Sunday, January 28, 2007

Today's New York Times business pages

Today's NYT business section has a few articles that are particularly interesting. They are as follows:

---"The Hard Rain That's Falling on Capitalism" by Ben Stein---Ben Stein is to capitalism what Calvin Trillin is to food. He's a believer and he writes well and with self deprecating humor. In addition to the article title, he begins with a Dylan quote from "Gotta Serve Somebody", and then goes into the benefits of capitalism for his parents and himself and states that "this miracle has been vibrant in the lives of hundreds of millions of Americans who have gone from nothing to something, thanks to the dynamics of capitalism". He then moves, however, to the abuses of the system that have grown in recent years. In a few short paragraphs it's all there. He observes that capitalism "is built on man's notion that he can trust his neighbor with his money, and that if the neighbor misbehaves, the law will chase him and catch him, and that the ladder of law has no top and no bottom, that even the nobles get properly handled(Bob Dylan again) once they get caught. If that trust disappears, if the system is no longer for the ordinary citizen but only for the tough guys, how much longer can the miracle last?"

---"A Growing Aversion to Ticker Symbols" by Andrew Ross Sorkin---this is an article about the trend of public companies going private. Whether because of Sarbanes Oxley, legal liability to shareholders and trial lawyer extortionists, or media scrutiny, the desire to go private is growing. One buyout banker, unnamed, is quoted as saying "you know, it's ironic, Calpers(the activist Calfornia state pension board) screams when a public company CEO is making a lot of money, but are completely content as a limited partner in a private equity firm to pay him a fortune when the company is private".

---"Now You, Too, Can Enter the World of 007 Finance" by Paul J. Lim---this article details the ability of a modest individual investor to use easily accessible ETF's and basic hedging strategies to have their own little hedge fund. It uses as an example an individual who says that he does not fancy himself as an amateur George Soros. He does however want a portfolio without the expenses and market returns of mutual funds, one that is "a spicier portfolio, keeping 75% of assets in stocks and bonds that he deems 'secure from fiasco' and 25% in more speculative investments".

---"Is the Fix Worse Than the Problem" by Gretchen Morgenson---this describes a proposal in Congress to address the excesses in executive pay. The problem with this, well detailed here, is that the bill's attempts to address deferred compensation will mainly affect middle income employees, and be especially onerous to those who are near retirement and have had the good sense to save during their careers. Such a horrible bill might seem unlikely, but when looking at already existing attacks on the financially responsible middle class like the AMT, the lack of cost of living indexes for taxes(i.e. two working members of a family with two children making in total $100,000 in New York City are just scraping by, and the same demographic makes that much money in many areas of the country and there's a swimming pool in backyard, but the tax rates are the same), and the thresholds for tax exempt savings plans, college tuition benefits etc. all have the same big blind spot(one could say red states vs. blue states but the Democrats are absolutely oblivious to this issue as well). This article is well detailed. Intuitively it seems correct and troubling, and hopefully the facts are right as Morgenson's work is not always distinguished by credible sources.

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