Friday, July 31, 2009

Packard's Law

"No company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. [And] If a company consistently grows revenue faster than its ability to get enough of the right people to implement that growth, it will not simply stagnate; it will fall."

Jim Collins How The Mighty Fall (page 55-56)

Tuesday, July 28, 2009

Examples of Legislature that has "screwed" our country

The Health Maintenance Organization Act of 1973 (Public Law 93-222)
For the first time combined payment with delivery and in turn took away market incentives. The birth of out of control healthcare costs.

Roosevelt cut a deal with bankers whereby they would make more money available but had the ability to choose to whom (what areas) they would lend. Most slums in today's major cities exist because of what Roosevelt allowed the bankers to do.

Enabled those who probably should not own a house to take title of house through easier credit and which contributed to the S&L collapse and then ultimately the realestate bubble and subsequent collapse of the US Economy.

Good intentions; bad results - Another Example of how our Fed Governement and politics has created the health care mess.

The law (PL 93 222) that gave rise to HMO's was a classic example of why the Fed government must not and should not be allowed to venture into dealing with health care. Though noble in intention it was thoughtlessly constructed and worst impossible to get rid of.

Our Constitution and its 27 Amendments lays out very clearly what the Fed governement should and more importantly should not be getting involved with and for good reason. It's remarkable to see how we allow our politicians to continually make the same mistake for the sake of self interest.

Monday, July 27, 2009

Putting the Fed Bailout in Perspective

Below is a fascinating blog from Barry Ritholtz's blog The Big Picture

" Whenever I discussed the current bailout situation with people, I find they have a hard time comprehending the actual numbers involved. That became a problem while doing the research for the Bailout Nation book. I needed some way to put this into proper historical perspective.

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:

Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion


data courtesy of Bianco Research


That is $686 billion less than the cost of the credit crisis thus far.

The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).

Go figure: WWII was a relative bargain."

Thursday, July 16, 2009

Health care is a scarce resource.

An excerpt (just one paragraph) from an article by Peter Singer in the New York Times:

"Health care is a scarce resource, and all scarce resources are rationed in one way or another. In the United States, most health care is privately financed, and so most rationing is by price: you get what you, or your employer, can afford to insure you for. But our current system of employer-financed health insurance exists only because the federal government encouraged it by making the premiums tax deductible. That is, in effect, a more than $200 billion government subsidy for health care. In the public sector, primarily Medicare, Medicaid and hospital emergency rooms, health care is rationed by long waits, high patient copayment requirements, low payments to doctors that discourage some from serving public patients and limits on payments to hospitals."

Thursday, July 2, 2009

Convert Debt to Equity; and fast!

By: | 10 Jun 2009 | 08:34 AM ET
Text Size

The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.

The main problem is the level of debt, and Taleb compared the authorities' efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation.

"These people failed us, they're going to fail us again," Taleb told "Squawk Box."


"They tell the banks to lend more but have less leverage," and expect people to go out and consume while unemployment is rising, he added.

"The way to restart everything is restructuring, conversion of debt into equity, convince people that debt is not good," Taleb said.

"Do not delay a root canal," he added. "Don't do piecemeal solutions to a problem that is fundamental."

"The solution is there, convert debt to equity. Usually it happens with Chapter 11, let's do it faster, and across the board," Taleb said.