We know from centuries of evidence in countless economies, from ancient Rome to today's Zimbabwe, that running the printing press to pay off today's bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid...
Inflation is a sinister beast that, if uncaged, devours savings, erodes consumers' purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.
--Richard Fisher, Dallas Fed Reserve President and CEO
http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm
The above link contains the full text of the speech at the Commonwealth Club I attended last week. It doesn't include the Q&A session, but is still worth a look-see.
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Tuesday, June 3, 2008
Monday, June 2, 2008
Fun Shareholder Meetings
A friend once asked me about the most fun shareholder meetings to attend. Here is my list:
1. Apple, Inc. (AAPL) To believe how charismatic Steve Jobs is, you have to see him in person. Long-time shareholders always attend, and the techies ask intelligent questions and swap user tips with other shareholders. Plus, the Board is filled with top-level people, including recently, Al Gore.
2. Berkshire Hathaway (BRK-A, BRK-B). You can buy the "B" shares to get into this meeting, which were selling at around $4,390 (much less than the "A" shares, which cost $132,350 for one share as of June 2, 2008). Berkshire Hathaway is fun because of the Q&A session with Warren Buffett and Charlie Munger; the live entertainment (Jimmy Buffett and Susan Lucci have appeared recently); and the annual video, which once showed Warren beating LeBron James in a one-on-one game (I still want to buy Warren's "1/8" number jersey, but they don't offer it anywhere!). Mr. Munger and Mr. Buffett work together so well, it's almost like seeing an elite, educational Laurel and Hardy show. In addition, there's lots of shopping to be done. I bought some great Fruit of the Loom underwear and some See's Candies at a discount.
Some caveats: the meeting's value depends a bit on the questions asked--if the questions asked are terrible, the meeting won't be as great. Also, this event has gotten so huge that it feels overcrowded--about 31,000 people attended this year. For example, I had to wait in line for about 45 minutes to partake in a food buffet. In addition, some of the events are spread out around Omaha, like Furniture Mart and Gorat's Steakhouse, so you need a car and GPS to be able to experience all the events.
3. Starbucks (SBUX). Starbucks' meeting is similar to Berkshire Hathaway's in the sense that a surprise guest comes every year to perform. In 2008, k.d. lang sang three beautiful songs, an experience worth attending just for her. Obviously, coffee is offered, but the meeting itself is the reason to attend. Starbucks usually unveils new goals and new items to the shareholders first, and I knew more about future plans than non-Seattle employees did for about a month after the meeting. A goody-bag is offered to shareholders on the way out. One downside--a huge line awaits all shareholders wanting to attend, so get there early and hope it doesn't rain!
4. Peet's (PEET). Peet's meeting is fun for several reasons. First, it is still a relatively small company, so the meetings feel like a family event. Second, the food and coffee are delicious. Third, sometimes the meeting is held at a roasting facility, which allows shareholders to get a sense of how the business is run.
5. Electronic Arts (ERTS). This one is a kick. If you want to see the environment in which video game designers work, check out this shareholder meeting. ERTS has an arcade, air hockey, foosball, and several other games, all for free. I spent an hour (okay, three) reliving my high school days in the arcade playing some John Madden football. Some other online games are apparently offered on the computers near the arcade, but I used that to check up on a work matter (I had to review a tentative court ruling the day of the meeting). ERTS has a Starbucks inside its company. You never have to leave the company, basically. It's a bit like Yahoo's set-up, where it's a little city within a company. The presentation also includes a preview of upcoming games on a big screen. And the best part of of it all? ERTS gives out a free video game to its attendees every year. Booyah!
6. Google (GOOG) is a new company, but it knows how to take care of shareholders. Food is offered (a friend told me they served filet mignon in 2008), and the founders sit on stools in casual-wear and answer questions in an informal setting.
7. Intuit (INTU). This one I mention only because they have given out valuable free software in the past. If you buy your Quicken software and live locally in Mountain View, CA, you might be better off just buying one share of the company and attending the meeting. The former CEO, Stephen Bennet, was very friendly at the meeting I attended a few years ago--he even replied to an email I sent. (I try to praise and point out responsive CEOs.)
Please add your own favorites in the "comments" section. I am always looking for fun shareholder meetings. I heard McDonald's and Coca-Cola's meetings are great, but I am not traveling across the country on my own dime for a shareholder meeting until I get more information. The big one I've neglected to mention is Walmart's annual meeting--it's supposed to be a big bash, but it's hard to take a few days off to travel to Arkansas and keep up on work.
Curt Hazlett, in a March 28, 2005 article, “Annual Meetings Can Be Valuable Tools for Journalists,” describes one reason I go to shareholder meetings–they offer valuable insight into a company:
http://www.businessjournalism.org/pages/biz/2005/03/
annual_meetings_can_be_valuabl/
1. Apple, Inc. (AAPL) To believe how charismatic Steve Jobs is, you have to see him in person. Long-time shareholders always attend, and the techies ask intelligent questions and swap user tips with other shareholders. Plus, the Board is filled with top-level people, including recently, Al Gore.
2. Berkshire Hathaway (BRK-A, BRK-B). You can buy the "B" shares to get into this meeting, which were selling at around $4,390 (much less than the "A" shares, which cost $132,350 for one share as of June 2, 2008). Berkshire Hathaway is fun because of the Q&A session with Warren Buffett and Charlie Munger; the live entertainment (Jimmy Buffett and Susan Lucci have appeared recently); and the annual video, which once showed Warren beating LeBron James in a one-on-one game (I still want to buy Warren's "1/8" number jersey, but they don't offer it anywhere!). Mr. Munger and Mr. Buffett work together so well, it's almost like seeing an elite, educational Laurel and Hardy show. In addition, there's lots of shopping to be done. I bought some great Fruit of the Loom underwear and some See's Candies at a discount.
Some caveats: the meeting's value depends a bit on the questions asked--if the questions asked are terrible, the meeting won't be as great. Also, this event has gotten so huge that it feels overcrowded--about 31,000 people attended this year. For example, I had to wait in line for about 45 minutes to partake in a food buffet. In addition, some of the events are spread out around Omaha, like Furniture Mart and Gorat's Steakhouse, so you need a car and GPS to be able to experience all the events.
3. Starbucks (SBUX). Starbucks' meeting is similar to Berkshire Hathaway's in the sense that a surprise guest comes every year to perform. In 2008, k.d. lang sang three beautiful songs, an experience worth attending just for her. Obviously, coffee is offered, but the meeting itself is the reason to attend. Starbucks usually unveils new goals and new items to the shareholders first, and I knew more about future plans than non-Seattle employees did for about a month after the meeting. A goody-bag is offered to shareholders on the way out. One downside--a huge line awaits all shareholders wanting to attend, so get there early and hope it doesn't rain!
4. Peet's (PEET). Peet's meeting is fun for several reasons. First, it is still a relatively small company, so the meetings feel like a family event. Second, the food and coffee are delicious. Third, sometimes the meeting is held at a roasting facility, which allows shareholders to get a sense of how the business is run.
5. Electronic Arts (ERTS). This one is a kick. If you want to see the environment in which video game designers work, check out this shareholder meeting. ERTS has an arcade, air hockey, foosball, and several other games, all for free. I spent an hour (okay, three) reliving my high school days in the arcade playing some John Madden football. Some other online games are apparently offered on the computers near the arcade, but I used that to check up on a work matter (I had to review a tentative court ruling the day of the meeting). ERTS has a Starbucks inside its company. You never have to leave the company, basically. It's a bit like Yahoo's set-up, where it's a little city within a company. The presentation also includes a preview of upcoming games on a big screen. And the best part of of it all? ERTS gives out a free video game to its attendees every year. Booyah!
6. Google (GOOG) is a new company, but it knows how to take care of shareholders. Food is offered (a friend told me they served filet mignon in 2008), and the founders sit on stools in casual-wear and answer questions in an informal setting.
7. Intuit (INTU). This one I mention only because they have given out valuable free software in the past. If you buy your Quicken software and live locally in Mountain View, CA, you might be better off just buying one share of the company and attending the meeting. The former CEO, Stephen Bennet, was very friendly at the meeting I attended a few years ago--he even replied to an email I sent. (I try to praise and point out responsive CEOs.)
Please add your own favorites in the "comments" section. I am always looking for fun shareholder meetings. I heard McDonald's and Coca-Cola's meetings are great, but I am not traveling across the country on my own dime for a shareholder meeting until I get more information. The big one I've neglected to mention is Walmart's annual meeting--it's supposed to be a big bash, but it's hard to take a few days off to travel to Arkansas and keep up on work.
Curt Hazlett, in a March 28, 2005 article, “Annual Meetings Can Be Valuable Tools for Journalists,” describes one reason I go to shareholder meetings–they offer valuable insight into a company:
http://www.businessjournalism.org/pages/biz/2005/03/
annual_meetings_can_be_valuabl/
Saturday, May 31, 2008
Mark Cuban on CEO Pay
Here is one more reason Mark Cuban should get more credit--besides the day spent working at Dairy Queen, besides his rabblerousing to make the NBA a better league, and besides transforming the Mavericks franchise into a contender--he has a delightful blog:
http://www.blogmaverick.com/2008/04/15/my-2-cents-on-ceo-pay/
The above entry is his take on CEO pay, and Mr. Cuban's idea is absolutely ingenious. It wasn't too long ago that companies were refusing to include the true cost of any stock option grants in their accounting reports. Mr. Cuban's idea makes the ability to fudge the numbers even more difficult, because it's hard to miss money coming out of the cash flow till. His idea would probably also accomplish what many shareholder compensation resolutions are trying to do--lower the ratio between the CEO's pay and the average worker. Here is Mr. Cuban's idea, in his words:
Make companies generate 100pct of their compensation in cash that is 100pct expensable in the quarter paid. Thats not to say they cant own stock. Hell yes they can own stock. But make them buy it either on the open market, or as part of the programs that make stock available to every company employee, on the same terms. They are getting paid enough in cash and if they believe in their ability to run the company, they can put their money where their mouth is. Eliminate all the free lottery tickets. Make them buy stock, options, warrants, whatever, on the same terms as everyone else can.
Shareholders tend to ignore how much stock is given to management, they don't ignore cash. Companies will always be a lot more stringent with their cash, whether its paid to the CEO or anyone else. CEO cash compensation will go way up, but total compensation will come way down. More importantly , CEOs getting paid huge sums in cash will stand out like a sore thumb when things arent going so well. They will be treated like everyone else in the cash zone and held far more accountable for their work.
I naively believed that this kind of out-of-control compensation would not happen after 2002, when E-Trade's CEO, Christos Cotsakos, received 77 million dollars at a time when his company lost 242 million dollars. The resulting outrage caused him to pay back some of the money, but obviously, no lasting changes occurred. Here is a link about that incident:
http://www.businessweek.com/bwdaily/dnflash/may2002/nf20020517_7164.htm
http://www.blogmaverick.com/2008/04/15/my-2-cents-on-ceo-pay/
The above entry is his take on CEO pay, and Mr. Cuban's idea is absolutely ingenious. It wasn't too long ago that companies were refusing to include the true cost of any stock option grants in their accounting reports. Mr. Cuban's idea makes the ability to fudge the numbers even more difficult, because it's hard to miss money coming out of the cash flow till. His idea would probably also accomplish what many shareholder compensation resolutions are trying to do--lower the ratio between the CEO's pay and the average worker. Here is Mr. Cuban's idea, in his words:
Make companies generate 100pct of their compensation in cash that is 100pct expensable in the quarter paid. Thats not to say they cant own stock. Hell yes they can own stock. But make them buy it either on the open market, or as part of the programs that make stock available to every company employee, on the same terms. They are getting paid enough in cash and if they believe in their ability to run the company, they can put their money where their mouth is. Eliminate all the free lottery tickets. Make them buy stock, options, warrants, whatever, on the same terms as everyone else can.
Shareholders tend to ignore how much stock is given to management, they don't ignore cash. Companies will always be a lot more stringent with their cash, whether its paid to the CEO or anyone else. CEO cash compensation will go way up, but total compensation will come way down. More importantly , CEOs getting paid huge sums in cash will stand out like a sore thumb when things arent going so well. They will be treated like everyone else in the cash zone and held far more accountable for their work.
I naively believed that this kind of out-of-control compensation would not happen after 2002, when E-Trade's CEO, Christos Cotsakos, received 77 million dollars at a time when his company lost 242 million dollars. The resulting outrage caused him to pay back some of the money, but obviously, no lasting changes occurred. Here is a link about that incident:
http://www.businessweek.com/bwdaily/dnflash/may2002/nf20020517_7164.htm
Friday, May 30, 2008
Stocks Update
Big pharma looks like one of the cheaper sectors in the market. Today, I bought
60 shares of PFE (Pfizer) at 19.33
50 shares of MRK (Merck) at 38.61
65 shares of WYE (Wyeth) at 44.41
In my tiny, self-made pharma fund, I like WYE the most. MRK will issue a dividend soon, which is one reason I wanted to own it. I bought 100 shares of PFE before (at around 20.70) and am averaging down. It will probably take years for the pharmas to get out of the doldrums. In the meantime, I am sure it will be a bumpy ride. If a Democratic president is elected, chances are that any universal health care plan will squeeze big pharma. In addition, Congress may decide to cut consumer prescription costs by supporting generics and reducing patent rights. But with money market yields at around 2%, I could do worse than put my money in these dividend-generating stocks. I am not necessarily a long-term investor--once MRK pays its dividend, for example, I will look to get out.
Update on June 2, 2008: Bought 50 MRK @ 38.12 (have 100 shares total now)
The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.
60 shares of PFE (Pfizer) at 19.33
50 shares of MRK (Merck) at 38.61
65 shares of WYE (Wyeth) at 44.41
In my tiny, self-made pharma fund, I like WYE the most. MRK will issue a dividend soon, which is one reason I wanted to own it. I bought 100 shares of PFE before (at around 20.70) and am averaging down. It will probably take years for the pharmas to get out of the doldrums. In the meantime, I am sure it will be a bumpy ride. If a Democratic president is elected, chances are that any universal health care plan will squeeze big pharma. In addition, Congress may decide to cut consumer prescription costs by supporting generics and reducing patent rights. But with money market yields at around 2%, I could do worse than put my money in these dividend-generating stocks. I am not necessarily a long-term investor--once MRK pays its dividend, for example, I will look to get out.
Update on June 2, 2008: Bought 50 MRK @ 38.12 (have 100 shares total now)
The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.
Thursday, May 29, 2008
Federal Reserve President Richard Fisher at the Commonwealth Club
Richard Fisher, the CEO and President of the Federal Reserve Bank of Dallas, spoke at San Francisco's Commonwealth Club (595 Market St.) on May 29, 2008. Some highlights:
1. Mr. Fisher is a big fan of Bill [McChesney] Martin, known for his statement that the job of a central banker is to "take away the punch bowl just as the party gets going."
2. Mr. Fisher said that the Dallas Federal Reserve's inflation numbers incorporate food and energy/gas prices. See http://dallasfed.org/research/ for more information. I believe that what Mr. Fisher was referring to is the the "trimmed mean PCE" numbers, but I could be incorrect. What seems clear, however, is that the PCE numbers are probably more accurate than the CPI numbers, which are usually "excluding food and energy." As you can see in the next link, the PCE numbers are usually at least one percentage point higher than the CPI numbers. See http://www.dallasfed.org/data/pce/index.html
Mr. Fisher indicated that only his bank and the Cleveland Federal Reserve Bank published these more comprehensive numbers.
3. Mr. Fisher's speech sounded like a more number-heavy speech that the former Comptroller David Walker would give. He warned us to do something about government spending, saying that we are "falling victim to complacency and recklessness." He mentioned the "frightful storm of untethered government debt." [He probably meant to say, "unfettered," not "untethered."]
8 years ago, we had a surplus of 236 billion dollars, with a Republican Congress and Democratic president (Mr. Fisher emphasized that these issues were non-partisan.)
Today, the expected deficit in 2008 is at least 410 billion dollars.
Our underfunded liabilities, using an infinite horizon discounted value, is 13.6 trillion dollars for social services.
[Now, I don't pretend to know what an infinite horizon discounted value is. For more information on infinite horizon projections, see
http://www.factcheck.org/article302.html
That article says that an infinite horizon model is misleading, but Mr. Fisher mentioned an infinite horizon "discounted value," which may be different.]
Mr. Fisher said that Medicare was the biggest problem. Medicare has three parts, A (hospitals), B (doctor visits), and D (drug benefits/prescriptions). He estimated a projected deficit of 85.6 trillion dollars for Medicare. Including the projected deficit of Social Security benefits, Mr. Fisher expects a 99.2 trillion dollar deficit in unfunded portions of entitlement programs. He said that this debt works out to be more than 300,000 dollars per person, assuming a population of 304 million, which includes nonworking adults and children. Income taxes have to increase 68%(?) to cover deficits, which is basically reaches confiscatory levels.
What to do about all this? Well, he didn't have much to say, other than it was our responsibility, because we elect the people who run the government.
4. Mr. Fisher dissented in the last three interest rate cuts. He is an inflation hawk and said that "inflation is the most insidious enemy of capitalism and prosperity." He also said that "running the printing press" [of money] is the worst option, because that causes inflation, and stable prices are necessary for growth.
5. Mr. Fisher mentioned a humorous story where someone asked a researcher, "Is there a difference between the Republicans or Democrats [Congresses] in terms of who spends more money?" The answer was, "There's only one difference--Democrats enjoy it more."
6. Mr. Fisher was more relaxed during the Q&A session.
When asked what his bank does, he said that among other things, the Federal Reserve lends money at the discount window; clears checks (which is a declining function--he said his children had never used a paper check--people are moving to online banking); assists the U.S. Treasury; and processes cash (his bank recently processed 12 billion dollars--cash is used more in TX).
Mr. Fisher ran for a U.S. Senate seat and lost. In his funniest remark, he said he calls the legislative branch "the lower intestine." This was after he said the best part of his job was that he was allowed to speak the truth, and most government officials could not do that because they had to get elected, or balance competing interests. The difference between his position and the other branches was that he "could tell the truth."
He said that the FOMC meetings were a civil deliberation and a process that emphasized civility.
Comparing Greenspan and Bernanke, he said both of them had a great sense of humor. Bernanke was "perditiously smart," understanding the Depression more than any other living human being. He said Bernanke's best experience was serving on the local school board in Pennsylvania. On Greenspan: he "listened very well," perhaps because he played the saxophone.
Mr. Fisher said we are in for a period of "anemic economic activity," but said he would not call it a recession. He said the "debauching of our credit system" hurts small businesses, which create jobs in America.
He also said that we are experiencing inflation and our current economic climate because "we won." In his most passionate remarks, Mr. Fisher commented that "Chairman Mao is dead--I won't say God bless his soul. Hồ Chí Minh is dead. In November 1989, the Soviet Union filed for bankruptcy. We won." Everyone wants to imitate our lifestyle, which raises prices and leads to a period of more competition as other countries adopt our successful capitalist model.
A question was asked about implementation of the Basel II Accord, but Mr. Fisher said the writer of that question should come up to him afterwards and speak to him about it directly, because it was a technical question.
Mr. Fisher said he was instrumental in getting NAFTA passed and was "proud of NAFTA." He referred to Joseph Schumpeter and "creative destruction," saying that it drove each of us to our "competitive advantage." but said that the media was skewed in its reporting. If a company shut down, the media was there, but it wasn't there to record an instance when a completely new job opened for that person who was laid off or in general. He said that only 1% of our economy was based on agriculture; 5% on mining; 11% on manufacturing; and the rest (84%) was services. To give us an idea of how the economy has changed, Mr. Fisher said that lawyers "produced" more GDP than auto manufacturers [a sure sign of over-legislation].
A question was asked about whether he believed that the numbers from the BLS were accurate. He said that he was more concerned about sufficiency of the data than its accuracy. There are apparently large swathes of the economy that aren't reflected in the numbers he receives.
Overall, it was a fun experience. I asked him a question privately, about which currency he believed would be the most stable over the next five years. Mr. Fisher said that he couldn't predict that far out, and a basket of currencies would be the most stable way of managing risk. He did say that the European Central Bank had only one mandate, which was to control inflation, while the Fed had a dual mandate [maximum sustainable employment and price stability]. His comments seemed to imply that the Euro might be the most stable currency, but for the long term, he said he favored the U.S. dollar. His refusal to give me a clear answer was astute. To give you an idea of just how quickly things can change, remember than as recently as November 2003, Mr. Bernanke is on record as saying that "the current risk of increased inflation is, for the time being at least, quite small." See
http://www.federalreserve.gov/BoardDocs/Speeches/2003/
200311062/default.htm
The job of American central bankers--especially given their recent inability to predict bubbles and busts--is to respect savers while minimizing unemployment. Hopefully, Mr. Bernanke will get back to the "respecting savers" part of the mandate by raising interest rates at the next FOMC meeting.
FYI: The San Francisco Federal Reserve is right up the street from the Commonwealth. Call ahead of time, but for now, they have tours open to the public on Fridays at noon. Otherwise, they are closed to the public.
1. Mr. Fisher is a big fan of Bill [McChesney] Martin, known for his statement that the job of a central banker is to "take away the punch bowl just as the party gets going."
2. Mr. Fisher said that the Dallas Federal Reserve's inflation numbers incorporate food and energy/gas prices. See http://dallasfed.org/research/ for more information. I believe that what Mr. Fisher was referring to is the the "trimmed mean PCE" numbers, but I could be incorrect. What seems clear, however, is that the PCE numbers are probably more accurate than the CPI numbers, which are usually "excluding food and energy." As you can see in the next link, the PCE numbers are usually at least one percentage point higher than the CPI numbers. See http://www.dallasfed.org/data/pce/index.html
Mr. Fisher indicated that only his bank and the Cleveland Federal Reserve Bank published these more comprehensive numbers.
3. Mr. Fisher's speech sounded like a more number-heavy speech that the former Comptroller David Walker would give. He warned us to do something about government spending, saying that we are "falling victim to complacency and recklessness." He mentioned the "frightful storm of untethered government debt." [He probably meant to say, "unfettered," not "untethered."]
8 years ago, we had a surplus of 236 billion dollars, with a Republican Congress and Democratic president (Mr. Fisher emphasized that these issues were non-partisan.)
Today, the expected deficit in 2008 is at least 410 billion dollars.
Our underfunded liabilities, using an infinite horizon discounted value, is 13.6 trillion dollars for social services.
[Now, I don't pretend to know what an infinite horizon discounted value is. For more information on infinite horizon projections, see
http://www.factcheck.org/article302.html
That article says that an infinite horizon model is misleading, but Mr. Fisher mentioned an infinite horizon "discounted value," which may be different.]
Mr. Fisher said that Medicare was the biggest problem. Medicare has three parts, A (hospitals), B (doctor visits), and D (drug benefits/prescriptions). He estimated a projected deficit of 85.6 trillion dollars for Medicare. Including the projected deficit of Social Security benefits, Mr. Fisher expects a 99.2 trillion dollar deficit in unfunded portions of entitlement programs. He said that this debt works out to be more than 300,000 dollars per person, assuming a population of 304 million, which includes nonworking adults and children. Income taxes have to increase 68%(?) to cover deficits, which is basically reaches confiscatory levels.
What to do about all this? Well, he didn't have much to say, other than it was our responsibility, because we elect the people who run the government.
4. Mr. Fisher dissented in the last three interest rate cuts. He is an inflation hawk and said that "inflation is the most insidious enemy of capitalism and prosperity." He also said that "running the printing press" [of money] is the worst option, because that causes inflation, and stable prices are necessary for growth.
5. Mr. Fisher mentioned a humorous story where someone asked a researcher, "Is there a difference between the Republicans or Democrats [Congresses] in terms of who spends more money?" The answer was, "There's only one difference--Democrats enjoy it more."
6. Mr. Fisher was more relaxed during the Q&A session.
When asked what his bank does, he said that among other things, the Federal Reserve lends money at the discount window; clears checks (which is a declining function--he said his children had never used a paper check--people are moving to online banking); assists the U.S. Treasury; and processes cash (his bank recently processed 12 billion dollars--cash is used more in TX).
Mr. Fisher ran for a U.S. Senate seat and lost. In his funniest remark, he said he calls the legislative branch "the lower intestine." This was after he said the best part of his job was that he was allowed to speak the truth, and most government officials could not do that because they had to get elected, or balance competing interests. The difference between his position and the other branches was that he "could tell the truth."
He said that the FOMC meetings were a civil deliberation and a process that emphasized civility.
Comparing Greenspan and Bernanke, he said both of them had a great sense of humor. Bernanke was "perditiously smart," understanding the Depression more than any other living human being. He said Bernanke's best experience was serving on the local school board in Pennsylvania. On Greenspan: he "listened very well," perhaps because he played the saxophone.
Mr. Fisher said we are in for a period of "anemic economic activity," but said he would not call it a recession. He said the "debauching of our credit system" hurts small businesses, which create jobs in America.
He also said that we are experiencing inflation and our current economic climate because "we won." In his most passionate remarks, Mr. Fisher commented that "Chairman Mao is dead--I won't say God bless his soul. Hồ Chí Minh is dead. In November 1989, the Soviet Union filed for bankruptcy. We won." Everyone wants to imitate our lifestyle, which raises prices and leads to a period of more competition as other countries adopt our successful capitalist model.
A question was asked about implementation of the Basel II Accord, but Mr. Fisher said the writer of that question should come up to him afterwards and speak to him about it directly, because it was a technical question.
Mr. Fisher said he was instrumental in getting NAFTA passed and was "proud of NAFTA." He referred to Joseph Schumpeter and "creative destruction," saying that it drove each of us to our "competitive advantage." but said that the media was skewed in its reporting. If a company shut down, the media was there, but it wasn't there to record an instance when a completely new job opened for that person who was laid off or in general. He said that only 1% of our economy was based on agriculture; 5% on mining; 11% on manufacturing; and the rest (84%) was services. To give us an idea of how the economy has changed, Mr. Fisher said that lawyers "produced" more GDP than auto manufacturers [a sure sign of over-legislation].
A question was asked about whether he believed that the numbers from the BLS were accurate. He said that he was more concerned about sufficiency of the data than its accuracy. There are apparently large swathes of the economy that aren't reflected in the numbers he receives.
Overall, it was a fun experience. I asked him a question privately, about which currency he believed would be the most stable over the next five years. Mr. Fisher said that he couldn't predict that far out, and a basket of currencies would be the most stable way of managing risk. He did say that the European Central Bank had only one mandate, which was to control inflation, while the Fed had a dual mandate [maximum sustainable employment and price stability]. His comments seemed to imply that the Euro might be the most stable currency, but for the long term, he said he favored the U.S. dollar. His refusal to give me a clear answer was astute. To give you an idea of just how quickly things can change, remember than as recently as November 2003, Mr. Bernanke is on record as saying that "the current risk of increased inflation is, for the time being at least, quite small." See
http://www.federalreserve.gov/BoardDocs/Speeches/2003/
200311062/default.htm
The job of American central bankers--especially given their recent inability to predict bubbles and busts--is to respect savers while minimizing unemployment. Hopefully, Mr. Bernanke will get back to the "respecting savers" part of the mandate by raising interest rates at the next FOMC meeting.
FYI: The San Francisco Federal Reserve is right up the street from the Commonwealth. Call ahead of time, but for now, they have tours open to the public on Fridays at noon. Otherwise, they are closed to the public.
Ronald Reagan on Libertarianism
If you analyze it I believe the very heart and soul of conservatism is libertarianism. I think conservatism is really a misnomer just as liberalism is a misnomer for the liberals — if we were back in the days of the Revolution, so-called conservatives today would be the Liberals and the liberals would be the Tories. The basis of conservatism is a desire for less government interference or less centralized authority or more individual freedom and this is a pretty general description also of what libertarianism is. Now, I can’t say that I will agree with all the things that the present group who call themselves Libertarians in the sense of a party say, because I think that like in any political movement there are shades, and there are libertarians who are almost over at the point of wanting no government at all or anarchy.
From Interview with President Reagan, published in Reason July 1975
http://en.wikiquote.org/wiki/Ronald_Reagan
One of the American public's worst misconceptions is that libertarianism calls for no laws. As I explained in my review of Milton Friedman's Capitalism and Freedom, Mr. Friedman himself stated the need for government: "The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the 'rules of the game' and as an umpire to interpret and enforce the rules decided on." See
http://willworkforjustice.blogspot.com/2007/08/capitalism-and-freedom-by-milton.html
Thus, anyone who states that libertarianism means anarchy or no laws is incorrect. Libertarianism merely means that you agree that interference with your ability to lead your life as you see fit--assuming your actions do not interfere with others' freedom--should be reduced as much possible.
More on government debt and the money we pay to the government: Richard Carmona, former U.S. Surgeon General (2002-2008), says that "75 cents of every tax dollar that you contribute [to health care] is spent on chronic disease, much of which is preventable" (The Commonwealth magazine, June 2008, page 44). Mr. Carmona singles out smoking and obesity as two of the largest scourges of health. One issue with having universal health care is how we regulate chronic disease--does an obese man get a free gastric bypass, or a free diet book? I wish I knew the answer.
One way to reduce the burden on any proposed national healthcare system is to have government workers use the premium + pay-as-you-go system (similar to Kaiser's HMO), while non-government workers use a separate, heavily subsidized health care system (similar to Britain's NHS). With most government workers not being "at-will" and therefore harder to terminate, they are best positioned to budget and pay monthly premiums. This type of carve-out is not unprecedented--postal and other federal workers, for example, do not get the same federal retirement benefits private citizens do because federal workers don't pay certain taxes. With more than 1.8 million civilian employees, the federal government, excluding the Postal Service, is the Nation’s largest employer. If you add in local and state government workers, you would have enough members to incorporate into a "closed system" of medical care (similar to Kaiser's HMO). In fact, you could probably leave the current HMO/PPO system intact, and then work with existing hospitals to provide heavily subsidized health care to private citizens while also investing in new hospitals. (There's no reason Thailand should have more hospitals than America per capita.) The out-of-pocket and insurance reimbursement system would shift to government members rather than private citizens, private citizens, especially blue collar workers, being the ones most required to be healthy so that they can be productive and pay taxes to sustain the government.
[Note: this post has been updated from its original content.]
From Interview with President Reagan, published in Reason July 1975
http://en.wikiquote.org/wiki/Ronald_Reagan
One of the American public's worst misconceptions is that libertarianism calls for no laws. As I explained in my review of Milton Friedman's Capitalism and Freedom, Mr. Friedman himself stated the need for government: "The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the 'rules of the game' and as an umpire to interpret and enforce the rules decided on." See
http://willworkforjustice.blogspot.com/2007/08/capitalism-and-freedom-by-milton.html
Thus, anyone who states that libertarianism means anarchy or no laws is incorrect. Libertarianism merely means that you agree that interference with your ability to lead your life as you see fit--assuming your actions do not interfere with others' freedom--should be reduced as much possible.
More on government debt and the money we pay to the government: Richard Carmona, former U.S. Surgeon General (2002-2008), says that "75 cents of every tax dollar that you contribute [to health care] is spent on chronic disease, much of which is preventable" (The Commonwealth magazine, June 2008, page 44). Mr. Carmona singles out smoking and obesity as two of the largest scourges of health. One issue with having universal health care is how we regulate chronic disease--does an obese man get a free gastric bypass, or a free diet book? I wish I knew the answer.
One way to reduce the burden on any proposed national healthcare system is to have government workers use the premium + pay-as-you-go system (similar to Kaiser's HMO), while non-government workers use a separate, heavily subsidized health care system (similar to Britain's NHS). With most government workers not being "at-will" and therefore harder to terminate, they are best positioned to budget and pay monthly premiums. This type of carve-out is not unprecedented--postal and other federal workers, for example, do not get the same federal retirement benefits private citizens do because federal workers don't pay certain taxes. With more than 1.8 million civilian employees, the federal government, excluding the Postal Service, is the Nation’s largest employer. If you add in local and state government workers, you would have enough members to incorporate into a "closed system" of medical care (similar to Kaiser's HMO). In fact, you could probably leave the current HMO/PPO system intact, and then work with existing hospitals to provide heavily subsidized health care to private citizens while also investing in new hospitals. (There's no reason Thailand should have more hospitals than America per capita.) The out-of-pocket and insurance reimbursement system would shift to government members rather than private citizens, private citizens, especially blue collar workers, being the ones most required to be healthy so that they can be productive and pay taxes to sustain the government.
[Note: this post has been updated from its original content.]
Zazzle dazzles!
I bought one custom-made shirt from Zazzle a few days ago, and it arrived today. I am very happy with the product. Many other custom shirt-printers require their customers to buy multiple (e.g., six or more) shirts before placing an order. Zazzle is more flexible. If you are interesting in buying a custom-made shirt or just want to buy a quality shirt, check out Zazzle:
http://www.zazzle.com/
http://www.zazzle.com/
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