Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Not at all sure that I've seen anyone here suggest that "capitalism is the source of evil in the world".
A fair number of us have observed that unfettered and unregulated capitalism can cause a whole lot of problems, though. Or haven't you noticed? Maybe you're part of that elusive "1%", in which case I can understand your perspective...
Esteemed Judge Richard Posner, a Chicago school adherent until 2008, has a more refined interpretation of capitalism. His views are outlined in his book "A Failure of Capitalism: The Crisis of '08 and the Descent into Depression".
Not sure what's going on now is capitalism in the traditional sense. This is a free-for-all, and what makes me furious is that you have people - even average investors - who get all irritated when the status quo is possibly interrupted or even questioned in a system that's clearly to at least some degree broken. People who argue that the financial companies are all good little boys and girls who have learned their lessons from 2008 and are now in a much stronger position. Bank of America says they're fine, they don't need to raise money. Oh wait, they really do. They really, really do.
Then you have a PRIMARY DEALER (MF Global) who - it turns out - was leveraged a sickening 80:1 and potentially took customer funds? These companies have learned nothing, and if MF Global was able to get in the mess they were in, that doesn't exactly give me confidence that anyone is going to step in before any of these other major financial companies get in a similar position.
Gordon Gekko seems like Mr Rogers compared to some of the people in the financial industry today. (The second film: "Someone reminded me I once said, 'Greed is good.' Now it seems its legal." From the first film: "I create nothing. I own.")
Now you have a series of financial companies who believe that they can come crying to the Fed whenever they screw up and are so leveraged and massive with trillions in derviatives that they have the excuse that letting them fail will cause a domino effect (and it probably will, but what let them get to that point?); I don't know why that comes as a surprise after they were bailed out. I don't know why anyone would think they learned a thing from 2008, and every day makes it even more clear that they didn't.
"average investors - who get all irritated when the status quo [is] questioned in a system that's clearly to at least some degree broken. People who argue that the financial companies are all good little boys and girls who have learned their lessons from 2008 and are now in a much stronger position."
Well, evidently we also have the "average investor" who is angered because he, as a perfectly innocent taxpayer, will be "forced" to help bail out, via the FDIC, all those greedy depositors who failed to do due diligence before trusting their money to the local bank branch. After all, all that they had to do was to go down to that bank, ask the bank to provide a detailed, complete and accurate analysis of the bank's financial position (which they no doubt would have been pleased to supply), take off a few weeks from work and examine that data before making their paycheck deposits.
Everyone who has lost money in this debacle has only themselves to blame, right? If they hadn't been stupid enough to think that the "system" was reasonably responsible, they would have... h'mmm... put their money WHERE, exactly? I must have missed that part- what did Mr. Friedman suggest again??
And guess what? The average taxpayer is going to bail these companies out again and again and again and again (and again and again) if they get into trouble. I have no doubt about that whatsoever.
Maybe if someone had, oh I dunno, regulated these companies or not looked the other way or thought for a second about how to try and make an effort to not have another 2008 again instead of letting them get larger and more reckless and more interconnected, we wouldn't be having this discussion and you wouldn't have to be making this argument (?!) about people having to research banks - hey, who in charge is at fault for the erosion of trust from the average person in the financial system? Who let things get to this point (again?) ???
There is little (if any) in the way checks and balances anymore and there's nothing - I think - that will be done about that. That is (OBVIOUSLY, from one of the FEW people who argued on fundalarm that the financial industry hadn't learned anything from 2008 and that the problems weren't over) NOT the fault of the average person, but that's the environment this is.
Meanwhile (x2), the MF Global website still has a section about "How MF Global Protects Client Assets", which goes into detail about segregating client funds.
"It seems some people who post on this board have articulated that capitalism is the source of evil in the world." - I disagree, Maurice. Capitalism is the best economic system ever devised. I'll take it any day over communism, socialism, or totalitarian-sponsored economies like existed in Germany in the 30s and 40s. Like you, I suppose, I've benefitted from this system.
But as others have remarked, the qualities that make capitalism so efficient also contribute to the excesses to which it can run. Unchecked, these excesses threaten the fabric of our society. Henry Ford was smart enough to know that if workers weren't paid a living wage, there'd be nobody to buy his products. Eisenhower warned of the undue influence of big business and defense contractors in the affairs of state. More recently, none other "capitalist" than Warren Buffet has deplored the increasing disparity in wealth between the "haves" "have nots" in our society and has promoted tax reforms under which the very wealthy, like himself, shoulder more of the burden.
I say the Gates and the Murdochs would not be as successful without the blessings our society as a whole has bestowed on them. Things like our courts & rule of law, democratic institutions, regulatory agencies, world military supremacy, defense R&D, publicly supported schools and universities, unions which helped secure the wages for workers to consume their products along with our ports, rails and highways. All of this contributed to the capitalist success story. And to this they owe society a debt.
I certainly don't agree with all the "protestors", nor do I ascribe the noblest of motives to all of them. But their presence in virtually every major city in this nation is a warning sign that something has run amuck with our capitalist system. Steps are needed to increase jobs, incomes, and opportunities for the poorest, raise living standards, and provide for good educations without kids having to leave college burried in debt. I fear without some reforms we're heading for a country none would want to live in. Grab your gold and guns and fortify the entrance to your cave ...
Maurice, rather than respond to my arguments about equality and opportunity, you have chosen instead to attack Warren Buffett - to the point of suggesting his views later in life are not viable - presumably because he's close to the end (actually looks pretty healthy). I imagine you can, in your mind anyway, dismiss the expressed views of many here based on our years. I cited three important figures, not because they are or were saints, but because they articulated viewpoints cogent to this discussion and with which I happen to agree. In effect, you have chosen to shoot the messenger rather than the message.
Reply to @hank: I liked your comments, although I tend to be a bit more bleak - not because I'd LIKE to be, but because that's how I - with rather significant certainty - see things going. In other words, I enjoyed your comments and agree with most of them, but the idea that anyone in government in this country will work together towards your goals is - in my opinion - unlikely at best.
Interesting that I'm quite a bit younger than probably everyone on this board and seem at least twice as cynical.
"Unchecked, these excesses threaten the fabric of our society." Yep.
As for Buffett, I will continue to refer to his interview with Andrew Ross Sorkin a month or two ago on CNBC, which I continue to think is one of the Great Moments in Awkward TV History, where Buffett becomes increasingly irritated with Sorkin's questioning (some of the questions are goofy) and, hilariously, rejects Sorkin's request to be invited to Buffett's political fundraiser dinner (he's "very selective", mind you!) without a second thought or the slightest bit of humor. The first "back to you guys" is Sorkin, much like the financial companies he covers, clearly looking for a bail-out.
Additionally, what irritates me is the "Uncle Warren" persona (which CNBC plays up - "Keeping Track of America's Billionaire Next Door") anyone who actually buys into that...oy. I do believe that Buffett is a great investor, but I think turning into some sort of media figure/persona ("Uncle Warren is buying America, won't you?") was not a good decision and I don't really believe what he's selling, nor do I entirely believe he believes everything he's selling to the masses.
Let me call it "AC" over the time frames of history. "AC" being, adjusted capitalism. Although not many forms of gov't during history's time frame are democratic or capitalistic.
The "AC" is when the folks "suggest" to the rulers of the gov't/social structure that it is time for a hair cut; ya know, just a trim here and there. Kinda like the situation in France in the day......that big single edge trimmer that is guided to do the close trim of those pesky neck hairs. A blindfold is mandatory for the trimee, so they can't see the red stained catch basket; as they kneel.
Our current system is indeed a modified capitalism; but is nothing new. The perversion continues and grows like a very slow cancer. There are more examples of crap than one has time to read about, much less write about.
One area of crap that continues to find its path of satisfaction for all involved; if one excludes ethics along with truth and justice is the "we (company whomever) are likely guilty as charged, but as you (SEC) would prefer to present a "fine" for our wrongdoings; we (company X) accept your (SEC) offer and will sign the letter stating that there may or may not have been corruption or a problem with ethics by someone in our organization, but do not admit to same.
There have been several of these for the big investment houses in the past year; and they just pay their fine of $500 million or whatever and all parties involved just move along to the next item on their list of "things to do".
We do not find any heads laying in the bucket, eh ???
Perversion is alive and well at many levels.
Our house has successfully provided guidance for our daughter, through our actions; that there is a very simple and basic function of one's life to have ethics and related virtues. And no, I am not writing from a religious viewpoint about such things; ethics and positive virtues; I feel, are a natural attribute of homo sapien types that becomes shaped to the negative or positive by those who provide or fail to provide the guidance. Unfortunately, too many get their positive virtues warped and twisted in their adult years from lack of real strength of character.
Mr. Catch has left the city square.....still waiting to find a head in the bucket.
I regard capitalism and Communism as two sides of the same coin - money is all that matters. Unalloyed, either fails. What needs to get thrown into the mix is a human element. Call that socialism, welfare, government intervention, whatever you want.
Friedman's defense of Ford's Pinto is so simplistic as to be an embarrassment. He knows better. It is built upon the base proposition stated above - only money matters. Thus, the only possible response to his question about how much money a company should spend on making a product safer (net the liability savings for a safer product) is zero. But our calculus in the real world is more complex. Current law, and one that I feel fairly reflects our collective beliefs, is that products should not be unreasonably dangerous. And what gets thrown into determining what constitutes "unreasonable" is both economic and moral. Neither trumps. American Business, Product Liability.
Pure capitalism is wild west, caveat emptor. Friedman appears in the video to espouse that. He opposes only deliberate falsehoods (fraud) - while conveniently neglecting to acknowledge that Ford was assessed punitive damages precisely for the fraud he condemns - suggesting that the car was safer than it knew to be the case. But with or without fraud, harm is done, to people individually and collectively, by companies (and people) acting on strictly personal monetary bases.
Regulations are the way we address these weaknesses in purely economic systems. You may not like it, but it seems like 99% of the people have come to a different conclusion.
"Back in the spring of 2007, I made a statement on the FundAlarm board that the US passed into a socialistic system. That was confirmed in my mind by the events as they unfolded in 2008 and since then."
Ah, Maurice...now I get your point! All of the financial damage and accompanying social damage isn't from unbridled, uncontrolled full-speed-ahead capitalism after all... it's the f'in Commies again! Damn! And here I thought that we had won.
Lessee now, at my age I have trouble keeping these actors straight... it's the socialists who want to acquire every last bit of wealth possible, no matter how it distorts or even destroys the US economy, and the capitalists who would prefer a more balanced asset distribution. Yes? Have I got it right now?
So the socialists at BofA were behind the infamous $5.00 debit card fiasco. Should have known.
Comments
A fair number of us have observed that unfettered and unregulated capitalism can cause a whole lot of problems, though. Or haven't you noticed? Maybe you're part of that elusive "1%", in which case I can understand your perspective...
For a quick summary, read the post "The Nirvana Fallacy Revisited—Posner", where he summarizes the shortcomings of naked capitalism. http://www.becker-posner-blog.com/2011/09/the-nirvana-fallacy-revisitedposner.html
Then you have a PRIMARY DEALER (MF Global) who - it turns out - was leveraged a sickening 80:1 and potentially took customer funds? These companies have learned nothing, and if MF Global was able to get in the mess they were in, that doesn't exactly give me confidence that anyone is going to step in before any of these other major financial companies get in a similar position.
Gordon Gekko seems like Mr Rogers compared to some of the people in the financial industry today. (The second film: "Someone reminded me I once said, 'Greed is good.' Now it seems its legal." From the first film: "I create nothing. I own.")
Now you have a series of financial companies who believe that they can come crying to the Fed whenever they screw up and are so leveraged and massive with trillions in derviatives that they have the excuse that letting them fail will cause a domino effect (and it probably will, but what let them get to that point?); I don't know why that comes as a surprise after they were bailed out. I don't know why anyone would think they learned a thing from 2008, and every day makes it even more clear that they didn't.
http://market-ticker.org/akcs-www?post=196861
Edited to add: "CME Group (CME) CEO says has determined MF Global (MF) is not in compliance with customer segregation requirements."
Well, evidently we also have the "average investor" who is angered because he, as a perfectly innocent taxpayer, will be "forced" to help bail out, via the FDIC, all those greedy depositors who failed to do due diligence before trusting their money to the local bank branch. After all, all that they had to do was to go down to that bank, ask the bank to provide a detailed, complete and accurate analysis of the bank's financial position (which they no doubt would have been pleased to supply), take off a few weeks from work and examine that data before making their paycheck deposits.
Everyone who has lost money in this debacle has only themselves to blame, right? If they hadn't been stupid enough to think that the "system" was reasonably responsible, they would have... h'mmm... put their money WHERE, exactly? I must have missed that part- what did Mr. Friedman suggest again??
Maybe if someone had, oh I dunno, regulated these companies or not looked the other way or thought for a second about how to try and make an effort to not have another 2008 again instead of letting them get larger and more reckless and more interconnected, we wouldn't be having this discussion and you wouldn't have to be making this argument (?!) about people having to research banks - hey, who in charge is at fault for the erosion of trust from the average person in the financial system? Who let things get to this point (again?) ???
There is little (if any) in the way checks and balances anymore and there's nothing - I think - that will be done about that. That is (OBVIOUSLY, from one of the FEW people who argued on fundalarm that the financial industry hadn't learned anything from 2008 and that the problems weren't over) NOT the fault of the average person, but that's the environment this is.
Meanwhile...
"MF Global Admits Using Client Money"
http://www.reuters.com/article/2011/11/01/mf-clients-idUSWEN030320111101
Meanwhile (x2), the MF Global website still has a section about "How MF Global Protects Client Assets", which goes into detail about segregating client funds.
http://www.mfglobal.com/File Library/corp/pdf/Our Company/Client_Asset_Protection_US.pdf
But as others have remarked, the qualities that make capitalism so efficient also contribute to the excesses to which it can run. Unchecked, these excesses threaten the fabric of our society. Henry Ford was smart enough to know that if workers weren't paid a living wage, there'd be nobody to buy his products. Eisenhower warned of the undue influence of big business and defense contractors in the affairs of state. More recently, none other "capitalist" than Warren Buffet has deplored the increasing disparity in wealth between the "haves" "have nots" in our society and has promoted tax reforms under which the very wealthy, like himself, shoulder more of the burden.
I say the Gates and the Murdochs would not be as successful without the blessings our society as a whole has bestowed on them. Things like our courts & rule of law, democratic institutions, regulatory agencies, world military supremacy, defense R&D, publicly supported schools and universities, unions which helped secure the wages for workers to consume their products along with our ports, rails and highways. All of this contributed to the capitalist success story. And to this they owe society a debt.
I certainly don't agree with all the "protestors", nor do I ascribe the noblest of motives to all of them. But their presence in virtually every major city in this nation is a warning sign that something has run amuck with our capitalist system. Steps are needed to increase jobs, incomes, and opportunities for the poorest, raise living standards, and provide for good educations without kids having to leave college burried in debt. I fear without some reforms we're heading for a country none would want to live in. Grab your gold and guns and fortify the entrance to your cave ...
Maurice, rather than respond to my arguments about equality and opportunity, you have chosen instead to attack Warren Buffett - to the point of suggesting his views later in life are not viable - presumably because he's close to the end (actually looks pretty healthy). I imagine you can, in your mind anyway, dismiss the expressed views of many here based on our years. I cited three important figures, not because they are or were saints, but because they articulated viewpoints cogent to this discussion and with which I happen to agree. In effect, you have chosen to shoot the messenger rather than the message.
Interesting that I'm quite a bit younger than probably everyone on this board and seem at least twice as cynical.
"Unchecked, these excesses threaten the fabric of our society." Yep.
As for Buffett, I will continue to refer to his interview with Andrew Ross Sorkin a month or two ago on CNBC, which I continue to think is one of the Great Moments in Awkward TV History, where Buffett becomes increasingly irritated with Sorkin's questioning (some of the questions are goofy) and, hilariously, rejects Sorkin's request to be invited to Buffett's political fundraiser dinner (he's "very selective", mind you!) without a second thought or the slightest bit of humor. The first "back to you guys" is Sorkin, much like the financial companies he covers, clearly looking for a bail-out.
Additionally, what irritates me is the "Uncle Warren" persona (which CNBC plays up - "Keeping Track of America's Billionaire Next Door") anyone who actually buys into that...oy. I do believe that Buffett is a great investor, but I think turning into some sort of media figure/persona ("Uncle Warren is buying America, won't you?") was not a good decision and I don't really believe what he's selling, nor do I entirely believe he believes everything he's selling to the masses.
http://www.cnbc.com/id/44730157/
"HOBBS: So Andrew, has he invited you to the dinner tonight?
ANDREW: I have not been invited. Warren has not invited me. Am I invited to the dinner tonight?
BUFFETT: No.
ANDREW: I don't know how much that plate costs, though. That's a pricey plate.
BUFFETT: Let's— get out your wallet.
ANDREW: Yeah, I've got to get my wallet out, so. Anyway, back to you guys.
BUFFETT: We're very selective.
HOBBS: Wow.
TAMRAZ: Oh.
BUFFETT: All you have to have is $1,000 or...(unintelligible)."
________
"You Own Some Investments?" "We Own Some Investments."
=
"ANDREW: You own some German bonds?
BUFFETT: We own German bonds.
ANDREW: German bonds.
BUFFETT: Yeah."
Let me call it "AC" over the time frames of history. "AC" being, adjusted capitalism. Although not many forms of gov't during history's time frame are democratic or capitalistic.
The "AC" is when the folks "suggest" to the rulers of the gov't/social structure that it is time for a hair cut; ya know, just a trim here and there. Kinda like the situation in France in the day......that big single edge trimmer that is guided to do the close trim of those pesky neck hairs. A blindfold is mandatory for the trimee, so they can't see the red stained catch basket; as they kneel.
Our current system is indeed a modified capitalism; but is nothing new. The perversion continues and grows like a very slow cancer.
There are more examples of crap than one has time to read about, much less write about.
One area of crap that continues to find its path of satisfaction for all involved; if one excludes ethics along with truth and justice is the "we (company whomever) are likely guilty as charged, but as you (SEC) would prefer to present a "fine" for our wrongdoings; we (company X) accept your (SEC) offer and will sign the letter stating that there may or may not have been corruption or a problem with ethics by someone in our organization, but do not admit to same.
There have been several of these for the big investment houses in the past year; and they just pay their fine of $500 million or whatever and all parties involved just move along to the next item on their list of "things to do".
We do not find any heads laying in the bucket, eh ???
Perversion is alive and well at many levels.
Our house has successfully provided guidance for our daughter, through our actions; that there is a very simple and basic function of one's life to have ethics and related virtues. And no, I am not writing from a religious viewpoint about such things; ethics and positive virtues; I feel, are a natural attribute of homo sapien types that becomes shaped to the negative or positive by those who provide or fail to provide the guidance. Unfortunately, too many get their positive virtues warped and twisted in their adult years from lack of real strength of character.
Mr. Catch has left the city square.....still waiting to find a head in the bucket.
Friedman's defense of Ford's Pinto is so simplistic as to be an embarrassment. He knows better. It is built upon the base proposition stated above - only money matters. Thus, the only possible response to his question about how much money a company should spend on making a product safer (net the liability savings for a safer product) is zero. But our calculus in the real world is more complex. Current law, and one that I feel fairly reflects our collective beliefs, is that products should not be unreasonably dangerous. And what gets thrown into determining what constitutes "unreasonable" is both economic and moral. Neither trumps.
American Business, Product Liability.
Pure capitalism is wild west, caveat emptor. Friedman appears in the video to espouse that. He opposes only deliberate falsehoods (fraud) - while conveniently neglecting to acknowledge that Ford was assessed punitive damages precisely for the fraud he condemns - suggesting that the car was safer than it knew to be the case. But with or without fraud, harm is done, to people individually and collectively, by companies (and people) acting on strictly personal monetary bases.
Regulations are the way we address these weaknesses in purely economic systems. You may not like it, but it seems like 99% of the people
Ah, Maurice...now I get your point! All of the financial damage and accompanying social damage isn't from unbridled, uncontrolled full-speed-ahead capitalism after all... it's the f'in Commies again! Damn! And here I thought that we had won.
Lessee now, at my age I have trouble keeping these actors straight... it's the socialists who want to acquire every last bit of wealth possible, no matter how it distorts or even destroys the US economy, and the capitalists who would prefer a more balanced asset distribution. Yes? Have I got it right now?
So the socialists at BofA were behind the infamous $5.00 debit card fiasco. Should have known.