Always Go To The Decision-Makers

I have believed for some time now that we people who live in democracies need to remember that fact.  We live in democracies.  We need to behave like it.

The United States of America just completed another election cycle.  The President is a Democrat with his own perspective and agenda.

The Senate is majority Democrat with its own collective perspective and agenda.

The House of Representatives is majority Republican with its own collective perspective and agenda.

So the USA has a mixed Congress and a seemingly less ideological President than could be the case.

Seems like a perfect opportunity to represent the citizenry's many individual interests I have a habit of including in two broad perspectives, demand side and supply side.

This article in Huffington Post (http://www.linkedin.com/today/post/article/20121116145626-143695135-the-president-asked-us-to-push-him-here-s-a-to-do-list-to-get-us-started?trk=eml-mktg-condig-118-p1) suggests to me that the President is well-advised to directly engage the Citizens of the USA to keep their elected representatives in both Houses of Congress on their toes, seeking win-win policies that enable both views to progress without hindering the other.

Seeing as neither the demand nor the supply side of society can succeed without the other, it has always seemed ridiculous to me that one or the other should obstruct the business of government.

When the People realize their interests are being met by no one, or less so by one or the other, the current crop of representatives can expect a very short stay in the positions.

In fact, if the two political organizations that lead and control representatives' engagement in government business are themselves seen to be irrelevant, or worse, obstructionist of the People's interests, can their existence be assured?

Perhaps more importantly, everyone tries harder when the folks are watching and engaged.  I have met a few elected officials and I have never met one of any party who did not take constituents' issues seriously.  Given that genuine interest on a person-to-person basis, I have high hopes for the Direct Engagement With Citizens approach, going over the heads of the elected representatives directly to those in charge, the citizens.

Understanding Banking

Joe points out it is necessary to join the dots to begin to understand the impact of bank actions and policy decisions.

http://www.nytimes.com/2012/05/29/opinion/nocera-the-simplicity-solution.html?nl=todaysheadlines&emc=edit_th_20120529

Do we need to remember Star Trek's Prime Directive as we go about daily business?

I think so.  I think we always need to ask, "How does this proposed action help us meet our mandate?".

If it does not help, then do we need to change the mandate or drop the idea.  Typically, I suspect, the correct choice is to drop the idea.

Thanks Joe.

Earth Calling, "S O S"

Please read this heartfelt letter.

http://uncloaked.wordpress.com/2012/05/18/an-open-letter-to-the-world-on-the-governmental-destruction-of-the-environment-in-canada/

Do Not Overbuild Capacity!

So it seems demand exceeds supply for NA autos.

I suggest not going nuts.

I wonder what the effect of having a chronic undersupply will be on profitability and pricing and resale value for consumers.

Remember the Prowler?  Chrysler refused to make more than they initially set out to make.  The demand was way over the supply.  The price went nuts.  The aftermarket or used car price went nuts.

Who lost here?  No one that I could make out.

The Prowler was not a mass market vehicle, but there is a valuable lesson here, especially when compared to flooding dealer lots with mass market cars that apparently no one wanted, no matter how many were sold.  The lots were bulging.

What does that do to price?  What does that do for resale price?

As I say, do not overbuild capacity because there you are then, once again stuck with high overhead costs, being forced to build ever more vehicles that might not be sold, thereby manufacturing waste that looks like finished goods, but is really waste.

Really expensive waste.

http://www.theglobeandmail.com/news/national/canada-seen-benefiting-as-us-auto-makers-scramble-to-restore-capacity/article2425602/?utm_medium=Newsletter&utm_source=Business%20Ticker&utm_type=text&utm_content=Canada%20seen%20benefiting%20as%20U.S.%20auto%20makers%20scramble%20to%20restore%20capacity&utm_campaign=94826265

Errors

If making mistakes were so easy to do, everyone would doing it.

Caveat Emptor, Caveat Venditor, "There be bullshit!"

Assuming the validity of these caveats in business transactions and managing transactions accordingly has long been accepted practice of prudence in transactions.

It seems it has also given license to inclusion of at least "near bullshit" in pitches to sell or buy.

The short-sightedness of this approach becomes apparent when an industry with a caveat business culture looks to third party support, such as raising capital to enable its transactions.

The capitalist and parties to the transaction then must devote what might be an inordinate amount of resources to demonstrate the factuality of the presented opportunity.

As befits bullshit, this business practice stinks and wallowing in it is stupid.

Health Demand Not Insatiable

We have often heard about the insatiability of healthcare demand, especially when it is taxpayer, publicly funded healthcare.  On its face, this has always been a ridiculous argument.

Think about your choices:
A.1. go to doctor (clinic, hospital, pharmacy whatever)
2. mow lawn
B.  1. go to doctor (clinic, hospital, pharmacy whatever) 
2. visit grandma
C. 1. go to doctor (clinic, hospital, pharmacy whatever)
2. wash the car
D. 1. go to doctor (clinic, hospital, pharmacy whatever)
2. golf
E. 1. go to doctor (clinic, hospital, pharmacy whatever)
2. read (write) blogs
and so on.
You get the idea.

Anyway, turns out the rise of healthcare cost to society is lessening, still rising, but at a slower rate.

How much of that cost is due to simple price increase where the number of service events has not increased, but the cost of each of them has?  Don't know.  Worth looking into as healthcare costs have traditionally seen much greater inflationary pressure than the broader economy.

And here's an interesting article on the issue:
http://www.nytimes.com/2012/04/29/health/policy/in-hopeful-sign-health-spending-is-flattening-out.html?_r=1&nl=todaysheadlines&emc=edit_th_20120429&pagewanted=all
Mike

Fiction and Myth in Finance

Is investment, as we've traditionally practiced it, based on solid economic and business evidence demonstrating our investment has generated enough productivity to make our expected returns affordable?

So we've had the Greek debt crisis. We've had the meltdown of 2007 -2008. We've had the Eurozone debt crisis and it's still on. We've had a series of debt and credit crises it seems ever since we've had debt and credit.

I heard an interesting commentator yesterday talking about what wealth management strategies to expect as over the next months as the Greek situation settles itself out one way or another.

The thought is that investors will move from equity to debt securities as debt securities stabilize with new attractive rates.

So I think about this and wonder, is that all there is? Debt ... equity ... debt ... equity as we oscillate from one type to another.

At the root of all this is the question, "What makes us think one or the other will provide greater stability or return?".

It seems to me investment as it is currently practiced is based on wishing and hoping.

What do I mean?

With debt, we believe the debtor will repay the debt with interest because ... why? He's a nice guy? He's a sovereign capable of taxing the population to service the debt? Somehow the debtor had not enough revenue today but will tomorrow? Why? Lately, no one of these has been borne out.

With equity, we believe the partner will return capital with gain because ... why? Same reasons as above for the debtor? But in this case, we are sharing the burden of generating the revenue required to offer a return. Sorta like saying we'll match every dollar the entrepreneur bets on the throw of the dice with one of our own and then cheer, "Come on Red!". Oops, mixed the games up, but does it really matter?

It seems to me investment should be clearly tied to productivity; clearly, transparently, obviously. That means investors invest in productive output and earn returns as part of that output, unit by unit. Anything else is a hypothesis and seems more like wishing and hoping, fiction in improved conditions making debt servicing achievable, myth that our simple investment actions when they incur returns aren't simply making the revenue generating pie smaller by an amount exactly equal to our return.

Isn't it about time we did the hard work of figuring out how relate investment to productivity, not in some vague theoretical way, but in some transaction by transaction of economic output way?