Three Posts & Three Paintings

For some reason, I am very tired this morning. Perhaps it is the work I was doing yesterday. On Tuesday, Wednesday and Thursday I wrote what I thought were three very well written posts about the kind of stuff we discuss here on MONEYTHOUGHTS. If I say so myself, I think they are worth reading again. Copy them and send them to your friends. Copy them and send them to your elected representatives. At some point, some one some where will help us spread the word. The TV news will not talk about this stuff, as they would rather talk about affairs. But one man's affair is not going to keep this economy down. We need to direct more people to the bigger issue of the LEVEL PLAYING FIELD for the rest of us. So, today I am going to post a few pictures that I have painted over the years that are still in the news today. The basic issue of fairness as it relates to the treatment of the individual investor has not been dealt with satisfactorily.

Stay tuned.

Use The Right Tool

My background is very much my father’s hardware store. In the ‘50s and ‘60s, a hardware store sold tools. The job is a lot easier when you use the right tool. Do not take my word for it, ask anyone that works with tools all day. I remember asking my father why he sold so many different weight hammers. Why was not one or two hammers enough. I learned that each hammer has a purpose and each weight makes a difference if you are swing that hammer all day. The bottom line, use the right tool for the job.

A private equity fund is a tool. Private equity funds over the years have provided the seed money for a number of great and vital companies that have grown into international companies. Yes it is important to understand what a private equity fund is.

Yesterday, I received a comment and an article about the use of private equity funds to buy into national banks. While on the surface that idea may sound good, the problem, as I see it, becomes apparent when you realize that the first duty of the private equity fund managers is to the private equity fund investors and not to that which they have invested in. How does that differ from a mutual fund investing in a bank? The big difference is that the mutual fund will never take seats on the board of directors. If the mutual fund does not like the way the bank’s management is running the bank, they can sell their stock in the bank. Depending on the size of their position and the volume of that bank’s stock that is traded every day, the mutual fund can be out of the stock in a matter of minutes or at the most a few days. Not so for a private equity fund. Private equity funds usually take a fairly large position in the equity of the company and as a result would get one or two seats on the board. Those who took seats on the board would have a conflict of interest from the start. Whose interests do they serve first? The bank’s interests, or, as a participant in the private equity fund, as all partners of the private equity fund are usually required to have some of their own skin in the game, the good of the fund? I am no Einstein, but for me, I have a problem with that. The private equity fund partner can not serve two masters at the same time.

If Secretary Geithner caves to the pressures from the private equity fund partners that want this rule change to permit them to invest private equity fund money in national banks, then I think we are in for 40 more years of wondering in the desert. I can not believe that Paul Volcker is sitting at the table where this is being discussed and not raising these same points. Where in the hell is Volcker? Has anyone seen or heard from Paul Volcker in a while? The Obama administration trotted him out there at the beginning and I have not seen or heard from him since.

Bottom line, in my opinion, this is an example of the wrong tool for the job. Private equity fund money should not be going into national banks. Banking, because of its position in the economy, please do not make me write a book about why this is the case, just take my word for it this time, should not be a recipient of private equity money, period.

Stay tuned.

Left, Right or Center: You Are Missing The Point

Yesterday I wrote what I thought was one of the best posts I have written since I started this blog MONEYTHOUGHTS. I have read it over several times, and each time, I was looking for a thread that I could develop in more detail. But, after reading this piece over and over, I believe the strength of the piece is in its simplicity, and the fact that it is devoid of numbers, formulas and a lot of Wall Street jargon.

If we Moneythought Heads are going to have an effect on the greater population of the United States, and perhaps even the world, as we do have readers from other countries, then it is important that everyday ordinary people are not turned off by a lot of the technical talk about the growth of the money supply and all the acronyms that are thrown around when discussing money, monetary policy and investments. Perhaps I have been going about this, the process to inform the people of the United States as to what caused the financial crisis, bond market meltdown and the resulting economic recession, all wrong.

The numbers are not what is important. The men behind the numbers and policies are not important. What is imperative is for people to understand that the process was corrupted. Corrupted and loaded against the interests of the American people, and tilted in favor of a very small, yet well financed few. The game of investing, which is no game if you understand that a savings account is not investing, has been corrupted and aided in that corruption by the Congress of the United States.

Regardless of whether you are politically left, right or center, in order for all of us to invest for our retirement or our children’s college education, we must have a playing field that is not controlled by a corrupt few. The knowledge that was gained more than 70 years ago from the Great Depression, and the laws that were passed in the 1930s and 1940s to protect the investor from abuse at the hands of the investment community were plowed under by our own Congress. Congress gave Wall Street the green light to steal and commit many frauds.

Until people get wise to this fact, and realize that this political left, right and center stuff is just so much bull shit, the sooner corrective action will be taken to restore the balance between Wall Street and Main Street. Given that inflation is a fact of life in the 21st century and that monetary policy and central banking and deficit spending are practiced in the United States, then it must follow that a level playing field must be restored if the American people are going to lift themselves up. The investment game must be repaired. The American people should not be made marks, nor should our Congress be promoting or protecting such behavior by the Wall Street community.

Stay tuned.

Money, Savings, Inflation & Investing

What if I told you that it is because of policies that cause us, as a nation, to run huge deficits, that there is such a huge emphasis on Wall Street, and in fact, on Main Street, to take more risk with our investments. The growth of investment products, such as hedge funds, happens for a reason. People and institutions feel the need to take more risk to grow their investment portfolios as a hedge against inflation.

If monetary policy, as implemented by the Federal Reserve Bank, is concerned with being the “custodian of the nation’s money”, then why is saving our money in a savings account in a bank a losing proposition? No doubt you have read in a newspaper or heard on TV about the low savings rate in the United States for many years. The argument is often presented that Americans spend too much and save too little. Consumption does drive the economy, and I think we can all agree upon that. But, what about savings? Is putting your money into a savings account a sound way to save for your retirement or your children’s college education?

Inflation destroys the incentive to save. Anyone that has been an adult through the 1960s and 1970s, and lived in the United States, knows what inflation can do to the purchasing power of their money. For example, anyone that bought a home in the ‘60s or ‘70s has seen the price of that home rise in value with inflation over those many years.

Why does our nation, on the one hand talk about how people need to save and not consume so much, while on the other hand see its currency lose purchasing power almost every year?

It is my opinion, that it is because of politics and policies regarding spending that does not take into account the detrimental effects that deficit spending has on our currency, the growth rate of the money supply, and ultimately the high degree of risk which is taken in investing, which is thrust upon those with the responsibility to hedge against the inflation that eats away at the purchasing power of our money each year.

As I doubt that national policies with regards to deficit spending is going to change, as both political parties spend money on their pet projects, it is my argument that if inflation is a fact of life in the United States, then it is imperative that regulation, oversight and transparency be present to protect the investor from the greed of Wall Street. As anyone with half a brain, me included, can see from history, that putting money into a savings account is no way to save and protect the purchasing power of their money over the long term. Then it is up to government and government regulations to be the firm hand to protect the American worker/investor against investment fraud. When that protection is dismantled and taken away, a financial crisis occurs and the bond market meltdown of toxic assets is the result.

When enough Americans wake up to how the game is played and how the game is deliberately broken to enhance the greed of the few, then real regulation will take place. Until then, we can expect more of the same and for history to repeat itself.

Stay tuned.

Fight Breast Cancer With A Donation

This morning I am going depart from my usual ranting about the economy, the markets, and how the politicians are in the pockets of Wall Street’s greedy bastards, and make my own plea for money.

Here in Cincinnati, we have a bike ride, a single day event the kind of bike ride you pedal yourself, that is called RIDE CINCINNATI. This bike ride was started for the purpose of raising money for BREAST CANCER RESEARCH at the Barrett Cancer Center of the University of Cincinnati. The man that started this ride, Dr. Harvey Harris, lost his wife to breast cancer after a 15 year battle. I knew his wife as I went to high school with both of them in the 1950’s. She was a lovely person.

I rode the first year the ride took place in 2007, and the second year 2008. This year I decided to try and do more than just do the ride and pay my entrance fee. I thought that I would form a team on one, myself and try and get people to donate to this important cause. With more money, there can be more research and hopefully some day we can eliminate breast cancer.

So far I have raised $220, that is 44% of my goal to raise $500. The ride date is Sunday June 14, 2009, and I will be out there. You do not have to be from Cincinnati to donate, as you can donate on-line directly to my team. Here is how you can donate to RIDE CINCINNATI. Google RIDE CINCINNATI, then go to DONATIONS. My team name is FRED ZIGLER and my code is 215716.

Breast cancer can attack both men and women, though it is more of a problem for women. Cincinnati has a great past when it comes to fighting disease as the live Polio vaccine was discovered in Cincinnati by Dr. Albert Sabin back in the 1950s. I hope everyone will give what they can. Thank you.

Saturday Is For Art

From THE ENVELOPE COLLECTION: Target? and Checkered. Acrylic on paper envelope 10"x13". $850 each framed and shipped in the U.S. Additional shipping cost outside of the U.S.

A New Supreme Court

Today, I am going to take the day off from talking about the economy, the markets and my favorite subject the credit rating agencies, and talk about the soon to be new opening on the Supreme Court. First, let me say that I am not a lawyer, never have been a lawyer, nor taught constitutional law. Almost 50 years ago, I took a course in the political science department on constitutional law and have always found The Court’s decisions interesting.

The pendulum swings back and forth in our Supreme Court’s interpretation of our constitution. Some may say that the court under President Obama is ready to swing back to the left, or a more liberal court. I remember some of the justices on the Supreme Court from the 1960s, and even the 1950s. For me, those were some great years for the Supreme Court. Civil Rights was a big thing then, and back then as today, that grabbed my attention.

You see civil rights is for everyone. Civil rights are not just about protecting the rights of minorities, people of color or people of any other orientation, or, however you wish to slice and dice us up as people. Growing up in the late 40s and 50s, left me with a special interest in the way a government treats all of its people. While the Second World War was behinds us, for me, as a little Jewish boy, living in a country where Jews made up about 2% of the population, the government’s willingness to protect and defend the civil rights of all its people was very important to me. This for me was not something to be taken lightly.

And so, the Supreme Court and its decisions with regards to civil rights captured my attention and I followed their decisions and their reasoning very closely. Without those men that sat on the Supreme Court in the 50s and 60s, I do not believe we would have a President Obama in The White House today.

So, now it is President Obama’s turn to nominate his choice for our Supreme Court. Before becoming President, Barack Obama taught constitutional law, so we know he knows something about the history of the Supreme Court. In my mind, civil rights needs to be protected and defended every day and every generation. I hope President Obama will feel the same way. I hope he will nominate a person who believes in the importance of civil rights for all people, because that is what civil rights is all about.

Stay tuned.