Archive for November, 2007|Monthly archive page

Handicapping Profits

In The Confiscation of American Prosperity, I looked at the correlation of poor corporate profitability with CEO’s low golf handicaps, as well as the use of corporate jets, and membership in far off country clubs.

Later, I learned of the relationship between CEO’s oversize mansions and negative corporate performance.

Liu, Crocker and David Yermack. 2007. “Where Are The Shareholders’ Mansions? Ceos’ Home Purchases, Stock Sales, and Subsequent Company Performance.” http://ssrn.com/abstract=970413

Now I see that Business Week has found a similar relationship (though not statistically analyzed between gold handicaps and subprime mortgage losses. Continue reading

The Perverse Imbalances between Town and Country

I am writing this paper for a seminar I will give at Yale. Any comments would be appreciated. It still needs work.

yale.doc

A note from a careful observer of US financial conditions

569: “I fancy that the great New York (banking) institutions have more skeletons in their cupboards than anyone yet knows about for certain, and that their concealed anxieties cramp their action more than is admitted.” Continue reading

Three Cheers for Ingenuity

“Dr Nguyen Phuoc Huy said his hospital could never afford to buy one as the endoscope costs around $30,000.  Instead he spent two years developing a DIY endoscope to peer inside the bodies of patients without the need for surgery.”

“The adaptor costs almost nothing because it is simply a system of lens linked to a webcam costing just about $30.  “In total I had to buy only the scope, which is about $800 …. A Pentium 4 computer with a colour printer is all that is needed for image processing …. I can now make a complete endoscope system in just one week”.”

Le, Hai. 2005. “Vietnam Medic Makes DIY Endoscope.” BBC News (22 August).

http://news.bbc.co.uk/1/hi/technology/4145984.stm

OK, it is a couple of years old, but still worth noting.

Rational Expectations and the Housing Bubble

“More than 70% of U.S. consumers believe a national housing bubble will burst and home prices will collapse within the next year, although 56% believe it’s unlikely to happen in the area where they live, according a new survey.”

Continue reading

Strip and Flip or Strip and Slip

The business press suggests potential internecine warfare between private equity and bond holders. For example:

Cimilluca, Dana. 2007. “Buyout Firms: Refined Rulers?” Wall Street Journal (20 November): p. C 3.

“Bondholders, after all, are natural enemies of private-equity firms, because the value of a company’s bonds tends to plunge when a private-equity firm wants to buy it.”

And then:

Thornton, Emily. 2007. “Perform or Perish.” Business Week (5 November): pp. 38-45.

Box p. 43: “50% of the U.S. companies that defaulted on their debt this year, half were owned by private equity companies.”

The Real Trickledown

The Wall Street Journal reports on the scandal about tainted Chinese ginger that found its way into U.S. stores. In part, the story reads ” The path of this batch of ginger, some 8,000 miles around the world, shows how global supply chains have grown so long that some U.S. companies can’t be sure where the products they’re buying are made or grown — and without knowing the source of the product, it’s difficult to solve the problem.”

The story here sounds strangely familiar, like the financial assets concocted from the subprime mortgage system. In fact, the whole capitalist system seems to be set up to avoid responsibility. Subcontractors, shell companies, and legal ruses allow people with power to avoid responsibility. This is the real trickle down. Continue reading

Really Fictitious Capital

Business Week had an interesting article about companies that buy and sell debt that has been discharged in bankruptcy — meaning that there is no debt. But the companies that buy the debt use unscrupulous methods to pressure people to repay the discharged debt that they no longer owe. Continue reading

Retribution, Complex Financialization, and the Law

A wonderful Ohio judge seems to have stopped foreclosure in Ohio because the investors in mortgage securities pools lack legal standing to foreclose because they cannot show proof ownership. After all, nobody knows who owns what. Continue reading

The Corporatization of the University

“Presidents at 12 private universities received more than $1 million in the 2005-6 school year, the most recent period for which data on private institutions is available, up from seven a year earlier, according to an annual survey of presidential pay to be released today by The Chronicle of Higher Education.  The number of private college presidents earning more than $500,000 reached 81, up from 70 a year earlier and just three a decade ago.  The survey also found that the number of public university presidents making $700,000 or more rose to eight in 2006-7, the reporting period for public institutions.  Only two public university presidents made $700,000 in the previous period.  The survey did not include E. Gordon Gee, who took over at Ohio State University earlier this year and whose $1 million pay package, before bonuses, is probably the highest of any public institution.”

“John W. Curtis, director of research and public policy at the American Association of University Professors, said rising pay to presidents was consistent with a “corporate mindset” at colleges.” Continue reading

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