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.