Mission Accomplished and the Boy Who Cried Wolf

Senator Barack Obama’s attempts to tie his opponent Senator John McCain to President George Bush could not have been better realized than by the great McCain himself. Today, McCain all but morphed into George Bush before our eyes. Watch as he gloats over his mission accomplished and disparages Obama in the process.

Of course, as in the case of his doppelganger Bush, the mission was not accomplished. The House today failed to pass the Wall Street bailout bill upon which the near term health of our economy depends. In addition to accusing Obama of “watching from the sidelines”, he later chastised Obama for “phoning it in”. Interestingly,  throughout the weekend, McCain “monitored the situation” by phone. Who does he think he is fooling? Clearly, McCain outdid himself today when it came to impersonating George Bush.

While we’re on the subject of the President, I am reminded today of an old fable. Why should we be surprised at the outcome of today’s vote?

“Iraq has WMD’s.”
“We will be greeted as liberators.”
“Iraq is the center of the war on terror (i.e. those guys who attacked us on 9/11)”
“If we don’t pass this bill, there will be dire consequences for our economy.”

The first three paraphrases of Bush assertions turned out to be lies. So is it any wonder that when the boy cries wolf again concerning our economy, even his own party fails to heed the call? Unfortunately, as in the fable, this time the assertion is not a lie and ordinary citizens will have to pay the price if something is not done soon.

All in all, it’s been a banner day for the Republicans. One of their leaders wakes up from his delusions too late to have any credibility and the other leader is so immersed in his own delusions (of grandeur) that he does not even realize that he is not a leader at all.


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Sarah Out-Hillaries Hillary!

Think back, my loyal readers, to the days of the Democratic primaries. Once upon a time there was a candidate named Hillary Clinton who was so presumptuous as to suggest that Barack Obama would be a fine running mate for her.  Needless to say, she put the cart way before the horse and not only did Barack not wind up her running mate, she did not end up being his running mate. I thought that her blatant display of ambition would not soon be eclipsed.

Then came Sarah Palin. Palin has done Hillary one better. She has (against every physical law of the universe) become John McCain’s running mate. Apparently, though, that is not good enough for her. She has decided that the ticket should be flipped. Can you blame her? When Sarah’s not there, McCain has no audience.

I’m sure you’ve seen this video before but it’s worth repeating here. We truly cannot make this stuff up!


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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. Yippeeki-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.

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