February 21, 2009

Too Many Parasites And Not enough To Eat

Politicians crack me up. When things are going great they seize the moment and do stupid things, (name your favorite) and when things are going poorly they do stupid things and my new favorite on that front is the recently launched mortgage plan. Never mind that there are any number of people out of work and struggling to pay their mortgage, or worse unable to. They might have to sell their homes and if the house was bought recently then the result isn’t fair. But we have to ask ourselves is the alternative of a goofy ill defined plan that hasn’t much of chance succeeding, not because it isn’t well intentioned but because there is no way to reasonably organize the objectives, better?. Trust me on this; I know organization and government is not organized. In fact I’m reminded of a comment made in the 90’s in Barron’s that neatly characterizes what I mean. Alan Abelson was writing an article about the problems that were bringing down Bankers Trust that surrounded unsavory activities in the derivatives market. One casualty of the fiasco was the staid conglomerate Proctor & Gamble whom with the help of the Federal Reserve and the SEC went about suing the rogue commercial bank. Abelson characterized the idea of politicians suing bankers was as being like trying to cure a ‘snake bite’ with ‘spider venom’.

Well although no longer in existence the label stuck with me and it’s never been more appropriate as it is today. Whether it’s the government meeting with the banks or the car companies meeting with the unions all I see are parasites meeting with parasites each looking for something to eat. We need to start thinking as though we are out of money, not that we have an unlimited resource. The government is the last true employer when there is no liquidity in the system, but that’s not what the mortgage bill is accomplishing, nor the spending/stimulus bill. The markets, in spite of the constant attempts to manipulate them are a terrific gauge of consumer health and the guidance of our corporations are an invaluable source of specific expectations. The markets are telling us that future problems are as distinctly destructive as current problems, and well intentioned efforts should be responding to both.

Rule: You can’t change the system you can’t even make it worse"(Isaac Singer).