The Shoes

Various "the year in review" ideas came to mind for a December 31st blog entry. Yet I kept coming back to a piece that I had not yet written that somehow, in my mind, would not come off quite right in 2009. It is about the shoe throwing incident that took place on December 15th in Iraq by some loser journalist. 

To be sure, a true journalist would have used a journalist's weapons of choice, words, to express disapproval. Instead, this clown could only manage to display his effrontery by heaving his shoes at President Bush during a press conference. An irony is that the fool would have faced instant death had he dared even aim a shoe at Savage Saddam, the very dictator that President Bush had ordered overthrown. 

Two reactions impress me about the incident and its aftermath: (1) President Bush's reaction; and, (2) the reaction by the press and media.

The weasel threw both his shoes at President Bush. Notice the President's reaction throughout. He was open-eyed, square-shouldered, and dodging the minimum required to avoid being hit. He maintained eye contact with the rag-arm in a defiant "you don't impress me nor scare me" posture. Given a chance, President Bush would have knocked the maggot's lights out. No confusion here about who was the man and who was the invertebrate.

George Bush's reaction was totally consistent with how he has dealt with the post 9/11 Islamofascism world - the world that almost exclusively dominated his two-term presidency. Say what you want for all his failings, his poor communication style, ill-timed policies, President Bush kept the homeland safe on September 12, 2001 and every day thereafter. Time seems to play tricks on the mind and distorts how truly important this is as an accomplishment. It is the most important responsibility of a President. When it comes to homeland security, President Bush displayed great purpose, tenacity, focus and resoluteness. He is to be applauded. May President-elect Obama have the same unflinching success.

Of course we all see the slapstick humor in the incident. After all, it is not everyday that some jackass tries to hit a President with his shoes. This is great fodder for Saturday Night Live and late night comedians. However, the gleeful, hand-wringing unadulterated joy that many in the press and media have taken in this does raise an eyebrow. And even some late night comedians, like David Letterman, are betrayed by the elation they feel upon seeing that someone tried to hurt or humiliate President Bush.

You just know that the leftist media would have been ecstatic if the shoe(s) had actually hit George Bush and they would have danced a jig if Bush had been hurt. The same far left media that exalts in harm coming to President Bush would be up in arms if something like this were to happen to a President they embrace -- Barack Obama for example.  But they hate Bush, so they adulate the wimpy shoe thrower.

This very same effete media decries when they, and other who behave in the same deplorable manner, are called "unpatriotic". You see, I did not support Barack Obama, but it would absolutely burn me if some ingrate, worthless journalist tried to harm or humiliate him. Acting like a patriot means that you take offense when someone tries to damage the President of the United States. Anyone. 

Yes, the leftist media fulminates when called "unpatriotic" during times like this. But, hey, the shoe fits.

Confidence, Leverage, and the Seesaw: Part 5 of a Series

"Too much leverage" is an often-cited and intelligent answer. The question is: "Why are the financial and credit markets, and therefore the economy, in shambles? Leverage is the financial term that relates the level of debt owed by an entity (personal or business) to the amount of capital (unencumbered assets) that it owns. 

Expressed mathematically: Leverage Ratio = Debt/Capital. A broader equation would be: Total Liabilities/Total Equity. Both ratios measure the extent by which an entity relies on debt, as opposed to its own capital, as a source of funds.

The key is to understand that the higher the Leverage Ratio, the greater the risk. Traditionally, entities are able to sustain high leverage ratios to the extent that they have steady, predictable cash flow that is timed in tandem with repayment of debt as it comes due. Consider the high-level of cash flow predictability of a utilities company (we all pay our electric bill, or else). Contrast this with the cash flow predictability of an antiques dealer. The former is in a far better position to load up on debt. 

In times of easy credit, debt is frequently repaid by borrowing elsewhere to pay existing debt and then stretching out the payment terms. This only serves to distort an entities' true debt repayment capacity.

Carrying a large amount of debt with minimal capital is not an easy task, but it can de done if conditions are just right. Think of a seesaw. It is possible to put a very light person at one end of the board (the lever) and have that lightweight (Capital Guy) lift a big, huge heavyweight (Debt Guy) as long as the right physical conditions exist: the relative weights at either end make sense, the length of the lever is appropriate, and the height and the positioning of the fulcrum along the lever is right. 

Over many years, and gradually achieved, that seesaw has managed to be calibrated to the point that the weight being lifted by Capital Guy was immense. We just kept adjusting the physical components of the seesaw, always ever so gradually. 

Then it came: JOLT!!!!! The sub-prime mess, Bear Stearns, Lehman, Freddie, Fannie, AIG, Washington Mutual, and many others. The precision of the carefully distributed seesaw proportions was given a swift and mighty shove. Debt Guy started to swing wildly and let out horrific shrieks. Capital Guy could not add enough heft quickly enough to counter. The lever started to gyrate and the fulcrum slid. Capital Guy can no longer carry Debt Guy. 

All of the "certain" seesaw proportions are a thing of the past and no one wants to trust Capital Guy's ability to carry Debt Guy as in the past. Capital Guy needs to bulk up and/or Debt Guy needs to join weight watchers.

Now we must start to re-set the balancing points in order to regain confidence of debt-carrying ability. But the seesaw first needs to stop its convulsions.

Misplaced CONfidence: Part 4 of a Series

Bernard Madoff is all over the news for allegedly swindling up to $50 Billion from investors in his Asset Management business. The term Ponzi scheme fills the airwaves and print media in the description of what Mr Madoff is accused of perpetrating. If true, and he does say he did it, Mr Madoff's will have pulled off the most massive flimflam in history. That word, flimflam, is a bit quaint, correct?

It is most unfortunate that common English usage is akin to alphabet soup. Nearly everything is an acronym: SUV, ADD, ADHD, HDTV, HMO, DVR, DVD, et cetera, et cetera. If not acronymized (might as well make up my own word here), then words are truncated to a pitiful stub: slo-mo, lit (as in English lit), and perp come to mind. Some acronyms have become everyday words and the fact that it started as an acronym is unknown to many: scuba, modem, detox. 

This fallout of this somewhat lazy English usage is not limited to rendering a less eloquent language. What is lost is the understanding, the full meaning, of the butchered word and its application. Self-contained underwater breathing apparatus is descriptive. Scuba is not. Scuba is just - a word. Might as well call it "lormit". It describes nothing.

Now, the digression I just put you through is not a consequence of my knowledge of Mr Madoff's penchant for acronyms nor have I heard that he was into scuba. It is because con man is short for confidence man. The full term -- confidence man -- not only tells you to hide your watch when you shake his hand but, most importantly, informs you as to how his scam actually works. He purposely sets out to gain your confidence, then he steals you blind.

Ever heard of George Parker? If not, then perhaps you've heard the popular retort that is directed to the gullible: "I have a bridge to sell you". George Parker sold the Brooklyn Bridge many times, sometimes twice a week. Police often had to stop the victimized buyers from erecting tollbooths on the famous bridge. He also sold other New York City monuments such as the Statue of Liberty, Madison Square Garden, the Metropolitan Museum of Art. Mr Parker inspired sufficient confidence to convince the marks that he was authentic.

Victor Lustig sold the Eiffel Tower twice and he sold several money printing machines. He also managed to trick Al Capone. Joseph "Yellow Kid" Weil used phony oil deals, women, race tracks, false identities to swindle many. Soapy Smith, from the old wild west days, fooled townspeople into thinking that some of the special soap bars he sold had a $1 or a $100 dollar bill wrapped around it. Someone, part of his confidence game, would exclaim that he had won $100. Then others would buy a soap bar and end up with ... soap. There was Frank Abagnale on whose life of playing confidence games they made a major motion picture, Catch Me if you Can.

Italian immigrant Charles Ponzi (1882-1949) was in and out of trouble during his misspent youth. Petty crimes mostly. Then he turned to the possibility of legally arbitraging in Postal Reply Coupons. What was illegal was convincing others to invest in his scheme and promising to double their money in 90 days. As long as he had more incoming stooges than investment returns to pay, he was in good shape. Ponzi was arrested, deported to Italy and died penniless.

These confidence men were only successful because they were able to connect with a mark that was driven by a bit of avarice or perhaps desperation. The confidence game was on when the victims gave in to trust the confidence man as a result of a gesture designed to garner that very trust. The victims all believed in something (and someone) that was too good to be true. 

The term confidence man is due to a fellow called William Thompson. Mr Thompson was active in New York City in the 1840s. He dressed nicely, as many other confidence men also dress. The genial Mr Thompson would strike up a conversation with a mark for a period of time and then ask: "Do you have confidence in me to leave me your watch until tomorrow?" Many did. 

Confidence Under Attack: Part 3 of a Series

Part 2 of this series on Confidence pointed to the lightning fast and accelerating blurring of the lines that is taking place between our political and business spheres. Left unabated, this cross-dressing that we are witnessing can only weaken the nation. 

The political trespass into the free market, or business, orbit is quite worrisome. We hear that these are emergency measures only. Pardon the skepticism, but it is truly uncommon for a government, even a benevolent one such as ours, to relinquish power that has been seized. Too many self-interests are created once a politician claims new territory. That dog will not easily surrender his bone.

One emergency leads to another and then another. The emergencies will be given different names to mollify voices of opposition to the expanding governmental  tentacles. Emergencies will be a/k/a "Special Measures"; a/k/a "Temporary Realignment"; a/k/a "Period of Adjustment". 

If we have seen what we have seen under a Republican administration, one can only tremble at the government overreach that will descend upon us by a Democrat administration in partnership with an activist Democratic-led Congress.  Their self-propelled pressures to control our economy can only be achieved by weakening our free market system beyond recognition.

Our economic house is indeed on fire. Without doubt there will be plenty of damage from the blaze. Government has extensive, but certainly not total, blame for the conflagration. We now look to the co-culpable federal government to be the fire department. Let's hope, nay -- let's demand -- that once the fire is tamed they do not feel obliged to get too comfortable and begin living in our houses. Let's remember that government works for us, The People, and we need to make sure that they go right back to the fire station.

Little Drummer Boy

A young boy, too poor to buy a gift for baby Jesus, plays his drum to please the newborn. 

In 1977, Bing Crosby and David Bowie deliver perhaps the finest rendition of this song. Listen.

Confidence Under Attack: Part 2 of a Series

The longtime nexus between Wall Street and Washington, D.C. has been strengthened beyond belief. The last days of March of this year gave us the Bear Stearns government-backed bail out. We had a new ballgame. The mixture of politics and business should ideally be kept as distanced as possible. Referees should not tackle the runner and linebackers should not throw penalty flags.

Now we are witnessing the bizarre and horrific spectacle of politicians like Barney Frank who somehow feel qualified to know which loans should be approved by a bank and at what rate. He does the aforementioned credit work in the morning. In the afternoon, he designs fuel efficient, affordable, well-styled cars that will salvage the Big Three.

So, too, we cringe as we watch corporate CEOs make desperate pleas for taxpayer money to save their businesses. Last week, it was the car guys; this week, commercial real estate developers; next week, what, massage parlors? They beg Washington when they should be petitioning investors and creditors to say yea or nay to whatever it is that they peddle.   

It is all strange indeed. A strangeness that stiff-arms confidence because roles have been changed. What we had come to expect in terms of spheres of responsibility is violated. Boundaries are blurred, if not obliterated. And it is all happening at warp speed. To this, we react as is dictated by human nature. It is as if a large, grotesque, and unknown beast has appeared in our mountain village. We watch with keen eyes. What is this thing? We move and breathe deliberately and silently. We need to figure this out first before we have restored confidence to go about our daily tasks.

Was not Socrates' definition of justice akin to each person performing the work for which he is best suited and that everything has it's place? Certain work should only be performed by those skilled for the work in question. Trespass with caution.

It's (Almost) All About Confidence

The present economic recession commenced in December 2007, a year ago. We learned this officially two or so weeks ago. To be sure, the recession is riddled with a host of accompanying economic data that substantiates, or proves, that times are tough. The unemployment rate, GDP, retail sales, capital spending are just a sample of the data we see. 

The depth and length of a recession depends largely on the restoration of confidence. We, as consumers, investors, and businessmen, have little confidence these days. It is clear that we had misplaced confidence prior to December 2007 and even into the first quarter of 2008. The child that ably manages his balance on a bicycle for the first time only to fall when someone interrupts him with a reminder that "he really doesn't know how to ride a bike" comes to mind. Once fallen, and confidence shaken, the newbie bike rider may be stupefied to hear that his future survival depends on his ability to immediately continue riding a bike.  

The point here is the paradox between the sickness and the cure. We are in the problem we are in because we borrowed too much and spent what we borrowed on things whose prices were inflated by a bubble. The macroeconomic antidote to this problem? More debt and spending. It is not unlike a drunk curing a blistering hangover by chugging a fifth of whiskey in the morning. 

Paradoxical or not, that may indeed be the drunk's short-term cure.  The long term cure is just too painful and requires great discipline. A society that pays homage to instant gratification eschews a long term, albeit healthy, remedy. However, this peculiar short-term cure requires the confidence that the morning fifth of whiskey will not cause the already splitting headache to make you feel like you just got hammered by a Joe Frazier left hook. 

Without confidence, no one will want to spend if we think our employment situation is shaky. No one wants to lend if they don't have confidence in a timely repayment. No one will invest without confidence that the investment itself is recoverable. 

When our confidence is shot, human nature, the primitive brain, takes over. We ration. We become rational. Our survival instincts sharpen. We save. We wait. We see. We react. It is irrational to do otherwise in the short term. We are survivors. Our DNA says so. Otherwise, we would not exist. Extinction is the fate of those species that do not promptly adapt to danger signals.

A manufactured sense of economic safety is a creation of modern man and takes the form of the various monetary and fiscal interventions that governments enact. These are actually good, sound tools that can avoid a worse recession and perhaps even hasten a recovery. But to work, they are forced to appeal to the modern brain and this requires a key ingredient that has the effect of telling the primitive brain to take a break -- yes, Confidence. 

Who was A.P. Giannini?

Amadeo Pietro Giannini was born in San Mateo, California in 1870. The son of Italian immigrants, Giannini succeeded in the wholesale produce business. His attention shifted to banking upon observing that banking practices tended to ignore the needs of what he termed the "little fellows". So in October 1904 Giannini founded the Bank of Italy in a building that had been a saloon in San Francisco. He offered basic deposit account services and granted loans based on his assessment of the prospective borrower's character. 

Now the story gets interesting. Recall that on April 18, 1906, scarcely 18 months from the opening of the Bank of Italy, San Francisco was hit with a disastrous earthquake that leveled the city and killed many. That same day Giannini travelled 18 miles by wagon from his home in San Mateo to the Bank, located in the North Beach neighborhood. He quickly loaded $2 million onto a produce wagon and covered the money with fruits and vegetables and took it back to his home.

Rather than shut down, as most other area bankers did for several weeks, Giannini opened for business in North Beach. Over a plank that rested upon two barrels he accepted deposits and extended credit that was critical to San Franciscans' early efforts to rebuild their city and lives. Giannini took risks and inspired confidence during the dire aftermath of the earthquake. Giannini had constructed a bench of sorts with his plank and barrels. A bench is the latin banco, from where the term bank stems.

He fervently insisted that San Francisco would rise from the ashes. Running a bank totally based on trust, he made his reputation by helping the city rebuild. Later, he expanded the Bank of Italy across California, breaking with the tradition of independent local banks by providing banking services to the Yugolsavian, Russian, Mexican, Portuguese, Chinese, Greek, and other immigrant communities. 

Through the 1920s, the Bank of Italy continued to grow. Then in 1928, Mr Giannini approached a San Francisco banker about a possible merger between the two financial institutions. You may have heard of the bank they formed -- the Bank of America. 

Giannini remained as chairman of Bank of America until 1945. When A.P. Giannini died on June 3, 1949, at age 79, hundreds of "little fellows" attended his funeral.

The Pie and the Russian Brothers

The pie is a commonly used metaphor for describing the nation's economy. For example, we routinely hear or read about "getting a slice of the pie" to connote an individual's or a delineated group's share of the economic goods. 

By paying close attention to how the metaphor is applied one gains a sense for the underlying economic politics of the user of the metaphor. Notice, for instance, that modern liberals will almost exclusively refer to adjusting the size of the pie slices, as in "the working class slice has grown thinner while the wealthy have a larger slice". Perversely, they want you to believe that having a larger slice of a shrinking pie is a good thing.

In contrast, those that focus on the free market engines of economic expansion speak about the policies and approaches that will make the pie bigger. "We need more ideas and energy centered on the opportunity to grow, on abundance, on new markets, on a willingness to improve and compete, on more economic freedom in the hands of the creators of wealth rather than in the undeserving hands of the distributors and self-proclaimed adjudicators of wealth". 

This "unfair slice" argument is the modern liberal's springboard for their banal liturgy about protectionist measures, class-warfare and all the other divisive stuff that constitutes the politics of envy and resentment. We need less focus on mealy-mouthed and corner-of-the-eye glances on what your neighbor has that you don't. We need less of this because it is the path of ruin, the path of losers.

There is an old Russian fable about two brothers. Only one brother owned a sheep. The sheepless brother was hopelessly consumed with envy. Then one day, this brother that did not possess a sheep found a lamp, rubbed it and out came a genie willing to grant one wish. The wish? Well, the brother sneered and wished that the genie kill the sheep of his brother. 

A Different Way to Pay Taxes

Americans would have a different attitude toward taxes if they were not deducted from our paycheck. Then, we would have to write checks every month payable to the various departments of the US Government for our income, payroll, social security, and all other taxes. There is something about owning something and then being forced to give it up. 

Paycheck deductions for taxes are too smooth, too easy and too automatic. They create the numbing unconsciousness that can delude one into thinking that the entirety of a hard-earned paycheck was never truly ours to begin with. The fact that some, upon receiving their tax refund, exclaim that "they got something back", is alarming when one really thinks about the mindset. Rather, the exclamation should be: "why did they overreach into my earnings and where is the interest payment?"

What Comes First, Price or Cost?

In their purest form, capitalists and socialists have a fundamental difference on how a product ought to be priced in the marketplace. Let's begin with the socialists. Socialists predominantly base business enterprise decisions on cost. To arrive at an appropriate product price, they add up the labor costs, material costs, and other costs associated with taking the product to market. To this sum they add whatever profit margin they view as essential, and this brings them to a grand total: the product price.

If foreign competitors offer the product at a lower price, then socialists decry unfair trade agreements and scream for protectionist measures such as tariffs that are aimed at elevating the competition's cost, and by extension, the competitor's price. Lowering their own price is not the solution, especially when rigormortis sets in on their sacred "cost + margin = price" mentality. Who suffers from this wrongheadedness? The consumer for one and any notion of business sanity for another. The socialists have it backwards because their stale process leads to political barriers that reward inefficiencies.

By dramatic contrast, a capitalist focuses on price as the key determinant. What price will be the most attractive to capture consumers in a competitive marketplace? Once that price is established, the capitalist organizes himself to arrive at a cost structure that will permit the delivery of the product and leave a residual profit. This process forces the free marketer to develop all sorts of increased productivity measures,  sound organization, efficient use of labor, technological progress, optimal distribution channels etc... It is this very effort to construct a cost structure that can work within the constraints of the price limitation that has brought us marvelous new technology, workplace enhancements, and general business innovation. It leads to economic growth.

Here's a riddle: What happens when you cross a free market-created price constraint with a labor union/protectionist business organization? You get huge losses with no flexibility to change because the cost structure is rigid. You get Detroit.

Deepak and Gotham

Deepak Chopra is a bit flustered these days because of  a commentary written by Dorothy Rabinowitz that appeared in the Wall Street Journal on December 1st. The piece, titled "Deepak Blames America", convincingly asserts that Mr Chopra, during a CNN interview, pointed the finger of blame toward the United States as it related to the Mumbai, India terrorist attack. 

To paraphrase the CNN interview, Deepak said that US foreign policy led to the murderous act because the policy is too nasty toward the otherwise easy-going terrorists. It would be far better for America to adopt a "root cause" approach to this pedestrian misunderstanding with those who want to annihilate us. By the way, the self-help guru put out the outlandish claim that those who drop bombs from 35,000 feet (US pilots) can also be considered terrorists. 

The inconvenience of the "roots cause" kumbaya is that we are being targeted because of who we are - western society. However, to correct the root problem, all we need to do is mass convert to Islam and abandon this silly democratic regime we have. Seems reasonable to me.

Deepak Chopra objects to the term "War on Terrorism", citing that it paradoxically translates into "War on War". I tend to agree with Deepak and would suggest a more illuminating term, such as "War on Islamofacsism" or "War on Radical Islam". The sagacious Mr Chopra prefers to dial down the rhetoric and call it "Serious but respectful objections with those who embrace a different but equal culture and possess a well-grounded dislike for Americans because we do not dedicate enough time to fully understand the root reason for why these peaceful human beings want to kill us". Okay, the conflict's name may be long but it may catch on in time.

Today is the 67th anniversary of the Japanese attack on Pearl Harbor. The next day when President Roosevelt declared war on Japan he used stark and clear words (dastardly, treachery, etc..) to convey his emotions and the reasons for war. Deepak would have advised the barbaric FDR to stand before congress daintily waving windchimes and call for a moment of aromatherapeutic, non-offensive dialog amid sushi and sake in order to engage in a guilt-ridden exploration of the "root cause" for the attack. We obviously did something to offend them. If you buy "The Seven Spiritual Laws of Success" you will not actually learn what we should have done in the aftermath of Pearl Harbor or 9/11 but Deepak would appreciate the patronage.

On December 5th, Deepak's retort to Ms Rabinowitz was printed in the Wall Street Journal. The letter was short and a bit whiney. He pouted because Ms Rabinowitz launched a personal attack on him. Somewhat disappointingly, Deepak exhibited a lack of creativity by using the same catty arguments, almost verbatim, that he used earlier in the week when he pawed at Fox News. Catty is never good, but being catty and lazy is inexcusable for someone who wrote a book conspicuously titled "Synchrodestiny". 

Enter Gotham Chopra, son of Deepak and rumored to have been conceived in the batmobile. Gotham follows Deepak's blurb of a letter with a rather long missive that is ominously prefaced with a threat to swing hard at Ms Rabinowitz because his daddy could not on account of Deepak's vow of non-violence in "all his words and action". (I may be allowed to dispute Deepak's allegiance with his own vow because his words do make my head hurt) The point is that Deepak cannot engage in bellicose words but he can recruit Gotham to the task - kinda like how the old mafia dons would take care of business. 

Gotham blusters that he will put this whole fracas with the terrorists in the "proper context". He does not. Gotham fails pathetically. Rather than elucidate, he punishes us with a rambling and incoherent series of non sequiturs. Further into his meandering letter I think I read the name Gandhi somewhere in there, something about his lending a bizarre idea to Deepak, and perhaps even a philosophical reminder that Cisco drank the whiskey and Pancho drank the wine.

Okay, I was going to write more about this but these guys just aren't worth it. So I'll stop right here. Deepak is a fraud and Gotham is a dullard.

As said by Churchill

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent vice of socialism is the equal sharing of the misery.

An Awful Time for Trade Barriers

The Democrat-led House of Representatives, spearheaded by Speaker Nancy Pelosi, is blocking a vote on the US-Colombia Free Trade Agreement. Rather than protecting the labor unions (such as UAW) and manufacturers, whose job losses Democrats claim to lament, this trade agreement inaction will prove costly at a time when our economy is in a desperate need of a tourniquet. The delay is especially ill-timed because the Canada-Colombia FTA was signed on November 21st. 

The benefits gained by Canada and Colombia will result in a loss for the United States. The Canada-Colombia pact will eliminate existing tariffs between those two countries for a wide range of products. Hence, why would Canada and Colombia choose to purchase from the US (with tariffs) when it is cheaper to buy-sell among themselves? Who gets hurt here? - labor unions and manufacturers, of course.

It is in our country's best interest to demolish trade barriers, especially with a democracy in our hemisphere. We should want all South American countries to realize the benefits of being a free-trading, economically-free, democracy. Canada is ahead of us on this one.

Somali Pirates

Lo and behold, there may be one topic that most of the world can rally around - the scourge of Somali pirates. Piracy off the coast of this disastrous African nation has been all over the news as of late. There have been 90 reports of piracy in 2008 by the Somali.

Using vessels that range from large to dinghies, these criminals board a ship, make hostages of the crew, and then ask for ransom for the lives of the hostages. Refer to this map to see worldwide reported pirating incidents for 2008 alone. There are three hotspots. Off the coasts of Somalia, Nigeria, and Indonesia.

Unlike pirates of yesteryear, there has been minimal interest in the captured vessel's merchandise, although a captured Ukrainian freighter was carrying tanks, grenades and a host of other military equipment.  In 2008 alone, these pirates have seized vessels from India, Iran, Ukraine, Saudi Arabia, Thailand, Great Britain, France, and many others. The The Saudi vessel was a supertanker holding about $100 Million in oil.

A coalition of several countries has been formed to patrol the Gulf of Arden. To defend against the pirates, commercial vessels are now better equipped to repel an attack. This defensive measure is quite expensive, when one adds the new technology, additional militarily-trained crew that is required, increased insurance costs, and the cost and use of the patrol boats that act as guardians.

This coalition for "pirate-free waters" needs to go a step further by taking the offensive. They should consider patrolling the waters closer to Puntland, on the northern shores of Somalia. This break-away region that is run by warlords holds the highest concentration of these pirates. Once stationed, the coalition should sink any and all vessels that leaves its coast. If they shift to another region, then sink all of those vessels as well. 

We are dealing with a criminal element that becomes increasingly brazen. Think Mogadishu in 1993 with Black Hawk Down. There is nothing that is swashbuckling romantic about the murderous thugs that perpetrate these high-water crimes.

True, many vessels that depart from the Somali coast are innocent fishermen. But that's the problem - these "innocent vessels" are indistinguishable from the pirates. Therefore, they should all be sunk until Somalia learns to conduct itself. Should it not learn, then they can just prey on one another and leave the rest of the world alone.