s not all that bad, really. He does this sort of thing, running the money printing press into the night, all the time. People get grumpy about inflation, and feel all recessed — that’s a recession joke, it’s OK to smile — but they get over it.
This is a good place for a break. Can you non-Capitalists get the what and the how, understand the elements and mechanics, from this? Can any Capitalist point out where I have erred?
19 comments February 10, 2009
More Smoke than Mirrors
From the Desk of The Rigorist
The New York Stock Exchange is in the news, and here, at least, I can add light instead of heat.
There is a general confusion in discussions regarding “investment” in publicly held corporations as the ones traded on the NYSE due to a semantic sloppiness in common English. I will start small and end large, from the understanding of investment we all have, to circumstances where such small ideas have no meaning.
Let’s start with a guy with an idea. He has no money but he’s got an idea. Maybe he’s Bob Ederer of Ocean Springs, Mississippi, the third-generation of a netting manufacturing family in Chicago who only needs machines to assemble and a place to run them. Perhaps he’s Tom Kossen of Jackson, Mississippi, a diesel mechanic without formal education, but a salesman nonpareil who sees the potential in on-site standby power generation systems. Instead of taking on debt which would bankrupt their businesses in their meager beginnings, they sell equity, partial ownership of their endeavors. If we have the wit and the foresight, we will buy all that they offer, INVESTING money that they will in turn invest in machinery and inventory.
Straightforward and simple so far, eh?
10 years pass and the value of our investment is now 10 fold what we paid. There is another guy with another idea. Steve Yobs or Cobbs or something like that. He has no money but he’s got an idea. We’re changing ponies and our investment is put up for sale. Yippee-ki-yay!
Joe Blow buys our equity at a premium no less, expecting increases in value and distributions of profits beyond the extra he pays. This is where things start getting weird.
So, how much of the money that Joe Blow “invests” does Bob or Tom get to use for machinery or inventory or anything else that would increase the value of the business?
That’s right. They get nothing, nada, zero, zilch, the big ROUND number. They get a brand-new guy at their stockholder meetings who knows nothing of their business, interested only in a quick return.
Joe Blow isn’t investing, he’s speculating. We call it investing, I believe, because this sort of thing is the closest regular folk get to the real thing.
10 years pass, and 10 more, and 10 more. The value of our original equity could be worth almost anything depending on what management wants the accountants to say. Bob and Tom have long since cashed out and retired. Previously authorized but un-issued stock has been sold. New preferred classes of equity have also been issued. There have been stock splits and buybacks. The number of stock owners has gone from a few to a few thousand , and no one owns a majority interest anymore.
It is that last element which qualifies this business to be traded on the New York Stock Exchange.
The price of a single share has been set blissfully free from stodgy calculations of the underlying value it represents. The double taxation of dividends has made “profit” into a dirty word, a vulgarity to be avoided. The stock price rises and falls on the hopes and fears of people more strongly influenced by the morning news and the phase of the moon. That’s not hyperbole, that’s what professional stock traders call “technical stock price analysis.” JFGI.
“Investors” gain and lose fortunes without affect to or effect of the business at issue.
So what are we to make of the rise and fall of the aggregate price of single shares of stock of 40 businesses classified as “industrial” traded on the NYSE? That is the definition of the NYSE Dow Jones index, you know.
Up 450, down 500, the only thing it means is a bunch of people have got their panties in a wad, and the MSM can mesmerize an audience with the drama long enough to sell soap.
Be very careful with the conclusions you draw from stock exchange indices.
6 comments September 19, 2008
Slander!
From the desk of The Rigorist
I apologize for my unexplained absence. I’ve been rude. It’s an unintended talent.
I live in a house that needs fixing. It’s been getting fixed this last week and a half.
I have a gutted garage apartment that suddenly has tenents. They are a homeless couple from South Carolina in their 30’s, children really, and I’m struggling to find balance for our reciprocal needs. They need to earn their keep. I say that precisely. I don’t need for them to earn their keep. Their gratitude and enthusiasm would have me in their debt without my constant restraint. I’ll turn this into a political point later.
I maintain a Firefox browser extension, rimwheel. I had an email asking for a update, so I took care of that. It needs replacing but I’m a dinosaur who punched Fortran decks. OOP is unnatural for me and JavaScript’s unique approach to it obfuscated it’s promise. Skate, the current name of my replacement is getting a rewrite.
I also have a blog, or at least a place on one, and that needs attention that it hasn’t gotten.
Therefore:
- kayinmaine, I shouldn’t have taunted you. I’m going to leave it at that lest I become ‘talented’.
- Rutherford, my perfectionism had silenced me. I’ll be back to work here this evening.
- I thank everyone who browsed Rutherford’s blog, but especially those who said not unkind words of me.
Finally, to address the ugly gossip and speculation that I might give aid to McCain, If I did that then I would feel personally responsible for the inevitable tragedy of John McCain’s election. It takes no intelligence to shoot at a blimp nor skill to hit one bumbling across the ground within the range of a shotgun. I do it to goad Democrats into arguing the issues. The guys at the McCain campaign are jus’ gettin’ beered up on the weekends and having some fun. That would be cool except that they’re blowing other people’s money on the ammo.
4 comments August 15, 2008
Age Before Beauty
From the desk of The Rigorist
When competing teams first meet there is the handshake to establish the common ground of sportsmanship. When the salesmen of competing businesses first meet they usually attempt to find common ground in their common humanity and their common frustrations. So here I am trying to make a good first impression. I start with a joke and I look through the news for something to beat up McCain with.
There is nothing there. The closest I can find is a breakthrough Alzheimer’s treatment.
When I dig deeper I find that he doesn’t have cancer. I search wider to learn that he’s trying to show independence and he is an “unabashed” conservative. Big whoop. Like I haven’t known that he was independent and shameless since he hooked up with John Edwards for that patient’s rights bill in ‘01.
McCain has got to be the slowest moving target on the political freeway. Any conservative position he takes is a flip-flop and any liberal one is redundant. He’s stuck. His free range maverick ways now leave him mud sucked, unable to move left or right. His sole attraction for the Republicans is he didn’t actually obstruct President Bush’s policies on Iraq or Afghanistan. The number of attractions he presents Democrats challenge enumeration.
It is to McCain’s ironic misfortune that Democrats emote rather than think. The voters he should be able to rely upon cannot consider him. Entranced with Barack Obama’s looks and kindness and vigor, they are unconflicted while rejecting John Kerry’s partner on CAFE standards, Paul Sarbanes‘ backer on corporate oversight, Senator Charles Robb’s cosponsor for military base closings, Lieberman’s across-the-aisle buddy on global warming and Ted Kennedy’s on immigration reform. Democrats are unmindful, a sadly accurate adjective, while abandoning the Senator that stood with them against President Bush’s tax cuts, federal embryonic stem cell research funding bans, and Supreme Court nominees.
A jilted McCain must turn away from the spectacle of Democrats swooning over their latest everlasting love d’jour and face Republicans unimpressed with his cleverness. The media that called him ‘Darling’ has tossed him aside to chase a younger, more slender tart with an easy smile and vacant eyes. Oh, the heart break of it all.
It puts a grin on my face, but I’m cold like that.
The only thing left for McCain or the Republicans is to calculate the proposed cost of Obama’s excesses and track the many dangerously dumb ideas Obama has had in order to scare people into voting for the dead guy.
2 comments July 30, 2008
Reading Between the Lines of the Williams-Ahmadinejad Interview
From the desk of The Rigorist
MSNBC Nightly News : ‘Response … will be a positive one’
Somebody at MSNBC has got to be smart enough to know what actually got said in this interview. Still, the polit-speak surrounding the meaning was so thick they thought they could tack a headline on it that would make Obama look good. Who’s got boots tall enough to slog though this? Who would waste their time collecting this rank fruit?
I do. I would.
Continue Reading 4 comments July 29, 2008
Point / Counterpoint
Have you ever noticed how predictable the political slant is of most blogs? I’m as guilty as the rest. You know if you read my blog, you’re likely to get a liberal perspective. You might also notice if you read the comments posted to my blog that you’ll get the conservative reaction.
I have decided to mix things up a bit and I have invited one of my most frequent “commenters”, Ecclesiastes, to join The Rutherford Lawson Blog as guest contributor. Henceforth, you can look forward to contributions from him that no doubt run 180 degrees counter to my own opinions. But that is the whole point.
Rather than provide detailed biographies, I think he and I both prefer to reveal ourselves through our posts. You can fill in the blanks from there (and I’ve been amused at some of the blanks that have been mistakenly filled in by some readers already).
I hope you enjoy the variety of opinion you will find here and I urge you to jump into the fray with your own views!
Respectfully,
Rutherford
2 comments July 28, 2008
Alien Thought
From the desk of the Rigorist:
Something my host Rutherford said here haunts me.
“If you or anyone else can help me understand this, I’d be appreciative”, referring to middle class conservatives identifying with fat cat financial predators.
It haunts me.
Not only because I yearn for connection, as does everyone, but because the most serious threat to America, Islam, is alien to liberals in precisely the same way as conservative thought. They aid and abet the Islamic agenda by acting as an infidel, just as Mohammad ( P B & J ) described. Mohammad knew how to crush such people. Islamic tactics were made and honed to subdue those who believe that people are good.
As much fun as it would be to pick on President Obama – and he is as fat, slow, clumsy, and ridiculous a target as one could hope for – his fate is sealed. Eventually the pork addicted Republicans, who have proved themselves to be as completely destitute of integrity as the Liberals have always said, will roll for the President in Act III of ‘Obama, a Shakespearean tragedy’.
How, though, can one draw a Liberal into such a paradigm shift? Rand used fiction to entice the undecided looking for entertainment. Rush uses disparagement to goad Liberals to substantively engage the reasoning beneath his monologues.
Hmmm.
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30 comments March 26, 2009