Category Archives: Business

Business, Economics, Political Commentary

Obama’s Policies More Bankrupt Than Chrysler

4 Comments

Hard to argue:

Obama’s grand design for U.S. automakers is the perfect opportunity to show where his moderate rhetoric varies from his big-government actions. He has said he doesn’t want the government to be a permanent owner of big companies, arguing — in part correctly — that he inherited the bailouts and partial nationalizations from the Bush administration. But Obama’s plans for Chrysler and General Motors belie his claims that he doesn’t want the government to dig in further. His actions show that he isn’t shy about using the powers he inherited to favor political allies such as Big Labor at the expense of millions of Americans with savings vehicles invested in auto company debt securities.

The government-union ownership structure — in which the United Auto Workers retiree health care fund would own 55 percent, Fiat would own 20 percent, the U.S. government would own 8 percent, and even the Canadian government would own 2 percent (Canada is “home to several to several large Chrysler facilities,” according to the Wall Street Journal,) — also has little to do with repaying taxpayers.

As a Wall Street Journal editorial just before the bankruptcy announcement put it: “Taxpayer-shareholders are likely to be far better off with a smaller stake in a truly private company that is better insulated from political meddling. Private owners are more likely than the Treasury or the unions to try to run the company for profit, and so increase its equity value over time.”

But that wouldn’t accomplish the political goals.

Business, Economics, Education, Media Criticism, Political Commentary

Socialism

7 Comments

College style:

In the videos, YAF members approach their classmates with a petition calling for the redistribution of student GPAs. “It would make it so that all students have an equal opportunity to go to grad school,” University of Oregon YAFer Kenny Crabtree explains. Students with bad grades would therefore be entitled to points earned by straight-A students.

Their classmates are flabbergasted.

“Is that, like, a joke or something?” one guy responds.

“Why would you take points from people who are higher up and give them to people who didn’t meet the requirements?” another asks George Mason University YAFers. But when asked if he supports Obama’s wealth redistribution schemes, he says “yes.”

Shocking? Not really. As I pointed out in my March 30 column, most college students are economically illiterate. When quizzed by the Intercollegiate Studies Institute about basic concepts, such as supply and demand, the average student’s score was 53 percent. And since most don’t work or pay taxes (only 46 percent of full-time students have jobs), they simply have no idea how capitalism works.

The economic illiteracy being promulgated by our educational system is quite depressing. It’s almost like it’s part of a grand scheme.

Business, Economics, Political Commentary

They Voted For The One

11 Comments

They wanted change. They got it:

Not surprisingly, companies’ take on the issue is that the proposals, if passed, would raise their cost of operations and put them at a disadvantage when competing against overseas rivals based in countries with lower corporate tax rates, according to SiliconValley.com. Silicon Valley companies will be among those lobbying against the proposals. Said Carl Guardino, CEO of the Silicon Valley Leadership Group:

On a Richter scale of 1 to 10, this is about a 20.

So ye sow, so shall ye reap.

We’ll see what this does to his approval ratings in Silicon Valley.

Business, Economics, Media Criticism, Political Commentary

Health Care Reform

9 Comments

…versus universal health care. Some thoughts from (MD) Paul Hsieh:

According to a recent CNN poll, 8 out of 10 Americans are generally happy with their current health care. But they are legitimately concerned about rising costs. Furthermore, the constant media drumbeat about our health care “crisis” is making most Americans think that everybody else is having a rough time with health care (even if they themselves are doing relatively well). This fuels the false perception that we need drastic change in the form of government-managed “universal health care.” In fact, the opposite is true. If Americans are satisfied with their health care quality but unhappy with rising costs, then the proper course is free-market reforms that lower costs, preserve quality, and respect individual rights.

Americans have already been burned by the congressional rush to pass the “stimulus” bill, which many legislators now acknowledge that they didn’t even read before voting for. Congress should not make the same mistake by rushing to pass “universal health care” legislation. Instead, Congress should slow down, take a deep breath, and engage in a full, honest discussion about the kinds of genuine reforms we need to actually correct our current problems.

Yeah, like that’s gonna happen.

Business, Economics, Media Criticism, Political Commentary, Technology and Society

The Real Cultural War

38 Comments

It’s about free markets versus fascist corporatism.

[Update early afternoon]

Sorry, but yes, it is fascism. Which is not identically equal to Nazism.

[Update a few minutes later]

So much for the rule of law:

As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end – although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler’s first lien secured lenders.

Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.

Hey, there are omelettes to make.

Business, Economics, Technology and Society

Airline Seats

15 Comments

Why are they so miserable?

I found this interesting:

Brauer, a former Air Force officer and mechanical engineer, still has a lot to do with our in-flight comfort. He’s been researching it almost since he started at Boeing in 1979 and consults with airlines on how seat configurations balance comfort against the bottom line. His calculations largely led to the 777’s shift to three rows of three, from the “2-5-2” configuration, which allows everyone to have a free seat next to them when the plane is 67 percent full (versus 44 percent).

I’ve kvetched about this before, I’m sure [Googling…yup, here it is, in comments), but a big reason that I don’t like wide bodies is that the window/seat ratio is much lower on them, and I’m a window man. But at least with the 3-3-3, I can get a window and still have a decent chance of an empty seat next to me. That would almost never happen with a 2-5-2. I don’t know why this should have required a calculation, though. It seems pretty intuitively obvious that 3-3-3 is superior, just because a row of three seems preferable to a row of five. It puts everyone closer to an aisle, other than windowers.

Or does it? Maybe a calculation is required…

Business, Economics, Political Commentary

More Candidates For Tea Parties

17 Comments

GM bondholders:

This is what happens when the government picks winners and losers: big unions walk away with GM and small investors get thrown by the wayside. Sooner or later, we’re going to have to return to some kind of normal economic activity, and when that happens we will need investors, large and small, to feel it’s worthwhile getting back into the market. Deals like this one are going to make that awfully difficult.

People are reeling from having their 401ks wiped out in the current market slide. And now those who had for years bought what they thought were “safe” blue-chip corporate bonds are discovering they were only safe until they were told by the government to go fly a kite because government wants to pay off the unions instead. That is deeply unfair to small bondholders, and it’s dreadful economic policy. As a friend of mine put it to me, “Who in their right mind will buy corporate bonds now? And if nobody’s buying bonds, how exactly are our debt markets going to get humming again? What a mess.”

It’s almost like they want to wreck the economy.

[Update a couple minutes later]

Apparently, Ken Lewis, head of B of A, has been fired.

The question is, who did it? The shareholders and board (you know, the old-fashioned way), or was it our new head of the economy continuing to grab more power?

[Update]

Apparently it was the board. And he’s still CEO, just not chairman.

Business, Economics, Political Commentary

GM Thoughts

5 Comments

From Mitt Romney:

GM’s new proposal, clearly produced under government duress, is worse than virtually any of the alternatives. It would give GM to the UAW and the U.S. government and make taxpayers pick up the bills. Of course, billions more from government would be drawn down right away. But the UAW could also depend on the Obama administration to keep up the subsidy for years and years to come. Government and Union co-ownership: It would be as ineffective as it is un-American.

The right course for GM is an out-of-court restructuring or bankruptcy. Either would keep the company in business and rid it of burdensome costs, work rules and obligations. The government could backstop the post-restructuring debt, helping the company get on its feet. GM must not fail: If its costs are brought in line with its competition, it can ultimately thrive and grow jobs. What is proposed is even worse than bankruptcy—it would make GM the living dead.

I was never a big Romney fan, but he’s looking pretty damned good right now.