Martha

I wonder what Martha Stuart was thinking this week when the $50 billion Ponzi scheme of former Nasdaq chairman Bernard Madoff came undone. (www.time.com/time/business/article/0,8599,1866680,00.html)
The SEC was intent on making an example of Martha Stewart when they sentenced her in 2004 for alleged “insider trading.” This, in hindsight, would have been three years after the suspicious investments of Mr. Madoff were originally investigated by that same SEC. I picture a harried investigator at the SEC getting a call from his boss to drop everything and get on this Martha Stewart case! “But I’m in the middle of an investigation of Madoff,” the harried worker protests. “He’s posted a suspiciously consistent profit of one or two percent almost every month for the past three years. We’re talking billions here!”

This would be, of course, the same SEC who failed to detect anything amiss at Bear Sterns, Lehman Brothers, etc, etc. But they got Martha Stewart. What amount of money were we talking about back there in the idyllic financial days of 2004? Oh yeah, it was 4,000 shares at $60 a share. Wow. Almost a quarter of a million dollars. That’s right Two hundred and fifty thousand big ones! Today the market doesn’t even react if a company announces a twenty million dollar loss. Any loss that starts with an “M” instead of a “B” doesn’t even register.

I don’t really want to kick a man when he’s down. The SEC isn’t the only culprit here. Moody’s Investors Service, who were ostensibly paid to rate investors for the public good had Countrywide Securities highly rated six months before their irregularities started coming to light. They also missed the Enron debacle until it was too late. An article in The New York Times raises relevant questions about the people who are supposed to be watching the shop. (www.nytimes.com/2008/12/07/business/07rating.html?_r=1&scp=2&sq=Moody's&st=cse) They quote an anonymous Moody’s managing director in September, 2007: “These errors make us look either incompetent at credit analysis or like we sold our soul to the devil for revenue, or a little bit of both.” He left out the words “criminally negligent”. The Times article paints a picture that Moody’s is involved in, at best what could be called a “conflict of interest.” The SEC is right there along side of them. But at least the SEC nailed that threat to society – the heartless arch-criminal, Martha Stewart.


By Myron Gushlak

Salt

I’m reading Mark Kurlansky’s book, Salt: A World History http://www.randomhouse.co.uk/salt/home.htm. I know that must sound incredibly dull. It is. Very much so. That’s not to say that the book doesn’t have its moments though. Did you know that humans cannot live without salt, but that the body does not make any of it? That sort of fascinating fact jumps out at you every ten or twelve pages. There’s more, of course, but I’ve only reached page 179, so nothing else comes to mind.

Why would I spend what seems like hundreds of hours reading such a scholarly work? Because there is no mention anywhere within its binding of Barack Obama, Senator Pelosi, George Bush, possible cabinet appointments, white house dogs, financial buy outs, the stock market, bail outs for the auto industry, consumer confidence, congress, recessions or unemployment

These days, I can hardly think of anything better to recommend a good book. Never mind that Samuel Johnson’s line comes to mind every twenty or thirty pages. “He is not only dull himself,” Johnson said though I do not remember who he was talking about, “he is the cause of dullness in others.” Sorry, Mark. I’m only telling you what many others are thinking.

Salt was the oil of early civilizations. The strongest, richest countries had the most access to it. That’s the type of thing that Kurlansky can run with for a hundred pages or more. His research is stellar. It must have taken years to write. It’s taking almost that long to read. After nodding out a time or two, I sometimes regress and turn on CNN, but after one or two stories about any of the above, I rush back to this literary sedative, finding great comfort and relief in the endless parade of words. I know I can’t keep on this path for much longer. My business is finance, after all. People rely on me and Blue Water Partners http://bluewater.ky for my expertise in investment banking. But I’m not ready quite yet to dive back into this whirlpool of financial and political information that we are all in the midst of. Soon, though. Soon. Or maybe when I’m finished Salt, I might first sneak a peek at Mark’s other book, Cod: A Biography of the Fish that Changed the World.


By Myron Gushlak