Has “The Fellowship” come across your personal radar yet? How about the C Street House? “The Chosen”? If none of these things have yet to make it into your world, drop your soap opera of the day, or your reality show du jour. This is “way more better” as the saying goes. You know all those republicans that feel it is their moral duty to instruct all of us mere humans about morality? You know the ones – The Governor Mark Samfords of the world, the Senator John Ensigns, the Chip Pickerings? Shall I go on? You know them either as the latest documented philanderers or you may know them as members of The Fellowship. It seems that many of the nation’s Christian Republicans hang out in (or live in) a boardinghouse in Washington, D.C. www.nytimes.com/2009/07/19/opinion/19dowd.html?scp=4&sq=The%20Fellowship&st=cse where prayer and bible study are de rigueur. It is nicknamed the C Street House.
Often referred to as “The Family” because of their constant quest for power and control , conservative Republicans continue to pontificate from this particular perch about God and country, and yes, morality. When questioned about the seeming contradiction between what is preached and what is practiced, some of these lofty Republicans refer to the fact that they weren’t merely elected, they were “chosen.” If you need to read more, check out Jeff Sharlet’s “The Family,” available in paperback, or read his article in Harper’s. www.harpers.org/archive/2003/03/0079525
I’m a sucker for this sort of thing. I keep waiting for Roger Clemens and Manny Ramirez to co-author a book about the moral pitfalls of drugs in sports. Or Paris Hilton’s future tome extolling the virtues of a good education. This would all be hysterically funny if it wasn’t so damn scary.
By Myron Gushlak
Thursday, August 13, 2009
Tuesday, July 28, 2009
Walter
It was hard to miss the news that Walter Cronkite died this past weekend. Every news station paid fitting tribute to the grandfatherly CBS anchorman. What caught my eye, however, was the enormity of his audience. In his heyday, three out of four Americans watched the news as it was read by Walter Cronkite. (www.cbsnews.com/stories/2009/07/19/sunday/main5173016.shtml)
By its very definition, nostalgia hearkens back to a time that seems simpler and less complicated. In this current era of splintered marketplaces, that nightly following seems incomprehensible. Does anyone even know how many possible news sources there are today? CNN, MSNBC, BBC,CBS,NBC – seemingly more sources than there are letters to cover them. Would ten or twelve percent of the country not be considered an enormous following? What does this say, then, about the enormous influence of this man?
Walter Cronkite made it his first priority to be an objective reporter of the news. Today, it is difficult to say when an anchor is reporting or when he is editorializing. Cronkite himself said that he only interjected his own opinion one time in his life – that during the Vietnam War. He said he thought the war was un-winnable and that the US should pull out without victory. What impact did that have? Lyndon Johnson, the president at the time, said that when he heard that he “lost” Cronkite, he knew he lost the American people. Think about that for a moment out of the context of television. Do many of us ever utter any words that effect more than a few hundred people? Most of us fail to impact more than a dozen. Cronkite was able to influence the policy of the country.
His stated objective to report the news without bias might have changed history again had he not retired when he did. Cetrtainly, in Bill Moyer’s excellent reporting of the weapons of mass destruction fiasco that led to the Iraq war, even one objective article might have prevented the groundswell of public opinion that led to that war. www.pbs.org/moyers/journal/btw/watch.html.
I think it is safe to say that no one will ever again wield so powerful a voice to shape public opinion. In that regard, Cronkite’s death marked the end of an era.
By Myron Gushlak
By its very definition, nostalgia hearkens back to a time that seems simpler and less complicated. In this current era of splintered marketplaces, that nightly following seems incomprehensible. Does anyone even know how many possible news sources there are today? CNN, MSNBC, BBC,CBS,NBC – seemingly more sources than there are letters to cover them. Would ten or twelve percent of the country not be considered an enormous following? What does this say, then, about the enormous influence of this man?
Walter Cronkite made it his first priority to be an objective reporter of the news. Today, it is difficult to say when an anchor is reporting or when he is editorializing. Cronkite himself said that he only interjected his own opinion one time in his life – that during the Vietnam War. He said he thought the war was un-winnable and that the US should pull out without victory. What impact did that have? Lyndon Johnson, the president at the time, said that when he heard that he “lost” Cronkite, he knew he lost the American people. Think about that for a moment out of the context of television. Do many of us ever utter any words that effect more than a few hundred people? Most of us fail to impact more than a dozen. Cronkite was able to influence the policy of the country.
His stated objective to report the news without bias might have changed history again had he not retired when he did. Cetrtainly, in Bill Moyer’s excellent reporting of the weapons of mass destruction fiasco that led to the Iraq war, even one objective article might have prevented the groundswell of public opinion that led to that war. www.pbs.org/moyers/journal/btw/watch.html.
I think it is safe to say that no one will ever again wield so powerful a voice to shape public opinion. In that regard, Cronkite’s death marked the end of an era.
By Myron Gushlak
Thursday, July 16, 2009
End of Recession
The million dollar question as we hit the mid point of the third quarter of 2009 is when will the recession end? I am reminded of the age old story of a business owner asking his accountant what was the sum of two plus two. The accountant replied, “What do you want it to be?”
A quick perusal of the web will find you a prediction that the end of this current quarter will mark the low point of the economy, to one that predicts the effects of the recession will last until the end of 2010. The financier, Conde Nast, who made a bit of a name for himself by predicting the real estate collapse back in 2002 illustrates the problem. He has predicted that it will end soon (www.portfolio.com/views/columns/economics/2009/01/07/Spotting-Signs-of-Economic-Recovery), and that it will not end anytime soon. (www.portfolio.com/views/columns/economics/2008/11/11/Economic-Predictions-for-2009) . Nast may be the only one, then, certain to be correct when all is said and done. Feel like relying on the leading economic indicators as the tea leaves for the future? Not so fast. The interpretation of the meaning of these indicators is as diverse the crowd at a United Nations Bake Sale.
At Blue Water Partners, www.BlueWaterPartners.com we are well aware that people are always making money no matter how bad the economy. I suspect the end of the recession will come at different times for each of us, or to paraphrase George S. Kaufman, “It depends on your threshold for pain.”
By Myron Gushlak
A quick perusal of the web will find you a prediction that the end of this current quarter will mark the low point of the economy, to one that predicts the effects of the recession will last until the end of 2010. The financier, Conde Nast, who made a bit of a name for himself by predicting the real estate collapse back in 2002 illustrates the problem. He has predicted that it will end soon (www.portfolio.com/views/columns/economics/2009/01/07/Spotting-Signs-of-Economic-Recovery), and that it will not end anytime soon. (www.portfolio.com/views/columns/economics/2008/11/11/Economic-Predictions-for-2009) . Nast may be the only one, then, certain to be correct when all is said and done. Feel like relying on the leading economic indicators as the tea leaves for the future? Not so fast. The interpretation of the meaning of these indicators is as diverse the crowd at a United Nations Bake Sale.
At Blue Water Partners, www.BlueWaterPartners.com we are well aware that people are always making money no matter how bad the economy. I suspect the end of the recession will come at different times for each of us, or to paraphrase George S. Kaufman, “It depends on your threshold for pain.”
By Myron Gushlak
Tuesday, June 30, 2009
Why Nothing Gets Done
The current economic situation has spawned a billion “fix it quick” schemes. I think most of them found there way to my desk via group e-mails. Most are half baked; all self-serving. But one caught my attention and it illustrates some very valid points. Not that I thought it was a good idea, just that it shed light on the complexity of the problems in a world with this many people. The e-mailer said that his solution for the current economic downturn was to give every American over the age of fifty one million dollars. He said that this would cost the government fifty billion dollars. More on that in a second.
With that influx of mad money pumped into the system, the author said, the housing crisis would be immediately ended because there would be a huge demand for upgraded houses. Banks would receive a huge influx of cash from existing mortgages being paid off. The auto companies would be back on the sunny side of the street because presumably everyone would buy cars. State coffers would bulge from the increase in sales tax revenues. Money would not only trickle down to every facet of society, but would gush down flooding even the most deprived areas of the economy with new money. “Happy days are here again….”
Okay, first of all, the man’s math was hideously wrong. There are over sixty million US citizens over the age of fifty, bringing the cost of his tongue in cheek plan well into the trillions. But let’s assume his math was correct. Imagine what would happen. The day the plan was announced, millions of people around the age of forty would flood the streets making the last week’s violence in Iran look like a stroll down Sunset Boulevard by comparison - everyone bemoaning their exclusion and demanding to be included in some way into “The Great Fix”. The Democrats and Republicans would want to take full credit for the plan for all those who would be receiving money while blaming the other party for excluding everyone else. Overnight, counterfeit birth certificate mills would spring up, with false documents selling for as much as $100,000 (ten percent of the value) or more. An entire industry dedicated to bilking the elderly would spring up instantly. (Even more tenacious than the one currently in place) The price of both houses and cars would be artificially inflated by the enormous demand, thereby creating a bubble that would only burst again after all the millions were spent a couple of years down the road. The effect on the global economy from this American solution is too complex to analyze in anything with only one volume.
This “solution” or lack of one to be more accurate, comes to mind with the United States grappling with health industry reform of an unprecedented magnitude. Be on the lookout for arguments from all those “forty year olds” about to be excluded from the final plans. Everyone currently benefiting from the system as it is now will be pumping billions of dollars into a marketing campaign warning the population that the new plan will bring down the very wrath of God. All those companies who will benefit from a change in plan will be pumping equal amounts of money promoting “the new solution.” It will be very difficult to harvest the truth from either argument. And no plan could possibly come close to being “right for everyone.”
Somebody, someplace will have to say, “This plan is not right for me. It will cost me more money, but I am in favor of it because it will benefit the country as a whole.” In fact, many millions of “somebodies” will have to say that. “Talk about your paradigm shifts…..…….
By Myron Gushlak
With that influx of mad money pumped into the system, the author said, the housing crisis would be immediately ended because there would be a huge demand for upgraded houses. Banks would receive a huge influx of cash from existing mortgages being paid off. The auto companies would be back on the sunny side of the street because presumably everyone would buy cars. State coffers would bulge from the increase in sales tax revenues. Money would not only trickle down to every facet of society, but would gush down flooding even the most deprived areas of the economy with new money. “Happy days are here again….”
Okay, first of all, the man’s math was hideously wrong. There are over sixty million US citizens over the age of fifty, bringing the cost of his tongue in cheek plan well into the trillions. But let’s assume his math was correct. Imagine what would happen. The day the plan was announced, millions of people around the age of forty would flood the streets making the last week’s violence in Iran look like a stroll down Sunset Boulevard by comparison - everyone bemoaning their exclusion and demanding to be included in some way into “The Great Fix”. The Democrats and Republicans would want to take full credit for the plan for all those who would be receiving money while blaming the other party for excluding everyone else. Overnight, counterfeit birth certificate mills would spring up, with false documents selling for as much as $100,000 (ten percent of the value) or more. An entire industry dedicated to bilking the elderly would spring up instantly. (Even more tenacious than the one currently in place) The price of both houses and cars would be artificially inflated by the enormous demand, thereby creating a bubble that would only burst again after all the millions were spent a couple of years down the road. The effect on the global economy from this American solution is too complex to analyze in anything with only one volume.
This “solution” or lack of one to be more accurate, comes to mind with the United States grappling with health industry reform of an unprecedented magnitude. Be on the lookout for arguments from all those “forty year olds” about to be excluded from the final plans. Everyone currently benefiting from the system as it is now will be pumping billions of dollars into a marketing campaign warning the population that the new plan will bring down the very wrath of God. All those companies who will benefit from a change in plan will be pumping equal amounts of money promoting “the new solution.” It will be very difficult to harvest the truth from either argument. And no plan could possibly come close to being “right for everyone.”
Somebody, someplace will have to say, “This plan is not right for me. It will cost me more money, but I am in favor of it because it will benefit the country as a whole.” In fact, many millions of “somebodies” will have to say that. “Talk about your paradigm shifts…..…….
By Myron Gushlak
Wednesday, June 17, 2009
Scam Insurance
The past eighteen months or so have provided an endless supply of news stories about financial failures, scams and reports of general mis-management. Regular readers of this blog will recall several months ago, that I railed against the watchdogs of the industry – Moody’s, Standard and Poor et al for being practically criminally negligent as they continued to highly rate the financial products of many of the now infamous companies as they were about to collapse. Freddie Mac and Lehman Brothers are only two of many examples. It seems that there might not be a need for the government to get involved with a punitive action against these institutions. It seems, as is often the case, that the market is taking care of that situation internally.
I am referring to an article that came out that reports that David Einhorn has revealed that his current short-selling target is Moody’s, the credit rating firm. www.dealbook.blogs.nytimes.com/2009/05/28/prominent-short-seller-puts-moodys-in-his-sights . Why is this newsworthy? Mainly because Mr. Einhorn , who runs the New York hedge fund, Greenlight Capital, is the same man who sold Lehman Brothers short many months before it collapsed last fall. Mr. Einhorn declined to say how long he had been selling Moody’s short, but the share price was down 7% as the story broke. “Einhorn contends that investors have learned not to rely on Moody's, which for years has been criticized because it earns fees from the companies it rates. And after the mortgage market melted down in 2007, Moody's came under fire for giving top grades to bonds and derivatives backed by subprime loans.”
In explaining his rationale, Einhorn said, “The truth is nobody I know buys or uses Moody’s credit ratings because they believe in the brand. They use it because it is part of a government –created oligopoly and, often, because they are required to by law.” The “oligopoly” surely refers to the practice of being paid by the very people you are hired to rate, one of my own problems with the rating system as spelled out in past blogs.
Those who favor less government regulation can tout this development as an example of how the market self-corrects without government micro-managing. It is a classic case of the problem being fixed from within -a modern version of taking the criminal into the back room and beating the crap out of him. By the time “the law” gets there, they might find that justice has already been served. It’s an amusing idea, really – the notion of selling short as vigilante justice. But it does have a certain old world charm nonetheless.
By the way, shortly after this story broke, Einhorn told Reuters that he had been watching Moody’s since 2002, which is explanation enough as to why his actions are gathering so much attention.
By Myron Gushlak
I am referring to an article that came out that reports that David Einhorn has revealed that his current short-selling target is Moody’s, the credit rating firm. www.dealbook.blogs.nytimes.com/2009/05/28/prominent-short-seller-puts-moodys-in-his-sights . Why is this newsworthy? Mainly because Mr. Einhorn , who runs the New York hedge fund, Greenlight Capital, is the same man who sold Lehman Brothers short many months before it collapsed last fall. Mr. Einhorn declined to say how long he had been selling Moody’s short, but the share price was down 7% as the story broke. “Einhorn contends that investors have learned not to rely on Moody's, which for years has been criticized because it earns fees from the companies it rates. And after the mortgage market melted down in 2007, Moody's came under fire for giving top grades to bonds and derivatives backed by subprime loans.”
In explaining his rationale, Einhorn said, “The truth is nobody I know buys or uses Moody’s credit ratings because they believe in the brand. They use it because it is part of a government –created oligopoly and, often, because they are required to by law.” The “oligopoly” surely refers to the practice of being paid by the very people you are hired to rate, one of my own problems with the rating system as spelled out in past blogs.
Those who favor less government regulation can tout this development as an example of how the market self-corrects without government micro-managing. It is a classic case of the problem being fixed from within -a modern version of taking the criminal into the back room and beating the crap out of him. By the time “the law” gets there, they might find that justice has already been served. It’s an amusing idea, really – the notion of selling short as vigilante justice. But it does have a certain old world charm nonetheless.
By the way, shortly after this story broke, Einhorn told Reuters that he had been watching Moody’s since 2002, which is explanation enough as to why his actions are gathering so much attention.
By Myron Gushlak
Wednesday, May 20, 2009
Approaching Equality
Laura Pendergast-Holt has apparently broken through the glass ceiling and is about to join the “white men only” hall of fame for scam artists. According to today’s Dallas Business Journal . (www.bizjournals.com/dallas/stories/2009/05/11/daily54.htmlPendergest-Holt” , Ms Pender-Gast pleaded not guilty to fraud charges and is currently out on $300,000 bond. She was the chief investment officer of the Stanford Financial Group, which is in the midst of an eight billion dollar fraud allegation. You will recall that this past February, the SEC charged R. Allen Stanford with fraud and seized all his assets.
Although the inclusion of Ms. P-G in this elite company can only be considered a triumph for women everywhere, it should not be construed as an indication that the fight has been won in any real sense of the word. Until Ms.P-G can be joined by other minorities, including, but not limited to the African-American community, can anyone really defend the assertion that any real equality exists in the upper tiers of American society?
Furthermore, her inclusion in this prison bound club does not, even now, allow Ms P-G to be treated equally. Most reports stoop to commenting on her attractive appearance, and her youthful age. This merely shows how far we, as a society, need to come. Until equal attention is paid to the personal appearance of such felons as Bernard Madoff and Stanford himself, all news reports merely underline how far things need to progress before true equality can be claimed. The report from the above cited Dallas source refers to her as the “former thirty-five year old chief investment officer.” Did they also refer to Madoff’s former ages? No, I think not.
But progress comes slowly. For now, we must content ourselves with the incremental successes as they happen. We now have the Susan B. Anthony of scams and her name is Laura Pendergast-Holt. A pioneer in her own right, perhaps some day her portrait will grace the $7 bill. The words of Charlotte Whitton resound loudly on such a proud day. “Whatever women do they must do twice as well as men to be thought half as good. Luckily this is not difficult.”
By Myron Gushlak
Although the inclusion of Ms. P-G in this elite company can only be considered a triumph for women everywhere, it should not be construed as an indication that the fight has been won in any real sense of the word. Until Ms.P-G can be joined by other minorities, including, but not limited to the African-American community, can anyone really defend the assertion that any real equality exists in the upper tiers of American society?
Furthermore, her inclusion in this prison bound club does not, even now, allow Ms P-G to be treated equally. Most reports stoop to commenting on her attractive appearance, and her youthful age. This merely shows how far we, as a society, need to come. Until equal attention is paid to the personal appearance of such felons as Bernard Madoff and Stanford himself, all news reports merely underline how far things need to progress before true equality can be claimed. The report from the above cited Dallas source refers to her as the “former thirty-five year old chief investment officer.” Did they also refer to Madoff’s former ages? No, I think not.
But progress comes slowly. For now, we must content ourselves with the incremental successes as they happen. We now have the Susan B. Anthony of scams and her name is Laura Pendergast-Holt. A pioneer in her own right, perhaps some day her portrait will grace the $7 bill. The words of Charlotte Whitton resound loudly on such a proud day. “Whatever women do they must do twice as well as men to be thought half as good. Luckily this is not difficult.”
By Myron Gushlak
Thursday, April 9, 2009
The Age of Scam
In the same way that the 50’s ended and the 60’s began when John Kennedy was assassinated in 1963, the 1990’s ended on September 11, 2001. --But what of the decade that followed – the decade with no easy nickname. The aughts? The O’s? Whatever it is or will be called, the first decade of the twenty-first century ended prematurely this past autumn with the fall of Lehman Brothers and the threat posed by AIG’s possible collapse. Perhaps it will be known as the Decade of the Scam. Not all the scams that have been discovered have had the enormity of the Bernard Madoff Ponzi scheme, nor had Allen Stanford’s cache, but a week barely goes by without a new scam being revealed. They are epidemic.
If we expand the definition of “scam” a bit, it will be impossible to paint the past decade as anything but a fertile ground that nurtured a valley of scams. It has been a decade of calling a spade a diamond. If the media agrees that the spade is a diamond, then it becomes, in fact, a diamond. Bill Moyers (www.pbs.org/moyers/journal/btw/watch.html) made that abundantly clear in his television show explaining how the weapons of mass destruction allegations became facts in the buildup to the Iraqi war eight short years ago. Moyer’s show is must watch tv, even now, five years after the fact (and is still available on line, I believe). Perhaps the roots of manipulating perception can even be traced to Bill Clinton’s infamous, “It depends on what you mean by the word ‘is’” defense. There are no shortages of examples. The Bush administration’s legal argument about torture is possibly the final word on this phenomena. You know the argument by now. It went something very much like “the President of the United States does not condone torture. The President sanctions waterboarding. Therefore, waterboarding is not torture.”
Some might call it simply good “spin doctoring” but whatever you might call it, the result is The Decade of Scam. Anything goes, as long as you can call it something else. I want to put that phrase in the past tense, make it “everything went” instead of everything goes. But I’m not feeling quite that optimistic. At some point, a spade is a spade no matter what you call it. Perhaps in this next decade we will figure that out.
By Myron Gushlak
If we expand the definition of “scam” a bit, it will be impossible to paint the past decade as anything but a fertile ground that nurtured a valley of scams. It has been a decade of calling a spade a diamond. If the media agrees that the spade is a diamond, then it becomes, in fact, a diamond. Bill Moyers (www.pbs.org/moyers/journal/btw/watch.html) made that abundantly clear in his television show explaining how the weapons of mass destruction allegations became facts in the buildup to the Iraqi war eight short years ago. Moyer’s show is must watch tv, even now, five years after the fact (and is still available on line, I believe). Perhaps the roots of manipulating perception can even be traced to Bill Clinton’s infamous, “It depends on what you mean by the word ‘is’” defense. There are no shortages of examples. The Bush administration’s legal argument about torture is possibly the final word on this phenomena. You know the argument by now. It went something very much like “the President of the United States does not condone torture. The President sanctions waterboarding. Therefore, waterboarding is not torture.”
Some might call it simply good “spin doctoring” but whatever you might call it, the result is The Decade of Scam. Anything goes, as long as you can call it something else. I want to put that phrase in the past tense, make it “everything went” instead of everything goes. But I’m not feeling quite that optimistic. At some point, a spade is a spade no matter what you call it. Perhaps in this next decade we will figure that out.
By Myron Gushlak
Monday, March 9, 2009
Legal Scams
With all the talk about scams and frauds and new government regulations, it is disturbing to me that there are still “credit counselors” and mortgage lenders out there preying on the desperate. Many of, if not most of, the credit counselors who offer to get people out of credit card debt are predatory lenders. Some are affiliated with the credit card companies and operate to discourage consumers to declare bankruptcy, even when that financial option might be the best available. Some of these “counselors” often do nothing more than take a fifteen year debt and convert it to a thirty year debt. Yes, the result is “lower monthly costs”, but the overall cost is criminal, and do nothing for the borrower except offer a band-aid for a gunshot wound.
The credit card companies are just as bad. Their slick advertising campaigns mask usurious rates that would have been illegal a few years ago, and quite frankly, I don’t know why they’re not illegal now. They can change rates “at any time, for any reason” provided they notify the card holder of the change. There is a bill pending, the so called “Credit Card Reform Act of 2008” that may attempt to address some of these ills, but there is no mention of limiting rates credit card companies can charge. There is an attempt to end the ubiquitous “double cycle” billing method which averages out the balance from two previous bills, so the consumer gets billed for retroactive interest even if they paid off the balance. (www.money.cnn.com/2008/07/21/pf/consumer) Even though the banking industry is opposed to the changes that this act will attempt to address, most consumer advocates complain that the proposed changes barely scratch the surface of what is needed.
There are still mortgage companies offering 97% mortgages and other financial options that got us into this mess to begin with. It is probably wishful thinking to believe that government can cure these ills. As long as there are people desperate enough, or uneducated enough to borrow money under punitive conditions, there will be lenders available to them. I want to, in the very least, add my voice against such practices. To me, the practices that are currently the norm in the credit card industry are nothing more than a legal scam, as wrong and as damaging as the illegal scams that grab the headlines.
By Myron Gushlak
The credit card companies are just as bad. Their slick advertising campaigns mask usurious rates that would have been illegal a few years ago, and quite frankly, I don’t know why they’re not illegal now. They can change rates “at any time, for any reason” provided they notify the card holder of the change. There is a bill pending, the so called “Credit Card Reform Act of 2008” that may attempt to address some of these ills, but there is no mention of limiting rates credit card companies can charge. There is an attempt to end the ubiquitous “double cycle” billing method which averages out the balance from two previous bills, so the consumer gets billed for retroactive interest even if they paid off the balance. (www.money.cnn.com/2008/07/21/pf/consumer) Even though the banking industry is opposed to the changes that this act will attempt to address, most consumer advocates complain that the proposed changes barely scratch the surface of what is needed.
There are still mortgage companies offering 97% mortgages and other financial options that got us into this mess to begin with. It is probably wishful thinking to believe that government can cure these ills. As long as there are people desperate enough, or uneducated enough to borrow money under punitive conditions, there will be lenders available to them. I want to, in the very least, add my voice against such practices. To me, the practices that are currently the norm in the credit card industry are nothing more than a legal scam, as wrong and as damaging as the illegal scams that grab the headlines.
By Myron Gushlak
Monday, March 2, 2009
Scam or Charity?
It is a scam if we give someone something and get nothing in return. But not always. Sometimes we give something away with no expectation of return, and that is called charity, and not a scam at all. So where does the billions of dollars of aid that the United States gives to Africa fit into that equation? There has been a re-examination of that aid due to the massive amount of attention received by Dambisa Moyo, often referred to as the “anti-Bono.” Moyo is a leading economist and policy maker in the United States and served as the head of Economic Research and Strategy for Sub-Saharan Africa. (www.brookings.edu/articles) She is the author of Dead Aid, hence her comparison to Bono.
She argues in her book that Western aid to Africa, a pet topic of mine over the past year, has not only perpetuated poverty but also worsened it. She points to China to support her argument where there are 3.1 billion people. Forty years ago, China was poorer than many African countries. Today they have money that they earned from what they built, working hard to create a system where they were not dependent on aid. China now lends money to the United States. She believes that aid to Africa has held it back. “You get corruption-historically, leaders have stolen money without penalty- and you get dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its own people” Moyo argues. (www.NYTimes/Questionsfor)
What she recommends in lieu of charity is to microfinance – to give people jobs. That resonated particularly with me because she cites Kiva (www.Kiva.org) as a suitable place to begin to truly help Africa. Kiva has been targeted in the past year by my own charitable foundation, (www.MyronGushlakFoundation.com)
Anyone who has spent any time parenting knows that this is a central dilemma. When to help and when to stand by and let your child fall. At some point, the offer of aid becomes a weapon creating a dependency that will guarantee compliance with what the giver wants to get in return. Aid can “buy” political compliance, as well as pave the way for favorable trade terms for the giver. So the original question stands, is it charity or is it a scam?
By Myron Gushlak
She argues in her book that Western aid to Africa, a pet topic of mine over the past year, has not only perpetuated poverty but also worsened it. She points to China to support her argument where there are 3.1 billion people. Forty years ago, China was poorer than many African countries. Today they have money that they earned from what they built, working hard to create a system where they were not dependent on aid. China now lends money to the United States. She believes that aid to Africa has held it back. “You get corruption-historically, leaders have stolen money without penalty- and you get dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its own people” Moyo argues. (www.NYTimes/Questionsfor)
What she recommends in lieu of charity is to microfinance – to give people jobs. That resonated particularly with me because she cites Kiva (www.Kiva.org) as a suitable place to begin to truly help Africa. Kiva has been targeted in the past year by my own charitable foundation, (www.MyronGushlakFoundation.com)
Anyone who has spent any time parenting knows that this is a central dilemma. When to help and when to stand by and let your child fall. At some point, the offer of aid becomes a weapon creating a dependency that will guarantee compliance with what the giver wants to get in return. Aid can “buy” political compliance, as well as pave the way for favorable trade terms for the giver. So the original question stands, is it charity or is it a scam?
By Myron Gushlak
The Perfect Scam
Add Steven Speilberg, John Malkovich and Mets owner, Fred Wilpon to the list of thousands of people or groups who were victimized by Bernard Madoff’s Ponzi scheme. (s.wsj.net/public/resources/documents/st_madoff_victims) The list is international in scope and public knowledge of the victims is added to daily as people join in on lawsuits trying to recover lost funds. The prurient details of actual amounts of money lost isn’t always available, but probably no one’s losses will exceed the seven billion dollars of the Fairfield Greenwich Advisors group who lost half of their fourteen billion dollars in assets.
More names will undoubtedly be added to the list as individuals and corporations seek to recover lost funds. Many of the more public names will find there way to Entertainment Tonight, but I think I think Phyllis Molchatsky’s reaction to her losses was the most interesting of any I’ve read about. She is suing the SEC alleging negligence in their failure to detect Madoff’s scam.
As I mentioned recently, even if Madoff bought estates or artwork every day for the past ten years, those real assets are around somewhere. Finding those assets may be the new century’s version of searching for sunken pirate treasure depending on how shrewd Madoff was in hiding his ill-gotten gains. I haven’t read anywhere whether or not he plans to cooperate with authorities in locating the lost empire’s wealth. But this story is just beginning.
During the last century, film director Alfred Hitchcock was a guest on the Johnny Carson version of The Tonight Show. Johnny asked the reigning king of crime and horror movies whether he thought that anyone ever committed the perfect crime. Hitchcock’s response, in his unique breathless delivery, was that he was certain that perfect crimes were committed every day. They were never uncovered, never even recognized as crimes. That’s what made them perfect.
Which of course makes me wonder, has there ever been a perfect Ponzi scheme? Has anyone ever bilked billions or even millions from investors, and then slowly and systematically lost money so that those investors never even knew they were never actually invested in anything? Probably not, at least not with that amount of money. But I wonder on a small scale if little Ponzi schemes aren’t taking place every day, never to be discovered. It’s only a perfect crime if you don’t get caught.
By Myron Gushlak
More names will undoubtedly be added to the list as individuals and corporations seek to recover lost funds. Many of the more public names will find there way to Entertainment Tonight, but I think I think Phyllis Molchatsky’s reaction to her losses was the most interesting of any I’ve read about. She is suing the SEC alleging negligence in their failure to detect Madoff’s scam.
As I mentioned recently, even if Madoff bought estates or artwork every day for the past ten years, those real assets are around somewhere. Finding those assets may be the new century’s version of searching for sunken pirate treasure depending on how shrewd Madoff was in hiding his ill-gotten gains. I haven’t read anywhere whether or not he plans to cooperate with authorities in locating the lost empire’s wealth. But this story is just beginning.
During the last century, film director Alfred Hitchcock was a guest on the Johnny Carson version of The Tonight Show. Johnny asked the reigning king of crime and horror movies whether he thought that anyone ever committed the perfect crime. Hitchcock’s response, in his unique breathless delivery, was that he was certain that perfect crimes were committed every day. They were never uncovered, never even recognized as crimes. That’s what made them perfect.
Which of course makes me wonder, has there ever been a perfect Ponzi scheme? Has anyone ever bilked billions or even millions from investors, and then slowly and systematically lost money so that those investors never even knew they were never actually invested in anything? Probably not, at least not with that amount of money. But I wonder on a small scale if little Ponzi schemes aren’t taking place every day, never to be discovered. It’s only a perfect crime if you don’t get caught.
By Myron Gushlak
Friday, January 30, 2009
Scams
The down time at BlueWater Partners (http://bluewater.ky/) is always interesting. I don’t think that would be too surprising to many people. When men work in high pressure jobs, handling large sums of money, things tend to get a little unpredictable during the breaks. Bond traders are notorious for this sort of behavior. A bond trader will work at warp speeds for hours at a time manning several telephone lines and computer screens simultaneously, and then bam, everything stops, and traders find themselves staring at one another in a minor daze. I knew of one bond trader in New York who caught mice and threw them out the window after making little parachutes for them during the down time. Things get weird. Conversations are often unrepeatable.
The talk the other day centered around the Bernard Madoff scam. It’s hard not to talk about Madoff, or “made-off” as I’ve heard him called recently, as in “he ‘made-off’ with all the money.” We started by talking about other scams, the original pyramid scheme of Charles Ponzi in the 1920’s to the Nigerian money laundering scheme that still surfaces every now and again. Madoff seems to have the biggest scam to date, at least in terms of dollars. The Albanian pyramid scheme of 1997 was the hands down biggest in terms of the numbers of people involved. It was estimated that two-thirds of that country’s entire population and government were caught up in it. Riots ensued when the whole thing collapsed, and the country still hasn’t fully recovered. But in terms of dollars, Madoff seems to have won a rather dubious prize.
Which led to the main topic of discussion – “Where is the money?”
If the totals that are being thrown around in the newspapers are remotely accurate, Madoff took hundreds of millions, and possibly billions of dollars. Think about that. In these days of billion dollar buyouts numbers get thrown around and lose their meaning. But he may have taken billions of dollars. A million dollars is a lot of money. If you spent a dollar a day for a million days you would have had to begin in the fifth century BC to be broke today. (without interest, of course.)
It was the esteemed consensus of BWP that a single man cannot spend that much money in his lifetime, never mind the forty or fifty years Madoff may have been at it. There just isn’t enough time in the day. It would take a foundation with many employees to spend at a fast enough rate. It’s a funny idea, not being able to spend a fixed amount of money, a Brewster’s Millions sort of fantasy, but think about it. If you stole one billion dollars, you would have to spend ten million dollars a day to make it disappear in a couple of decades. Now think about how much work it would be to spend ten million dollars a day every day for a couple of decades. If you gave it away in huge allotments. far too much attention would be drawn to you. Did he buy an estate a day for a year? A roomful of Picassos? Where are they? What a dilemma! So the question remains, where is the money?
I was reminded of a story I read many years ago. A man in France stole what is the equivalent to one million dollars in quarters. Do you know how much space you need to store a million dollars in quarters? What are you going to do with them? Sell them each for a nickel to neighborhood children? Go to quarter casino machines every day for eight hours? You would draw so much attention to yourself that you would be caught in weeks, which leads me to the what the police chief in charge of the case was quoted as saying, “Stealing this much money is its own punishment.”
By Myron Gushlak
The talk the other day centered around the Bernard Madoff scam. It’s hard not to talk about Madoff, or “made-off” as I’ve heard him called recently, as in “he ‘made-off’ with all the money.” We started by talking about other scams, the original pyramid scheme of Charles Ponzi in the 1920’s to the Nigerian money laundering scheme that still surfaces every now and again. Madoff seems to have the biggest scam to date, at least in terms of dollars. The Albanian pyramid scheme of 1997 was the hands down biggest in terms of the numbers of people involved. It was estimated that two-thirds of that country’s entire population and government were caught up in it. Riots ensued when the whole thing collapsed, and the country still hasn’t fully recovered. But in terms of dollars, Madoff seems to have won a rather dubious prize.
Which led to the main topic of discussion – “Where is the money?”
If the totals that are being thrown around in the newspapers are remotely accurate, Madoff took hundreds of millions, and possibly billions of dollars. Think about that. In these days of billion dollar buyouts numbers get thrown around and lose their meaning. But he may have taken billions of dollars. A million dollars is a lot of money. If you spent a dollar a day for a million days you would have had to begin in the fifth century BC to be broke today. (without interest, of course.)
It was the esteemed consensus of BWP that a single man cannot spend that much money in his lifetime, never mind the forty or fifty years Madoff may have been at it. There just isn’t enough time in the day. It would take a foundation with many employees to spend at a fast enough rate. It’s a funny idea, not being able to spend a fixed amount of money, a Brewster’s Millions sort of fantasy, but think about it. If you stole one billion dollars, you would have to spend ten million dollars a day to make it disappear in a couple of decades. Now think about how much work it would be to spend ten million dollars a day every day for a couple of decades. If you gave it away in huge allotments. far too much attention would be drawn to you. Did he buy an estate a day for a year? A roomful of Picassos? Where are they? What a dilemma! So the question remains, where is the money?
I was reminded of a story I read many years ago. A man in France stole what is the equivalent to one million dollars in quarters. Do you know how much space you need to store a million dollars in quarters? What are you going to do with them? Sell them each for a nickel to neighborhood children? Go to quarter casino machines every day for eight hours? You would draw so much attention to yourself that you would be caught in weeks, which leads me to the what the police chief in charge of the case was quoted as saying, “Stealing this much money is its own punishment.”
By Myron Gushlak
Saturday, January 17, 2009
Dead Cat Bounce
I thought it might be fun to go back a year ago trying to find egregiously wrong financial forecasts for the year 2008, soon to be put out of its misery. I didn’t find any. Just about everybody was predicting dire consequences for the year just ended. If someone thought that forecast was overly pessimistic, I couldn’t find any evidence of it. The prospects for a good financial 2009 are also rarer than BMW’s in a trailer park. The only issue for debate seems to be how long things will stay bad. It was a bit surprising to me to read in multiple sources that most end of the year forecasts had the beginning of the recession as having already started in December, 2007, even though the US government didn’t “officially” put us in one until eleven months later in November.
Mark Lanler’s New York Times article of December 10, 2008, seems to echo the cries of doom and gloom that dominate the media and the internet for 2009. (www.nytimes.com/2008/12/10/business/worldbusiness/10global.html) His opinion is particularly disturbing because he cites the lack of an obvious engine to drive a recovery. The latest “buzzword” seems to be infrastructure investment as a way out of the woods, but the term is thrown around so frequently that it becomes like the emperor’s new clothes, true because we all say it’s true and we all want it to be true.
The late December stock market mini-rallies can be attributed to “a dead cat bounce”. We at Blue Water Partners (www.bluewaterpartners.com) “borrowed” that line several years ago with little apology to the originator of the term. An unnamed Singapore broker cited in The Financial Times, coined the phrase after a precipitous market plunge on Monday was followed by a modest recovery on Tuesday. His rather macabre observation was “that even a dead cat will bounce if dropped hard enough from high enough.” (www.thelede.blogs.nytimes.com/2007/03/01)
The term never fails to bring a smile to our faces, though the sentiment is hardly worth smiling about. Our hopes for 2009 is that the year as a whole will not (in retrospect) be anything more than a dead cat bounce from the plunge of 2008. Money will, of course, be made in 2009. Money is always being made somewhere. Buyers are making acquisitions. It’s a good time to have your financial people on speed dial, especially those who know how to drive value.
By Myron Gushlak
Mark Lanler’s New York Times article of December 10, 2008, seems to echo the cries of doom and gloom that dominate the media and the internet for 2009. (www.nytimes.com/2008/12/10/business/worldbusiness/10global.html) His opinion is particularly disturbing because he cites the lack of an obvious engine to drive a recovery. The latest “buzzword” seems to be infrastructure investment as a way out of the woods, but the term is thrown around so frequently that it becomes like the emperor’s new clothes, true because we all say it’s true and we all want it to be true.
The late December stock market mini-rallies can be attributed to “a dead cat bounce”. We at Blue Water Partners (www.bluewaterpartners.com) “borrowed” that line several years ago with little apology to the originator of the term. An unnamed Singapore broker cited in The Financial Times, coined the phrase after a precipitous market plunge on Monday was followed by a modest recovery on Tuesday. His rather macabre observation was “that even a dead cat will bounce if dropped hard enough from high enough.” (www.thelede.blogs.nytimes.com/2007/03/01)
The term never fails to bring a smile to our faces, though the sentiment is hardly worth smiling about. Our hopes for 2009 is that the year as a whole will not (in retrospect) be anything more than a dead cat bounce from the plunge of 2008. Money will, of course, be made in 2009. Money is always being made somewhere. Buyers are making acquisitions. It’s a good time to have your financial people on speed dial, especially those who know how to drive value.
By Myron Gushlak
Fashion
An article in this month’s Vanity Fair on George Bush caught my eye. Actually the cover photo of actress Cate Blanchett caught my eye, but why quibble? I was surprised that Vanity Fair would write about Bush or about anything that doesn’t carry a designer label, but I was quickly drawn into the article. Nothing in the piece was particularly new or surprising. The article is a composite of brief historical information, juxtaposed with comments by the people on the periphery of those events. The mosaic that evolves is anything but complementary to Bush 43. I’d read much of the same in Bob Woodward’s “State of Denial” and the excellent Cheney biography, “Angler” by Barton Gellman, but it occurred to me half way through that I was reading “Vanity Fair”.In a Marshall McCluhan moment I realized it is , literally, now fashionable to bash George Bush.
Perhaps it is my training in investment baking (www.Bluewaterpartners.com) but when I see everyone swimming upstream, I tend to want to see what’s going on in the other direction. When everyone’s pulling out of the market, it is often the best time to wade in. With that in mind, I tried to envision a favorable historic treatment of W. If the Middle East miraculously stabilizes and follows Iraq’s “democratic” lead, I suppose Bush will be seen as being ahead of his time. Perhaps the mortgage meltdown will be laid at the feet of former President, Bill Clinton’s decision to make housing more available to the poor of this country, and, even though Bush continued the Clinton program, the blame may get shifted there. People who travel extensively will tell you that the perception of America has drastically deteriorated in the past eight years. I don’t know how history will treat that. I realized quickly that I was swimming upstream just to get the point where I could make a case that he was merely an average president. Lawrence Wilkerson, top aide and later chief of staff to Colin Powell called him a “Sarah Palin-like president.” That comment would be considered a positive comment when compared to the other descriptions in the article.
The surprise to me when I read that Bush has a 29% approval rating is that almost one out of every three people do approve of his performance. Who are these people? And what are they wearing?
By Myron Gushlak
Perhaps it is my training in investment baking (www.Bluewaterpartners.com) but when I see everyone swimming upstream, I tend to want to see what’s going on in the other direction. When everyone’s pulling out of the market, it is often the best time to wade in. With that in mind, I tried to envision a favorable historic treatment of W. If the Middle East miraculously stabilizes and follows Iraq’s “democratic” lead, I suppose Bush will be seen as being ahead of his time. Perhaps the mortgage meltdown will be laid at the feet of former President, Bill Clinton’s decision to make housing more available to the poor of this country, and, even though Bush continued the Clinton program, the blame may get shifted there. People who travel extensively will tell you that the perception of America has drastically deteriorated in the past eight years. I don’t know how history will treat that. I realized quickly that I was swimming upstream just to get the point where I could make a case that he was merely an average president. Lawrence Wilkerson, top aide and later chief of staff to Colin Powell called him a “Sarah Palin-like president.” That comment would be considered a positive comment when compared to the other descriptions in the article.
The surprise to me when I read that Bush has a 29% approval rating is that almost one out of every three people do approve of his performance. Who are these people? And what are they wearing?
By Myron Gushlak
Wednesday, December 17, 2008
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
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
Friday, December 5, 2008
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
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
Thursday, November 13, 2008
Stock market
“The difference between playing the stock market and the horses is that one of the horses must win.” This was the lament of a BlueWaters lunch last week. Some of the most humorous things I’ve ever heard were about money. Perhaps it is because, as Voltaire said, “when it comes to money, everybody is of the same religion.” Perhaps it is because sometimes all a man can do is laugh. The stock market, as “the experts” tell us, is still trying to find a bottom. Meanwhile, the government announced last week that it would sell $55 billion in bonds next week as part of the massive borrowing plan to pay for its financial rescue packages. Some say that figure might have to expand to over $300 billion by the first quarter of 2009. And that does not include any possible life preserver thrown to the US auto industry. Clearly the bottom has not yet been reached.
I’ve given my opinion several times over the past year about the possible dangers of other countries buying our bonds as part of their Sovereign Wealth Funds, and using the influence that investment provides as political leverage in the future. I’d feel a little bit better about the proposed sale of stocks if the US government released some sort of statement that might indicate that they are at least aware of the possibility of such a conflict of interests in the future. I haven’t heard a word about it. And maybe that is to be expected. A drowning man doesn’t much care who is throwing him a rope. I (still) would like to think that someone at the upper levels of government has their eye on this sort of thing, and a contingency plan for the future exists should the United States suddenly find itself leveraged into decisions it would not otherwise make.
I admit to being snowed under by all the negative economic news on the heels of the exhaustive (and exhausting) presidential campaign. I look back nostalgically to the pre-crisis and pre-election days when Janet Jackson’s exposed breast might be the most compelling story of the day. Today she could run naked through the stock market and all anyone would want to know was what she was buying or selling.
By Myron Gushlak
I’ve given my opinion several times over the past year about the possible dangers of other countries buying our bonds as part of their Sovereign Wealth Funds, and using the influence that investment provides as political leverage in the future. I’d feel a little bit better about the proposed sale of stocks if the US government released some sort of statement that might indicate that they are at least aware of the possibility of such a conflict of interests in the future. I haven’t heard a word about it. And maybe that is to be expected. A drowning man doesn’t much care who is throwing him a rope. I (still) would like to think that someone at the upper levels of government has their eye on this sort of thing, and a contingency plan for the future exists should the United States suddenly find itself leveraged into decisions it would not otherwise make.
I admit to being snowed under by all the negative economic news on the heels of the exhaustive (and exhausting) presidential campaign. I look back nostalgically to the pre-crisis and pre-election days when Janet Jackson’s exposed breast might be the most compelling story of the day. Today she could run naked through the stock market and all anyone would want to know was what she was buying or selling.
By Myron Gushlak
Tuesday, November 4, 2008
Blame Game
The Blame Game has started in earnest trying to pin the blame to a specific face (or faces) for the world wide financial crisis. This past week, the New York Times nominated Henry Cisneros, Bill Clinton’s top housing official as a partial culprit. All Cisneros did (as well as the former President) was to try to bring the American dream of home ownership to a wider portion of the population. Borrowing eligibility standards were lowered. In fact, they were practically dispensed with altogether.
A couple of months ago I wrote about well intentioned people trying to help others. I referred to the Dooling novel, White Man’s Grave, while discussing the Myanmar refusal to allow charitable aid into their country after a devastating earthquake. I was merely pointing out that help isn’t always received in the way it was intended. Things sometimes go inexplicably wrong in the charitable transaction, no matter how well intentioned. Many thought my words were misanthropic, at best, and “disgustingly anti-social” at worst. I was accused of using logic to rationalize being un-charitable. In my defense, the Myron Gushlak Foundation says otherwise (), but I did not choose to argue (if I could have). Andrew Carnegie, one of the twentieth century’s most prolific philanthropists said “One of the serious obstacles to the improvement of our race is indiscriminate charity.” One assumes he was serious.
I’m not saying that people should not try to help their neighbor. That would be anti-Christian and politically insensitive. And even though I’m not running for anything, I still would never suggest such a thing. I’m just saying that whenever someone offers to help me, I instinctively put my hand to my pocket to make sure my wallet is safe. “Home ownership for everyone!” much like “a chicken in every pot!” never seems to work out as nicely as it sounds. Somewhere, somehow, there is always some poor cattle rancher going out of business because no one’s buying beef anymore as the pots get filled with chickens. All I’m saying is that the housing market was moving along quite nicely with an almost incessant steady though non-spectacular growth year after year, decade after decade. It wasn’t broke. For sixty years or more, people bought houses, made money slowly and incrementally. Why did anyone feel the need to fix what wasn’t broke?
By Myron Gushlak
A couple of months ago I wrote about well intentioned people trying to help others. I referred to the Dooling novel, White Man’s Grave, while discussing the Myanmar refusal to allow charitable aid into their country after a devastating earthquake. I was merely pointing out that help isn’t always received in the way it was intended. Things sometimes go inexplicably wrong in the charitable transaction, no matter how well intentioned. Many thought my words were misanthropic, at best, and “disgustingly anti-social” at worst. I was accused of using logic to rationalize being un-charitable. In my defense, the Myron Gushlak Foundation says otherwise (), but I did not choose to argue (if I could have). Andrew Carnegie, one of the twentieth century’s most prolific philanthropists said “One of the serious obstacles to the improvement of our race is indiscriminate charity.” One assumes he was serious.
I’m not saying that people should not try to help their neighbor. That would be anti-Christian and politically insensitive. And even though I’m not running for anything, I still would never suggest such a thing. I’m just saying that whenever someone offers to help me, I instinctively put my hand to my pocket to make sure my wallet is safe. “Home ownership for everyone!” much like “a chicken in every pot!” never seems to work out as nicely as it sounds. Somewhere, somehow, there is always some poor cattle rancher going out of business because no one’s buying beef anymore as the pots get filled with chickens. All I’m saying is that the housing market was moving along quite nicely with an almost incessant steady though non-spectacular growth year after year, decade after decade. It wasn’t broke. For sixty years or more, people bought houses, made money slowly and incrementally. Why did anyone feel the need to fix what wasn’t broke?
By Myron Gushlak
Thursday, September 25, 2008
Financial Musings
My head is spinning. Freddie Mac, Fannie Mae, Bear Stearns, Lehman Brothers, AIG. Federal bailouts seem imminent for most of them. I cannot calculate how many people have asked me in the past week for my opinion about these historic events. Uncertainty and financial markets mix like oil and water, and this time around is no exception. I would like to add a calming voice to the current situation. There is a history of this sort of thing, and the financial world did not end. Most people do not realize that in the Savings and Loan bailout of the 1980’s, the government was able to recoup most or all of its investment, as I mentioned many blogs ago. I do not want to minimize what has happened either. The Federal government has taken on debt that some estimate may be as much as half a trillion dollars. That sort of thing will have far reaching repercussions. We are in uncharted waters, I think, but the ship is sound.
I am fascinated by the mass psychology of tumultuous financial events such as the one we are currently in. I get impatient to know how it will all turn out, wishing I could fast forward to a more stable point in the future. Not just for the financial gain I would have by knowing the future (though if I’m daydreaming, there is no reason to leave out those sort of fantasies) but just to see who steps forward, who was right, who was dreadfully wrong. You can say a lot of things about the twenty-first century so far, but you can never call it boring. I am also fascinated by the history of such events. The decision of this government to bail out these institutions makes me wonder if the entire Great Depression might have been avoided if the government came in and supported the banks in 1929. That is the most fascinating thing about all this. Did we just avert the second Great Depression, or did we just guarantee its arrival?
By Myron Gushlak
I am fascinated by the mass psychology of tumultuous financial events such as the one we are currently in. I get impatient to know how it will all turn out, wishing I could fast forward to a more stable point in the future. Not just for the financial gain I would have by knowing the future (though if I’m daydreaming, there is no reason to leave out those sort of fantasies) but just to see who steps forward, who was right, who was dreadfully wrong. You can say a lot of things about the twenty-first century so far, but you can never call it boring. I am also fascinated by the history of such events. The decision of this government to bail out these institutions makes me wonder if the entire Great Depression might have been avoided if the government came in and supported the banks in 1929. That is the most fascinating thing about all this. Did we just avert the second Great Depression, or did we just guarantee its arrival?
By Myron Gushlak
Wednesday, September 17, 2008
Non-conventional
There is no shortage of things to say about the recently concluded Democratic and Republican conventions in the United States. As a “foreigner”, perhaps my take might be a little different from the standard CNN/Fox News fare. As I’ve stated in the past, one of the perks of my investment banking business, Blue Water Partners, is the opportunity I have to confer with people of almost every nationality from countries spanning the globe.
It has escaped no one’s attention that the United States has nominated a black man for its highest leadership position. While not quite as shocking as the possibility of the Germans nominating a Jew, it has definitely caught the world’s eye. Some of the non-European people I do business with are quite euphoric. There is skepticism about the willingness of the United States to actually elect him, however, especially in the southern states where racism is assumed to be alive and well. But the possibility has garnered plenty of attention.
McCain and Obama could not be more different in their personalities and speaking styles. And as the cable and network talking heads point out ad nauseum in their attempt to be even-handed, both are coming to the party with their own unique talents. A couple of things strike me as a non-American, however. One is the insistence on referring to the next president as the “leader of the free world”. If that is the case, shouldn’t we Canadians (or Europeans) get a vote, or a half vote? It brings to my mind the baseball World Series, which if I’m not mistaken has been won by an American team every year it has been played. But I can shrug that off as normal American hubris.
The Democratic convention was a remarkable display of passion. The Republican convention- not so much, except for the reception given the Vice Presidential nominee, Governor Sarah Palin. Apparently you Americans are big on the Hollywood ending – “virtual unknown PTO mom rises to become the supreme commander of the world” scenario. Life imitating art, for certain! It raised a few eyebrows in the lunch I had with several European businessmen last week. Only in America.
But even that unlikely script did not cause as much of a discussion as the Republican speaker who stated (and I’m paraphrasing) that Obama was ready to turn his back on Iraq while McCain was committed to stay until the war was won. Everyone I’ve spoken to was surprised that that notion was not challenged by the “political experts” after the speech. The consensus among people I’ve met was “what will the Americans have won?” The war has thrown trillions of dollars of debt onto this and future generations. It has cost thousands of American lives, and many more thousands of wounded veterans are returning home requiring medical attention for years to come. The price of gas has almost doubled in the US since the war began, their economy is in shambles, and certainly it would be difficult to defend the argument that the Middle East (and the world by extension) is safer today than in 2001. So what is it that Americans, or at least McCain Republicans think they are on the verge of winning?
At any rate, the open window on the American way of selecting its leaders is always entertaining. It is also helped immeasurably by such American inventions as Tivo and the fast-forward button.
By Myron Gushlak
It has escaped no one’s attention that the United States has nominated a black man for its highest leadership position. While not quite as shocking as the possibility of the Germans nominating a Jew, it has definitely caught the world’s eye. Some of the non-European people I do business with are quite euphoric. There is skepticism about the willingness of the United States to actually elect him, however, especially in the southern states where racism is assumed to be alive and well. But the possibility has garnered plenty of attention.
McCain and Obama could not be more different in their personalities and speaking styles. And as the cable and network talking heads point out ad nauseum in their attempt to be even-handed, both are coming to the party with their own unique talents. A couple of things strike me as a non-American, however. One is the insistence on referring to the next president as the “leader of the free world”. If that is the case, shouldn’t we Canadians (or Europeans) get a vote, or a half vote? It brings to my mind the baseball World Series, which if I’m not mistaken has been won by an American team every year it has been played. But I can shrug that off as normal American hubris.
The Democratic convention was a remarkable display of passion. The Republican convention- not so much, except for the reception given the Vice Presidential nominee, Governor Sarah Palin. Apparently you Americans are big on the Hollywood ending – “virtual unknown PTO mom rises to become the supreme commander of the world” scenario. Life imitating art, for certain! It raised a few eyebrows in the lunch I had with several European businessmen last week. Only in America.
But even that unlikely script did not cause as much of a discussion as the Republican speaker who stated (and I’m paraphrasing) that Obama was ready to turn his back on Iraq while McCain was committed to stay until the war was won. Everyone I’ve spoken to was surprised that that notion was not challenged by the “political experts” after the speech. The consensus among people I’ve met was “what will the Americans have won?” The war has thrown trillions of dollars of debt onto this and future generations. It has cost thousands of American lives, and many more thousands of wounded veterans are returning home requiring medical attention for years to come. The price of gas has almost doubled in the US since the war began, their economy is in shambles, and certainly it would be difficult to defend the argument that the Middle East (and the world by extension) is safer today than in 2001. So what is it that Americans, or at least McCain Republicans think they are on the verge of winning?
At any rate, the open window on the American way of selecting its leaders is always entertaining. It is also helped immeasurably by such American inventions as Tivo and the fast-forward button.
By Myron Gushlak
Monday, September 8, 2008
Education Revolution
Have you noticed what is happening in New Orleans? In the wake of Hurricane Katrina, there is an excitement brewing about education, of all things. Most of the existing pre-Katrina school system was washed away by the hurricane, both literally and figuratively. Even before the hurricane, the system was failing miserably. Statewide, Louisiana ranked as low as 46th out of the fifty United States in student achievement rankings. Instead of rebuilding a broken system, New Orleans decided to become a laboratory for charter schools. More than half of New Orleans’s public-school students are now in charter schools. Early successes have caught the attention of educators nationwide, as well as local governments still unsure about the viability of the charter school concept.
Charter schools are publicly financed, but are run privately. The individual school has much more latitude about the students it accepts and the curriculum it chooses to follow. Paul Vallas, the former head of the school systems in both Chicago and Philadelphia is the superintendent behind this mass experiment. Thus far, the experiment is successful beyond most reasonable expectation. We hear about the failures of New Orleans all the time. It is truly uplifting to hear about the occasional phoenix that every now and then rises from (very wet) ashes.
Robert M. Hutchins has said “We have not had the three R’s in America, we have had the six R’s: remedial readin’, remedial ‘ritin’ and remedial ‘rithmetic.” Perhaps out of the misery of Katrina, something may actually change for the better. Before Katrina, New Orleans and education went together as well as McDonalds and good nutrition. Don’t look now, but the times, they are ‘a changin.
By Myron Gushlak
Charter schools are publicly financed, but are run privately. The individual school has much more latitude about the students it accepts and the curriculum it chooses to follow. Paul Vallas, the former head of the school systems in both Chicago and Philadelphia is the superintendent behind this mass experiment. Thus far, the experiment is successful beyond most reasonable expectation. We hear about the failures of New Orleans all the time. It is truly uplifting to hear about the occasional phoenix that every now and then rises from (very wet) ashes.
Robert M. Hutchins has said “We have not had the three R’s in America, we have had the six R’s: remedial readin’, remedial ‘ritin’ and remedial ‘rithmetic.” Perhaps out of the misery of Katrina, something may actually change for the better. Before Katrina, New Orleans and education went together as well as McDonalds and good nutrition. Don’t look now, but the times, they are ‘a changin.
By Myron Gushlak
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