Monday, May 28, 2012

Altarpiece No. 2 In Progress

Here are a few photos of my latest art project, Altarpiece No. 2.  I am using popular and 1/2" birch plywood.  There is more woodworking to do on the case and the 2 doors.  I haven't decided what additions I would like to make before the latex primer coat.

Friday, May 25, 2012

Private Equity Is Just Another Tool Chest

There has been a lot of discussion recently about private equity and whether private equity is a good thing or a bad thing.  Like most things in life, it can be both, and it really depends on how it is used and who is using it.

First, there are several kinds of private equity as not all private equity is the same.  Private equity that invests in start ups, sometimes referred to as seed money, is one form of private equity.  Other forms of private equity take a small company to its next level with an infusion of cash and managerial talent.

One thing about private equity is that there is always an exit strategy.  This exit strategy can be selling the company to a bigger company that can use the smaller company to build the bigger company into a still larger corporation.  Some exit strategies call for an IPO, initial public offering, like in the case of Facebook's recent IPO last week.

Private equity for the most part uses other people's money such as wealthy investors or institutions that invest such as public pension funds or state insurance funds.  The private equity management receives a fee for their management skills and a nice slice of the profits when the exit strategy is concluded.

Some private equity firms are good at marketing themselves and building huge private equity funds, but marketing well and managing well are two very different sets of skills.  I have seen private equity funds that are filled with talented and educated people do very well for their clients and themselves, and I have seen private equity people that invest in a hardware store chain that don't know the difference between a claw and a ball peen hammer.

For the most part, private equity is a good thing because private equity invests where commercial banks don't want to risk their capital.  At least that is the way it used to be in the old days. Now commercial banks are investment banks and they risk their capital everyday on derivative bets few people in the organization understand.

So, in conclusion, let me say private equity like any other tool in finance is only as good as the people using that tool.  As my father used to say, just because you have a big tool chest doesn't make you a craftsman. It just makes you a person with a lot of tools.  Knowing how to use them skillfully is a whole other ball game.

Saturday, May 19, 2012

A Primer On My Self-Education As A Historian

I have been reading history books nearly all my life, and before I could read history books written for adults, I discussed the history of the world with my father when we would drive to and from his hardware store.

At the age of 23, I read my first book on Jewish history.  It was not the best book ever written about Jewish history, but as a survey book it was fine.  The title of that book is Jews, God and History by Max I. Dimont. I, like many of my contemporaries that went to Hebrew school and grew up in a conservative to orthodox Jewish home, knew our Bible, its stories and even the Jewish holidays that were not in the Bible such as Purim.  We knew a lot and yet we did not know a lot too. After finishing this survey book, as I call it, I decided to look for and find other books that covered Jewish history in more detail. Naturally, I found several, and, over the years, I have continued to find books dealing with various aspects of Jewish history. The Holocaust has had several books written about it, and the lives of survivors.  Some of these books just fell into my hands by accident, and others were given to me as a gift from friends, some that were not even Jewish.

It occurred to me in the early 1970s as I was riding the bus home from work that for someone that had a degree in American history and a year of graduate school in European history, I knew very little about black history, or , for that matter Native American history.  I decided I would do something about that and started reading books by African-American writers. And, around that time I found the great book about Native American history - Bury My Heart at Wounded Knee:An Indian History of The American West by Dee Brown.

Now that I am retired, and I don't have to get up in the morning at 5:50 to go to work, I can lay in bed and read. Recently, my interest in history has brought me back to a book I had bought a while ago at one of those book sales where they are just about giving away books.  ARC OF JUSTICE:  A Saga Of Race, Civil Rights, And Murder In The Jazz Age by Kevin Boyle has again reintroduced me to black history in the United States.  This book should be on the reading list for every high school senior in America!  Americans should know their social and intellectual history as well as their political history to be truly educated about what happened in the United States.

It just so happens that on my recent trip to Kettering, Ohio and the 2nd & Charles bookstore, I would find a book about W.E.B. Du Bois, the first African-American to receive his Doctorate (Ph.D.) from Harvard University. I look forward to following up the ARC OF JUSTICE, which mentions Dr. Du Bois with the book W.E.B. Du Bois: Voice of the Black Protest Movement by Elliott Rudwick.  On that same trip, I found another book dealing with the Holocaust - IBM And The Holocaust: The Strategic Alliance Between Nazi Germany And America's Most Powerful Corporation by Edwin Black.

Educating oneself about ones history can hardly be left to public education at either the high school or college level of the 1950s and 1960s. The education I received back then was just the beginning, a survey history and very incomplete. For those that think history of the world started in the year 2000, I would suggest that they drop back and pick up the story a few hundred years back. Perhaps then they will understand what took place and why their world is the way it is. History is much more than a collection of dates, it is the story of the lives of real people and their struggles to live free, with their civil rights and dignity.

Wednesday, May 16, 2012

Bringing Back Glass-Steagall

One of the problems in communicating in the United States is that while we all speak English, the words we use have definitions that we each hold that may be as different as everyone's finger print! When I write about money, banking and monetary policy, I use words we all can read, but do we all understand them in the same way? Everyone, I think, wants a money and banking system that works. Yes, works for everyone, and leaves no one short changed. The Glass-Steagall Act from the 1930s did just that. And, it has been my opinion for several years, I have been writing this blog MONEYTHOUGHTS since February 2008, that in order to make our banking system work for all of us, we need to separate the function of commercial banking from the function of investment banking. And, for good measure, insurance companies should not be owned by either commercial banks or investment banks. Yes, I know commercial banking is more exciting if it has an investment banking division. Exciting in so far as the investment banking division can trade, do swaps and put together all kinds of derivatives to play the market. Yes, I said play the market. Commercial banking is far less exciting as hedging for a commercial bank can simply be done by matching assets against liabilities under the risk management department with a senior investment officer of the commercial bank. Commercial banks make loans and one thing that a commercial bank has to do is to make sure they have not loaned long term and borrowed short term. When interest rates go up the commercial bank will find themselves in a bit of a problem if they haven't matched their loans (the loan's maturity) with certificates of deposit (with similar maturities). I know this is far less exciting then creating a derivative that looks like a salad from every continent on earth, and then betting the ranch that your assumptions were valid before you ran that salad threw your mathematical model. I have no problem with an investment bank trading and creating derivatives, so long as they are using their own money, or their shareholders' money. Yes, I know this means that commercial banks will have slower earnings growth and that they will get a corresponding Price/Earnings ratio that will be commensurate with that slower less exciting growth. But, that is the price we all pay for having a commercial banking system that can not bring our domestic economy to its knees. I am sure my explanation could have been explained better by Paul Volcker or Professor Krugman, but since they have never contacted me about being a guest writer for my blog, I guess you will have to get by with me. I can assure you that I know what I am talking about. This money and banking stuff is not rocket science or brain surgery. Believe when I say, you don't have to be a genius to understand this stuff. Yes, derivatives can be made very complex, but just because they are complex does not mean that they are right. For example, take the derivatives JP Morgan Chase bet on recently, they were, I can assure you were very complex, having been run through some very complex mathematical models, yet their assumptions were mostly likely wrong. Because, if their assumptions had been correct, they would not be losing $2 billion dollars!

Monday, May 14, 2012

Marriage & Civil Rights From 1600-2012

Last night I was watching one of my favorite TV shows "Finding Your Roots" with Professor Louis Henry Gates, Jr. on PBS. The show deals with tracing peoples' roots, and many of the people that Professor Gates brings on his show are African-Americans. Last night, I learned that about 5,000 negro slaves and freemen fought in the Revolutionary War, and that Professor Gates was related to a black man that had fought in the Revolutionary War of 1776. In discussing the laws in the United States before the end of slavery, we find that negro slaves could not marry because marriage was defined as a civil right, and negro slaves did not have civil rights because they were considered by the law to be property. Two pieces of property can not get married. Slaves were permitted to ask their master if they could live with a particular slave in a cabin on the plantation and have a family, but there was no marriage ceremony except for the act of "jumping the broom", and if the master wished to break up the family through sale, he could do so. Once slavery was abolished in the United States (1863), and no human was to be considered property any more, then the long struggle began for negroes to fight for their full civil rights. The fight and struggle for civil rights is something I witnessed with my own eyes here in the United States while I was growing up in Cincinnati, and as an adult both as a civilian and the short time I was in military service. What is clear, is that marriage in the United States had nothing to do with the Bible, because if marriage had been based upon the Bible, then it would have been mandatory that negro slaves enter into a contract of marriage, over and above their station in life as slaves (property). However, that was not the case. The Bible in the United States does not take precedent over civil law that held that the institution of slavery was legal and binding. In fact, negro slaves could be set free by the terms of their master's written Will which was not uncommon. This then leads me to believe that if marriage is a civil right, then any two people, so long as neither is considered property, can enter into a marriage contract. The Bible has no legal status in the United States where marriage is concerned by historical tradition. In fact, the Bible has no legal standing where civil rights are concerned, going back to pre-revolutionary times. Therefore, marriage is a contract that can be entered into by two people, regardless of sex, that are not considered property and possess their full civil rights.

Friday, May 4, 2012

Economics Is Easy, Politics Is Hard

I wrote to a friend expressing my frustration with the way economics is dealt with on TV. I was encouraged to copy what I wrote and put it on my blog. Those who have been reading my blog, MoneyThoughts, over the last 4 years, may find what I wrote a repeat, which it is, of my feelings about economics and politics. Here goes;
I listened to Paul Krugman on The Last Word last night on MSNBC. He is a Nobel Prize wining economist that teaches at Princeton University. Yes, he is MOT. The guy knows too much and yet he keeps trying to break through the ignorance out there about Keynesian Economics. I don't know how he keeps so cool about the level of discourse in the media when it comes to discussing economics. I get to a point where I wish I could just scream: "you all are a bunch of idiots and none of you talking heads on TV understand how economics works!!!" I don't write much on my blog, Moneythoughts, anymore because I have said it all several times and in every way I know how. Economics is easy, politics is hard. The Republicans decided after the presidential election that they were going to do everything in their power to make sure that the anomaly of a black president would not repeat itself in 2012. Fuck the country, and too bad if you were hurt badly by the financial crisis of the Bush years, but we Republicans have one and only one objective: stop that black president from being re-elected in 2012!!! When the Democrats had control of both the House and the Senate (2009-10), they should have passed larger stimulus bills and they did not have the courage to do it. The economy is coming back, but the trouble in Europe is not helping us either. That coupled with the Republicans who are hell bent to defeat Obama in 2012, will mean that any growth coming between now and the new congress of 2013, will be very little. If players in the commodity markets see the slowing economy coming, they will sell their futures and prices, such as oil, will come down. Oil is one of the most inflationary pieces of our economy as it is everywhere - it is up and down the system. Enough about the economy. Not enough people understand how the economy works, and there is too much misinformation out there on TV. Economics is easy to understand, politics is mean, bitter and sometimes cruel. Hope you all have had a good week.

Tuesday, May 1, 2012

The Triptych

This painting that I call THE TRIPTYCH is done in acrylic paints on birch plywood. I like to paint on wood after I have fashioned something with the wood. Last year I built a case with 2 doors and called it THE ALTARPIECE. I am going to do another altarpiece this year, but on a much smaller scale. I am still debating with myself about the shape as I want this little piece, though small in size, to have some stature. The stature part falls on me the craftsman building the case and the 2 doors. And, then painting something scaled to the smaller overall size of the piece. This time I think I will need to make a drawing, the actual size, so that I get the angle cuts right. THE TRIPTYCH by F.D. Zigler, Great American Artist, 2012.