Crazyman’s Economics

For oil companies, speculators and Congress, it was record-breaking!

Angry yet?

We got a mention about our book and site today from an 18-year old blogger named Dillon Godley on his blog site. Dillon bills himself as an enthusiastic fighter for the right, but is seriously misguided when it comes to Crazyman’s Economics and our mission.

We have taken a purposely non-partisan approach to our book and our efforts, because the greed of Wall Street affects EVERYONE, regardless of political affiliation. We want Congress to force Wall Street to be accountable to investors.

But Mr. Godley mistakes our passion for Wall Street reform for as an unequivocal devotion to Joe Biden. According to Godley:

“(Biden’s) preternatural disposition to Robin Hooding taxpayers and corporations (which involves going after the “fat cats” like T.E. Scott “educates” us through his asinine Marxist toilet paper) makes my skin crawl, as well as that of others who value liberty, life, and property.”

Why does it make Godley’s skin crawl? I have no idea. Why does Godley consider our site (and presumably our book) “asinine Marxist toilet paper?” I have no idea. Why does Godley think he has the collective insight as an 18-year old of everyone who, according to him, “value liberty, life and property?” Again, I have no idea. The quote above is the only mention of T.E. and the book. No explaination of why he believes this. 

I have read through Godley’s blog, and he certainly is passionate and considers himself a “free-market conservative libertarian.”  However, like a lot of 18-year old pseudo-intellectuals, why use a simple word when a complex word makes you look smarter. Take this passage:

“…currency mismanagement can undermine economic growth and make capital growth possibilities more constricted, especially under superfluous new regulations concomitant with the current fiat currency stupidity. Stable currencies are paramount to economic growth; without stable units of account, one cannot effectively tabulate the magnitude of factors upon the economy as well as the degree of performance currently undergone.”

Well written, lots of impressive words, and the ladies will certainly be impressed when he breaks out that verbiage at frat parties in college. But as he’ll learn, he uses a lot of unnecessary words to not say much.

“Marxist toilet paper” is a nice dig, but has no meaning without why he believes that. He connects us to Biden, though the nice letter we have from Congressman Ron Paul about our book may surprise him. Republican Congressman Dan Burton said nice things about our efforts to address speculation in the crude oil commodities market. Are the distinguished Congressmen “Marxists” as well?

Mr. Godley, T.E. Scott worked as a blue-collar laborer for 32 years; you’ve been alive for 18. After that, T.E. Scott started and owned a company for 24 years before he retired, that in 2007 grossed $45 million and employs 150 people. That’s six years longer than you’ve been alive. He has 3 times more business experience than you have life experience. Keep that in mind.  

We believe in capitalism and the encouragement of private businesses like Scott Pet Products. But what happens when they go public and they use the “free capital” to develop an unfair advantage to bully private companies? These companies in many cases don’t run more efficiently than private companies, or run the companies with the best interests of minority shareholders or employees in mind.

We’re not Marxists for insisting on corporate accountability when CEO’s run companies into the ground and leave with multi-million dollar “golden parachutes.” We’re not Marxists when we oppose the Federal Reserve bailing out not only Fannie Mae and Freddie Mac, but private Wall Street firms that mismanaged our investments with no accountability or culpability. We’re not Marxists when we want people to keep their money and invest in their local communities instead of handing it to Wall Street with their influence over Congress and the media.

Mr. Godley, you’re obviously a bright kid, and I prefer your passion for doing what you believe is right as opposed to the vapid “The Hills/Real World” idiots we’re presented as representing the youth of America. I would suggest you read the book and understand what we’re trying to achieve, and I would be surprised if you end up agreeing with us.

As for Obama/Biden, if they support real Wall Street reform, we’ll support them. If McCain, Barr, Baldwin, Nader, McKinney or General Zod provides a real agenda of campaign reform, we’ll support them. Our mission is to protect the people from Wall Street. Does that make us Marxist? No, it makes us Americans. 

“Well, my name is Dave Samson. I began involvement in the stock market in 1999. At first I was buying all kinds of different stocks that were being touted in I-net websites. The vast majority of the time I ended up losing money, sometimes LOTS of money. Eventually, if you hit someone over the head often enough, you quit playing. Which is what I decided to do…but only for a while.

“My problem was that I kept thinking that it was something wrong I was doing in my investment decisions. Eventually, I stumbled upon a Yahoo message board of a company I maintained a small number of shares in. I was losing on that stock too, but I happened to read more, much much more about this particular company (ticker ALU, now bankrupt). I began to learn about PE ratios and other fundamentals that I was not aware of. One poster had the most to say about ALU, and I became more confident about buying larger amounts of shares as the stock declined. Eventually, I owned about 20,000 shares.

“After I did my largest purchases, I called the company and spoke to a PR firm hired by said company. It dawned upon me (finally) that it really didn’t make sense why stocks went up or down on a daily basis–even after earnings reports or “news” of some sort, there was never any consistancy about any particular stock going up or down (I noticed that some went up after supposedly bad earnings, while others went down after good earnings). I told the PR rep lady that the entire thing seemed like a pyramid scheme. I said it tongue in cheek because I really did not want to believe that it was in fact such a scheme (especially considering my large position I know held in ALU). Her response? In a sort of sly but honest tone of voice she told me, “That’s riiiight…” So I asked her, “So how DOES a stock go up or down?” She replied, “Well, do you have friends and family? Tell them to get in…” At that point I was dumb struck…and very very scared since most of my money was now tied up in nothing but a caniving pyramid scheme game! In the end, I got lucky, and actually got out with a profit that time.

“But foolishly, I continued to participate in the scheme. Eventually, I lost more money. However, around 2001 I read on various stock chat message boards about the concept of short selling. I then realized just how bogus the entire stock market was. Because when I studied the fundamentals of most companies, I realized that there were many totally worthless and other grossly overvalued companies trading at insane market caps. I then began short selling, and quit buying altogether. I had some success, some failures. But as time went by, I realized that the one’s I covered at a loss had I been patient I would have ended up with profits as well. So, I then decided to go more heavily into shorting.

“After a while, I was up something like $35,000 at one point. I was then very confident. Though I didn’t always win, I was successful most of the time. So then, I decided to short more heavily, the most obviously blatantly overvalued (and worthless) companies trading. Problem was, around that time, almost every other small time stock trader was learning the same things I already knew, and they too started shorting everything in sight. It was at that point that the shorting game blew up. The Institutions who run the BID-ASK show then practically cornered all their shares between themselves, and (I believe) collusively decided to bid all their own junk back up. I ended up giving back my gains, and losing an additional $35k or so. I had had enough. I saw it was a controlled and rigged scam against the retail small time traders versus the Institutions who have every weapon at their disposal. Indeed, while all the little small time do it yourself type stock traders were shorting, the Fed mysteriously continued to lower interest rates to almost nothing in the face of economic data that clearly showed that no such action was warranted.

“But not one to give up hope, I stumbled upon other financial chat boards that presented a number of companies paying fat dividends, a very enticing concept considering where interest rates were at the time. So, I began buying some of these stocks in a small way. I was buying mostly MREITS, bond funds, municipal bond funds, and oil transporting companies. In the beginning I was getting big dividends and often time the stock prices were going higher. I was making my money back at last. As I gained more confidence, once again I went overboard and bought more heavily, especially in one MREIT, ticker NFI. I was up about $30k again and felt good and confident; my retirement was going to be great because of all of those dividends. Or so I assumed.

“Eventually, the prices started to dip. But I felt so confident, that I just kept buying those dips. I wasn’t about to be “shaken out.” To make a long story short, I bought so many dips that I ended up losing about $150,000 in very short order. The Fed this time mysteriously began raising rates to levels way beyond I think anyone’s expectations. The excuse that it was the Fed’s fault for causing the real estate debacle was now in place. In the mean time, the insiders of these companies I lost so much of my money in were still taking their fat salaries and cashing out their stock options.

“I then remembered what the PR rep lady told me years ago, about the stock market really being a pyramid scheme. I should have not only listened, but acted by staying out of the scam altogether. It was my fault, but I accuse the entire system of fraudulently hyping itself as something more than an ongoing institutionally controlled BID-ASK inspyramid scheme, where only the insiders, fund manager/brokers, and perhaps a wealthy few of the latter’s clients who get the inside scoop end up making a real cash profit in the “long term.” Sure, you can win. Just like I did. But when you win some, you get confident. You think everything is on the up and up. So of course you don’t quit while you are ahead. Of course you play more and more, until you end up losing not only your gains, but your principle as well. I may have been a fool, but the system is, as you say, an incredibly ingenious con created by people with tremendous skills and wisdom and conning you into their game. So am I the only one to blame for my losses? No, the con men who set up the system should not be permitted to continue their systematic psychological financial control game that they call “The stock/bond/commodities markets.” It’s all just a pre-planned extremely clever manipulation scheme invented by the wealthy few to try to lure in the majority of non-wealthy into their game with their ultimate goal of taking outsider’s monies. And then after their game is eventually over, which could take decades, they will have their excuses ready so as to pin the blame on something other than themselves to try to pacify the angry masses who end up losing.”

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Thanks!

T.E. Scott and Stephen Edds

I’m a sports fan and a NFL fan, (T.E., not so much) and I enjoy reading Gregg Easterbrook’s Tuesday Morning Quarterback column on ESPN.com. Easterbrook brings insight and research to the NFL that is not normally offered by the “jock-ocracy.” However, he also finds ways to incorporate science and politics into the mix as well.

This week, during his AFC preview (in which he correctly picks my beloved Colts to return to the Super Bowl,) he takes time to give an honest and infuriating account of Fannie Mae and Freddie Mac.

“Increasingly Fannie Mae and Freddie Mac are looking like little more than devices to transfer money from the pockets of taxpayers to the pockets of Fannie and Freddie senior executives. Former Fannie Mae boss Franklin Raines paid himself about $50 million for years in which, we now know, the company lied about its earnings in order to inflate executive bonuses, while management was playing fast and loose with other people’s money. Beginning in 2007, Fannie Mae and Freddie Mac went off the cliff, their stocks plummeting to less than 20 percent of their previous values, and taxpayers were put on the hook as guarantors of the firms’ bad management decisions. The Congressional Budget Office estimates the Mae-Mac debacle will cost taxpayers $100 billion or more. Yet Freddie Mac CEO Richard Syron was paid $14.5 million for 2007, including a $2.2 million “performance bonus.” Syron has taken home $38 million total from Freddie in the past five years. Fannie Mae CEO Daniel Mudd got $14.2 million for 2007, plus a substantial prepaid life insurance policy and other perks including “financial counseling, an executive health program and dining services,” the Washington Post reported.”

As we talk about in “Crazyman’s Economics,” CEO’s with excessive salaries and stock options does not guarantee that they are motivated to do what is best for the corporation, the employees and the stockholders. Easterbrook points this out as well:

“Executives receiving very high pay justify their deals on two grounds: that they are risk-takers in high-pressure situations, and that they have valuable expertise. Now we know that no one at the top of Fannie Mae and Freddie Mac took any personal risks — everything was federally guaranteed, and all mistakes billed to the taxpayer. Here, the New York Times reports that Syron was repeatedly warned in 2004 that the organization was taking on bad loans, and did nothing. Syron justified his inaction by complaining to the Times that he was under pressure from various Fannie constituents. That’s why he was paid so much, to take the heat! Yet he took no heat, rather, devoted himself to avoiding responsibility. If things go well, executives are lavished with money and praised as risk-takers. If things go poorly, executives are lavished with money and blame others.

“And just what incredible expertise do Syron and Mudd possess? They made billion-dollar blunder after billion-dollar blunder; they failed to realize things as basic as buyers borrowing without documentation of income may not be able to repay loans. People chosen at random from the phone book could hardly have performed worse. Yet the federal bail-out legislation just signed by George W. Bush does not require them to give back any of their ill-gotten gains.

“This is the core lesson of CEO overpay scandals: The corrupt or incompetent executive always keeps the money. He may be caught and embarrassed by bad press, but he keeps the money while someone else — shareholders, taxpayers, workers — is punished. Raines recently settled a federal legal complaint by agreeing to return about $3 million of his $50 million, but kept the rest; his employment contract was worded such that even if he was malfeasant, whatever he took from company coffers was his. Hilariously, federal prosecutors claimed victory because Raines “surrendered” to the government a large block of stock options — options now worthless, owing to the Fannie Mae decline Raines helped set in motion by lying about Fannie numbers. Until Congress enacts a law that allows money taken by corrupt or incompetent executives to be recovered, the lying will continue. Lying by CEOs is what society rewards!”

People falsely believe because such high-profile people as Enron’s Ken Lay serve prison time, that this is justice being served. But the truth is that Ken Lay was the exception, not the rule. Time and time again, we see CEO’s with golden parachutes leave a company in ruins and making a fortune off our trust. “Crazyman’s Economics” talks about how CEO’s, Congress, the MSM and Wall Street all have the same interests that don’t match those of the public. Easterbrook takes it one step farther:

“Why does Congress tolerate the swindle aspect of Fannie and Freddie? For the standard reason: Congress is on the take. Here, Lisa Lerer of Politico reports that in the past decade, Fannie and Freddie spent almost $200 million on campaign donations to Congress and on lobbying members of Congress, some of the lobbying money going to former members. This year, for instance, Fannie gave the legal max of $10,000 to Speaker of the House Nancy Pelosi and to Republican House Whip Roy Blunt, neither of whom face meaningful re-election challenge. As for costly lobbying, the implied deal is: Don’t rock the boat while in office and someday you too will be a former member getting easy money to lobby former colleagues. During Senate debate on the Mae-Mac bailout, Majority Leader Harry Reid refused to permit a vote on an amendment that would have barred Fannie and Freddie from giving money to members of Congress. Reid did not merely oppose the measure, he refused to allow the Senate to vote on it — so that members of Congress could remain on the take, without having to go on record about the matter.

“Now that taxpayers are covering Fannie and Freddie’s cooked books, the $200 million diverted to Congress in effect came from average Americans, forcibly removed from their pockets — and thanks to Senator Reid, more will be forcibly taken from your pocket and placed into the accounts of senators and representatives. This is what TMQ calls a Sliver Strategy. The Sliver Strategy is a means to disguise embezzlement. Congress looked the other way while Fannie and Freddie approved vast amounts of bad debt, in order to shave off a sliver for itself — in this case, the $200 million in lobbying and donations. Had Congress simply awarded itself $200 million, editorialists would have been outraged. Because the money was slipped in to a larger fiasco of much greater sums wasted, Congress got away with it.”

I am not in favor of socialism or against capitalism, but there is a better way to promote responsible and accountable corporate leadership.

P.S. Please tune in to Thom Hartmann’s show today at 2:00 PM Eastern time to hear T.E. Scott talk about “Crazyman’s Economics.”

One person who trusted Wall Street and lost everything:

Do you have a similar story, or know someone who does? Fill out the form on the left and let us know. It’s only when we look around and begin to notice that there are millions who are in the same boat as Jim can we put pressure on Congress to take action.