Bailout Watch 533: Investor Confidence Ebbs

by Ronnie Schreiber

May 22nd, 2009 6:32 AM

bailout watch 533 investor confidence ebbs

More than a few TTAC commentators pooh-poohed the risk to the capital markets by Obama giving the UAW cuts ahead of senior creditors. Now the chickens are coming home to roost. There was that thing I sent you yesterday about Indiana, burned in the Chrysler bankruptcy, announcing the state won’t invest in bailout companies. Legislators giving tax incentives and other state aid to business is one thing, the state treasurer managing pension funds and state investments has a higher level of fiduciary (and legal) responsibility, and he’s not going to risk getting sued or worse. Today, Bloomberg reports that a bunch of hedge fund managers say they won’t invest in unionized businesses. Also, Jack Welch described the governments actions as “The creditors’ rights were trashed and the unions got 55 percent of the company.” People may not always be rational actors, but when you have everyone from economics professors to mom & pop investors asking “who will buy bonds if the terms are rewritten by the gov’t?”, it shouldn’t be any surprise that institutional investors act accordingly.

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U mad scientist on May 24, 2009
Everyone knows it's about all the non-essential, non-governmental items in the budget. Absolutely. The by far largest part of the discretionary budget is the military. Everything else is cheap and more necessary in comparison. - I don’t want to hear any anti-libertarian nonsense on this one either. It's only the most poisonous ideology of our times alongside its pal "conservatism". Don't worry, I think I've made that point sufficiently clear. There are still no takers for the challenge to identify successful civilizations or anything really based on those principles. - Even an intelligent Keynesian will tell you that not all government spending is good to ease a recession This is a good point to support the above. For example, after the dot com bubble in early 2000's, amassing a large and expensive military campaign in response to cave dwelling provocateurs was a really bad idea. Subsequently, allowing excessive creation of capital through the banking system to support both housing and consumer credit bubbles (a subtle but significant form of government supported spending) without consideration for the inevitable burst was a terrible idea. You shall note that both disasters were promoted to the plebs with the manufactured ideologies above without regard for what intelligent, rational, and educated people correctly predicted as inevitable results. - In this context, speculators are prime contributors to the propagated memes of "investment", due to the wealth of the successful ones. Most people are unaware of the massive and expensive PR (ie. propaganda) industry paid for by the profits of capitalism (that's also your money). If humans were nearly as rational as usually claimed by free-market theory, such a clear inefficiency would be unnecessary. Since instead humans are easily and predictably manipulated, that cycle of profit becomes a systematic evolutionary advantage and therefore naturally perpetuated. Actually research on speculation is not impossible. For example, math sims of commodities futures markets find that a few percent of transactions as speculation can help speed accurate pricing without significant side-effects. However, large proportions inevitably end in bubble dynamics, which benefit the few at the expense of many. Those few use the new wealth to further promote bubble friendly policy, and so the cycle continues. - However, one of the biggest reasons for the bubble was how most internet businesses were cleverly avoiding taxation that their brick and mortar competitors couldn’t avoid. This and many things about the internets in your post are hopelessly geriatric. People should stop trying to learn anything technology related from conservative websites. They are uninformed about such matters due to their general backwardness.

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Landcrusher on May 24, 2009

Agent, Seriously? Military spending by the US allows your country to implement so many silly liberal schemes you should be happy about our spending. --- Conservatism and Libertarianism have actually done quite well every time and place they are tried. Unfortunately, the statists and purveyors of scarcity based economics keep grabbing control and otherwise sabotaging the movements. Whenever I hear one of the standard rebukes about how something conservative failed it is always about how the path was strayed from, not how the path led us astray. For instance, your examples of Keynesian stimulus are perfect examples of liberal plans failing. There was no conservative or libertarian ideological root to invading Iraq or to subsidizing housing. None at all. The Bush family have always been socially conservative statists, and not especially pro military either until it suited their purposes. The spending on Iraq didn't help the economy, so that is evidence against Keynesian theories. Also, the subsidized housing and securitization were government free lunch attempts that didn't pan out at all. What part of conservative or libertarian ideology do you connect to those policies? --- Your theories on speculation are interesting, but what's the point? --- Lastly, the geriatric thing is nothing other than a label and dismiss move which is no more valid than an ad hominem attack. Perhaps if I could recall the best latin, I could coin a new phrase that would mean "to the theory" or "to the ideology". Instead of actually making a case against a theory, the sophomoric debater simply labels an argument as being fruit of an ideology, calls the ideology names, and then dismisses it without one bit of useful argument.

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U mad scientist on May 24, 2009
Military spending by the US allows your country to implement so many silly liberal schemes you should be happy about our spending. This is a misconception because the reason given for many military excursions are virtuous ones whereas the primary objectives tend to be more selfish. - Whenever I hear one of the standard rebukes about how something conservative failed it is always about how the path was strayed from, not how the path led us astray. This is the same excuse the communists or any other crackpot ideology have. Any time their idiotic ideas fail due to inherent crappiness, they blame impurity of the implementation. To be fair, they have the tendency to be promoted by parties well aware of this and just use the conveniently appealing bits to fool the undereducated who are unaware of the long history of failure. But to communism's credit, it's actually a reasonably complete ideology (instead of something completely fake) that has shown to work in smaller primitive communities unlike our libertarian friends who even screw that up. - For instance, your examples of Keynesian stimulus are perfect examples of liberal plans failing. This'll be funny because all evidence is against this and you will end up being humiliated. Please do continue past your assertion and provide us with educational insight into how conservatives view economic history. Even terribly poor spending like that for war has shown to be fairly successful. - The spending on Iraq didn’t help the economy, so that is evidence against Keynesian theories. This is because it was done extremely poorly by extremely corrupt people. Investigation afterward into the fairly opaque process found that priority was given to expensive mantelpiece projects that were profitable to certain US interests (and still poorly done due to lack of government oversight; who needs that, right?). Almost nothing has been spent on bread and butter infrastructure. By spending standards, this is criminally poor. Remember it's your money entrusted to appointees of the last admin who pretty much all the "conservatives" voted for because they were supposedly more responsible with cash. This goes to earlier points I've made that stupid people think things they're incompetent at must be shared by all. There's all manner of pretty successful government program which look out for the public interest; just because crooks you somewhat identify with can't be trusted with them doesn't mean they cease existing. - Your theories on speculation are interesting, but what’s the point? The point on speculation is to tie in to my larger point to discuss the hows and whys of public opinion. People like to think they form their own opinions, but it's generally led by more sophisticated forces. It's quite easy once you understand the fundamentals to pick out what individuals believe in, why they were led to this, and how they think because of it. This is valuable because becoming more sophisticated than the opposition (propagandists perhaps in this case) tilts the playing field to your favor. Now I do tend to pick on conservatism, but it's what's popular here and leads to a very significant portion of comments, and it's absolutely true the ideas are poison. - the sophomoric debater simply labels an argument as being fruit of an ideology, calls the ideology names, and then dismisses it without one bit of useful argument. This only works well if you can do it in an accurate and amusing way. Otherwise, humiliation inevitably results when you are called into question. For example, few of the internets companies were competing against traditional retailer, and most where not much profitable at all, which is not terribly relevant in crazy bubble economics. Even in the exceptional cases of successful e-retailers, their inherent advantage lies in their excellent physical stock turnover, potentially double that of even by far best B&M stores like costco, extremely low minimal stock levels, and free cashflow due to all this plus net payment terms. Thus, the case rests that people should stop learning about technology and innovation from groups unfamiliar with them.

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U mad scientist on May 24, 2009

Don't be mad at me, get angry at the people who gave you the poorly supported ideas that are impossible to defend. BTW, think about the psychology behind that. How would one consider ideologies with such a fixation over people that subsumes their entire thought process and they would toe the line in the face of overwhelming objective informed evidence to the contrary.

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