Going down like ninepins - who's next?

[Leonis]

I found this interesting, just read it in Monday's Sydney Morning Herald:

Robber barons must be made to pay for their greed Date: June 28 2002 By George Trefgarne If you believe Adam Smith was a phoney, capitalism is a fraud, and the stockmarket is a casino, now is your chance to say so. One of the great speculative manias of all time is in the advanced stage of collapse and its consequences will be with us for years. So far, only investors, a few market players and those goatee-bearded dotcommers have felt the impact of shrivelling shares. But Wall Street is in the third year of a bear market, a performance unseen since the 1930s, and soon the draught will be felt in the real economy. As we saw at WorldCom this week, that will mean job losses. No doubt some academics, pundits and left-wing rabble-rousers, playing on fears the system doesn't work, will take advantage of the situation and question the very values and institutions on which the world economic system rests. After all, these characters have been on the defensive ever since the fall of the Berlin Wall, when the more excitable capitalists boasted history was over and they had won. If you are one of the 17,000 losing their jobs at WorldCom, you might listen to the malcontents. Some might even dust off their old copies of Das Kapital and say it would be better if the economy was centrally planned and run by "experts". But those of us who believe in markets must not be cowed. The first thing to realise is that markets are not perfect. They merely represent the collective wisdom of thousands of people and are the least bad way anyone has come up with for matching supply and demand. But, like anything dependent on human nature, they can fall victim to greed and fear. As Churchill said of democracy, capitalism is the worst system, apart from all the others. Rather than the markets failing, they are working. With the benefit of hindsight, we can see that the bull market of the Clinton years was just a bubble in which huge amounts of capital were misallocated on wasteful enterprises, notably those based around the Internet. Collapsing markets are about dismantling that elaborate superstructure of overinvestment, so unprofitable enterprises close, capital is reallocated and growth resumes. This is what the economist Joseph Schumpeter called creative destruction, a process every entrepreneur has to live with. The market is certainly signalling economic difficulties, but we are not facing a systemic collapse, as during the 1930s, when the situation was aggravated by worldwide tariffs, strikes, and communist and fascist governments in Europe. So if the system isn't the problem, what is? The answer is that just about every one of the recent problems to hit financial markets has been caused by individuals acting incompetently, fraudulently or dishonestly. The comparison is not so much the 1930s, but the beginning of the 20th century, when millionaires such as Vanderbilt, Rockefeller and Frick emerged in America. We, too, live in an age of robber barons. They are the greedy chief executives, bankers and accountants, some of whom have lied and cheated, misled investors and looted companies for their own benefit. "What do I care about the law. Ain't I got the power?" the steel magnate Vanderbilt once said. That is just the attitude we have seen during the tech boom. It starts right at the top, with Alan Greenspan, chairman of the United States Federal Reserve. During the Asian crisis of 1998, the venerable central banker began to play the market. Every time stocks fell, he puffed them up again with an interest-rate cut, inflating the bubble further. Whenever things went wrong, such as September 11, he responded by cutting rates. Investors became used to shares going up, rain or shine. Instead of asking questions, scrutinising company accounts, or doubting the bizarre claims of the so-called New Economy, investors became complacent and credulous. Uncle Alan blew money into the system and just inflated the bubble further. Nobody is questioning Greenspan's honesty or even his good intentions. He just got it wrong. That is more than can be said for many of the players on Wall Street who inhaled his heady gas and became delirious on the vapours. Andersen, the accountants, have already been found guilty of obstructing justice by shredding documents as Enron collapsed. The market is taking its revenge on those it cannot trust, now the authorities are also acting. They should not hold back. The events at WorldCom are a case in point. The company was booking routine running costs as capital expenditure. That is seriously misleading and allowed profits to be exaggerated. No doubt the FBI, Congress and the Securities and Exchange Commission will be coming after Scott Sullivan, the chief financial officer, and Bernie Ebbers, WorldCom's founder, just as they have come after other fallen barons of Wall Street, such as Kenneth Lay and Andrew Fastow of Enron, or Henry Blodgett, the analyst at Merrill Lynch investment bank who put buy recommendations on Internet stocks he privately described as "junk". Even Martha Stewart, the apple-pie American icon, is facing an insider-dealing probe. And the greed, of course, is not confined to Wall Street. We are facing not so much a crash, as a crisis of confidence. Those responsible must fall on their swords, or be brought to book. George Trefgarne is economics editor of The Daily Telegraph, London.

Source: The Age

[Silver Cheetah]

[quote]Originally posted by Leonis:
[QB]I found this interesting, just read it in Monday's Sydney Morning Herald:

Robber barons must be made to pay for their greed Date: June 28 2002 By George Trefgarne [qb] So far, only investors, a few market players and those goatee-bearded dotcommers have felt the impact of shrivelling shares. But Wall Street is in the third year of a bear market, a performance unseen since the 1930s, and soon the draught will be felt in the real economy. As we saw at WorldCom this week, that will mean job losses. [QB]

By the economics editor of the most right wing paper in Britain, for anyone who isn't aware of the politics and ideology of The Daily Telegraph, (which is probably most people on this forum.) The Telegraph subcribes 100% to the prevailing free market ideologies (like it's not obvious... [img]smile.gif[/img] )

I would totally dispute the statement 'So far, only investors, a few market players and those goatee-bearded dotcommers have felt the impact of shrivelling shares.'

Is this man living on another planet or what? Here in the UK, 100s of 1000s of people are going absolutely bonkers because their private pension plans are in total disarray. During the last couple of decade, a large percentage of the population changed from public to private pension plans. Now they find that the value of their savings has dropped dramatically. Public confidence here in private pension plans has gone through the floor, and there are a whole lot of very worried people wondering just how they're going to manage upon retirement.

More and more companies are closing off their pensions schemes to new employees, who are having to go it alone in funding their own. However, due to the long bear market, and the recent spate of revelations re corporate misdoings, people no longer know what to do or who to trust.

I seriously question this guy's flippant dismissal of the problems as confined to those who have been so far 'found out'. Maybe that's the way the situation is being perceived in Australia, but is far from the case in the UK.

Basically we don't know WHAT the situation is.

The plain facts are, how on earth is the investor supposed to know which sets of accounts are honest and which are not? If we can't trust the accountants, and if the company is lying to the market, how are we to know? Netscape's founder Jim Clarke said 'I don't understand why business journalists expect to be told the truth. The share price is too important for that.'

In Britain, the Times last week published research shoing that 10 of Britain's leading 10 insurers have booked up to £5.7 billion in profits they have yet to earn, to boost the apearance of financial strength.

The problems are actually inherent in the system. As soon as a company is floated, its worth is very much dependent on how its current performance and future prospects are perceived by the market. Those who buy shares, or bonds, do so on the basis that the company will provide them with decent returns on their investment.

In the cut throat, dog eat dog environment of the markets, to be seen doing less well than expected is to wipe value of the share price, as investor confidence falls, (obvious but I thought I'd say it anyway). It is crucial that companies are seen to be doing well, otherwise, they run the risk of going to the wall.

Of course sharp practice takes place. If it's that or ruin, many executives will go for the sharp practice, and hope that they get away with it, as opposed to seeing the value of the company decline and fall, and their fortunes with it. Of course they will look for any loophole they can find.

So, how to stop it? Anyone got any ideas? I haven't. It's all very well to talk glibly of doing something to stamp out managerial propensities for manipulating earnings, but what? Answers on a postcard please - or just post 'em here.....

Originally posted by Silver Cheetah: By the way, oh Monsieur tres Omniscient [img]smile.gif[/img] How do you know the 'hundreds' of companies are not being 'stupid' about their accounting? You can't know, can you, and neither can I. However, I think we are about to find out. Watch this space! (Well, not this space actually. The business pages are likely to be rather more informative - for the really serious investor anyway. [img]smile.gif[/img] )

Hah! Quite simply actually SC [img]smile.gif[/img] And I didn't need to be omniscient to have the knowledge [img]smile.gif[/img] In the USA at least there are tens of thousands of small business which have been incorporated (Half the people I work with have their own side businesses which are incorporated) And these people are not cooking the books like the Big Bad boys in the news paper [img]smile.gif[/img] Oh I grant you that there are others who are cheating on the books, but Im hoping that this wake up call will get them back on track, and we will proably see more new legislation covering accounting in the near future. It also looks like the execs in these cases are not going to be able to just walk away from this even richer than when they whent in. There are already class action lawsuits against some of the bigger names.

[Silver Cheetah]

Originally posted by The Hunter of Jahanna: quote: Just out of interest, what do you think the purpose of life is? To get ahead? If so, with what purpose in mind? To achieve what? I'd be really interested to get your answer on this one.)

The purpose of my life is to live it to my version of the fullest. In my short time on this planet , I have traveled to 10 countries and been exposed to numerous cultures.Thanks to that, I completely understand why most of the world cant stand Americans. We suffer from a terminal lack of respect. I have had a few jobs, met a lot of great people, and gotten married. I have also been an avid outdoorsman hunting all accross america with everything from spears and knives to guns. I have seen 2 deer fight for control of a herd. I have seen eagles snatch fish out of lakes.I have seen nature in all its glory and I constantly wonder why people cant live like animals. Animals dont worry about taxes and colledge or who has a better car or a better job.Animals dont steal or rape or murder or do drugs. Animals just live everyday like it was their last mainly because it could be. Their days arent filled with things either, they are filled with sleeping, eating and playing.Why cant people live with simplistic common sense like animals do? Take a house cat for example. If you dont feed it, it will go out and get its own dinner.Why cant people be more like that?? If you dont feed them , why dont they go out and get their own?? This is where my thinking comes from , SC.

If you spend a week or 3 in some remote wilderness , like Alaska ,here they fly you in and drop you off and you have to fend for yourself, you will begin to wonder why the rest of the world cant do the same.I have done it 3 times and each time I bring less and less. THe last time I only brought a hunting knife, water purification kit 2 changes of clothes and lots of socks. I didnt get cold, go hungry or miss a second of my so called "real life". That is what I think the purpose of the rest of humanity should be. TO become one with the world around them and blend in with nature instead of trying to control it. To be able to survive in the world with only your wits and a pocket knife.If we humans stopped just carrying around that over sized brain of ours and started useing it to think , a lot of people would realize that the things we value only have the value we place on them. What is more important, a house,car and computer , or self respect, self reliance and a life you enjoy?? I once heard a quote somewhere that said "time spent being liked could be better spent likeing being."[/QUOTE]I too, believe in living life to the full, and do so, - although my way is rather different from yours.

The reason we can't live like animals is because we have a different sort of conciousness, which associates the past and the future which the present in a way that animals don't. Animals have an ability to live 'in the moment' which most humans lack. We are concious of what is going to happen tomorrow, next week, and next year, and want to prepare for that. Most people are too afraid to let go and live for the now.

I notice that you yourself, whilst being happy to be flown in to Alaska or wherever, are not doing it full time. You come back to civilisation and your computer etc. Why is that? Why do you not go back to nature 100%, and commit to living your life that way? I would like to have your answer to that, and we could then take this part of the discussion further.

Another thing to be aware of is that we are currently more than 6 billion people living on this planet. Even if it were desirable to go back to nature and live in the way you describe, we could not do it. Our huge demands just for food would decimate the wildlife poplulation very quickly. Our food is in the main, as you know, intensively farmed, both in terms of animal and plant food. Remove that, and you might see a few difficulties in feeding the planet, just because of sheer numbers. (I personally believe we could do it if people stopped eating meat, but that's a whole other discussion and not one I want to get into here.... [img]smile.gif[/img] And anyway, that wouldn't suit you, as you like hunting so much.)

Originally posted by Silver Cheetah: By the economics editor of the most right wing paper in Britain, for anyone who isn't aware of the politics and ideology of The Daily Telegraph, (which is probably most people on this forum.) The Telegraph subcribes 100% to the prevailing free market ideologies (like it's not obvious... [img]smile.gif[/img] ) I would totally dispute the statement 'So far, only investors, a few market players and those goatee-bearded dotcommers have felt the impact of shrivelling shares.' Is this man living on another planet or what? Here in the UK, 100s of 1000s of people are going absolutely bonkers because their private pension plans are in total disarray. During the last couple of decade, a large percentage of the population changed from public to private pension plans. Now they find that the value of their savings has dropped dramatically. Public confidence here in private pension plans has gone through the floor, and there are a whole lot of very worried people wondering just how they're going to manage upon retirement. More and more companies are closing off their pensions schemes to new employees, who are having to go it alone in funding their own. However, due to the long bear market, and the recent spate of revelations re corporate misdoings, people no longer know what to do or who to trust. I seriously question this guy's flippant dismissal of the problems as confined to those who have been so far 'found out'. Maybe that's the way the situation is being perceived in Australia, but is far from the case in the UK. Basically we don't know WHAT the situation is. The plain facts are, how on earth is the investor supposed to know which sets of accounts are honest and which are not? If we can't trust the accountants, and if the company is lying to the market, how are we to know? Netscape's founder Jim Clarke said 'I don't understand why business journalists expect to be told the truth. The share price is too important for that.' In Britain, the Times last week published research shoing that 10 of Britain's leading 10 insurers have booked up to £5.7 billion in profits they have yet to earn, to boost the apearance of financial strength. The problems are actually inherent in the system. As soon as a company is floated, its worth is very much dependent on how its current performance and future prospects are perceived by the market. Those who buy shares, or bonds, do so on the basis that the company will provide them with decent returns on their investment. In the cut throat, dog eat dog environment of the markets, to be seen doing less well than expected is to wipe value of the share price, as investor confidence falls, (obvious but I thought I'd say it anyway). It is crucial that companies are seen to be doing well, otherwise, they run the risk of going to the wall. Of course sharp practice takes place. If it's that or ruin, many executives will go for the sharp practice, and hope that they get away with it, as opposed to seeing the value of the company decline and fall, and their fortunes with it. Of course they will look for any loophole they can find. So, how to stop it? Anyone got any ideas? I haven't. It's all very well to talk glibly of doing something to stamp out managerial propensities for manipulating earnings, but what? Answers on a postcard please - or just post 'em here.....

I know this will sound totaly unsympathetic but there is a reason that ANY intelligent investor knows the word "Diversification". The foolish people that worked for Enron for example had a huge percentage invested in their employer..big big stupid mistake, You already are 100% dependant on your employer for your income so you should not be putting the BULK of your investment dollars there too. Second, if you are going to have a private investment plan you should not put all the money into one kind of stock (example tech stock) For pension plans only highly diversified mutual funds should be looked at. Perfect examples of good pension funds are, funds that cover the "Wilshire 5000" or the entire DOW. While temporary setbacks (like the current crisis) will happen, over a 30 year period you will make money.

The problem here is not the system, it is the ignorant and or greedy people who do not educate themselves on how to best manage their funds. Yes there are shady characters manipulating their companies earnings statements but if you don't have all your money in one basket you can only be burned for a little instead of everything.

I cannot speak as to how your funds are managed over there, the laws and system are probably very different from here. All I know is that if you keep your funds properly diversified you should have nothing MAJOR to fear in having a privatized pension fund.

Perhap[s the schools should start teaching economics 101 again

[Silver Cheetah]

Originally posted by MagiK: quote: Originally posted by Silver Cheetah: By the way, oh Monsieur tres Omniscient [img]smile.gif[/img] How do you know the 'hundreds' of companies are not being 'stupid' about their accounting? You can't know, can you, and neither can I. However, I think we are about to find out. Watch this space! (Well, not this space actually. The business pages are likely to be rather more informative - for the really serious investor anyway. [img]smile.gif[/img] )

Hah! Quite simply actually SC [img]smile.gif[/img] And I didn't need to be omniscient to have the knowledge [img]smile.gif[/img] In the USA at least there are tens of thousands of small business which have been incorporated (Half the people I work with have their own side businesses which are incorporated) And these people are not cooking the books like the Big Bad boys in the news paper [img]smile.gif[/img] Oh I grant you that there are others who are cheating on the books, but Im hoping that this wake up call will get them back on track, and we will proably see more new legislation covering accounting in the near future. It also looks like the execs in these cases are not going to be able to just walk away from this even richer than when they whent in. There are already class action lawsuits against some of the bigger names. [/QUOTE]Not omniscient then, just omnipresent! [img]smile.gif[/img] Seriously MagiK, I don't care how much you get around, babe, you can't possibly know more than the directors of a very small proportion of US listed companies. On this one, let's wait and see. Hey, maybe we could have a bet on how many ninepins there are left to go down. I reckon this one is going to run and run....

On the accounting regulation/legislation front - hehe, first time I've heard a right wing American actually calling for MORE restrictions, rather than less! There is balm in Gilead, after all.... hehehehehe

Far as I know, you've already got regulations/legislation more than a normal person could get their head round in a life time. So, more of the same then eh?

In answer to someones question about the purpose in life.

Life only has a purpose if you believe in a God, Goddess or creator being/beings of some sort. If there is no "higher" power then there is no purpose behind life, the universe and everything.

Soooo Based on my "religious" beliefs MY purpose in life, is 1. Take care of myself, my family and a distant 3rd, others. All the wile realizing Im doing this because I have the "faith" that I have. If there is no faith, the only purpose can be to take care of #1.

I will grant that My kids come first not me, but to take care of them properly I have to take care of me..so it is a vicious cycle [img]smile.gif[/img] But in the country I live in, under its ideals of freedom and of a democratic republic which embraces capitalism ...my job is to make money. Money used to care for my children who are my responsibility because we produced them, just as others are responsible for the offspring they produce. So yes, getting ahead is a good thing.

I will also argue that I do not "screw over" other people to get ahead...it isn't necessary. I do my job and am rewarded for good results and in effect punished for failure.

Originally posted by Silver Cheetah: Not omniscient then, just omnipresent! [img]smile.gif[/img] Seriously MagiK, I don't care how much you get around, babe, you can't possibly know more than the directors of a very small proportion of US listed companies. On this one, let's wait and see. Hey, maybe we could have a bet on how many ninepins there are left to go down. I reckon this one is going to run and run.... On the accounting regulation/legislation front - hehe, first time I've heard a right wing American actually calling for MORE restrictions, rather than less! There is balm in Gilead, after all.... hehehehehe Far as I know, you've already got regulations/legislation more than a normal person could get their head round in a life time. So, more of the same then eh?

Oh we are just talking about listed Corporations, Im assuming listed means on the NASDAQ.

I don't need to know everyone of them or even a lot of them, I know how business operates. And yeah the "big boys" get away with a lot but there is no more evidence that ALL others cheat than there is that MOST don't so neither of our statements is supportable by available "facts"

You take a pesimistic and negative view in assuming that all corps cheat. I take the opposite approach. The fact that I live and work with honest business people gives me reason to believe that decent hard working business people do exist and are running many business. I don't know how many crooked dishonest business people you live near or work with so I can't say how you come by your knowledge. If all you base it on is the stories listed in the headlines...like I said...there are only 4 or 5 in the news here, which out of all the businesses is a very very low percentage.

You are right about how much is regulated already, what will hopefully be done is not so much NEW regulations but refinement and reformation of existing policy.

As for getting around [img]smile.gif[/img] That doesnt even count in this issue, you could travel forever and never know anything about business. I personally couldnt run one with Bill Gates helping me out. I dislike the whole business owner schtick...it isnt for me. I was however slightly bemused that 7 out of 15 co-workers all had corporations with themselves as the only employee....and apparently they are making some serious money at this game.....At the expense of having a personal life I think...but that is just my opinion.

[ 07-02-2002, 10:04 AM: Message edited by: MagiK ]

[Leonis]

Originally posted by Silver Cheetah: I seriously question this guy's flippant dismissal of the problems as confined to those who have been so far 'found out'. Maybe that's the way the situation is being perceived in Australia, but is far from the case in the UK. Basically we don't know WHAT the situation is..

Good post. I think our government would like to see it that way - even in the face of One.Tel, Ansett, HIH, United Medical Protection etc...
The public seem to be hurting and pretty p****d off though. (Particularly those who've lost jobs, inurance policies, investment etc...)

I actually got to see some of the other ways we were all affected when I worked for *a telco* a few years back. [img]graemlins/1puke.gif[/img]
They had 'policies' and programs in place to double charge a percentage of random calls on people's bills - if they complain, refund it, if not, $$$ thankyou very much! That sort of thing is rife. I stumbled across it one time and was horrified and couldn't wait to get out of there.

Trefgarne feels at ease saying this:

The answer is that just about every one of the recent problems to hit financial markets has been caused by individuals acting incompetently, fraudulently or dishonestly.

then this

It starts right at the top, with Alan Greenspan, chairman of the United States Federal Reserve....(edit)...Nobody is questioning Greenspan's honesty or even his good intentions. He just got it wrong. That is more than can be said for many of the players on Wall Street who inhaled his heady gas and became delirious on the vapours.

That's bizarre; system or individual matey?
I'd have to agree about the 'robber barons' though. But current government and business practices are designed to support them as far as I can tell.

"The rich get richer, the poor get the picture" as Midnight Oil elegantly stated.

Solutions? How do you remove greed from an individual? Does it weigh about a pound?

[WOLFGIR]

Just a couple of thoughts around the MS discussion here...

Have you thought that peole might have wanted the MS products and the Monopoly basis it offers since that is a higher productive rate for companies, friends etc. You can communicate with each other easily. (Read easily apart form all the shite that can happen when you use something that is electronic )

Many buisnesses here chooses MS because they know it works with the rest of the market in 90% which means less time to spend on making up things as they go. Gamers buy MS cause they want to be able to play all the games.

Monopoly isn´t always bad, and you can choose to stand aside. Competition means different products to place your product in a different light and hope that consumers choose your products.

A more open program market, and maybe even some static choices in the OS´s should make most things work on different OS´s but then you have Monopoly on different comapny solutions and have a monopoly there as well.

See GIF, PSD, JPEG .DOC and all the other litte endings out there, based on technologies and standards that have outmatched others..

Just a couple of thoughts, and by all means, if you want there is a way to make MAC and PC communicate almost without trouble now adays, and it is getting easier to use Linux as well