Myth465

I have read books by Ron Paul and Murray Rothbard and listen to Schiff weekly. I enjoy the purity of the Austrian School, but thats a bout it. It sounds so simple, but seldom answers many question about how to go forward. They seem to believe we should just let the chips fall where they may and remove all regulation to truly free up the market. It doesnt address pooled needs like education, water, police and fire protection, and also other utilities. It also does little to address externalities and stake holders. What about the environment, safety, and peoples general well being. Its sounds great to say remove the minimize wage and we have full employment, but at what cost. In my opinion a truly free market is just as dangerous as a top down communist one. ----- Its pure, its elegant, its easy to understand. I dont think it would work though in the real world and for most people. Isnt the point of an economy to improve the lives of the majority? Thanks for the link this Koo Guy seems interesting.

aw you guys are making me work. I will look into it this weekend. When something is trading at a $1 and people are saying they wouldnt sell for less than $10 its tough not to get interested.

SFK seems to be getting alot of discussion Can anyone give me the 1 paragraph writeup on them with a thumb in the air guess on the valuation.

Here is a good interview with the CEO of Contango. http://www.fool.com/investing/general/2010/02/10/interview-with-an-oil-and-gas-contrarian.aspx

I think thats a good comparison. It just like insurance. You want to make sure Management is smart and can allocate capital. You have to basically have blind trust on reserves for both of them. Over time it should be obvious though. There are much better capital allocators found in insurance vs energy though.

Contango has a good presentation on its website. Its attached below. I look at production reserves and costs. I see the price of all commodities rising over the long term. I want a company with low costs, low to no debt, good management, and long term reserves. Everything else will take care of itself. I buy when the marginal companies cant make much money because the commodity is selling for too low. Natural gas at $3 is perfect. Right now is still a good time to buy but gas could go lower.

This makes alot more sense then the cheap float idea people are talking about. That honestly doesnt pass the smell test for me.

You have to love this honest and frank response. This is the sort of response I can respect. One executive faced with dealing with the new ultimatum said: "It was pretty amazing but we actually chuckled because it's the sort of hard ball we would have played if we'd been in the FSA's shoes."

Tone deaf is the right word. Since when did banking become God's work. Just read the title. Talk about laying down the lay. This is why I do believe in privatization though. The Government through the legal system inherently has control of all corporations operating in the country.

I only looked at Q4 results for ZNT but know Hall decently well. HALL seems to have better underwriting and has an owner manager who can allocate capital at the helm. ZNT may have those things as well, but I dont see it from looking at Q4.

Thats a very good rule of them and would have saved me a lot of grief on ATSG and NOBL.

I too was happy about the seat loss. Obama is amazing, he has compromised so much that both bases dislike him and are disenfranchised. Hopefully it will act as a lesson to go after what you want. Bush was very good at this, he brought home what his base sent him there to do and this was regardless of what the rest of the country thought.

His argument is much better then yours and Buffet clearly said he thought they did an amazing job giving what they were dealing with and this would be a fairly easy bill to pass (which is what everyone else is saying). Its not so much that we (correct me if I am wrong), disagree with what you are saying. Its more the rationale and ideology that is problematic. No one said this was the best idea or even a bright idea. We are arguing that politically something must be done and this is one of the few things that is tough to vote against. I am also saying that the CEOs have brought this on themselves by trying to have there cake, eat it also, and leave the door open so that they could go back for seconds. Imagine trying to pass the too big to fail CEO goes broke bill in this political environment. This seems like a step in the right direction. Obama Proposes Volcker-Style Financial Reform http://economistsview.typepad.com/economistsview/2010/01/obama-proposes-volckerstyle-financial-reform.html

My guess it that India believes its less worthless then the USD

Thanks for the tip. They have had a solid few years and I bought my first slug early this month.

TWA you own LRE Lancaster? Right

Rebuttal 1 Yes, actions are needed to correct prior errors and political process issues (due to gridlocks in Congress and lobbying). I also argue that the private Big Banking sector has not helped, and has caused this problem by failing to listen to good advice (Buffetts). They have brought the rage on to themselves and throw a match on a powder keg voters. They should be blaming politicians and pushing for sensible regulation. Rebuttal 2 Im not sure how politically aware you are but, try passing that law (receivership) through Congress and let me know what the free marketers end up voting. Also tell me how a law taxing bankers bonuses will end up vote wise. Show me more then 40 Senators who want to go home saying they didnt agree with that tax. You tell me which one sells better and is easier to pass. Financial reform and regulation, both of those ships have sailed. I would say the leverage is gone (the money has been given out). Now they are simply trying to appease outrage. I understand the goal, dont support the solution, but will take it given nothing else. I would prefer a moratorium banning bonuses for select divisions and executives. Rebuttal 3 Realistically Employee A was worried about losing his job and is still at Goldman counting his bonus. he knows there is no regulation on the horizon and is enjoying his day. Ok let me propose a scenario for you. Person A puts bolts on a car, and his employer GM institutes a bonus pay for performance system. Person A takes a 20% paycut and is paid a reasonable and livable wage. He now is offered a 40% bonus based on metrics related to how fast he puts on bolts. He does an amazing job, exceeds expectations, but is laid off due to GM failing. Or he does an amazing job and GM gets a bailout, but doesnt award his bonus. Either case is fair to me because you cant do better than your company. Its happening all around the country except in high finance. Companies are struggling and good / great employees are suffering. Raises are down, hours are longer, and things basically suck for most people (compared to a few years ago). Its the nature of business. Finance wants to take money directly from tax payers and in the same year pay out huge bonuses. It doesnt look right and isnt right. Ideology be damn. Contracts / Personal liberties or not. It doesnt pass the smell test, to most sensible people and politically is suicide. The CEOs knew that or should have known that. They could have limited bonuses to traders (or specific key employees) and Management teams (any executive) should have passed on a bonus for the year. They failed to run the companies correctly. If they wanted to pay bonuses they should have said clearly to the public that this division had nothing to do with the meltdown and profited using minimal support we are giving them a bonus but, skipping the bonus for these divisions and all executives to show that we understand what is happening. They refuse to so now government is using a blunt tool (taxes to correct wrongs). The Fed booked record profits on their portfolio. Should Ben Berknanke get a bonus based on this profit? Someone is going to have to pay and to say they should have paid back but now its trampling on rights is not good enough.

See my above reply. I edited it for your edit. We argue on what should have been done. We are debating tactics, but talking about the same thing. Doing it your way, the preferred way, would have probably costs about the same or slightly less with no moral hazard and better transparency. You are making the same arguments as Joseph Stiglitz and I agree with yours and his. What should be done going forward now that those mistakes were made is what I thought we were discussing.

You arent thinking hard enough. Straw-man aside. The bailouts in 08 & 09 (as poorly as they were implemented) were a better allocation of capital than cancer research. I dont know if 800 billion would have cured cancer, but I do know things would be infinitely worse with a crippled financial market. And thank you for breaking out your arguments. I think everything gets lost in the shuffle and we end up talking about the function of capital markets and trusts. My issue is that your replies seize on 1 word within an entire paragraph and go off on that word. When that word isnt even the main point of the paragraph. 1. Bailouts were given to investors that shouldn't have been. This could have been done in a way that avoided a recession (bailing out depositors, but not bondholders) - Partially agreed, receivership should have been used. Contracts (bonuses, counter-parties, other) should have been destroyed thru the receivership process. It should have been like the S&L crisis. But this solution is the free market solution that was proposed by budding capitalist. I think they were stuck on the bondholders. The only reasons the banks are doing well right now is due to equity and debt offers which wouldnt have happened if everyone got screwed. 2. Punishing employees for bonuses (a) isn't the right party to punish, (b) infringes on individual rights. - I dont agree with this. There are better targets, but the banks wont listen. If the government gives you support then they can largely do what you want. The CEOs are acting irresponsibly so the next target will likely be the employees. Employees get screwed all the time, ask any good worker that was laid off. 3. Taxing banks with a special tax is the right party to punish either. The investors now, 1.5 years later, aren't the same as before. - True but you have to use what you got to get what you want. The banks are pushing back on regulation and lobbying for nothing to be done. The responsible thing for them to do is admit that they screwed up and help design reasonable legislation to prevent this. They got there cake and want the option of another slice. The investors of Goldman were enriched by the rescue of AIG why shouldnt they pay. ----- I think I understand your points and agree with them in theory but how would you solve this politically. The past is the past, going forward if you were Obama what would you do? Its easy to Monday morning quarterback and say the textbook should have been followed but what now. Just move on and do better next time?

I agree too. They have an entire empty city that was built for GDP purposes. Seems to that they are cooking the books or juicing GDP. I dont think its over, you dont have a 20 year debt laden party with a 1.5 year fairly mild hangover. If you cure the hangover by drinking again than.... Unemployment and deleveraging feeds on themselves. I think we are in for 3-4 lame years of growth. I think these discussions are valuable taken in the right context. Most who thought it wasnt over and were looking for a pullback got crushed by the market raise. I think Buffett said it best, cash is a horrible investment. You know it will be worth less tomorrow than it is today. You want to have enough of it around, but not much more. Keeping that in mind you have to do something with it.

The former is the preferred allocation of capital, given the situation. You cant look at everything in a box. Butter is better then guns, unless someone has a gun pointed at you. Also I am beginning to agree with the others (in terms of the pointlessness of this endeavor), you seem to take 1 point or word and focus on it. Versus looking at the greater point of the argument. Im not attacking you personally, but we seem to be hoping around from buzz word to buzz word. I bear some blame as well.

I would also say they did a ok job given the circumstances...under time pressures, decisions that needed to be made were made. Taking circumstances out of it I think they did a D job. Mistakes that were made, given the circumstances (i.e. bailouts of certain firms, forced tarp investments on firms like WFC), should not be punished after the fact. Furthermore, they are punishing the wrong parties. Investors (bondholders and stockholders), were the real beneficiaries from the bailouts, and should have been wiped out/diluted to a larger extant, at the time the bailouts were made. Its like a dog, you can't beat it a year after catching it pissing on your couch. I agree with this, stockholders and bondholders of the TARP banks won. They are silently grateful and really havent said much of anything. Bankers who also won out (what do you think would have happened to these CEOs and IBs had these firms collapsed, I think they would be a socialist looking for a hand out, actually they were corporate socialists who got handouts), are patting themselves on the back and claiming they were the smartest guys in the room. When their profits are based on government support (guarantees, zero percent interest rates, cash bailouts, accounting changes). You are focusing on 1 type of bailout. Giving cash is 1 way to help a firm, but everything above was effectively a handout. If the government had not guaranteed money market funds what do you think would have happened. If we still had mark to market, then what. These guys are celebrating while we have 15%-18% unemployment and underemployment. Dont you think Joe 6 pack, is going to be a little annoyed. Didnt Buffett tell Goldman that they were making a political mistake with the bonuses. The banks are also fighting regulation. They want business as usual with government support. Dont you think that has unique consequences. You can have your cake (bondholders and stockholders), and you can eat it too. Just dont gloat about it. --- That statement makes perfect sense. The largest recipient of the AIG bailout was Goldman. It doesnt get more sophisticated. It was just another backdoor bailout inmo. The holders of Freddie, Fannie, AIG (CDS), and Bank Debt were foreign government, insurance funds, pension funds, university endowments, and investment banks. They are the only ones with that kind of cash. No sense bailing out these groups then forcing them to take a haircut on this paper, then bailing them out again. Also fear and greed assure mispricing. Thats the whole point of value investing. Bailout or no bailout. We will all die off and our kids will continue the boom and bust cycle. Your investment theory contradicts your economic theory. Very interesting. There will always be bubbles. The problem is banking bubbles sink the whole ship and should be prevented. The point of capital markets is not the pricing of risks. The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities. Capital Markets facilitate economic development. Thats there point. When everyone misprices risk letting everyone fail for the sake of ideology misses the mark in my opinion.

I am actually enjoying the debate / discussion, and would like it to continue. I realize that personal attacks dont allow for that and would like to remove them. No one is saying you or your firm is responsible. Honestly if you dont work at a Major tarp bank which received billions of dollars and lobbied for accounting changes then you are out of scope. I think when we say the bankers and bonus's its quite clear who everyone is talking about. No one (well no one worth listening to means) the guy making 60k in NY, working 80 hours a week who gets a 50k bonus to earn a decent wage based on his hours. Goldman's average salary is $750,000. It sounds like thats much more then you make and much much more than I make. Second you completely missed the point of my arrangement and went off on a small tangent based on 1 word taken out of context. Trust referenced the credit freeze, and trust is a big part of lending. When you lend with no collateral you are saying you trust that they will pay you back, its hard to have trust when banks are failing every 3 days. Hence capital markets froze. What im arguing is to put away your ideology and look at the situation. I had similar issues, I listen to Peter Schiff each week. I also read Ron Paul's book. I really enjoy where they are coming from, and agree with it in a controlled setting. The problem is so do alot of the people who ran the crisis. Greenspan was an Ayn Rand libertarian who abhorred the idea that government should break up anything; he once wrote that "the entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance." Bigger was better, he said, and that way of thinking largely governed his stewardship of the Fed from 1987 to 2005. He also was the prime cause of the biggest crash since the Great Depression. You are talking about how a capitalistic system works, and not looking at the situation as it was. You are talking theory and not looking at reality. Im guessing Greenspan, Paulson, and Berknake agree with your theory, but when the shit hit the fan they dealt with reality. Have you asked yourself why? Buffett is the greatest investor walking around today, and the richest man in the world. He thinks they did a good job based on what they had to deal with. Do you know why he said that? Also I am not entrenched, my views have changed significantly over the year. When the facts change my views change. I am always open to growth.

I think this one is better and more appropriate. Craig T. Nelson: "I've been on food stamps and welfare, did anybody help me out? No. No." -- on lack of fiscal responsibility

Agreed. Sounds like in a round about way you are saying. Upton Sinclair's - "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"