Government Workers Double-Dipping

The LA Times' Patrick McGreevy exposes public sector double-dipping here.

David Turner retired as a state fire chief in 2004, went back to work for the state firefighting agency two days later and is still employed there. He collected $65,229 in salary in the last fiscal year in addition to a state pension of $105,000.

Paul W. Anderson is a psychiatrist at Napa State Hospital who retired two years ago from the state Department of Mental Health. His pension is $117,840. He also received $104,200 in state wages in the last fiscal year.

"Public service" work now allows some people to earn almost a quarter of a million dollars a year. Astounding, isn't it?

Clip from The Castle (Aussie Film)

1.57 Billion Muslims

Here is an interesting report on the number of Muslims worldwide.

Does this mean I can no longer impress/shock Americans by asking them to name the most populated Muslim country? Sigh. 

The Pew Forum has published lots and lots of good stuff. If you're interested in religious discussion, check them out.

[Editor's note: links have been updated.] 

Awesome Music Video

California Dreamin' Over?

The Guardian has a somber story on California's decline here. Read it and weep. And then do something about it. Here's a short "To-Do" list:

1. Do not pass any more propositions that require taxpayer funds [without accountability]. In the alternative, make sure you read the actual text of any proposed laws/propositions before you vote in favor of them. If you can't understand a proposition's actual language, vote against it. Force legislators to use plain language statutes.

2. Do not allow the state government to get bigger--it's big enough already. If you don't believe me, look here and here.

3. Whenever someone starts talking about California's so-called education crisis, remind them about Proposition 98. Prop 98 requires California to use a large portion of the growth in General Fund revenues for K-14 education. Basically, Prop 98 forces California to use at least a certain percentage of its revenue for education, even if California needs funding for other projects, and even if it constrains funding for other portions of the state's budget. Prop 98 passed (barely) with a 50.7% vote and amended the state Constitution, Article 16, Section 8. Here's subsection (a):

From all state revenues there shall first be set apart the moneys [sic] to be applied by the State for support of the public school system and public institutions of higher education.

Read that Constitutional provision carefully, and don't ever let anyone whine about California education--not only are the kids set, the Constitution puts them first in line for money. And if any government employee--including a teacher--starts whining about pay, remind him/her that state employees' pensions and health care benefits are helping bankrupt California. Side note: it's not like government workers, including teachers, are going to be destitute if we cut their medical benefits and reduce their pensions--CalPERS already has almost $200 billion for state workers' pensions. Yes, that's "billion" with a "b." Guess who paid all that money? If you work in the private sector and paid taxes, you did. Do you have a pension, a relatively safe job, and the possibility of lifetime medical benefits? I'm just sayin'.

4. Stop trying to divide the state by race or immigration status. We're all in this together. No one's going to be happy if we try to deport millions of people, because mass deportation would require us to separate mothers from their American-born kids. It won't happen anyway, so what's the point of bad-mouthing your neighbors? Turn your attention to helping everyone assimilate, regardless of race.

5. Spend your money on local businesses. Use yelp.com to separate the wheat from the chaff. 6. If you're really brave, consider a Treasury Note or a California bond. These investments will hurt you if inflation hits, but some of the bonds are yielding more than average money market rates.

That's all for now. Vaya con dios. We may need divine intervention to help get us out of this mess, but we'll get through it.

Bonus: The LA Times' Patrick McGreevy exposes public sector double-dipping here. Interesting stuff, isn't it?

Muslim Themed T-Shirt or Bumper Sticker?

Idea for a t-shirt to be worn by Muslims:

I'll apologize for 9/11 when white people apologize for Timothy McVeigh, Jews apologize for Bernie Madoff, and Mormons apologize for Glenn Beck.

The point? It's ludicrous to demand someone apologize for an event or person just because someone of his/her religious or racial background happens to be involved.

Debate on Mahmoud Ahmadinejad

In case anyone is interested in my latest attempt at reasoned discourse, check out the comments section of this post.

Excepting Ken's comments, I call it, "The Triumph of Rhetoric over Reason." It's not a pretty day for logic.

Neil Postman, author of Amusing Ourselves to Death, would be both proud and sad that his predictions have come true.

Fascinating Discussion on Iran, the U.S., and Nuclear Weapons

Interesting discussion on Iran, the United States, and aggression.

Thomas More and The Law

Roper: So now you’d give the Devil benefit of law!

More: Yes. What would you do? Cut a great road through the law to get after the Devil?

Roper: I’d cut down every law in England to do that!

More: Oh? And when the last law was down, and the Devil turned round on you–-where would you hide, Roper, the laws all being flat? This country’s planted thick with laws from coast to coast -- man’s laws, not God’s -- and if you cut them down -- and you’re just the man to do it -- d’you really think you could stand upright in the winds that would blow then?

Yes, I’d give the Devil benefit of law, for my own safety’s sake.

–Robert Bolt, A Man For All Seasons

Now, replace the "the Devil" with "terrorist," and think about the Patriot Act's loosening of government/legal restrictions.

Islam and Economics

Not sure how I missed this post about Islam and economics.

Not that surprising, if you ask me. Islamic traders/businessmen seem to have prospered in almost every time period in the world.

Tax Policy

The NYT had an interesting chart that showed--at least in 2003--total tax distribution:

http://graphics7.nytimes.com/images/2003/01/20/business/21DOUBLE.chart.jpg

The breakdown, by percentage of income, was similar, supporting the idea that American tax policy was equitable.

If anyone finds a similar chart for 2008, please leave a comment with a link.

Satire: Healthcare Reform

Awesome post on healthcare reform here. My fav?

The government is incapable of running anything efficiently, and if allowed to offer a health care option, will run health care so efficiently that it will put private insurers out of business.

And I thought satire was dead.

Franklin Templeton Limited Duration Fund's Shareholder Meeting (2009)

I attended Franklin Templeton Limited Duration Income Trust’s (FTF) annual shareholder meeting on September 24, 2009. This meeting was held by the specific fund, not Franklin Templeton (BEN) itself.

I was the only shareholder attending. No refreshments were available. There was no prepared informal presentation.

Four other persons, all from the mutual fund, attended the meeting. Glenn Voyles (Portfolio Manager); Helen Dong (Inspector of Elections); VP Karen Skidmore; and Sr. Corporate Counsel Jason Venner. I was most impressed with Mr. Venner. After the meeting’s formal portion concluded, I asked several questions.

Some background is necessary before explaining my first question. FTF is a closed-end mutual fund. Such funds typically trade at either discounts or premiums due to several factors, including potential liquidity issues. More specifically, unlike open-ended mutual funds, buyers may only purchase shares from existing owners. I asked about FTF’s approximately 8% discount to its net asset value (NAV). I also asked whether FTF’s approximately 20% Fannie Mae and Freddie Mac bond holdings might be the reason for the discount.

Mr. Voyles said there was “no fundamental reason for” the discount. He said during the last fiscal year, there were “more sellers than buyers,” meaning the fund's price was affected by supply/demand issues. He did not believe Fannie Mae and Freddie Mac had anything to do with the discount. He indicated he did not believe the fund would reduce its exposure to Fannie Mae or Freddie Mac.

Mr. Voyles also talked about “mortgage dollar rolls.” I’ve never encountered this term before. According to FTF’s 10K, page 30, mortgage dollar rolls are “agreements between the Fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date...The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.” Did you get that? I didn’t, so I asked what they were.

Mr. Voyles said that these rolls were a form of leverage. He said that before investing in these rolls, the Fund’s leverage was in the form of auction rate preferred shares. He explained that the rolls were a form of leverage backed by mortgage-backed securities and increased the fund’s liquidity. However, he also said he could not tell me exactly how it works because he was involved in a different research department. (Mr. Voyles is on the high yield bond team, not the mortgage or leveraged loan team.) Mr. Venner was kind enough to show me the exact page in the 10K that defined the term.

When I asked about the auction rate securities (ARS) market, Mr. Voyles said Franklin Templeton was not experiencing any problems. The problem, he said, was that the secondary market (for ARS) has frozen.

Interestingly enough, Mr. Voyles said the “use of leverage has helped returns” by approximately 5 to 6 percentage points (from June 2008 to June 2009). FTF currently holds approximately 100 million dollars in ARS, down from 190 million dollars.

At this point, VP Karen Skidmore seemed concerned I was asking so many questions and told me I could ask only one more question.

I asked why anyone should choose Franklin Templeton over Vanguard or another investment firm. Mr. Voyles said that FTF had a large, experienced team, and its “fundamental research” was outstanding.

I don’t think FTF was prepared to have shareholders attend their annual meeting. I was pleased FTF’s senior counsel was able to show me the definition of mortgage dollar rolls, but I was concerned that even after the meeting, I still didn’t understand how FTF was using mortgage dollar rolls as leverage. My investor "spidey-sense" started going off when no one seemed to be able to explain exactly what the heck these things were.

Investors interested in preferred shares ETFs may also consider PGF, PFF, or PSK, but these investments seem heavily supported by financial companies. In addition, it is unclear whether these ETFs have been paying out dividends consistently.

Overall, I wish FTF was more prepared for its annual meeting. Other than Mr. Venner, I was unimpressed with everyone else at the meeting.

Disclosures: I own an insignificant number of FTF shares. I sent this article to FTF's corporate counsel prior to publication but did not hear back from him.

Wise Words from Neil Postman

From Neil Postman's Amusing Ourselves to Death: 

George Orwell feared those who would deprive us of information. Aldous Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. 

I love the centrifugal bumblepuppy, even though I have no idea what it means. I highly recommend Amusing Ourselves to Death. 

Bonus: "The law is what legislators and judges have written. In our culture, lawyers do not have to be wise; they need to be well briefed." -- Neil Postman 

Bonus II: hat tip to Popehat's Patrick for finding THIS incredible visual graphic/comic of the Huxley-Orwell divide.

Riots in Pittsburgh

Here is sgtrob88 commenting on a youtube video of police tear-gassing students at the University of Pittsburgh:

I would imagine 75% or more of these kids are liberal, yet going through this will probably not dissuade any of them of the notion that over-sized government is BAD. Like their hippy parents they will continue to allow government to increase in size and power all in the name of "caring for the little guy," while ignoring their own experiences in governmental abuse. While corporations are no saints, government is the one able to beat your *ss and get away with it.

Makes sense to me, except we need to differentiate between government actions that have the power to harm citizens (police, unnecessary laws, etc.) and government actions that can protect the public (public defenders, VA hospitals, etc.). Of course, since few people will agree on which government actions will either harm or protect the public, it seems appropriate to have a bias against broad laws or power of any kind.

Reason #15,473 Not to Go into Law: You Might Become a Real Prostitute

Reason number 15,473 not to go to law school: if you don't pass the bar, you might end up becoming a high-priced escort. See here for the story of a Stanford Law graduate who ran a high-priced call girl service.

If the link doesn't work, try googling "Cristina Warthen," "Brazil," and "Stanford Law." From the SJ Merc article:

Warthen gained notoriety when she was busted as a jet-setting call girl who sold her services to pay off her Stanford Law School debts. She got her law degree from Stanford in May 2001.

I wonder if she ever met Eliot Spitzer...

Movies and Special Effects

Hat tip to CollegeHumor.

Guess Who?

Guess who made the following comment:

You’ve got to cut spending, you’ve got to balance the budget, you’ve got to stop fighting these wars, you’ve got to bring our troops home, you’ve got to quit expanding the welfare state here at home...

Hint: it's one of the few honest members of Congress.

Unusual Tax Deduction

No joke--a lawyer tries to deduct expenses relating to prostitutes and pornography:

http://taxprof.typepad.com/taxprof_blog/2009/09/tax-court-denies-.html

The Tax Court shoots down his argument, of course.

Educational Discrimination: Race Baiting?

I just had a major argument with someone about educational benefits. It got so bad, her boyfriend was ready to fight me inside a Marie Callender's.

Apparently, this woman's friend had complained that a school district denied her white child benefits because of his race. This woman then said her friend raised this issue at a public school meeting and was "brave" for doing so. This woman specifically said that "only minorities could apply for these benefits," which riled me up. (Later, in an online discussion, she wrote, "my friend's child was not allowed to obtain government assistance because an administrator determined that the program was for minority groups only.")

I said several times that the government could not deny public educational benefits to anyone based on race. She reiterated that only minorities could apply for these benefits. After several minutes of heated back-and-forth discussions, I heard her say the law and reality were two different things. In other words, the law itself might not discriminate against white kids, but in reality, the school district wasn't allowing white kids to apply for certain benefits. (I guess what she meant to say earlier was, "In practice, school districts allow only minority children to apply for certain benefits.") I asked for the name of this anti-white program. She couldn't tell me the name of the program.

Then, some other people at the table jumped in. One person said teachers were giving undeserving minorities passing grades so their schools could get funding. I said it sounded like teachers were passing stupid people (of all races) to get funding. He agreed. I said if stupid people are being passed, we're not necessarily talking about minorities--we're talking about stupid people. He clarified that a certain percentage of minority students had to be passed each year to get funding. Once again, no one was able to cite a specific law or program.

Afterwards, I thought about "No Child Left Behind." The law apparently rewards school districts for retaining children from disadvantaged groups, including disabled kids and economically disadvantaged kids. I suppose a teacher who wanted to game the system would pass an ever-increasing percentage of black kids each year. My friend's husband probably meant to say that teachers are unfairly promoting stupid kids who happen to be black, not black kids because they are black. Maybe it's a subtle difference, but it's an important difference. I didn't see any federal funding tied to ensuring a certain number of minority kids pass a particular grade. (If I am wrong, I hope someone will leave a comment citing a U.S.C. or C.F.R. section.)

Someone else then mentioned a school program that allows black kids from a poor section of town to attend an affluent Atherton, California school. The problem? These black students live outside Atheron's mainly white and rich county, so their parents don't pay the same amount of local property taxes as the white Atherton parents. In essence, it seems these black kids are getting a free ride, i.e., a special benefit because they are black--or at least that was the insinuation.

After a few questions, I found out these black kids live in a county (maybe an unincorporated area?) without a school. Because they don't have a school in their county, the nearby Atherton school allowed them to attend. I pointed out that these kids weren't getting a free ride because of their race--they had to go to school, and their county didn't have a school. It sounded like someone saw a bus dropping off a bunch of non-white kids at the mainly white Atherton school district and assumed there was a pro-minority government program. In the alternative, perhaps there was a busing program to help desegregate various schools. In these programs, both white kids and minority children may attend schools in other districts. [See below for more information on this Atherton busing program. The Tinsley Act/Program, aka VTP, does create more opportunities for minorities; in fact, the district's own webpage specifies that "Students of Color living in the Ravenswood City School District entering kindergarten, first, or second grade" are eligible. Minority students, aka "students of color," are assigned limited placements through a lottery system; however, white children from the better-performing Atherton schools may apply to attend the poorer-performing Ravenwood School District.]

If anyone knows of any government program that denies benefits to anyone because of race, s/he should contact this legal foundation (Pacific Legal Foundation). In America, the government cannot legally prevent anyone from receiving educational benefits because of their race. See here for a relevant U.S. Supreme Court decision, and my analysis of the decision here.

In six years of legal practice, I have seen legitimate complaints about anti-white government programs only in two instances: allegedly improper promotions or unqualified hires in government jobs, especially in police departments. If, however, you believe the government is denying educational benefits to white children because of their race, you should know that such programs may be illegal. Again, see here.

I find this notion of anti-white government programs ludicrous. I mean, an entire swath of teachers, parents, lawyers, boards, PTAs, and administrators would have to knowingly violate the law (or stay silent) for schools to deny "special" benefits to white children because they are white. We're talking about tens of thousands of people involved in a de facto conspiracy to violate the law and prevent white children from applying for public benefits.

Now, there may be special programs to assimilate Spanish-speaking children in schools, but such programs are not based on race. For example, an Argentinian immigrant of German ancestry could benefit from such a language-assimilation program. In addition, I favor opening the desegregation program to all poor children, including white children, from East Palo Alto.

Once again, to the extent there are programs that assign special benefits to children because of their non-white race, you should contact the Pacific Legal Foundation or the Cato Institute. You may also contact me. I am very interested in learning whether widespread anti-white discrimination exists in the administration of educational benefits in California.

Anyway, whew! Not what I expected on a Friday night. In the future, I hope all children and adults study Occam's razor--the idea that in most cases, the simplest explanation is the right one.

Update: I researched the law extensively to see whether I could find something on point. Here is what I found: see 20 USC 1703: "No State shall deny equal educational opportunity to an individual on account of his or her race, color, sex, or national origin..." After Brown v. Board of Education, this country has taken numerous steps to ensure that all children have equal access to educational benefits.

I thought about the idea that some teachers were passing kids who didn't deserve to pass. I looked up the No Child Left Behind law again. It doesn't force teachers to pass kids of any race; however, it does establish vague goals, like "closing the achievement gap between high- and low- performing children, especially the achievement gaps between minority and nonminority students, and between disadvantaged children and their more advantaged peers." It appears to authorize programs for lessening the achievement gap, but it is unclear who is funding these programs.

In one section, however, NCLB establishes a specific grant for "students with disabilities, ethnic minority students, and students with migrant parents" for the sole purpose of visiting Washington, D.C. (It looks like more of a pro-tourist grant than a race-based grant.)

There are other sections of NCLB that focus on children with disabilities and "ethnic minority groups," but every single provision provides a reward for adult teachers and government workers of *any* race if they improve "retention" of low performing kids, including minority kids. I did not see any benefits that were restricted to minorities only. All educational programs must be open to all students, but schools appear to be rewarded for boosting the academic performance of ethnic minorities. In any case, it is unclear to me how a white student is negatively affected if a minority student unfairly passes a grade. If anything, the undeserved promotion probably hurts the minority student.

Outside the educational sphere, I did see some government programs that favored minorities over non-minorities. For example, certain government contracts are open only to minorities--see 10 U.S.C. § 2323. However, within the educational sphere, it appears that teachers and administrators of *all races* may get more school funding if they promote academic achievement for economically disadvantaged children, including minorities and disabled children.

This country has racial issues and a major economic divide, but playing up "white victimization" isn't the way to solve anything. Just my humble opinion.

Update: I started looking at California state laws, too. One Education Code section is interesting:

54402. For purposes of this chapter, a "disadvantaged minor" is a minor who is potentially academically able but scholastically underachieving, and must compensate for inability to profit from the normal educational program. He is a minor who...(c) Is, because of home and community environment, subject to such language, cultural, economic, and like disadvantages as will make improbable his completion of the regular program leading to graduation without special efforts on the part of school authorities...

Sections 54403 and 54405 allow the State Board of Equalization to establish K-12 programs to assist "disadvantaged" minors. The word "race" isn't used anywhere, so the law does not prevent linguistically slow or culturally disadvantaged white kids from participating in the programs; however, it is clear that many minorities will participate in these programs. The reason many minorities will participate in these programs is because their parents, unlike domestic-born kids of any race, probably have no idea how to help their kids with homework. If your parents don't speak English and haven't been to school here, then obviously, they will have difficulty helping their kids understand their homework.

I realize single or poor white mothers may also lack the time to help their children with their homework. Under the law, no school may deny disadvantaged or low performing white children entry into these remedial/extra programs.

By the way, other sections authorize programs to assist "migrant" workers, but these are remedial programs and are not based on race. For example, Swedish kids who came to California in September and knew they wouldn't stay a long time would be able to participate in these programs. Fishing migrants and many other categories of migrant workers are included, not just agricultural migrants.

Update: I just thought of something that might clarify the discussion. Some people might argue ESL and other language-assimilation programs are anti-white b/c they sap resources from schools that would otherwise go to native-born kids, many of whom happen to be white. I can see why some people think this way; after all, 99% of the kids in ESL programs are probably non-white. Perhaps if you walk into a class with 99% minorities, it's easier to believe that your white child, who isn't getting special language classes, is somehow harmed (even if your white child is taking advanced English).

In reality, language-assimilation programs are not race-based; for example, German immigrants who don't speak fluent English would be allowed to enter ESL programs. It just so happens that a lot of our recent immigration has been from so-called non-white countries. In the future, if most of our immigration comes from Sweden, and we spend lots of money on ESL programs, I have a hard time believing that anyone would say such "special" programs are anti-white or deny benefits to white children.

I already mentioned language-assimilation programs earlier, but I'm not sure if I was clear. I really don't see any evidence that schools discriminate against white kids because they are white. I rest my case on the inability of anyone to specify a single specific program where schools deny benefits to white kids (who, by the way, don't need remedial English courses). I do understand that someone may argue that desegregation or busing programs discriminate against white children to the extent white children cannot apply for these programs.

I'd appreciate seeing some specific evidence of harm to white children as a result of desegregation programs. Without specific evidence, it is hard to have a productive discussion. For example, at the dinner, I felt like Richard Dawkins, trying to refute creationists--no matter how many times I demanded proof, someone expected me to accept allegations of anti-white K-12 discrimination on faith. Sigh.

Update: here is a friend/teacher, who sheds some more light about the Atherton issue:

I am glad that someone is taking the time to dispel the many misconceptions people have about society and education. You are correct about NCLB. It is essentially an unfunded federal mandate that actually has nothing to do with grades. It has to do with scores on standardized tests but has no bearing on passing or failing classes or moving on to the next grade.

Also, there is a desegregation program that allows East Palo Alto minorities to attend Palo Alto, Atherton, Mountain View schools (some others too). Our district (Palo Alto Unified) does bus in minority kids from East Palo Alto every day in what we call the Voluntary Transfer Program which is only available to minority students even though they have a district of their own (Ravenswood). It was a court mandated ruling from the 70's called the Tinsley Act. You should look into it. It was designed to provide equal opportunity to minority kids from East Palo Alto in the form of better teachers, books, etc. I do think that white children can apply even though there aren't many in East Palo Alto.

Fascinating. See here, here, and here for more on the Tinsley Act. The district's own page states, "Students of Color living in the Ravenswood City School District entering kindergarten, first, or second grade" are eligible for the program. At the same time, California's Constitution allows voluntary desegregation programs. See Article I, Section 7:

Nothing herein shall prohibit the governing board of a school district from
voluntarily continuing or commencing a school integration plan after the effective
date of this subdivision as amended.

There is also controversy about whether the Atherton school is subsidizing the students from the other side of town. For example, one person commented, "The [Palo Alto/Atherton] district gets $3,500 per student in return. But Palo Alto spends approximately $10,300 per student, so it is 'subsidizing' these students by about $6,800 apiece for a total of $3.7 million a year." If anyone has more information about the Tinsley Program, please leave a comment.

Bonus: according to John Barton, while "California is ranked near the bottom in student test scores, the state is 25th in per-pupil spending for the current K-12 operations, according to the National Center for Education Statistics, part of the U.S. Department of Education. It is No. 1 in teacher salaries nationwide -- the U.S. average is $45,810 while the California average is $56,283 (2002-03)."

Symantec's Annual Shareholder Meeting (2009)

I attended Symantec’s annual shareholder meeting on September 23, 2009. The company offered shareholders a goodies bag that included a complimentary copy of Norton Online Backup; a zip-up notebook; a nice pen; and a small padlock (symbolizing Symantec’s security focus). Approximately thirty attendees were treated to coffee, juice, and pastries.

I was looking forward to this meeting for two reasons: one, the Investor Suffrage Movement asked me to move Proposal No. 3 on behalf of another shareholder; and two, this would be new CEO Enrique Salem’s first year handling the annual meeting.

Chairman and former CEO John Thompson opened the meeting and introduced various Board and executive team members. After Mr. Thompson was done, Executive VP and General Counsel Scott Taylor allowed me to move Proposal No. 3 (sponsoring shareholder: Kenneth Steiner) and to provide a short explanation of the proposal. I’ve been to many shareholder meetings, but this was my first time moving a proposal. I delivered a short summary about the proposal and then sat down.

One quick aside: I attended Symantec’s meeting last year and was very impressed with then-CEO John Thompson. I was looking forward to seeing him again this year, but had forgotten that corporations tend to despise outside shareholder proposals. Responding to such proposals takes up attorney time and internal resources. The usual corporate attitude is that if shareholders don’t like the way the executives run the company, they can sell their shares. So perhaps I should not have been surprised that while I was reading the presentation, Chairman John Thompson, seated only several feet from me, was staring at me with a “Make My Day” expression. (To his credit, Mr. Salem recognized me from last year and skipped the stare-down.) Thankfully, after the meeting, Mr. Thompson was his usual charismatic self, entertaining various attendees with some stories. Mr. Thompson appears to be in great shape and has lost some weight since last year.

After I moved the proposal and delivered the short summary, Mr. Taylor closed the polls and announced preliminary results. Proposal No. 3 passed. After Symantec takes additional steps--such as amending its bylaws--the threshold for calling special meetings will be 10% ownership, down from 25% ownership.

Mr. Taylor then introduced President and CEO Salem, who delivered a brief presentation about Symantec’s accomplishments. I’ve listed what I consider to be the most interesting information below:

1. 120 million consumers use Symantec’s software.

2. Symantec’s customer base is 30% consumer, 70% enterprise.

3. Symantec wants to “commoditize infrastructure,” which means driving costs out of the environment (I asked Mr. Salem to clarify this term after the meeting. He gave me an example of a consumer choosing between two hard drives--Symantec wants to give the consumer the same capabilities in each product so the consumer can choose based on price. For more information, see page 3 of the Annual Report, under “Enable our customers to simplify their heterogeneous environments and reduce costs...”)

4. Symantec is growing its data loss prevention and “online backup” business. Symantec anticipates a lot of growth from its “online backup” business.

5. Symantec’s growth comes from both “organic innovation and acquisitions.” For example, Symantec is testing “reputation-based” analytics (i.e., should this software run on my computer?) and has an impressive R&D budget. (Note: Symantec's reputation-based analytics feature is live in Norton's 2010 products.)

After the informal presentation, Mr. Salem opened the meeting to questions. A shareholder made several comments about Proposal No. 3, which he opposed. He said that labor unions hated Mr. Robert Miller (who was singled out several times in the proposal) because he was a tough CEO. He said American corporations are being “denigrated” by activists.

Mr. Salem, like most corporate executives, is no fan of outside shareholder proposals. He could have taken the bait and criticized the proposal; instead, he showed admirable diplomatic skills. He indicated he would work with Symantec’s largest shareholders, and he was committed to shareholder success. I immediately realized Symantec had chosen a CEO with excellent PR skills, which is important for any service-oriented company.

Another shareholder, Tony Mazzapelle, questioned a large goodwill writedown. Mr. Salem acknowledged the unusually large writedown of approximately $7.4 billion and explained that at one point, the dislocation of the stock market had caused Symantec’s goodwill to be valued more than the corporation itself. The company recognized the issue and complied with SEC rules to resolve the matter. He also clarified that the large goodwill was the result of several acquisitions, not just one.

Mr. Mazzapelle then raised an issue dear to my heart, which is non-GAAP vs. GAAP accounting. Personally, I hate non-GAAP results. Even though it’s legal and common to use them, non-GAAP numbers allow accountants too much leeway. Here, for example, using non-GAAP numbers allowed Symantec to report operating income of approximately $1.88 billion for Fiscal Year 2009. During the same time period, however, using GAAP, Symantec reported an operating loss of approximately $6.5 billion. Slight difference, no?

Mr. Mazzapelle rightfully complained that publishing both sets of numbers was confusing, and he asked whether the company would continue to publish both sets of numbers. Mr. Salem responded that Symantec would be using both GAAP and non-GAAP methodologies in the future. He said if shareholders wanted a clear vision of the company’s finances, they need only to review Symantec’s cash flow, which is approximately $1.5 billion annually. His response left even a skeptic like me satisfied.

Another shareholder questioned Symantec’s marketing costs. Mr. Salem indicated the company was aware of the issue and was focused on growth (which naturally entails significant marketing costs).

Was Symantec gaining or losing market share against McAfee (MFE)? Mr. Salem said Symantec was gaining in the large enterprise segment, but not in the small business segment. He also said, the “quality of our products has never been better.”

I asked my usual question: what is Symantec’s competitive advantage in the marketplace? Mr. Salem said that Symantec’s software could run on almost any platform (Linux, etc.) and protected consumers “against the widest range of threats.”

Overall, I was very pleased with Mr. Salem’s demeanor, knowledge, and delivery. Prior to the meeting, I was concerned that after having a CEO as charismatic as Mr. Thompson, Symantec’s next CEO would have difficulty measuring up. My concerns were clearly misplaced.

As I mentioned earlier, this is my second year attending a Symantec annual meeting. Once again, Symantec ran its annual meeting professionally. It deserves kudos for delivering a pleasing shareholder experience. Its ability to run a great meeting is especially notable because its local competitor, McAfee, doesn’t seem to emphasize its annual meetings. For example, in recent years, McAfee (MFE) hasn’t bothered with an informal slide presentation. To make matters worse, when I last attended McAfee’s annual meeting, shareholder relations staff treated me like an intruder (I appeared to be the only non-employee shareholder there, which might have bothered them). Although McAfee's stock has done better than Symantec's recently, once Symantec digests its massive (and perhaps ill-timed) acquisitions, it may outperform McAfee. In the meantime, long-term, patient shareholders may want to consider buying Symantec stock.

Disclosure: I own an insignificant number of SYMC shares. If I do add shares, I expect to hold them for several years. Also, I provided a copy of this article to Symantec prior to publication. Consequently, I incorporated some minor changes in my sole discretion. Almost all the changes related to correcting numerical values, such as changing $7.7 billion to $7.4 billion (I originally wrote $7.7 billion because that's the number I heard the shareholder say).

Why Newspapers Are Dead

Barry Ritholtz beautifully sums up the declining newspaper business:

I would argue that mainstream newspapers haven’t just lost readers because of the Internet as an abstract new medium, but that they lost readers because they became – with some exceptions – nothing but official stenographers for the powers-that-be. No wonder people have lost all faith in them.

Years from now, anyone who wants to know why newspapers died need only review the paragraph above. Also, I'm not sure why Barry used the plural form of "exceptions"--he probably meant the New York Times.

John Mauldin Interview

Just a short post today.

Here is a great interview with John Mauldin. The interviewer is Wall St Cheat Sheet's Damien Hoffman. More from Mauldin here.

Will Ferrell on Health Care Reform

Protect Insurance Companies PSA from Will Ferrell

Magma Design's Shareholder Meeting (2009)

I attended Magma Design Automation Inc.’s (LAVA) shareholder meeting on September 17, 2009. The company offered attending shareholders coffee, water, untoasted bagels with cream cheese, and assorted pastries. There was no prepared informal presentation.

CEO and Chairman Rajeev Madhavan handled most of the meeting. CFO Peter Teshima also answered several questions. Both CEO Madhavan and CFO Teshima responded to my questions with energy and confidence. I asked several tough questions, and I received good answers. Some quick points:

1. Some of the information provided in the 10K is now outdated. Although Magma’s 10K states, “There is substantial doubt about our ability to continue as a going concern,” (page 11) Magma recently secured financing and will be able to satisfy its May 2010 bond obligations. According to statements made at the meeting, management waived the original 70% voting requirement (page 59). About 54% of the 2010 bondholders participated in the 2010 note exchange offer. This new development allows Magma to avoid distributing all of its cash to the May 2010 creditors.

2. Magma derives a significant percentage of its revenue from outside North America. See 10K, page 24: “we generated 41% of our total revenue from sales outside North America.” Consequently, Magma’s future revenues may not entirely depend on the American consumer.

3. Magma may have patent infringement issues. See 10K, page 27: We believe the patent portfolios of our competitors are far larger than ours, and this may increase the risk that they may sue us for patent infringement...” (To be fair, many tech companies face the possibility of patent infringement litigation.)

4. Other bloggers have said they expect Cadence (CDNS) to buy out or merge with Magma; however, CEO Madhavan seemed mildly upset that his company wasn’t getting the same respect as Cadence and was somewhat dismissive of Cadence’s financial position. In contrast, he had high praise for Synopsys, Inc. (SNPS).

According to a Magma company employee, CEO Madhavan seems to admire Synopsys’ financial profile due to its 90/10 revenue model, where 90 percent of revenue during a given quarter stems from backlog and only 10 percent from same-period deals. On the other hand, according to the same internal Magma source, Cadence and Mentor Graphics (MENT) have not yet achieved this preferred 90/10 revenue model (Magma points out that it achieved this 90/10 ratio two quarters ago). To be clear, CEO Madhavan did not express an opinion of a possible or a preferred merger or acquisition scenario.

I asked CEO Madhavan my usual question: “What is your competitive advantage in the marketplace?” CEO Madhavan answered that Magma software offered a “value proposition.” Using Magma’s software, semiconductor companies could save one million dollars in the process of designing a single chip. My understanding is that Magma’s software streamlines various aspects of chip design, which allows semiconductor companies, especially analog chip companies like Maxim (MXIM) and Linear Tech (LLTC), to use fewer engineers. Obviously, fewer engineers means less overhead for a semiconductor company, and less overhead means more financial flexibility. That’s the short version of Magma’s purported advantage. The following is the long version, based on my conversation with an outside engineer:

Designing chips is expensive because designs usually go through several modifications before they actually work. Engineers first design a circuit on a computer (called schematics). Then, they run modeling/simulations to make sure the circuit runs properly on the computer. After computer testing, the engineers transfer their design from the software/abstract to a physical layout for fabrication. The final step is sending the layout to the fab to make the actual chip. However, even after the manufacturer/fab creates the chip, work is not done. Engineers still have to test the chip in their lab in real-life scenarios. Sometimes the chip doesn’t work to the proper performance specs. This gap in expected performance requires the engineers to go back and re-work the design. The company must go through all the design stages again prior to sending a new, improved design to the fab. Unfortunately, every iteration (i.e., modifying the schematics) costs the company money. Depending on the skill level of their engineers, a company may have to fund several more iterations. Magma is saying that its software reduces the number of iterations and therefore saves chip design companies money and resources.

I questioned the CFO’s reliance on non-GAAP accounting numbers, citing pro forma accounting gimmicks used by Enron. CFO Teshima countered by saying that only “one or two acquisitions were the primary difference between GAAP and non-GAAP numbers.” CEO Madhavan left the meeting saying that Magma was the “new kid on the block,” implying that it wasn’t getting the respect it deserved.

I enjoyed the energy Magma’s executive team brought to the table. The CEO seemed unafraid of his competitors and prepared to compete. Magma’s current share price, which is under two dollars, reflects the company’s recent financial problems. Magma indicates that such financial problems are behind it, and it is confident about the future. In my opinion, Magma has several high risk factors, but also the potential for major upside. Personally, I am going to wait until Magma’s balance sheet improves before making any major purchases, but I will be following the company more closely.

Disclosures: I own an insignificant number of LAVA shares. A Magma employee also had an opportunity to review this post prior to publication and submitted some comments to me. I incorporated a few of his comments, mainly relating to the 90/10 revenue model and paragraph 1, which starts, "Some of the information provided..."

Liberal Judges vs. Conservative Judges

I was thinking this morning about courts and politics. I've discovered I tend to get along very well with former military servicemembers and police officers. One of my best friends is a JAG (from ultra-conservative Orange County, no less). Another lawyer I respect is also a JAG. While I don't know many police officers, I've found most of them to be hard workers.

As an anti-war libertarian, I find it strange that I can easily socialize with people on opposite ends of the philosophical spectrum. (At least now I understand Ron Paul's comment that individual military servicemembers, as a group, contributed more to his presidential campaign than to any other candidate's.) I did some thinking, and I realized I get along with liberals because I favor change and diversity, and I get along with conservatives because I see the limits of the law in creating any real change. In other words, I am hopeful enough to get along with the liberals, but cynical enough to see the inefficacy of most liberal programs.

As attorneys, there comes a period of time when we get enough experience to see the system as it is, not as we want it to be. Think of the famous Gandhi quote--"Be the change you want to see in the world"--but minus the idealism. After we clean the pixie dust from our eyes, young lawyers look at our student loans and get back to work. (The potential for starvation helps clear the mind rather quickly.) We realize, sadly, that the law doesn't matter so much as the audience, and the only audience that much of the time is the judge, who gets selected randomly. Is it strange to think that the law relies so much on randomness? I assure you, at some point, you get over it, or you go insane. As fans of Trainspotting will appreciate, I choose sanity.

I have also noticed that conservatives tend to work harder. For example, I've noticed that judges who were former military servicemembers work the hardest. Even politicians who used to be military, like Chuck Reed, are known for working hard. Servicemen don't seem to lose their work ethic, and they bring it with them to every job, whether it's politics or the bench. Thus, while many government jobs are filled with "lifers" resistant to change and who do the absolute minimum required, the military is probably the one branch of government that demands you work hard, no exceptions allowed. As a result, when servicemembers finish their military commitment, they bring the same "hardcore" attitude to their civilian careers. In my experience, judges who are ex-military usually read the court filings and are well-prepared for court hearings, even if they don't reach a fair result or go overboard. Many other judges are quite content to show up and let their law clerks do most or all of the work, but that lax attitude doesn't seem to afflict most ex-military members.

Police officers tend to function like military servicemembers. They're also hardcore, and they respect hard work. (By the way, the police officers I've met usually hate Democrats, because they think Democrats are naive in thinking their policies or laws would have any effect on a child molester or a drug dealer trying to make a buck.)

So why do I tend to get along with cops and military servicemembers, even though I am anti-war and I favor more police oversight? I guess it's because I'm hardcore, too. I'm fond of saying, "I do what I say, I say what I mean." As I get older (cue Winston Churchill and his comment about young hearts and old brains), I've noticed that many self-proclaimed liberals tend to be big thinkers and big talkers but lack the capacity for actual sacrifice. For example, I recently saw a liberal activist with a T-shirt that said, "Anti-War." Well, that's great, but how does buying yourself a T-shirt help some little kid in Iraq? Personally, I would take that T-shirt money and donate it to kiva.org, the Red Cross, or some other organization. That's the problem I've seen with many liberals--they have strong views, but they refuse to sacrifice anything themselves. It's usually someone else who has to do the sacrificing--either the rich, the small business owner, etc.

As for liberal judges, I've found many of them tend to have a poor work ethic. While the conservative judges are at home reading the papers for court the next day, the liberal judges tend to be teaching law classes, giving seminars, publishing some legal treatise--i.e., something that allows them to impart their knowledge to the public.

Don't get me wrong--I love legal seminars, especially the ones that include judges. But other than one judge, who's in federal court, I don't tend to see liberal-minded judges prepared with insightful questions to ask. One time, I provided a liberal-minded judge with extensive legislative history relating to a law. I marked in bold and 14 point font all the relevant sections of the history that showed the judge that his law clerk's statutory interpretation was wrong. The judge practically freaked out (I could almost hear him thinking, "You don't expect me to read all this, do you?"), and--in my subjective opinion--may or may not have ignored the legislature's intent.

Maybe I'm a terrible oral advocate, but I've left court several times feeling like my hard work and research were a waste of my time and my client's time. Too often, there are no tentative rulings to focus the oral argument, or the judge does not ask me a single question. As a result, I've become critical of judges who rely solely on their law clerks, even when their clerks do excellent work. As far as I'm concerned, judges who don't personally read the legal briefs are stealing from taxpayers. It seems no different than a lawyer who bills for time never worked. A lawyer who tried to bill for unworked hours would be fired, so why should a judge be treated any differently? After all, judges are paid for their time and expertise, just like lawyers. Shouldn't they read the legal briefs, even if they have research attorneys?

Before addressing some differences between conservative and liberal judges, it's important to note that I am generalizing--there are liberal judges who are hard-working, and conservative judges who appreciate nuance. At the same time, I have noticed some distinct patterns among liberal judges and conservative judges. In my experience, conservative judges tend to read the papers; either ask relevant questions or none at all (think Clarence Thomas); tend to work hard; tend to avoid legal seminars and other outside legal activities; and have a well-run, efficient courtroom (i.e., if someone starts repeating arguments already stated in the papers, they get cut off).

The downside to conservative judges is when they're good, they're great, but when they're bad, they're the Devil's spawn. Really horrible conservative judges, for example, think they're the only thing standing between anarchy and civilized society. As a result, if the bad conservative judge hates your case, you and your clients will get sanctioned or will suffer somehow. Another characteristic of terrible conservative judges is that if you don't suck up to them, you will pay for it. The legal system has many technicalities, and a bad conservative judge can make your trial or legal motion Kafkaesque if he feels like you're not giving him appropriate respect; in the alternative, he may just dismiss your case, knowing that your client probably doesn't have the resources to appeal.

In contrast, liberal judges tend not to sanction parties, even when they richly deserve it. Say what you want about "sympathetic" judges, but when it comes to avoiding embarrassing scenarios, I'm putting my money on the liberal judge. At the same time, generally speaking, liberal judges tend to believe their compassion and wisdom absolves them from reading every paper that is filed. Perhaps that is a reasonable perspective. After all, most law/research clerks are quite good, and they summarize the legal papers very well. The downside to relying on law clerks is that it takes a long time for a new lawyer to get any respect from some liberal judges. If a new lawyer is good, but the judge never reads his papers, the new lawyer will never get any respect.

When I first started out, I could tell who read my legal briefs by the level of respect I got from the bench. Typically, due to my youthful appearance, if a judge hadn't read my legal briefs, he would act like he was doing me a favor when I won. In contrast, the judges who had read the papers knew I wrote well, and they would treat me no differently than anyone else. Over time, I realized that most of the judges who read my papers happened to be more conservative. I really enjoyed not being treated differently just because I didn't have 40 years of experience. After all, if your papers are well-written, and you cited the proper case law, why should the number of years you've had a bar card matter?

Again, I realize this post relies on generalizations, but I hope you've enjoyed it. One last comment: if you get the chance, vote for female judges. There aren't enough of them in court, and, just like in real life, the more women around, the less likely it is that the men do crazy things. According to the Federal Judicial Center's History Office, only 25% of Article III judges are female, and only 1% identify themselves as Asian Americans. (Source: Shawna Wilson, Oct 2009, Young Lawyer.) I don't know the exact state court statistics, but a similar gender imbalance probably exists in California state courts.

P.S. I just realized a shorthand way to summarize my entire post. Have you seen the early episodes of the TV series, Scrubs? If so, think of Bob Kelso as the average liberal judge--the one who doesn't practice medicine and lets other people do much of the work--and think of Dr. Cox as the average conservative judge--the one who looks like the a**hole, but who's really the main person holding up the place. I'd probably play Dr. Dorian, who, "despite his numerous flaws, quirks, and personal insecurities," is shown to be a very competent doctor. Well, at least that's what Wikipedia says.

P.P.S. Make sure you read Ken's comment. Overall, he may be right that there are only two categories of judges: judges who require strict, slavish compliance with evidentiary rules, and judges who don't. But Ken's comment also tells you that judges have wide discretion in interpreting the evidence rules, which should tell you that the rules are too convoluted. The more convoluted the law, the more the legislature is allowing judges to potentially decide outcomes based on individual preferences.

Let me give you two examples of a judge administering evidence rules differently. In one trial, opposing counsel had numerous emails that hadn't been verified, i.e., no custodian of records appeared, no declaration, just a bunch of emails sent by some employees. No one was disputing that the employees had sent the emails. Opposing counsel waited the end of his examination before asking the court to admit the twenty or so emails into evidence. The judge, knowing my objections would require tedious parsing of the emails, glared at me, almost daring me to tick him off by making an objection. This was a bench trial (no jury), so I didn't object to the emails. The judge admitted the emails into evidence. The judge glaring at me won't show up anywhere in the record or transcript.

In another case, I had numerous emails to introduce. All emails were given to me by the corporate defendant. All the people who had sent the emails used corporate email accounts. No one was disputing that the plaintiff had sent these emails. A company employee admitted on the stand that no one had hacked into the server, and there was no reason to believe the emails had been altered or forged in any way. Opposing counsel came from a large law firm and objected several times to the emails. The judge refused to admit the emails into evidence.

What's the difference between scenario A and scenario B? I don't know what to tell you. One was a jury trial, and the other one was non-jury, but that should not have made any difference. By the way, the same judge presided over both trials.

[Update: about a year after the trial in which the judge refused to admit numerous emails into evidence, I had another jury trial with a different judge. This trial also involved several important emails. I was able to get the emails admitted into evidence.]

(A federal judge, the Hon. Judge James Rosenbaum, has tried to come up with a solution, FRE 808; however, other than one law review article, I don't see much else on this new proposed rule of evidence.)

Capitalism

Why Capitalism Fails, by Stephen Mihm:

Modern finance, [Hyman Minsky] argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse...Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff...

As Minsky observed, “Success breeds a disregard of the possibility of failure.”

Not entirely surprising, is it? Remember LTCM?