matthutch's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/201795/comments http://seekingalpha.com/article/174443-rip-retail-stores-closed-in-2009?source=feed#comment-769595 769595 Fri, 20 Nov 2009 15:43:04 -0500 http://seekingalpha.com/article/121094-allen-stanford-ponzi-operator?source=feed#comment-394350 394350
first of all, the ratings agencies are a federally-imposed oligopoly. that whole system needs to be overhauled.

second, my comment was in response to the idea that people who "concocted every kind of derivative" are crooks. again, coming up with product ideas is not a crime, nor is it crooked. if that were true, all the people coming up with crazy ideas that never turn into commercial successes would be filling up our prisons. instead, misrepresenting something that is known to be incorrect is fraud. i think you'll have a hard time proving that the rating agencies (who are not investment bankers, by the way, who were the object of the original post) acted in bad faith in putting together their models. i'll assume you know how the cdo's and cmo's were structured and how they justified the ratings. just like everyone else who bought mortgage-backed securities, they underestimated the risk. it's easy to see what the problem was ex post, but it as easy to see them ex ante. of course, there were some who did, but as the saying goes, economists have predicted nine of the last three recessions.

this isn't the first time in the history of mankind it's happened either. it wouldn't be right to say that every time someone underestimates risk and tries to sell something based on that idea they were being deceptive.]]> Wed, 18 Feb 2009 20:54:15 -0500
first of all, the ratings agencies are a federally-imposed oligopoly. that whole system needs to be overhauled.

second, my comment was in response to the idea that people who "concocted every kind of derivative" are crooks. again, coming up with product ideas is not a crime, nor is it crooked. if that were true, all the people coming up with crazy ideas that never turn into commercial successes would be filling up our prisons. instead, misrepresenting something that is known to be incorrect is fraud. i think you'll have a hard time proving that the rating agencies (who are not investment bankers, by the way, who were the object of the original post) acted in bad faith in putting together their models. i'll assume you know how the cdo's and cmo's were structured and how they justified the ratings. just like everyone else who bought mortgage-backed securities, they underestimated the risk. it's easy to see what the problem was ex post, but it as easy to see them ex ante. of course, there were some who did, but as the saying goes, economists have predicted nine of the last three recessions.

this isn't the first time in the history of mankind it's happened either. it wouldn't be right to say that every time someone underestimates risk and tries to sell something based on that idea they were being deceptive.]]> http://seekingalpha.com/article/121094-allen-stanford-ponzi-operator?source=feed#comment-393908 393908
by the same notion, not understanding the risks, even if you came up with the product, isn't fraud. there was fraud at the loan origination level. sure. but that requires no derivatives. securitization has been around for awhile and wasn't invented by bankers. tell me what these fraudulent derivatives were.

and no, looking at something post hoc that didn't work doesn't mean it was fraud. fraud requires deception, and the broad use of these derivatives show no indication of fraud. it shows ignorance and stupidity. if it *was* fraud, meaning the bankers knew the risks and misrepresented them to their clients, they forgot to tell the guys on the next floor, b/c they fell for it hook line and sinker from the bankers at competing firms. if they knew about it and deceived those to whom they sold the derivatives, why are bear, lehman, merrill no longer with us and so many other firms on government life support? it's ludicrous to say they fully knew the risks and lied.

and i'll add that the compensation structure is screwed up as well. as long as compensation is measured in relatively small annual increments and the risks of a series of decisions can build up over two or three years, we'll see this again. people will take risks if the consequences of those risks occur a few years into the future and they won't be held financially responsible for assuming those risks (ie forfeited bonuses, etc). enron, for example, had similar problems, where they had people getting paid for future/expected profitability as they brought in deals with no recourse if the deals weren't as profitable as expected.]]> Wed, 18 Feb 2009 14:36:51 -0500
by the same notion, not understanding the risks, even if you came up with the product, isn't fraud. there was fraud at the loan origination level. sure. but that requires no derivatives. securitization has been around for awhile and wasn't invented by bankers. tell me what these fraudulent derivatives were.

and no, looking at something post hoc that didn't work doesn't mean it was fraud. fraud requires deception, and the broad use of these derivatives show no indication of fraud. it shows ignorance and stupidity. if it *was* fraud, meaning the bankers knew the risks and misrepresented them to their clients, they forgot to tell the guys on the next floor, b/c they fell for it hook line and sinker from the bankers at competing firms. if they knew about it and deceived those to whom they sold the derivatives, why are bear, lehman, merrill no longer with us and so many other firms on government life support? it's ludicrous to say they fully knew the risks and lied.

and i'll add that the compensation structure is screwed up as well. as long as compensation is measured in relatively small annual increments and the risks of a series of decisions can build up over two or three years, we'll see this again. people will take risks if the consequences of those risks occur a few years into the future and they won't be held financially responsible for assuming those risks (ie forfeited bonuses, etc). enron, for example, had similar problems, where they had people getting paid for future/expected profitability as they brought in deals with no recourse if the deals weren't as profitable as expected.]]> http://seekingalpha.com/article/121094-allen-stanford-ponzi-operator?source=feed#comment-393668 393668
how can you call a person who does this a crook? do you ever see infomercials or pass the home shopping network on the way to another station? i see a bunch of pretty oddball stuff for sell, all to help them "make a commission [of sorts] from selling". back in their respective days, cars, radios, tvs, personal computers, cell phones, etc were all fairly oddball such that many people never expected them to catch on commercially. just b/c you don't (and it turns out they and many people who bought them) understand them, doesn't mean they are crooks for coming up with them, even as we look back and see there were problems.]]> Wed, 18 Feb 2009 12:37:37 -0500
how can you call a person who does this a crook? do you ever see infomercials or pass the home shopping network on the way to another station? i see a bunch of pretty oddball stuff for sell, all to help them "make a commission [of sorts] from selling". back in their respective days, cars, radios, tvs, personal computers, cell phones, etc were all fairly oddball such that many people never expected them to catch on commercially. just b/c you don't (and it turns out they and many people who bought them) understand them, doesn't mean they are crooks for coming up with them, even as we look back and see there were problems.]]> http://seekingalpha.com/article/121238-chrysler-held-hostage-by-cerberus?source=feed#comment-393644 393644
this is the important line from this article. cerberus didn't invest in chrysler to see it fail -- it planned to make money by making and selling cars. well, that didn't happen. because they do see the company for what it (likely) is, they see an additional investment as a waste of money and contrary to their obligations to their investors.

the only way they see a possibility to make a profit on their investment is to turn to rent-seeking. there's nothing surprising here. companies do this all the time. i think it's disgusting. not that they seek rents (after all, that's a human survival technique to desperately look for help from whomever might give it to you), but that politicians play along. the pols, it seems, seem to buy your analogy of the personification of chrysler as a faultless hostage with a gun to her head. not so. chrysler, like any other business, is a collection of (hopefully) productive assets and the people hired to operate them. if those assets have value, and i presume they do to one degree or another, they will be used to close to their best use, if not in the short run, then in the long run. that might be by chrysler or another company. for government to step in to interfere with this process, in effect allowing the "profit" but not the "loss" if they believe it's too great, is not capitalism. and government officials who give out favors when companies seek a handout or some other kind of political favoritism only perpetuates the problem by indicating that lobbying can pay off.]]> Wed, 18 Feb 2009 12:24:22 -0500
this is the important line from this article. cerberus didn't invest in chrysler to see it fail -- it planned to make money by making and selling cars. well, that didn't happen. because they do see the company for what it (likely) is, they see an additional investment as a waste of money and contrary to their obligations to their investors.

the only way they see a possibility to make a profit on their investment is to turn to rent-seeking. there's nothing surprising here. companies do this all the time. i think it's disgusting. not that they seek rents (after all, that's a human survival technique to desperately look for help from whomever might give it to you), but that politicians play along. the pols, it seems, seem to buy your analogy of the personification of chrysler as a faultless hostage with a gun to her head. not so. chrysler, like any other business, is a collection of (hopefully) productive assets and the people hired to operate them. if those assets have value, and i presume they do to one degree or another, they will be used to close to their best use, if not in the short run, then in the long run. that might be by chrysler or another company. for government to step in to interfere with this process, in effect allowing the "profit" but not the "loss" if they believe it's too great, is not capitalism. and government officials who give out favors when companies seek a handout or some other kind of political favoritism only perpetuates the problem by indicating that lobbying can pay off.]]> http://seekingalpha.com/article/121046-stimulus-bill-signed-now-will-it-work?source=feed#comment-392975 392975 Wed, 18 Feb 2009 00:05:32 -0500 http://seekingalpha.com/article/120195-did-2008-s-677-billion-trade-deficit-cause-the-recession?source=feed#comment-386684 386684 Americans haven’t borrowed to fund the trade deficit. No debt was created. You can wonder, though, if we’d have as large of a trade deficit if we didn’t require such a large capital surplus to fund our budget deficit. The federal government has borrowed to fund its deficit. And with all the government is about to borrow to fund future deficits, including the stimulus, the capital surplus is about to get a whole lot bigger.
“The Chinese government alone holds about $2 trillion in U.S. and other securities, and these could be used to purchase about 20 percent of the value of publicly-traded U.S. companies.”
I don’t see why this is a concern. What would happen if they decided they wanted to diversify (ie sell what they own and buy something else)? They would significantly impair the assets they’re selling, realizing massive losses, and bid up the assets they’re buying. They would create huge gains for whoever buys the assets they sell and whoever sells the assets they buy. And now your concern is that they will now do something nefarious after they buy up our assets. If they do anything but run them profitably, they will lose on their investment. If SWF’s really wanted to hurt us, they could just shut off the oil or stop buying debt. But why don’t they? Because Americans are their customers and they realize the W in their SWF is inextricably connected with the US.
“The American appetite for inexpensive imported consumer goods and cars is also a huge factor driving up the trade deficit.”
We only buy as much as we do from non-US sources is because it’s cheaper. Why do we buy so much oil? It’s cheaper than alternatives. Not because we’re “addicted”. All consumers have an appetite for relatively inexpensive goods. They make judgments based on quality, price, convenience, and any number of other reasons. Are you arguing they should buy without regard for the value per dollar? You might be able to convince politicians that paying too much for something is a good way to stimulate the economy, but I think you’ll find it much harder to convince anyone who actually spends their own money.
“Dollars spent on imported oil and cars and consumer goods from China cannot be spent on U.S. goods and services, and every dollar that U.S. imports exceed exports negates at least one dollar of federal stimulus spending.”
This isn’t true (if you’re on board with the idea that even if the federal dollar is stimulative in the first place). First, this assumes that every dollar spent on an imported good goes straight to China or the Saudis. In fact, Wal-Mart makes a profit when you buy. They paid the trucking companies to get it there. Often, Wal-Mart bought it from someone else, who makes a profit. There are a lot of people who get a piece of that dollar. Second, again, that dollar we send over there doesn’t do them a bit of good. For them to benefit from that dollar, they need to buy dollar-denominated assets. That might be a dollar-denominated tractor or a dollar denominated treasury note or a dollar-denominated whatever.]]> Fri, 13 Feb 2009 01:06:30 -0500 Americans haven’t borrowed to fund the trade deficit. No debt was created. You can wonder, though, if we’d have as large of a trade deficit if we didn’t require such a large capital surplus to fund our budget deficit. The federal government has borrowed to fund its deficit. And with all the government is about to borrow to fund future deficits, including the stimulus, the capital surplus is about to get a whole lot bigger.
“The Chinese government alone holds about $2 trillion in U.S. and other securities, and these could be used to purchase about 20 percent of the value of publicly-traded U.S. companies.”
I don’t see why this is a concern. What would happen if they decided they wanted to diversify (ie sell what they own and buy something else)? They would significantly impair the assets they’re selling, realizing massive losses, and bid up the assets they’re buying. They would create huge gains for whoever buys the assets they sell and whoever sells the assets they buy. And now your concern is that they will now do something nefarious after they buy up our assets. If they do anything but run them profitably, they will lose on their investment. If SWF’s really wanted to hurt us, they could just shut off the oil or stop buying debt. But why don’t they? Because Americans are their customers and they realize the W in their SWF is inextricably connected with the US.
“The American appetite for inexpensive imported consumer goods and cars is also a huge factor driving up the trade deficit.”
We only buy as much as we do from non-US sources is because it’s cheaper. Why do we buy so much oil? It’s cheaper than alternatives. Not because we’re “addicted”. All consumers have an appetite for relatively inexpensive goods. They make judgments based on quality, price, convenience, and any number of other reasons. Are you arguing they should buy without regard for the value per dollar? You might be able to convince politicians that paying too much for something is a good way to stimulate the economy, but I think you’ll find it much harder to convince anyone who actually spends their own money.
“Dollars spent on imported oil and cars and consumer goods from China cannot be spent on U.S. goods and services, and every dollar that U.S. imports exceed exports negates at least one dollar of federal stimulus spending.”
This isn’t true (if you’re on board with the idea that even if the federal dollar is stimulative in the first place). First, this assumes that every dollar spent on an imported good goes straight to China or the Saudis. In fact, Wal-Mart makes a profit when you buy. They paid the trucking companies to get it there. Often, Wal-Mart bought it from someone else, who makes a profit. There are a lot of people who get a piece of that dollar. Second, again, that dollar we send over there doesn’t do them a bit of good. For them to benefit from that dollar, they need to buy dollar-denominated assets. That might be a dollar-denominated tractor or a dollar denominated treasury note or a dollar-denominated whatever.]]> http://seekingalpha.com/article/104792-free-market-healthcare-falling-victim-to-recession?source=feed#comment-300374 300374
"Could it be possible that our free market healthcare system is rationing care just like the socialist systems?"

Any resource with less than an unlimited quantity available for consumption needs to be "rationed" somehow. Healthcare is no exception. The difference between rationing with a market system (usually referred to as allocation) and rationing under socialism is who does the allocating. Under a market, resources are allocated based on prices that people respond to. Socialism allocates by bureaucrats/committee. Our current system of health care in almost no way resembles a market, let alone a free one.]]> Fri, 07 Nov 2008 15:58:01 -0500
"Could it be possible that our free market healthcare system is rationing care just like the socialist systems?"

Any resource with less than an unlimited quantity available for consumption needs to be "rationed" somehow. Healthcare is no exception. The difference between rationing with a market system (usually referred to as allocation) and rationing under socialism is who does the allocating. Under a market, resources are allocated based on prices that people respond to. Socialism allocates by bureaucrats/committee. Our current system of health care in almost no way resembles a market, let alone a free one.]]> http://seekingalpha.com/article/89243-two-types-of-speculation-one-harmful-one-not?source=feed#comment-223492 223492
His thesis seems to be that because speculation based on incorrect information causes a misallocation of resources, it is bad. OK. Granted. So what? Did I miss his action step conclusion? Does he think this kind of speculation should be banned? Surely not. Who gets to decide what is good information and what is bad information? I hope he doesn’t think that people should be disallowed of an investment/speculation because they disagree with the accurate information police. Or maybe he simply prefers people should only be able to speculate on information that his wisdom deems accurate? This is nothing more than political hackery dressed up as economic analysis.]]> Tue, 05 Aug 2008 17:28:57 -0400
His thesis seems to be that because speculation based on incorrect information causes a misallocation of resources, it is bad. OK. Granted. So what? Did I miss his action step conclusion? Does he think this kind of speculation should be banned? Surely not. Who gets to decide what is good information and what is bad information? I hope he doesn’t think that people should be disallowed of an investment/speculation because they disagree with the accurate information police. Or maybe he simply prefers people should only be able to speculate on information that his wisdom deems accurate? This is nothing more than political hackery dressed up as economic analysis.]]> http://seekingalpha.com/article/86768-bill-gross-the-housing-gse-bill-is-best-way-out-of-credit-crisis?source=feed#comment-213253 213253 Thu, 24 Jul 2008 10:26:01 -0400 http://seekingalpha.com/article/82675-illiinois-countrywide-potentially-devastating?source=feed#comment-192751 192751 Wed, 25 Jun 2008 14:26:50 -0400 http://seekingalpha.com/article/81510-defending-the-vulture-funds?source=feed#comment-186636 186636 Mon, 16 Jun 2008 16:14:28 -0400 http://seekingalpha.com/article/81249-drilling-in-anwr-what-s-not-to-like?source=feed#comment-185047 185047 Fri, 13 Jun 2008 12:42:29 -0400 http://seekingalpha.com/article/81249-drilling-in-anwr-what-s-not-to-like?source=feed#comment-184997 184997 Fri, 13 Jun 2008 11:29:35 -0400 http://seekingalpha.com/article/81249-drilling-in-anwr-what-s-not-to-like?source=feed#comment-184983 184983
another question: if they destroyed us (as well as our allies), who would buy their oil? the truth is, they may not like us terribly, but they know our economic livelihood depends on us buying oil from them. i think that the less we depend on them, the more likely it is that they try to do something to us - the costs are less.]]> Fri, 13 Jun 2008 11:16:12 -0400
another question: if they destroyed us (as well as our allies), who would buy their oil? the truth is, they may not like us terribly, but they know our economic livelihood depends on us buying oil from them. i think that the less we depend on them, the more likely it is that they try to do something to us - the costs are less.]]> http://seekingalpha.com/article/81249-drilling-in-anwr-what-s-not-to-like?source=feed#comment-184965 184965
why do we keep talking about our "addition to oil"? as far as i can tell, using the same logic, i'm addicted to all kinds of things: air, milk and bread, concrete and steel (looking out my office window at several buildings 30 stories +), etc. rather, I choose to use oil b/c its cheap.

as far as the effect of drilling on the environment? first of all, we shown that with recent technology, the impact is minimal. second, we effect the environment every time we turn around. so what? so do animals. so does falling water. as far as science tells us, dinosaurs died by some crazy natural phenomenon. beavers build dams - cute; humans build dams - disgusting. why are humans less natural than anything else?

so what if we run out of oil? as we run out, the price of oil will skyrocket. that, and that alone, is all the incentive we need to go to other options. the more expensive oil is, the better other option will be. so why, in the meantime, should we limit the use of our resources? we can see what hoarding of food has done for other countries. we don't need artificially higher priced energy.

as for who benefits when we drill for oil in anwr? how about tax payers? the oil companies don't own the land right now. the land will be leased. and maybe we charge by the barrel for extraction. any money the treasury receives from selling the rights to extract is less money taxpayers will have to pay. (that of course assumes you think government will lower taxes; i personally think they'll simply spend more.)

why so we need some kind of "race to the moon" type government-funded program? why are we as a society better off because we went to the moon? no one lives there. no one's close to living there. we don't vacation there. the government decided we needed to go there, so we spent a lot of money doing it. i'm sure there was some rocket or satelite technologies that were discovered in the process, but was it worth the cost? i'm skeptical that it was. i can't think of many (any?) technological directions the government has chosen for us that have been better at the process than the market.

and to make a short list of our future energy sources and say "that's it" is ludicrous and shortsighted. how in the world can any of us predict the direction of energy? we can't predict what the market will do next week. energy innovation in 20 yrs? forget about it. didn't you see "back to the future"? using banana peels and beer cans was imaginary, but you can count on innovation. which speaks to one persons comments about t. boone pickens thoughts about the efficiency of wind. my belief is that you can't base the efficiency of an energy source right now on someone's investment. he's betting, just like al gore and others, that we will either 1) be mandated by government to use at energy (you don't think they aren't funding the green lobby, do you?) or 2) seriously run out of other energy sources at which time the relative efficiency of these energy sources will increase dramatically.

sorry for the long post.]]> Fri, 13 Jun 2008 11:00:02 -0400
why do we keep talking about our "addition to oil"? as far as i can tell, using the same logic, i'm addicted to all kinds of things: air, milk and bread, concrete and steel (looking out my office window at several buildings 30 stories +), etc. rather, I choose to use oil b/c its cheap.

as far as the effect of drilling on the environment? first of all, we shown that with recent technology, the impact is minimal. second, we effect the environment every time we turn around. so what? so do animals. so does falling water. as far as science tells us, dinosaurs died by some crazy natural phenomenon. beavers build dams - cute; humans build dams - disgusting. why are humans less natural than anything else?

so what if we run out of oil? as we run out, the price of oil will skyrocket. that, and that alone, is all the incentive we need to go to other options. the more expensive oil is, the better other option will be. so why, in the meantime, should we limit the use of our resources? we can see what hoarding of food has done for other countries. we don't need artificially higher priced energy.

as for who benefits when we drill for oil in anwr? how about tax payers? the oil companies don't own the land right now. the land will be leased. and maybe we charge by the barrel for extraction. any money the treasury receives from selling the rights to extract is less money taxpayers will have to pay. (that of course assumes you think government will lower taxes; i personally think they'll simply spend more.)

why so we need some kind of "race to the moon" type government-funded program? why are we as a society better off because we went to the moon? no one lives there. no one's close to living there. we don't vacation there. the government decided we needed to go there, so we spent a lot of money doing it. i'm sure there was some rocket or satelite technologies that were discovered in the process, but was it worth the cost? i'm skeptical that it was. i can't think of many (any?) technological directions the government has chosen for us that have been better at the process than the market.

and to make a short list of our future energy sources and say "that's it" is ludicrous and shortsighted. how in the world can any of us predict the direction of energy? we can't predict what the market will do next week. energy innovation in 20 yrs? forget about it. didn't you see "back to the future"? using banana peels and beer cans was imaginary, but you can count on innovation. which speaks to one persons comments about t. boone pickens thoughts about the efficiency of wind. my belief is that you can't base the efficiency of an energy source right now on someone's investment. he's betting, just like al gore and others, that we will either 1) be mandated by government to use at energy (you don't think they aren't funding the green lobby, do you?) or 2) seriously run out of other energy sources at which time the relative efficiency of these energy sources will increase dramatically.

sorry for the long post.]]> http://seekingalpha.com/article/80215-why-cap-and-trade-beats-a-carbon-tax?source=feed#comment-179931 179931 Thu, 05 Jun 2008 17:48:58 -0400 http://seekingalpha.com/article/79701-windfall-profits-for-big-food-where-s-the-outrage?source=feed#comment-177971 177971 Mon, 02 Jun 2008 11:36:28 -0400 http://seekingalpha.com/article/79309-greenspan-bubbles-are-a-necessary-part-of-innovation?source=feed#comment-176078 176078 Thu, 29 May 2008 12:33:42 -0400