Friday, December 14, 2012


Wall Street money managers report their performance regularly.  Public companies report their performance regularly.  Airlines file endless reports on maintenance and safety.  The EPA monitors pollution standards.  The Nuclear regulatory board studies the performance of nuclear reactors.

Isn't it time to study the performance of welfare recipients.  Let the government go back five, ten, fifteen and twenty years.  Let it then compile who the recipients were and where they are in life now.  What is their income, what is their education level, etc.

Just as so many of us are monitored by form or another of performance standards, so should be the welfare system.

After the welfare statistics are compiled, a real case for the long term value of government welfare will begin to emerge.

So many studies have been done on the outcome of high level college educations.  It would be beneficial to the country to do the same type of studies on the other end of the spectrum.  Then if the current system isn't producing at least average results newer methods should be examined.

Friday, December 7, 2012


During the Civil War there were less than 30 million people in the Country.  During the Civil War there were over one million dead and wounded.  Unbelievably this would be the equivalent of over 10 million on today's 300 million plus population.  Imagine the enormity and agony of that War.

If you saw the movie "Lincoln" there was a scene in which Lincoln was given the opportunity by the Confederacy to end the War.  The political and emotional pressure was on Lincoln to end the bloodshed without a resolution of the slavery issue and the maintenance of the United States as a union without slavery.

Lincoln believed the issue of the Union and slavery and the thirteenth amendment were more important than the immediate cessation of hostilities.  This was the hierarchy of Lincoln's convictions.  The death toll was put aside until the surrender of Lee at the Battle of Appomattox.

This is not a blog about the Civil War, Lincoln's credos, or the rightness or wrongness of Presidential convictions.  It is just about what issues Presidents are willing to draw the line on and stake their place in history upon.

"Today we are faced" with problems of much less severity than what would have been the equivalent of 10 million casualties today.

We are faced with something that has become known as the fiscal cliff, the fiscal war if you will.  I searched the Internet and had difficulty finding who invented the term fiscal cliff.  There is no cliff and both the tax increases proposed and spending allusions are not significant in any case.  The spending proposals are spread over so many years that absolutely no one knows if they will have any impact at all.  The idea that a tax increase on the top earners will help economic activity is one hundred percent false.  For every dollar that is taxed away from anyone, rich or whatever, they have one dollar less to spend on food, clothing and everything else.

During the Civil War Lincoln was fighting for the Union and the dignity of all human beings.  The position of the Republican party to not raise taxes is strictly a question of who gets to spend the increased taxes, the persons that made the money or the politicians.

Unfortunately the social desire by some for more and more so called safety nets will ultimately make it impossible for safety nets to be paid for at all.

President Obama knows all the above.  In the end will he make choices that actually lead us to an increased standard of living or will he sacrifice results for politics?  The exact opposite of Lincoln.  

Wednesday, November 28, 2012


Grab the phone.  You grab the other phone.  You get that one.  Syntex collapsed 50% in a short period of time due to rumors of cancer being caused by their birth control pill.  On the phone was three doctors.  How many of your patients are getting cancer we asked.  All three doctors didn't seem to know what we were talking about since none of their patients were getting cancer.  They further stated they were just doing some preliminary tests and if there are crazy rumors circulating, they didn't know anything about it.

Our brokers had been recommending Syntex to clients.  We were in a state of shock as the stock collapsed and we put out the word "It seems that the Syntex rumors may be false - we are going to bet that they are but there are no guarantees.  We are going to buy more but that's all we can tell you".

Did we use inside information?  In today's world, some government officials would think we did.  But what in the world is research if you don't try to learn more about the companies you are interested in than other people have learned about the same company?  How do you draw the line between thorough aggressive research and guaranteed inside information?   I am absolutely certain that more so called "hot" stories both negative and positive, are right as often as they are wrong.

The SEC is busy indicting specific individuals for alleged use of inside information.  That might be a good idea or a bad idea, but to me it makes very little sense.  For every investor that wins with an inside tip one loses - the net effect on the market is really zero.

Why doesn't the SEC randomly pick 25 investigators.  Then pick 25 brokerage offices around the country.  Then subpoena the records of 10 brokers in each brokerage firm they select.  Then call each of the selected brokers into a room and ask them what they know about the companies that they had been recommending to their clients.  Having done this in my own mysterious way in the past, I am certain they would discover that most brokers had little to any specific knowledge on the companies they were recommending.

Now we have cases where money managers, who are paid a lot of money, break their backs trying to ferret out information for their clients so that they have a chance of achieving a positive return on their investments.  If inside information was of any particular value, there would be all sorts of money managers achieving returns far in excess of the overall averages.  If the government wants to claim that the only thing money managers should do is read public reports, then there really won't be any need for research at all. Any investor could attempt to ferret out the same information as the money manager.

I guess we will get to the point where someone invents something and is required to expose their invention to the marketplace before they even make the product.  Some investigating agency could claim they had "inside invention" because the inventor spoke to a scientist, who was sitting in his rowboat in Fiji and mentioned a molecule he felt may have some promise, and the inventor used the molecule.

If Jim Cramer gets some information from somewhere and recommends it on his program, and I don't happen to watch his show because I don't subscribe to his station, did his viewers have inside information compared to me?  There is a reason why our standard of living doesn't increase anymore.  That's why sunshine turns into stormy days.


Tuesday, November 27, 2012


You can talk all you want about the give and take among the various entities that comprise the economy.

But as we ponder today's headlines one that would seem worthwhile to me is "Will Walmart become the next Twinkies?"  We have written before about how the inflexibility of union attitudes has resulted in the decline of a number of major industries from airlines, to textiles, to steel, to aluminum, to the post office, to automobile makers, etc.

Here is an approximate set of facts that never appears in the mainstream media, probably because it's above the analytical capability of most media personnel.  Walmart did approximately $450 billion dollars of sales in it's latest reported year.  Since there are approximately 3.4 billion shares outstanding, each shareholder was entitled to approximately $132 a share of sales for each share that is outstanding.

There is a second part.  Walmart had to pay for the items that it sold in its stores and then pay it's almost 2 million employees for all the things they do to run the business.  Those cash costs amounted to $423 billion or 94% of the $450 billion dollars of sales, and on a per share basis $124 of the $132 per share of sales to each shareholder. Consequently each outstanding share of Walmart generated income of $8 a share which theoretically and indirectly were assigned to a shareholder.

Now the third part.  After paying taxes and capital expenditures, each dollar of sales that Walmart generates it EARNS 1.3 PENNIES.  If you added that back into all the expenses, Walmart would have no more money than it currently has to pay for running their business.

We live in a country where the media is allowed to present union leaders and left wing professors claiming that Walmart makes billions of dollars of profits and should give large pay increases to its personnel.  As you can see, from the very simplistic analysis above, their comments are destructive, misleading and incorrect.  One day the management and shareholders will just walk away and say enough is enough.  ONE PENNY, ONE PENNY, ONE PENNY.

If you don't think you are watching the next Twinkies...Wake Up!

Thursday, November 15, 2012


The only thing that has sustained the economy has been the Federal Reserve.  Up until this point, Fed Policy has been as close to 100% correct as it could have possibly been.

The Senate and the House of Representatives have been totally wrong. Until such time as their policies become appropriate, the status of our economic well being will stay diminished.

The only policies that will help us into a healthy and long term uptrend must consist of some of the following.

1. Confidence on the part of the business community.

2. Recognition by the President that you can't pay people in the middle class or any class steadily increasing wages, if corporate profits are not increasing at the same time.

3. The only way to get out of our deficit is to increase individual income, increase corporate profits, increase dividends and increase capital gains. These increases will result in a growing tax base and will allow the deficit to eventually be wiped out.

4. Avoid anything that increases taxes, reduces consumption and weakens confidence, as this will only cause the deficit to grow.

5. Government spending has to be increased by putting into place infrastructure, such as new schools, on a massive basis.

6. Tax deductions have to remain in place as long as they induce economic growth.

7. Tax rates have to stay approximately where they are.

8. The leaders of Congress and the Executive branch must stop creating an environment where "success" is not respected and rewarded but is diminished and punished through taxation and regulations.

If you don't grow the economy steadily there is a smaller and smaller pie to take from, which is an absolute recipe for diminished returns to all segments of society.  

Wednesday, November 14, 2012


As Gandhi praised Hitler (Blog dated March 2, 2012), along with Joseph Kennedy Sr., Ambassador to Germany and as Chamberlain called for "peace in our time" praising Hitler, and as actors praise Chavez, our President seems to have joined this list of infamous overrated men.

In the newspaper in New York, one of their editorial writers, a master of words, and a confused soul, likens the Prime Minister of Israel to a party boss concerned with his political power.

Think of the absurdity of this writer's views on Israel's Prime Minister.  Almost beyond belief.  On Israel's one side are eighty million people with 40% illiterate and one the lowest per capita incomes in the world, who just elected a radical President concerned about a Palestinian state, when his own country's people suffer immensely.  On its borders to the north lives Hezbollah and Hamas,  terrorist organizations.  Syria, to its west, is filling up with Iranian arms and terror.  Jordan barely hangs on by its teeth.  Libya is hardly put together.  Iraq is trying but is a mess.  North Korea seems intent on making matters worse. Iran's President sounds like Hitler reincarnated.

This newspaper writer must know that security, which is almost impossible to achieve, is what drives Netanyahu, not some stupid coalition.  That means nothing to him or his party or to Israelis, as should be obvious when anyone weighs the risks of living in Israel.  This famous newspaper editorialist probably is so concerned with his sources of information in the Middle East that he obviously has lost his right to be taken seriously on Israel's security.

As hard as we try to show an even hand in the Middle East, we will unfortunately learn over time that the radicals have their eye on the oil.  Israel cannot sway to the appeasers and weaken its position any further.  If atomic weapons proliferate, how can anyone expect to live in peace.  

OIL IS THE ONLY ISSUE - NOTHING ELSE...(Originally Published 9/14/12)

Look at a desk.  Put a dot on it.  That's the land size of Israel in comparison to the land size of other Middle Eastern countries.  Can you really logically believe that this tiny little place is so repugnant to Muslims just because the inhabitants of Israel are significantly Jewish? Also the Jewish population is Israel is mainly secular, not religious.

The entire issue is over the control of oil.  As long as the United States continues to be so dependent on Middle Eastern oil, Israel will be the scapegoat.

Israel acts as a beacon of protection against the tyrants, terrorists and power seekers who would use oil as the ultimate power source.  It's not Jews that are the problem, it's the ultimate euphoria of being able to have world domination through the oil.  Until we get off the oil addiction, (the sooner the better), there is no hope for real stability, ever, in the Middle East. 

I am reposting a blog that we wrote in 2011 about how to break the oil addiction. 

Tuesday, October 16, 2012


Sally and I were having dinner with a wealthy acquaintance of mine and was astounded when he proclaimed that "I don't support medical causes, they already get too much money." He knew I had leukemia. What he didn't know was that cancer would soon strike his immediate family. Does he still feel the same way?
I have now had cancer for ten years. It's called CLL, Chronic Lymphocytic Leukemia. It is an incurable disease. Many people die from it and some people live a long time with it. Your prognosis is based to a great extent on the makeup of your DNA and the quality of medical care you can get.
If I would have listened to my original hematology oncologists, when first diagnosed, I would have been gone from this earth a long time ago. I was fortunate enough to seek out one of the very best physicians in this field, Dr. Michael J. Keating of M.D. Anderson Cancer Center. After about four years the cancer advanced to the point where I needed treatment. It was through Dr. Keating and his wonderful staff (especially Alice Lynn) that I received the state of the art chemotherapy treatment, long before it was recognized as the "gold standard treatment" for this disease. Simply put, there was all sorts of recommended treatments across the country, most of which have since been dropped and many of which were being recommended on the Internet.
My knowledge of this disease is extensive and modestly I have been able to point more than a few people in the right direction in order to help them with this disease, CLL.
During my extremely difficult chemotherapy treatments, I was thankful for the medicine created by the biotech industry, without which many cancer deaths would come much sooner.
If I have one piece of advice for dealing with this disease it would be to seek out the best possible medical advice, have a complete modern diagnosis of your blood and make sure you get the latest treatment protocol. Unfortunately there are only about ten world class leukemia treatment centers in our country. Many are really good but only a few are great. Another piece of advice, don't listen and believe too much of what you read on the Internet, much of which is confusing, misleading and written by the wrong people. You only have one chance to fight this, so make it your best chance.
I have been lucky, I'm still alive after ten years, still in great shape and look forward to a long life. It turns out I fought this disease correctly and reaped the benefits. You can live with cancer if you fight it correctly and if you're lucky. You can help others if you learn through the process of taking care of yourself. You can never let the word cancer prevent you from having a positive outlook.
"Money Cures."

Wednesday, October 3, 2012


On December 6, 2011 President Obama gave a brilliant speech in Kansas. He covers alot of territory, mostly economic. Between the lines you can read that the country has not increased the standard of living in a long time. He calls it the problem of the middle class and obviously those below the middle class. He seems to really understand that a combination of factors, from unions, geopolitical forces, greed, over emphasis on financial activities, entitlements and advanced technology have contributed to the lack of increasing living standards. He couches his speech in populist rhetoric but certainly comprehends the big picture better than any other politician I have heard speak on these issues. This makes him tough to beat in the upcoming election.

The magnificent Lincoln/Douglas debates of the 1850s centered on different views about the cohesiveness of the Union and issues pertaining to slavery.

Now we are faced with the Republican Presidential candidates arguing their view of how to get America's economic prosperity returning to preeminence.

Lincoln/Douglas versus Obama and the Republicans. Obama is prepared for the equivalent of the 1850s debate. Let's hope the Republicans can put forth a candidate with the clarity and vision expressed in Obama's Kansas speech.

Here is the link to President Obama's speech.

Tuesday, September 18, 2012


Although truth is complicated, it is the essence of our legal system.  You raise your hand and take an oath to tell the truth. 

It takes absolutely no courage on the part of politicians to be pro-abortion.  There are millions of votes involved.  The same is true for a long list of other specialized interest groups.  Certain religious groups vote almost exclusively left or right.  Certain racial groups vote almost exclusively left or right.  The same is true of unions, gun owners and a whole long list of interest groups.  This interest group voting is the way it works in the real world and is very hard to overcome.

Without going into Candidate Romney's motives, it seems to take a certain moral conviction to stand up for what you believe in, rather than what will help you get elected.  The fact is that he spoke the truth when he indicated that a large percentage of the tax payer population do not pay federal income taxes. 

That happens to be true. The question then becomes is this a situation that will, in time, work towards the detriment or the improvement in this close to 50% of the population's standard of life?

In any case, Romney was probably right, a significant portion of those people vote democratic under all conditions.  Such was the stance of my Mother, who I loved dearly...Democrat - 100% of the time.

Sunday, September 16, 2012


This is the real story on the Middle East.  The riots from the Middle East are nothing more than a staged operetta. 

They have only one purpose.  The purpose is to take our eye off Iran and their march towards nuclear arms. 

The riots are meant to scare so that no one will dare deal with Iran, since the Middle East and other places will erupt into chaos. 

Tuesday, September 11, 2012

A RESPONSE TO A THINKER...(Originally Published May 2011)

Thank you for the extremely insightful comments on my recent blog pertaining to oil. Please bear with me as I attempt to frame my answer within the historical context of our nation's history. Bizarre as this may seem, I believe that it is within this story the answer to your questions lie.

After the Revolutionary War a disparate group of states with a very minimal and primitive central government existed. At the constitutional convention there were two primary government theories, that of the Federalists who wanted a strong central government and that of the Anti-Federalists who wanted most powers to lie in the states.

The Anti-Federalists, which enjoyed the oratory excellence of Patrick Henry and George Mason, believed in small changes and that "tweaking" the articles of confederation was all that was needed. It was pretty clear that the general populous of the time, about three million strong, as a majority, felt the same way.

Madison, Hamilton and Washington, a formidable group if there ever was one, believed in a very centralized sovereign government. Anti-Federalist argued that the sovereign central government sounded liked a re-creation of living under the aegis of King George the Third and the British Parliament.

In essence, Madisonian Hamiltonian position was that the articles had to be completely redone. The upcoming constitution could not create a strong nation with just a little fixing here and there of the articles. For whatever reasons, that 1870's period of time had attracted a set of delegates, probably never since duplicated in intellectual content.

When all was said and done, a convoluted constitutional government of Congressional, Senatorial, Judicial, Executive, Electoral and state's rights was embedded in our constitution. It seemed anything but kingly, and in fact was a vast sharing of overlapping powers.

Many, including Madison, came to believe that the great strength of our Republic was set in place by the seeming dilution of powers among many.

I tell you the story for two reasons, one; our response to the oil situation requires the same type of "do over" as our response to the articles of confederation, namely the courage for a new plan . Two; the answers will lie in a series of responses, rather than in one overall response.

A little more necessary review of history is needed before drawing conclusions. Since the birth of the nation, there has been almost two hundred fifty years of all kinds of things occurring. It's everything from the Industrial Revolution, Scientific Revolution, Agricultural Revolution to dealing with foreign powers and everything else. We have progressed, we have had ups and downs, we have brought more to the world than probably any country before us in the shortest possible period of time. For example, we dealt with WWII, in spite of a questionable response to our use of atomic bomb and a questionable response to the Holocaust problem. But even the Founders did not deal with all the issues. It put some aside such as slavery, women's rights, and Indians for another day but it dealt with things. It faced big recalcitrant issues and moved forward.

Along the way this nation has been built by oil. We are a large place, three thousand miles wide and we developed processes that involve the integration and use of this large space by the many. Cars and trucks use most of the oil.

Furthermore, deep in the bowels of the State Department, the CIA and our security apparatus lies a vast network of people and machines dedicated to a world view and hopefully peace.

Besides the potentially millions of people employed in this country at oil related jobs and infrastructure, there are hundreds of millions of Muslims, who one way or another, rely on their future well being from a steady stream of oil income. The shutting down or diminishment of the oil recovery domestically, or the oil power base around the world, would be potentially too catastrophic to face up to.

So what to do......
1. We have to let it be known that we consider the overall oil dilemma, not just the price, to be a crisis at least equal to any other crisis this country has faced.
2. We have to let it be known that all arguments and discussions to alleviate this problem on a permanent basis will be undertaken under all levels of government and society until a constitutional blueprint for the oil crisis has been submitted and accepted.
3. We have to let it be known that all points of view should be put forward during the development of the energy constitution, argued and decided upon and accepted by a majority of the people.
4. We have to let it be known that we will be willing to speak with anyone but will not allow ourselves to live under the constant threat of oil embargoes and constant price threats.
5. We have to let it be known that all hedge funds and speculators should be excluded from this market and no professorial economic or private property arguments will override the need from energy related threats.
6. We have to let it be known that oil producing countries shall not be able to provide gasoline in their nations at close to zero cost while selling oil at many multiples of actual production cost.
7. We have to let it be known that if this is to continue we will begin to demand exorbitant prices for necessary items from oil producing countries and at the same time selling those items in the normal domestic market at normal domestic prices.
8. We have to let it be known that every car in this country will be replaced by at least a one hundred mile per gallon car within at least a five year period whatever the resulting problems bring.
9. We have to let it be known that since cars and trucks are the primary users of oil that all this talk about alternative sources continues to be a deception from current scientific reality. Under existing circumstances oil producing countries will always reduce the price of oil below the cost of developing alternative energy sources whenever they reach a point of real competition.
10. We have to let it be known that we have the back bone to face the dislocations that these steps will cause because not facing them is not an alternative.
11. We have to let it be known that we do whatever it takes to stand up to special interest groups because the national problem requires solving this problem once and for all.
12. We have to let it be known any arguments about the undemocratic nature of the pursuit to solve our energy problems have to be put aside.

Monday, September 10, 2012


This will almost sound like a fairy tale.  The good fairies, the group of democrats who recently proposed that profits should be eliminated from corporations, stand with their magic wands waving to a drum beat.

For those inclined to left-wing wand waving here are some simple take them to whatever drum beating march you choose.

In the fairy tale land of no profit this is what would happen:

1. There would not be any corporate profit left to buy plant and equipment.
2. The millions of workers that work in those industries wouldn't have any jobs.
3. The fairy tale land wouldn't have any money left over to pay dividends to your mutual funds, your IRAs or investments in IBM or anything else.
4. The few dollars that are left from these "wicked" profits couldn't be retained in the companies to pay off debts and provide a financially strong environment to maintain employment.

The good fairies of profit elimination must want to live in another world called Obama, Saul Alinsky, Communism and Failure.  Who are these good fairies?

Friday, August 31, 2012


The following is a quote from page 193 of the book called "Reckless Endangerment".

"Paul Pelosi, Jr., the son of Nancy Pelosi the former speaker of the House, worked as a mortgage broker and sales manager at a Countrywide office in California." The book further states; "When the company was beginning mass layoffs, Pelosi's name was on the list of those to be cut. According to a former executive with knowledge of the situation, Mozilo (the head of the company) personally removed Pelosi's name from the list."

Barney Frank, President Clinton, Nancy Pelosi, Andrew Cuomo, Robert Rubin, Larry Summers, along with many other influential Democrats were all major perpetrators of the financial crisis. 

Isn't it time to check how Nancy Pelosi's son got involved in the mortgage brokerage business and what, if any, connection did Nancy Pelosi have in her son's employment at Countrywide. 

Wednesday, August 29, 2012


I received tons of controversy on my abortion comments. Maybe I shouldn't have even gone there.

Even though I still come down on the side of pro choice with "tons of reservations", I leave this subject with one final question for now.


Monday, August 20, 2012


As a general rule, the tax returns of Candidate Romney should be considered as private as anyone else's.

Some people get cancer, they need a top cancer oncologist.  Should they ask the Doctor for his tax returns?  They might be indicative of a fraudulent mentality.  Would that even affect their surgical ability?

There are three main things to consider:

1. It is highly likely that Candidate Romney's returns have been prepared by a certified public accountant and possibly even a major accounting firm.  Is Obama saying that the accounting firm has participated in illegal activities and certified Romney's tax return in spite of the fact that there is an indication by Obama of a tax impropriety?

2. The government runs the IRS.  It is likely that Candidate Romney's tax returns have been audited by the IRS if not once, many times.  If they haven't been it might indicate a possible significant oversight by the government or after years of auditing the Romney returns, they hardly ever found anything that would suggest malfeasance. 

3. To make the Obama attacks on Romney's privacy being invaded without claiming that his returns are in someway fraudulent sounds like nothing more than negative, outrageous and unnecessary politics. 

A person and his church are also a private matter.  Since President Obama attended Reverend Wright's sermons for many years, why not have all of them released to the public?  The moral and social ethics of this President might become much clearer even as he attempts to indite the morals of Romney.

If the Democrats want Romney's returns for more years let them state that they expect to find tax fraud.  Otherwise, let the IRS and the CPA's do their jobs.  Stop attempting to mislead the American public. 



I thought I understood the abortion issue. Aborting babies, in effect killing them, didn't seem like a good idea. Neither did not giving people choice over there own bodies or bringing babies into the world that the mothers didn't want, seem like a good idea.

I have become more knowledgeable where our medical dollars are spent. It seems we spend by far the largest percentage of our medical dollars on people 70 and older.
Why would we make such an effort to keep people who are not likely to live much longer alive and yet kill people that may have a hundred years to live?

A society that doesn't protect people on both ends of the scale is still a bit primitive. I'm rethinking my position on abortion but I'm pretty sure I'm Pro-Choice.  I would like to hear your thoughts. Stay tuned...

Wednesday, August 15, 2012

Reckless Endangerment - A Great Book

In an exhaustive piece of research Gretchen Morgenson and Joshua Rosner wrote a book about the housing fiasco called "Reckless Endangerment".

This is by far the most insightful book I have read on this subject.  You only have to read the first 75 pages to unfortunately understand that the primary perpetrators of the catastrophe were Fannie Mae, Barney Frank, William Clinton and an extraordinarily corrupt, primarily Democratic group of Senators.

If Candidate Romney could give one copy of this book to everyone, the lies of the current President and Vice President would be exposed.

Freedom is not "I'll give you a dollar and then you owe me your vote and loyalty".  If you care to read our blog titled "CHAINS OF MANY KINDS...HOUSING, HISTORY, GOVERNMENT AND FREEDOM" which we recently reposted, you will know what it's like to not be free. 

Friday, August 10, 2012



It may seem like an unimportant event, but the US Post Office, which is a unionized workforce, for all intents and purposes is in bankruptcy. This is another example of the effect of significantly inelastic unions making the Post Office join the long list of failed unionized industries. The general rule is in order for unionized workforces to grow and prosper, wages and benefits must be elastic to competitive forces.

Tuesday, July 17, 2012


According to Boeing's own website they recently had 22,000 global suppliers.  It is well known that somewhere around 25 to 30% of General Motors parts are outsourced.

Every time you see Obama running an ad blaming Romney for outsourcing, try to remember that this President doesn't want you to know the facts.  He just wants power anyway he can get it including deception. 

Monday, July 16, 2012


Maybe he gets away with it because he's black. Maybe he gets away with it because he's the President.

Obama is a purveyor of falsehoods and outrageous incomplete thoughts that in many respects border on verbal treason. 

Obama has been running deceptive political ads on Candidate Romney's outsourcing of jobs. 

We all know Warren Buffet has been a big time supporter of President Obama. One of the major divisions of Berkshire Hathaway, Warren Buffet's company, is called Fruit of the Loom.

According to the Fruit of the Loom website "more than 90% of our products are made in the United States, Mexico, Honduras, Salvador and Morocco.  The backbone of our production is sourced from suppliers located in 33 countries including China, Bangladesh, India, Pakistan, Thailand, Indonesia and Vietnam."

The absurdity and the out of context nature of Obama's ads should make even the most liberal democrats realize what a deceptive and miserable character our President is. 

Thursday, July 12, 2012


In another one of its absurd articles, that New York newspaper that pays its executives millions and is a miserably ran company, published a story today about how several JP Morgan brokers pushed sales of their own funds even at their client's expense.

There are two very simple points that need to be made about this story:

1. Does it mean that if Consumer Reports concludes that Toyotas perform better than General Motor cars that all the GM salesman should stop selling GMs and start pushing Toyota?

2. The current performance of the JP Morgan funds has nothing to do with how it will be in the future.

The article is another destructive example of thoughtless reporting. 


Aspen Colorado voted to ban plastic bags from the town's grocery stores and enacted a 20 cent fee on paper bags.



How many people  working in the plastic and paper industry will now lose jobs.  As Jack Nicholson said in a famous movie, "You don't want to hear the truth, you can't take it".

The environmentally powerful lobbyists outsourced more jobs. We are a democracy therefore we get what the people want, in this case less jobs.  

Friday, July 6, 2012


A major New York newspaper and their Economist wrote an editorial today about Mitt Romney titled "Off and Out with Romney". 

In summary, the editorial claims that Mr. Romney's "career wouldn't have prepared him to manage the economy."  The editorial goes on in detail about Bain Capital, outsourcing, offshoring, health care, etc. The editorial is basically a political advertisement distorting facts to support the Obama campaign.

Here is the bottom line on both candidates:

President Obama was a short term United States Senator and to my knowledge never ran a business, never ran a city or state prior to his election.

Mr. Romney was a successful businessman, saved the Olympics and was the Governor of Massachusetts.

Where have we gotten with President Obama - what has he really done to help our economy grow? What experience did he have when we elected him to the highest office in our country?  In the words of this Editorial writer what in Obama's past "prepared him to manage the economy"? I say nothing much and that's one of the reasons we are where we are at now, no job growth and a business community afraid of what Obama may do next....

The fact is Mr. Romney is much more qualified to be President based upon his career than Obama was four years ago.  That's a fact.  Possibly if Mr. Romney was a minority he would have a better chance of winning the election  even if he was less qualified.

This failing newspaper needs to stop editorializing with malicious and inaccurate commentary.

Thursday, June 28, 2012


What happened at JP Morgan is not even the tip of the iceberg.  Capital markets cannot be traded successfully using huge leverage without catastrophic breakdowns.

The Background:
1. Wall Street firms were allowed to go public.  Allegiance was no longer to clients and partners but to public shareholders.
2. The fixed commission structure of the industry was gotten rid of and in its place was put a negotiated commission structure.
3. The money management industry, aside from the brokerage industry, developed control of commission generating assets.
4. As the profitability of the historic Wall Street model deteriorated, greater risks had to be taken in order to achieve increasing shareholder profits and for brokerage executives to earn high compensation (financial dangers were somebody else's problem).
5. It didn't matter how much risk the firms, took the money no longer belonged to them.
6. Shareholder profits overrode fiduciary responsibility.
7. Most Wall Street fortunes have been made on fees from other people money.  Very few Wall Street employees have made their fortunes investing in the markets they recommend to their own clients.
8. Large financial  organizations all hire public relations firms.  Its hard to separate fact from fiction or where the PR takes over from the reality of the controlling people in management.
9. Jimmy Dimon should have to produce his investment portfolio to see if the methods the bank was using with other people's money was being used in the same manner in his own portfolio.
10. We already know that Warren Buffett only wants to buy back Berkshire shares near book value, but he buys publicly traded companies that trade many times above book value which makes no sense whatsoever.
11. The very survival of our Capitalist structure depends on a slow unwinding of the gambling in trillions within our savings institutions.
12. Even if a half dozen people at JP Morgan can understand what was going on, what would happen if God forbid,  these half dozen people had an accident in a plane or one could ever pick up the pieces.
13. Lastly, Congress is elected for only two years and 98% of the Congressman know absolutely nothing about the banking system.

We should stop worrying about the sexuality of people and begin the arduous task that lies ahead. If we try to escape from this we will fail.

Friday, June 22, 2012


The Obama Presidential campaign continues to disrespect the intelligence of the average American.

An Obama advertisement currently running states that women are discriminated against in the workplace. According to Obama's political ad, women receive 70% of the pay that men do for the same job. Clearly if that was true, it would be wrong.

These ads are information that is out of context and not true.

1. How long has the woman been doing the job compared the man?

2. How well does the woman do the job and on what criteria compared to the man?

3. What is the average age of the woman compared to the man?

4. What is the level of education of the woman compared to the man?

5. How effective is the woman doing her job compared to the man?

It is highly misleading to just state on public TV that women are discriminated against.

Did this misleading President mean to say that the government pays women less money than men for the same job with the same experience? Did he mean to say that the people that flip hamburgers in a food chain are paid differently based on gender?

I don't think so. If we can run ads based on gender we can run ads based on religion, color and everything else.

What companies is he talking about, etc? By the way, President Roosevelt's secretary, Missy, was paid $5,000 dollars per year in the 1940s, while men with the same job were paid twice as much. If it's true Mr. President, is it still true in your administration? Is that what you are really talking about?

We need a more educated nation so politicians like yourself can't run these kinds of distorted advertisements.

If this was really true Mr. President what have you done in the last four years to correct this so-called injustice?

Friday, June 15, 2012


Unfortunately Obama is such a leftist, probably a socialist deep in his mind, that he wants to raise taxes as the economy weakens.

What a sad story...

Wednesday, June 13, 2012


I was responsible for handing out a pool of money to several money managers. They all seemed to have pretty consistent performance records (a couple of points plus or minus the yearly averages) and they averaged among them about sixty companies in their portfolios.

Other things being equal, I decided the money would be placed with those money managers who knew, at the least, the basic financial information of the companies they owned.

I want to put this in perspective. Each portfolio manager owned approximately 60 different companies. Each one of these companies issued an annual report and a SEC form called the 10K. In addition, each of these companies issue quarterly reports called the 10Q. Each of the companies issued at least another 15 financial releases of one sort or another throughout the year.

Since the average 10K is over 100 pages and the average 10Q is about 50 pages this means that for each company a portfolio manager, wanting to know about their investments, would read over 400 pages per company per year. Multiply this times 60 times for each company in their portfolio and you would be reading 24,000 pages. On each of these pages there are hundreds of numbers, thousands of words, hundreds of footnotes and confusing accounting explanations.

The SEC, in its great wisdom, along with other regulatory agencies has provided such extensive historical data on companies that practically no one is capable of effectively reading and analyzing the tons of data.

So the question we were going to put to the managers, most of whom ran billions of dollars, ran along the following lines, what are the sales of company, what are their gross margins, how many shares were outstanding along with similar other questions. Over 80% percent of the questions could not be answered by these very skilled money managers.

So what good does all the disclosure do the average investor if most skilled money managers aren't using it? We all know that over time professional money managers don't tend to outperform the major market averages and the value added is more towards portfolio structure and asset allocation. The average and sophisticated investor is not capable of getting any value from the pages of risk disclosure in financial reports.

Money managers cannot effectively use 24,000 pages of annual data. Their brains won't be able to parse the information effectively.

So what's to do. That's for another blog.


Tom Friedman is a writer. He is also a part of the so called one percenters. I wonder how many occupy wall street people or left wing democratic liberals think of him in those terms.

He has written a lot of excellent books, he is one of the great journalists, extremely hard working etc. etc. etc.

In his June 13th editorial on page A23 of a New York newspaper, he made what I consider to be a major and serious almost critical misanalysis of the European and Middle Eastern political situation. He wrote about how the unification of Europe is not working and how in the Arab world they are falling back into "sects, tribes, regions and clans". At the end of the editorial he wrote the following astonishing analysis of chaos.

"When countries with such different cultures become this interconnected and interdependent, when they share the same currency but not the same work ethics, retirement ages and budget discipline-you end up with German savers seething at Greek workers and vica versa".

Now I am going to rewrite this sentence to try to bring his analysis into the context of our own country. The words that I'm changing are highlighted.

When people or states with such different cultures become this interconnected and interdependent, when they share the same currency but not the same work ethics, retirement ages or budget discipline you end up with anyone who is not in the one percent club seething at the well to do.

If Tom Friedman's editorial about the collapsing European and Middle Eastern communities is even close to correct, we should expect as a responsible writer that he point out that we are on the same path.

President Obama is using the "bully pulpit" to fan the flames of jealousy and class warfare.

As long as the public school building I went to which is now 100 years old and the black and Hispanic children attending are failing at standardized tests and a man of "change" changes nothing of importance, there goes our chance for excellence. Jealousy and class warfare will only make matters much worse.

Is what's happening in Europe and the Middle East the canary in the coal mine?

Monday, June 11, 2012


The left-wing democrats are claiming the Romney does not support teachers, police officers or firefighters.

There are several things these three groups have in common among others.

One - They are all government jobs.
Two - They are all Union jobs.
Three - They are all groups that have attempted to use fear as a basis for taxpayer's support.
Four - They are all paid for with tax dollars.
Five - We pay for these services whether we want them or not.

If you don't support the teachers, you wont get education for your kids. If you don't support the firefighters, your house will burn down and if your don't support the police officers you will be attacked by the "hoards".

These jobs are called "essential" services.

Now think about it this way. If food isn't delivered to the super market, is that an essential service? If medicine isn't delivered to the drug store, is that an essential service? If the pharmacies and doctors don't do their jobs, is that essential services? If your dog is sick, is your veterinarian an essential service. How about a gas station - I guess that's an essential service too.

The left-wing unionized workers unions have found ways to differentiate themselves from the rest of us so that what they do is an "essential" service. Essential is defined as union.

Obviously Candidate Romney salutes the work done by ALL essential services as does President Obama.

The difference is Romney is looking for ways to increase the size of the economic pie whereas Obama just counts votes.

Monday, June 4, 2012


New York City's Mayor Bloomberg wants to tax soda because some people think its a significant contributor to obesity and bad health. Okay, so we pay a tax on soda, you can drink soda if you want to or not.

But here is the kicker...Mayor Bloomberg owns a TV station that espouses financial advice day after day after day. People lose money on much of what is said on these kinds of financial news channels.

So if soda is bad, so is inaccurate, incomplete or misleading, second to second financial commentary.

Obviously we should tax the people who watch financial TV channels because they may be harming their financial well being, just the same as soda.

No wonder we can't grow the economy.

Sunday, June 3, 2012


Time magazine, in its recent edition, shared a superb article on the complexity of the American Civil War. Its really a must read for those of us trying to maintain a historical grasp of this time in our history.

Among what may or may not be one of the more minor points of the article by Mr. Drehle, was the statement "One of the blessings of being able to set up shop on a new continent was that Americans never had to be defined by clan or tribe or region."

Unfortunately, as we grasp to believe this statement has credibility, the fact is it's untrue and as we will see in a moment, contributes significantly to the dimension of our economic problems.

We no longer argue over the wrongness of slavery of any sort, or about the right to equal education between men and woman, but we do argue incessantly, in subtle and direct ways, about inequality of economic wealth.

Walk down Fifth Avenue in New York, among many other places, and what you find is doorman or two, possibly a security person in the lobby, and maybe even an elevator man. Go down to Florida, and behold the many gated communities which are ostensibly for the wealthy but are significantly upper middle class, and look for the myriads of security men driving around in each community.

We may not be being defined by clan, but we are being defined by other things like wealth, education and expanding rights.

It can be said that if you can afford to live in a better neighborhood or have a bigger boat or whatever, you're barely a welcomed part of society in many places. Very few of the people on Fifth Avenue or in our many gated communities would give up these security amenities. These types of social segregation by, "class", are known to not work in the long term interest of democracy. Let us ask why not...

Jealousy among tribes, clans or economic classes is part of the mosaic of mankind. Unfortunately the jealousy as it exists, requires so much security that it's bad for everyone and does not get to the root cause of why.

Awhile back in one of my blogs, I wrote that no one can argue about everyone having available the so called amenities of living in our type of society. I stated that this could only come about if the thrust of the nations policy was to create wealth and wealth and wealth. I stated that wealth should not be gotten illegally or immorally, but it would be good for everyone if we figured out how to increase it. I've been met with some hostility on my emphasis on wealth. Simply put, the size of the pie has to grow so the slices can be bigger and someday of equal size.

The wealth of this country basically flows through the system. Therefore, other things being equal, the more flow the more volume. It is well known in economic circles that tax policy has been used to incentivize those areas of the economy that the prevailing government deems in the nation's interest. Depletion deductions for resource companies are meant as an incentive to seek more resources. Mortgage interest deductions are meant as incentives for people to buy homes, apartments, create jobs and demand for building products. Charitable deductions increase donations for organizations in need. Taxes on cigarettes are meant to reduce consumption of a very harmful product, and on and on it goes. If these so called loop hole deductions are taken away or reduced, I think it would indicate that the whole concept of targeted tax incentives was counterproductive. Without going into this too deeply, taxes are just another expense, no more and no less, to individuals and corporations. As a general rule, any expense including taxes, can reduce consumption or in a corporate sphere, contribute to higher prices.

The idea is to incentivize wealth creation and then decide the best we can whether the free flow of the market forces or more centralized controls, will push wealth retention in more economically productive directions. It can be argued that allocation of cash flow by corporations to buy back their own shares at inflated prices is a misallocation of free cash flow. For managements to tell their shareholders that they are returning wealth to them from share repurchases, can in many cases be shown to border on the absurd. We all know that the government also makes mistakes. It's real simple because people make mistakes. If we decide the government can increase wealth more effectively than wealth creators, so be it. This is pretty unlikely to occur.

We should always clamp down on the schemers. We have to let it be known that America is a land of equality before the law, a land where prejudices are unacceptable; but not a guarantor of equality of results. In summary, we are on a journey that can only be properly served when the doorman and the gates come down, and the poor and the rich can walk among each other with a feeling of dignity and safety.

Friday, June 1, 2012


Obama is so bad I can't even figure out what to say about him.

Thursday, May 31, 2012


I lived in a unionized family for alot of years.

There is so many words written in so many media that to believe that my words have any impact on others would be folly. So you could say that I write my blogs as a record of my thinking to myself. Very few people care what I say nor should they. I'm just one person that does some good stuff but slides along in the vast cauldron of life along with all my readers.

A newspaper in New York runs so many articles that are replete with misleading information. A particular article I am referring to is "The College Gap Leaves Some Cities Behind".

If you dig a little deeper you would see that the largest number of union workers live in California and just over half live in just six states.

One of those six states is Ohio. Ohio is the state in which the city being referred to in the article is located. National statistics show that black people have the highest union membership rate in the country and they also have a lower college graduation rate than other races.

When we fix the reasons behind the unionization and lower education levels we will go a long way from not having to write distorted articles in national newspapers.

For those of you that may think this sounds like a biased article I remind you that I was not only brought up in a unionized family but I also spent 10 years in the Fifth Avenue Armory in the midst of Harlem. There were three white guys in my unit. I can say that I was never better treated, accepted and had tons of friends.

If we don't look at the real causes of headline articles we will never fix the real problems that show up on the surface but are not even close to the cause.

Wednesday, May 30, 2012


Some people are always perpetual victims. It's my teacher's fault, it's my father's fault, it's my mother's fault, it's everybody's and everything's fault but my own. If you stay up late, if you don't concentrate, if you don't set reasonable goals, if you make wrong decisions and you know that they are wrong, you are responsible and even more as you grow older.

Set three good goals such doing well in school, jumping an extra foot and improving your social behavior.

Love ,

Thursday, May 24, 2012


From time to time we like to keep track of the investment performance of our old associate, Lew Sanders.  This has academic interest to me since he truly is a real smart guy,.  If man with his brains can't outperform the S & P 500, it speaks volumes as to the difficulty of the "Average Joe" trying to outperform the market.

The only real access we have to his portfolio performance is a website called Tickerspy which aggregates the portfolio holdings of investment firms based upon SEC filings. Sanders Capital, his recently formed investment firm, seems to have been under performing the market averages in most time frames that I can find reported on the Tickerspy website.

For example, figures on Tickerspy show that the S & P 500 return is approximately down 3% for the last three months, while the Sanders portfolio seems to be reported down 8%.

For the latest 6 month period the S & P 500 shows a return of about 12 1/2 %, while the Sanders portfolio shows a return of about 3 to 4 %.

If these figures are close to  correct, they don't say much during this short time frame for the value added by the Sanders Capital group.

In my opinion, there is no such thing as value investing and since Lew is as good as it gets, in terms of academic knowledge, indexing is still alive and kicking.  

Thursday, May 17, 2012


This blog may be highly controversial.  I will keep it short. For whatever my blogs may have been worth, I consider this to be by far the most significant.

For whatever reasons, justified or not, antisemitism towards Jewish people has been a long term historical reality.  In the mid 1800's after a relatively long period of Jewish attempts to integrate into European society, it became apparent that no matter what methods of assimilation the Jews tried, antisemitism remained.

Out of this period grew a series of Jewish responses; Jewish enlightenment, Socialism, Immigration, Zionism and Westward migration.

I have had a difficult time trying to really put my finger on why I didn't like President Obama.  He is educated, young, a family man, hardworking, likes dogs and kids, etc. and certainly not stupid.  A politician par excellence.

And now for the kicker.

Unfortunately a very significant number of the Jews became socialists, communists and today would be called left-wing liberals.  There was a strong feeling that if all people became very similar, the universal man if you will, then the Jews would be able to blend in and antisemitism would disappear. We all know that this assimilation attempt failed.

Today we know that the antisemitism against Jews was a prejudice and generally not predicated on Jewish failings, any more or less than any other group.  If you go and watch the TV today you will see our President calling for "prejudice" against people he believes to be rich, rather than explaining to the masses how our system works and how we tend to benefit immensely from creation, entrepreneurship, investment of wealth, etc.

Just as the Jews tried to leave their areas of settlement and find new homes to not be attacked, you will find more and more builders of this nation looking for ways to separate.  The Facebook founder who gave up his US citizenship to move to Singapore is the very beginning, no wheres close to the end.

So in summary, I hate to say it but our President looks to me like a bigot who instead of attacking the Jews, has chosen a campaign strategy of attacking the successful, both were small minority groups.

Let's hope that this bigotry will be just as unsuccessful as antisemitism.

Wednesday, May 9, 2012


My original blogs were meant for young people starting their careers. Negotiation among people is a complex matter.  Most of us, when we are young, know next to nothing about the strategic and emotional concepts of negotiating contracts.

This little vignette is dedicated to protect you from predators (including yourself), in the give and take of contract signing.

The original contracts at the founding of Sanford Bernstein and Company were endlessly thorough. I was able to have included many protections against partners who could turn out to be devious.  At that age, I did not grasp the full extent of the causes of human aggression and deception.

Bernstein was smarter than I was and had included in the contract, a minimum ownership under all future possibilities.  I was naive enough to cave into pressure from two of my partners and accept a lesser form of ownership rights after 72 hours of intense negotiation.

In the end there was a loophole that enabled Bernstein, Hertog and Sanders to vote to diminish my responsibilities.  I should never have agreed to that loophole and it was a serious learning experience which I vowed to never do again.

Along the way while I was President at Bernstein, I was discussing with Martin Sosnoff his joining of the firm as Chief Investment Officer and significant shareholder.  He decided to stay with his own company where he was in partnership with someone else.

Finding my situation at Bernstein not to my liking I left the firm.  I had six other offers of significance to join new firms but decided because of close friendship with Martin (a brilliant and unique man) that I would help him build his company, Atalanta.   Several people would join me from Bernstein including their Chief Financial Officer Harvey Siegel, an extraordinarily bright operations executive.

Not wanting to repeat the same contractual errors I made in the Bernstein negotiation, I insisted on a much stronger contract with Atalanta and was given a substantial portion of the firm, for which to this day I am grateful.

Through the efforts of several people we were able to build Atalanta from about $150 million in assets to almost $6 Billion from 1980 to 1986.  The firm was extremely profitable and I estimate had the highest assets under management per major owner in the industry.  Along the way we went public.  That is really the episode that I suggest caused the firm to go from $6 billion in assets when I left to only $2 billion a few years after my departure.

The point is, although I had a much stronger contract in many respects than my preceding contract with the Bernstein organization (which in my opinion would not have existed had I not joined the firm), as it turns out the new contract with Atalanta was not strong enough.

Although Atalanta was one of the largest money managers for the Catholic Church, Mr. Sosnoff decided to become a major shareholder in Caesars World.  Most of his shares were held in margin accounts.  During the market decline of 1987, Caesars went from about $30 to $10 which caused huge margin liquidation, wiped out a fortune and resulted in a depletion of the Atalanta assets.  Unfortunately these assets didn't recover to the 1986 highs for many, many years later.  I don't believe the firm was ever as close to as profitable as it was when it was a private entity.  There are three major ways to become wealthy, build a profitable business, take the business public, and make concentrated investments using as much margin and leverage as you can.

But today's kind of long vignette is really about Green Mountain Coffee and how ego traps even brilliant people. Recent history is replete with the effect of leverage on the downside, the most recent of which is Green Mountain Coffee.  Caesars World recovered in price. Although I don't know the Green Mountain story, it may also recover. Even Chesapeake Energy, which is a similar leverage in reverse catastrophe, may live to see another day.

In my next blog about Atalanta I will tell you what happened.

Thursday, May 3, 2012


Yesterday an analyst at a major brokerage firm forecasted that the price objective for Green Mountain Coffee was $51.  When the report was written the stock was trading in the high $40's.

Today Green Mountain is trading at $27 a share, down from the high $40's in one day.  This analyst is still predicting a price objective above $50.  If we want to clean up the research side of the investment business one way to do this is to tell this analyst to take his entire paycheck and buy Green Mountain stock in the $20's.

Who wouldn't  do that if you could double your money?  It's a strange world.

Wednesday, May 2, 2012


It wasn't long ago that a company called OpenTable was a "hot stock" selling at over $100 a share.  It recently was trading at $36.  It wasn't long ago that American Airlines was considered the premier airline.   American recently filed for bankruptcy.  Research in Motion was the leader in cell phones and sold at $140 a share and now trades in the low teens.  General Motors had double its market share. Microsoft was being sued for antitrust right before competition for its operating system exploded. First Solar and the other solar companies were hot stocks selling for many times their current prices. Netflix was a $300 stock a year ago and is now $75.00.   Green Mountain Coffee was a $100 plus stock six months ago and is trading today for $28.   Don't let anybody fool you because when each of these things were occurring very few, if any, forecasters predicted negative change for these companies, only continuation of the existing circumstances.  I can make a list of the demise of hot companies that would run page after page. 

This is especially true in stock brokerage firms most of which have disappeared over the years.  There was EF Hutton, Dupont, Lehman, Bear Stearns, Kidder, Bache and Soloman. Even Merrill Lynch is no longer a stand alone.  Ask yourself the question if these brokerage firms knew anything much more that the rest of us about investing how could they have not had made their fortunes in purchasing what they had been recommending.
We recently wrote a blog about the perils of machines trading of hundreds of millions of shares of stock daily.  This blog didn't get much attention. Machines that have no intention of investing in companies, waiting for dividend growth or probably in most algorithms not knowing anything about each of the companies their trading in.  These machines make it even more difficult. 

There was a recent event that might seem quite unimportant in the scheme of things and wasn't even in this country.  If you are familiar with the canary and the mine story it should not be overlooked.  I will just quote the headline for you and I suggest you keep it in mind because it's another example of what's going to happen. 

The headline was "MEXICO'S BENCHMARK IPC INDEX PLUNGES AFTER WRONG ORDER".  Within minutes the index dropped 2%. 

But now the real story.  With all the mistaken research opinions (it just happens to be part of the business) the SEC, in it's political wisdom, led by a Chairman with substantial ties to Bernie Madoff, has chosen to allow an inquiry into a firm called Egan Jones.  This is a recently started firm in the bond rating business.  It also happens to be the firm that was the first to lower the United States' bond rating.  In this mornings press, Bill Gross of Pimco, confirmed his views that the US bond rating would come down again.  But the SEC has chosen to go after this Egan Jones firm on the basis of what seems to be some minor misinformation in a 2008 regulatory application with administrative charges.  The three major bond rating firms, one of which we wrote about at length and will repeat the blog shortly, are not even mentioned.  There are serious issues in our Securities businesses as there are serious issues in the political business. 

How in the world did Obama appoint as the head of the SEC a person with such close ties to Bernie Madoff, who is now beginning to prosecute a case against a small bond research firm before it even concludes whats going on at the three large firms responsible for American Bond ratings.  All of which  I believe have high personnel turnover so that many of their ratings, at the very least, are done by a changing group of people which  tends to make them close to worthless.  Very few of them had the courage to call what occurred in the housing market just like very research analysts have the courage to call radically priced investment concepts unworthy of investors money..  The same concept applies to municipal bond debt which if they were being issued by companies would  be considered junk. 

The bond raters are no different than the stock recommenders.  The public should understand that Wall Street ratings and recommendations are a product being sold for profit not a guarantee or anywhere close to that of investment success. 

Friday, March 23, 2012


Overlay a chart of the S & P 500 and Berkshire Hathaway since May of 2002.  It looks to me as if they both follow a very similar path throughout that entire period.  Why in the world Berkshire gets so much publicity seems to be a delusion of the press.

I knew a man who was once called a  Wall Street "Investing Legend" by the media and a major university.  Each time I examine his public investing record all I seem to find is under performance to the major averages.

Many of Berkshire's major division heads seem to be being paid millions of dollars a year to run Berkshire's various parts while Buffet publicizes that he doesn't hardly take a salary.  He doesn't take a salary so I guess he doesn't pay much taxes.  He doesn't pay a dividend on his shares and generally he doesn't buy back shares of his own company.  Since as you've seen the performance of Berkshire mirrors the S & P, shareholders seem to get a very mediocre return.  The emphasis seems to be on the maintenance of an illusion as to how rich Mr. Buffet is and how little taxes everybody else pays.

From what I can tell in the press when he dies his shares will go to a Foundation, hence there will be little taxes on his estate.  From what I can tell the Foundation receiving the shares of his estate spend a substantial amount of its money on projects outside the United States.

In summary, his stock doesn't perform relatively and there seems to be lots of missing important information in the company's annual report.  Additionally, Mr Buffet has figured out a method for avoiding substantial tax payments for himself while his poor little secretary goes to Congress and complains about other people's taxes.

Remember Berkshire Hathaway hasn't diverged much from the S & P performance for over a decade. Warren Buffet is a marketing genius.  

Thursday, March 22, 2012


Many months ago when I bought my first IPAD I said to my business partner, "Holy Moly-this product is going to have some huge impact on PC sales". Months have passed and I have begun to think of how many people are employed in making PCS and their ancillary equipment.

The gadget that brought down an industry and we didn't see it coming. Holy Moly???

P.S. I must be crazy. "Laugh of the Day"

Tuesday, March 20, 2012


This morning I looked at a stock market screen with almost 300 symbols on it. They were all red.  You mean to tell me everybody decided to sell all of these 300 stocks and all of the buyers decided to go away.  I don't think so.  I think massive computer programs kicked in for whatever reason.  Today, computer trading accounts for most of the transactions on the stock exchange.  The self centered argument for maintaining this gambling casino environment is as wrong as the housing market speculation was. We all have access to company information and the economy.  Only a limited few have access to huge computers where a push of a button executes the buying and selling of millions of shares.   This has to end before a machine controlling a machine controlling a machine pushes the wrong button.

Monday, February 27, 2012


1. Warren Buffett tries to convince investors that his shares should be priced on book value.  On page two of his annual report he actually compares the change of the S&P to the change in the book value of his stock.  Why doesn't he compare book value to book value at the very least. Usually in modern times if it's real book value it's either based upon liquidation value or earnings power.

2. I have never seen a more complicated annual report. For example, you have to go all the way to page 59 to find that Berkshire owns a company called McLane that accounts for almost 25% of Berkshire's total revenues but contributes 2% to total earnings.

3. Consequently its fair to say that instead of $144 billion dollars of reported revenues Berkshire's real important base is closer to $111 billion dollars.

4. Nearly 15% of total Berkshire revenues are generated by the Burlington Railroad which Warren Buffett had absolutely nothing to do with building or creating.

5. By the time you take off $33 billion dollars of revenues from McLane and $20 billion dollars from Burlington you are left with about $90 billion dollars of revenue that one can impute to Berkshire management.

6. Of that $90 billion dollars of revenue, $32 billion dollars are in something called "other" businesses that seems to consist of about 100 little businesses and are nothing more than a huge conglomerate, usually not rewarded a high price earnings ratio by investors.

7, By the time you subtract the low profit margin of McLane and a huge conglomerate of dozens and dozens of companies, you are left with a $59 billion dollar business.

8. Another subsidiary called Marmon does another $7 billion dollars of business, requires $10 billion dollars of identifiable assets and probably earns about $600 million for a 6% return on investable assets.

9. You go to Berkshire's consolidated statement of earnings and you cant even find a mention of McLane, the food wholesaler that earns next to nothing.  It seems to be included in insurance and other.  That seems awfully  misleading to me.

10. I'm not even sure if the annual report, on page 27, is clear enough on the average number of shares outstanding. Value Line and Morningstar seem to show close to 2.4 billion shares outstanding, average or not.

11. On page 101, there is a list of non-insurance businesses and their number of employees, a total of 270,000.  There is about 60 non-insurance businesses, 40,000 people work for the railroad which has next to nothing to do with Buffet.  Marmon and McLane employ another 30,000 people, you can go figure out for yourself what the future profitability of these businesses is worth.  About 40,000 people work for fruit of the Loom and from what I can tell that company that doesn't seem to be doing well.

12. Where can you find the record of these individual companies?  I certainly couldn't.

13. You have to go all the way to the 60's though the early 80's to find when Berkshire's performance through book value significantly exceeded the performance of the S&P.   Recent years show an entirely different picture.

14. As regards to his large common stock positions on page 16 of the annual report he shows a $19 billion dollar profit of which $12 billion is in Coca Cola which he has probably held for 40 years. It shows another $4 billion dollars profit in Procter & Gamble which leaves very little profit on the rest of the portfolio. Has Buffet's performance on his stock portfolio been even close to the S & P?

15. Mr. Buffet talks about buying back his own stock up for up to no more than 10% of book value.  Well, if that is true why would he pay substantially more than book value for other stocks and not his own?

16. The company shows  a shareholder equity of $169 billion dollars.  There is $50 billion dollars of goodwill a non-asset asset and $76 billion dollars in equity securities most of which are probably float from the insurance companies and are not really Berkshire assets in my opinion.

17. I guess as Berkshire Hathaway common stock weakened into the high $60's Mr. Buffet was forced to buy back his own shares.  This may have been done to take attention away from the fact that Berkshire's share price had not changed since 2006 and was reaching the point where investors would begin to look for the real story.  Do your own analysis.

Seems to me that the cult of Warren Buffett, upon closer examination, is way out of proportion to reality.

Why in the world Buffets opinion on gold has any bearing on Berkshire Hathaway is beyond me except that he may have wanted to point out that in recent years you would have made a heck of alot more money on gold than on Berkshire's common shares.

Thursday, February 23, 2012


Recently a company called Gilead made an acquisition.  It paid $10 billion dollars cash for a company called Pharmasset.  Pharmasset had no revenues but it had a potential biotech product of significance.  A few months after the acquisition, the efficacy of Pharmasset's product is called into serious question by negative data on the pending product.

Everyone who owned shares of  Pharmasset was able to sell to Gilead (who seems to have done pretty sloppy due diligence), including insiders. I wonder if $10 billion dollars doesn't mean much if it's not your money?  Who knew what?  Was this the ultimate insider sale?

It's kind of ironic to note, that on February 7th (before the announcement of disappointments in the drug trials) insiders at Gilead sold a substantial number of shares.  Was this the ultimate double-pronged insider sale jigsaw puzzle?

Wednesday, February 15, 2012


As President Obama ranted about not going to Las Vegas and flying on private planes, the jobs passed us right by.  Tens of thousand of jobs, from construction to everything else, were created in China building the world's most successful gambling hotels and resorts.  If you look deeply, you could create the case that Obama is really out to weaken the country's economic position.  Good jobs and lots of them, went away while our President who has never created one job used populist rhetoric to unite votes instead of creating jobs.  


For those of you that hang on to every word that Warren Buffet has to say, I hope you don't mind that I point out the following.  Berkshire Hathaway stock is selling at the same price that it did in 2007.

Mr. Buffett takes money that he earns in the insurance company and instead of reducing premiums, he takes the excess and invests it in mature companies like PG, JNJ, WPO, WFC, AXP, KO, KFT, etc.

He is a rich man but Berkshire Hathaway is nothing more than a conglomerate, period, end of subject.  Lots of hype, but no shareholder returns in many years.

Tuesday, January 31, 2012


I was going to write a further review of the Presidents State of the Union Message. As I continued to read the speech, finding it so full of rhetoric and appeal to emotion, I came across a hugely misleading, out of context statement by the President. His comments are an attempt to make a laughing stock of the capacity of the average American to think for himself.

He spoke about how the CEO of Master Lock told him it made good business sense to bring jobs back home to America. He states that his unionized plant in Milwaukee was running at full capacity. Sadly, these are facts:




How absurd to use a small company that belonged to a tobacco company as an example. I can't believe that we will accept such flimsy contextually dishonest information from this President. He is good with words, but he almost never good with truth.

Friday, January 27, 2012


President Obama referred to the GI Bill of Rights in the State of the Union speech. This highly partisan President did not make it clear as to certain facts about the origin of the bill.

1. Harry W. Colmery, the former REPUBLICAN National Committee Chairman wrote the first draft of the GI Bill of Rights.

2. Elizabeth Rogers, REPUBLICAN of Massachusetts is considered by many the "Mother of the GI Bill."

Isn't it interesting how the President presented this subject as if it was a democratic party achievement only?

Information primarily by Wikipedia.

Thursday, January 26, 2012


When I read Obama's State of the Union message I remain flabbergasted by the flowering concepts and the total lack of ideas. Obama makes the statement that for the first time in nine years there are no Americans fighting in Iraq. He makes this statement as if its some type of accomplishment, but it's nine years later and time for this to end...anybody would know that.

He talks about the death of Osama Bin Laden while Egypt,Yemen, Syria and parts of Africa continue in total disarray. He speaks out of context as to reality. He compares the financial institutional problems to our American Armed forces, as if dying in combat can possibly belong in the same sentence as the housing crisis. He states that our Armed Forces are not consumed with personal ambition. Nothing could be further than the truth since many of our Armed Forces desire growth, opportunity and higher rank. He makes it sound as if the only ones that focus on the mission at hand are the Armed Forces. Words, not truth. He has never served in the Armed Forces and probably knows very little about the highly structured disciplined regime of the "enlisted man".

He talks about leading the world in education and offers no suggestion as to how to take our people out of the fields of poverty and low paying jobs in so many industries in this country. He speaks of an America that attracts high tech industry and high paying jobs with no specific ideas.

He wants to be in control of our own energy. Great! So why brag about pulling our forces out of the Middle East and complaining about the tax depletion allowances granted by Congress to incentivize the exploration of oil.

What in the world does his Grandfather being in Patton's Army have to do with the GI Bill. The GI Bill did not come into existence because his Grandfather was in Patton's Army. When World War II came the Germans were certainly way ahead in the quality of their Armed Forces equipment.

His family may have been optimistic people but before WWII the unemployment rate was approaching 20%. Whether you like it or not it was the War that brought the unemployment rate down.

Poverty stricken blacks and whites did not understand they were part of "something larger". They knew nothing of contributing to a story of success. Many were even children of the "dust bowl". They were struggling to survive.

The idea of raising a family, owning a home, going to college and putting a little away for retirement was the early attempt to raise one's standard of living. He is right when he says there is a shrinking number of people doing well not a growing number of people.

To imply that most Americans don't get a fair shot and that some groups of people don't do their fair share and that most don't play by the rules is again just words and if put to the test for facts, would be totally bogus. In general, you can't compare the SAT results of a first generation immigrant from South America to a family that has been through several generations in America.

I'm only on page two of the speech. I could keep going on since Obama's thinking on almost every part of this speech is analytically incorrect. I don't want to bore you anymore today.

Friday, January 6, 2012


It's well known that our democracy is some kind of mixture of everything. In today's world the Internet has given a venue where millions of us, (including me), have been provided with a forum for words, words, words. The words have become a cover up for solving the critical issues of our time. We have been able to function under the protective umbrella of the words "well at least we are better than any other system", even if those systems are failing on a multitude of levels.

An article in a renowned northeastern newspaper stated that there has been a significant increase in the tax auditing of the so called well to do. I'm not in favor of the tax cheats and certainly have no objection to a comprehensive and fair auditing of anyone.

Unfortunately the "left wing liberal elite" do not call auditing successful people profiling. The plain fact is that auditing any group, compared to any other group, is plain old profiling.

Lets assume you had two children, one stood on their own two feet and did whatever a kid was expected to do in acceptable terms. The other was a recalcitrant, lazy bully. The parents, cowering in fear of the bullying child, turns on the other child out of fear of antagonizing the negative one. Somehow this is backwards. Obama's mantra was change. What many of us assumed was he meant change in facing the real issues. That would have meant auditing rich and poor equally.

Almost in a reflection of desperation of these thoughts there has been a recent increase in the number of doctors filing for bankruptcy. You vote, predicable...yes or no. Two thousand pages of many people in this country knows what it says? Profiling under the guise of auditing and a health care program that's losing our doctors are both examples of government behavior where the election is more important than doing the job right.

As I said before, labor's lack of flexibility has destroyed major American industries. Now the mighty "Union of Government", will over time, eat away at the underpinnings of people's desire to excel. Along with this we are now seeing the beginnings of a decline in our military establishment which will just be another industry driven to retreat by the misplaced but "feel good" attitude of our populist politics even when the results are negative. Declining relative military strength, along with declining relative economic strength, are the historical prescription for long term relative standards of living weakness.

Shepard Osherow. All Rights Reserved