An old man told my old friend many years ago in Sicily: Buy real estate on the water. My friend told me that he thought the old guy was crazy. On the contrary, that old man had the wisdom of seeing a future different that of the past dictatorship of Mussolini. Real estate taken away from the nobles and distributed to the people would eventually create value. With the introduction of democracy and eventually some capitalism, property values tended to go up in Italy. Another factor is inflation. If inflation is at 20 percent, it is reasonable to assert that property values should go up 20 percent. In a perfect world, maybe inflation and property values should go hand in hand. But this is not case. Real estate is different and laws are different in different places. Collusion in real estate also tend to keep prices higher as well as easy lending. It is funny that when you ask Kudlow or any other top economist at some Waldorf Astoria conference about real estate, they tend to shy away indicating that they don't make predictions on real estate. A real economist, instead would have to crunch some numbers and come to some kind of value. When I asked Larry back in November 2005 a combo question about Americans borrowing too much and real estate values going up too fast, he argued on the contrary relating his answers to the health of the M1 and M2 and M3 and the strength of the GDP.
Little did he know that we were, and still today, heading towards one of the most depressive period since the Great Depression.
Wednesday, June 25, 2008
Sunday, June 22, 2008
EXECUTIVE COMPENSATION part 1 A
Larry is a true believer of unlimited executive compensation. That means that you can make as much as you can. Who doesn't agree that this is the american dream. If everyone can get unlimited compensation, then we don't have to worry anymore. That can be very inflationary and I will review that at a later point. I believe in unlimited compensation for your private company , not a public entity or corporate entity that is involved in accountability to its shareholders or mutual holders. Let's look at for example, an insurance company that raises premiums from its customers. The CEO and top management will love to get as much as they can in executive compensation but when it comes to reimbursing their customers who have suffered a mishap, they will try to cut any money due them.
And what about those banks that have people's money in FDIC protection up to 100,000 only. Ask those executives what happens to those customers who had more than 100,000 in their bank account. Those executives only worry about their compensation and in the meantime they orchestrate with OPM (other people's money). I believe there has to be a balance or some kind of standard mathematical formula for those companies who are entrusted with other people's money. As a believer of true capitalism, I put the interest of the corporation ahead of the interest of management. The corporation has to endure. But there is here an obstacle that creates confusion. As Larry keeps saying that he wants a cut in the corporate tax rate, I see that management tries to avoid paying higher corporate taxes by increasing their salaries. I will say that we need to have corporate reform that not only looks at taxes but at various issues across the board.
And what about those banks that have people's money in FDIC protection up to 100,000 only. Ask those executives what happens to those customers who had more than 100,000 in their bank account. Those executives only worry about their compensation and in the meantime they orchestrate with OPM (other people's money). I believe there has to be a balance or some kind of standard mathematical formula for those companies who are entrusted with other people's money. As a believer of true capitalism, I put the interest of the corporation ahead of the interest of management. The corporation has to endure. But there is here an obstacle that creates confusion. As Larry keeps saying that he wants a cut in the corporate tax rate, I see that management tries to avoid paying higher corporate taxes by increasing their salaries. I will say that we need to have corporate reform that not only looks at taxes but at various issues across the board.
Tuesday, June 17, 2008
IN A WORLD OF FAKE ECONOMISTS
The world is full of economists, but only a handful of them are real and honest. Most economists start off with good intentions just like L. Kudlow,
but eventually they get influenced by politics and politicians. In their conferences, it's very little, if any, economics. He will be all politics about candidates and who will win the next election or who will lower taxes or whatever. He even calls politicians his own personal friends. The influence of a politician has altered his views on the economy from time to time. Enough of politics. It's now time to tell the truth and proceed to debate on what this economy really needs in order to get back in shape. Let's forget about lowering taxes and let's zoom on the issues that we need to take care of before we can look at taxes. In the next few sessions, we will debate on these issues.
but eventually they get influenced by politics and politicians. In their conferences, it's very little, if any, economics. He will be all politics about candidates and who will win the next election or who will lower taxes or whatever. He even calls politicians his own personal friends. The influence of a politician has altered his views on the economy from time to time. Enough of politics. It's now time to tell the truth and proceed to debate on what this economy really needs in order to get back in shape. Let's forget about lowering taxes and let's zoom on the issues that we need to take care of before we can look at taxes. In the next few sessions, we will debate on these issues.
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