PaulBBrown

Reading 'Riting and Financial Literacy

The talk shows nationwide were filled yesterday with discussions of the current crisis on Wall Street. Not just the financial talk shows, but the traditional ones where people yell that their taxes are too high and the Democrats are to blame, and the ones where they blame the Republicans for everything. What was most interesting was how little everyone--callers and hosts--understands about the causes of the crisis specifically, and about finance in general. I can live with the fact that people can't tell the difference between preferred and common stock, but not to know that the value of bonds rise as interest rates falls, or that the head of the Federal Reserve cannot buy a company on behalf of the government strikes me as pretty glaring gap in someone's education. More…

The Mouse that Roared

Okay, I have given the matter of the AIG bailout 24-hours worth of thought, and here’s what I have concluded. I plan to announce to the federal government that I am the proud owner of an $85-billion-in-sales company that has fallen on hard times due to my own incompetence. I will tell the government that I could, of course, have my company declare bankruptcy, but I have decided that my firm is “too big to fail.” The effects on the global economy would be cataclysmic if I filed for bankruptcy, and so the government should simply buy my business. (I am a reasonable guy, I’ll take a check.) If my strategy (or AIG’s) sounds familiar, you probably remember a movie that came out nearly 50-years ago called The Mouse that Roared. More…

Why (oh why) is Uncle Sam Buying a Big Business?

What the heck is our government doing buying a private company? I want to think about this a lot more, but the federal government receiving nearly 80% of AIG in exchange for an $85 billion loan strikes me initially as a truly, truly, truly bad idea. Yes, I understand the concept of "too big to fail." And yes, I understand that the move is an attempt to stabilize the world's bond and equity markets. But isn't capitalism--and not governments--supposed to do that as a matter of course? More on this tomorrow. More…

Let’s See if I am Right

It happens so rarely, that I have to draw attention to the times I am correct. Yesterday I wrote that we needed a HUGE sell-off in the market if stocks are ever going to resume their upward rise. Right before the close yesterday, the market fell 500 points. In percentage terms it is a significant—but not dramatic—number. It represented a decline of 4.4%. But a 500 point drop sounds huge. Let’s see if this is enough to jump start the market. More…

It Needs to Get Worse on Wall Street

The first thing I did when my plane landed moments ago was to check to see how the markets were doing. With the word last night that Lehman was filing for bankruptcy, AIG needs $40 billion, and Merrill Lynch is being sold, I was expecting a HUGE market sell-off. In fact I was hoping for one. Typically, the way awful periods (such as the current one) in the stock market end is with a huge capitulation--investors all say at once, "I give up. Sell." The market drops dramatically as a result, and a couple of days (or weeks) later stocks start to go up again. As of 12:48, the Dow was "only" down 277. Bad? Yes. A blow off? No. I am afraid we need to see things to get even worse....before they will get better. More…

Are You to Blame for Wall Street Woes?

Bulls make money. Bears make money. Pigs get slaughtered. I was reminded of this old Wall Street saying as I was going through the papers this morning which are filled with stories about whether Lehman Brothers, one of the oldest investment banks, will survive. In the large part financial institutions like Lehman are in trouble became of the housing mess. And, in large part, the housing mess was created by people like you and me--folks who thought real estate prices could only go up forever, and so either bought more house than we could afford, or bought houses as an investment with the expectation of making a quick profit. That was dumb. More…

I Know I should Feel Bad, but...

"In tough times, even the billionaires worry," read the headline in the newspaper the other day. To which I say (churlishly, I concede): It is very hard to feel sorry for people who have a lot more money than you do. More…

The Game Sure Seems Rigged

Rep. Charles Rangel, who is in charge of Congressional oversight of the U.S. tax code thanks to his position as chairman of the House Ways and Means Committee, is scheduled to hold press conference today to, in the words of The Wall Street Journal “respond to questions raised in recent weeks about his compliance with congressional disclosure rules and his tax returns.” Rangel has already said he didn’t report on his taxes more than $75,000 in rental income on a resort villa he owned in the Dominican Republic. And the Journal notes “documents released on Rep. Rangel's behalf also showed he paid no interest for a mortgage used to purchase the beach property.” More…

Leverage

“The best negotiating position to be in is when you can push back from the table, say ‘no thank you,’ and walk away without a single regret.” A very smart lawyer told me that years ago. And that remains true today. Keep it mind, the next time you are trying to strike a deal. If you are in the position where you can walk away, you are bound to get everything you want. If you aren’t, you need to know what you can live with…and once it reaches that point where you can't, you need to be prepared to walk away. More…

Why is it so Hard to Spend Money

Wouldn’t you think with the economy sputtering, retailers would make it easier for you to give them money? That was thought I had while shopping recently—or at least trying to. My breakfast meeting in Manhattan ended early and I thought I would buy a couple of dress shirts. I couldn’t. The store didn’t open until 10, and I had another meeting then. I went jogging Saturday morning and took a different route, and ended up on the main street in the next town. Great, I thought, I will stop into the deli and pick up a couple of sandwiches for lunch. But I couldn’t. The store didn’t open until 11. More…