Friday, November 4, 2011

OccupyWallStreet - Why MF Global's Collapse Matters

Brett Arends writes an article on SmartMoney" Why MF Global's Collapse Matters:

"You'll probably hear a lot in the days and weeks ahead about how much Jon Corzine and the other honchos have just "lost" on their MF Global incentive payments, restricted stock, and options. 
Ignore it. 
The options racket is grossly misunderstood by the wider public, which is, I suppose, just how the honchocracy like it. Stock options are free chips in the casino. These guys walk into the casino and they are given armfuls of free chips. They are encouraged to gamble. If they win, they get to keep it all. If they lose? No biggie. They can just mooch on down the Strip to the next casino, where they will be given another big pile of free chips. This doesn't "align" their interests with stockholders. It doesn't encourage them to build a business. It encourages them to take big gambles."


Here is the OccupyWallStreet Variation - which will never be articulated by the mob (since mobs are basically inarticulate and the individuals in OWS are doofi).
The subsidy racket - via Government grants, loans or loan guarantees is grossly misunderstood by the wider public, which is, I suppose, just how the honchocracy and idiot-ocracy like it. Government grants, loans and government loan guarantees are free chips in the casino. These campaign contributors walk into congress or the administration the casino and they are given armfuls of government (i.e. taxpayer) dollars. They are encouraged to gamble. If they win, they get to keep it all. If they lose? No biggie. They can just mooch on down the Strip to the next congress or administration, where they will be given another big pile of free chips. This doesn't "align" their interests with stockholders, or employees. It doesn't encourage them to build a business. It encourages them to take big gambles and to gild their parachute
I am much more careful when spending a dollar that I have to earn. When a government or a business has access to other peoples' money (OPM - say it quickly for a hidden pun) they tend to misuse and squander. That is why the Government, and government stimulus programs cannot lead us out of a recession. 


And for the Keynesians out there that want to continue to argue: please name the correct amount of government dollars required. Stop guessing, stop saying "a little more" what is the number? Or, do you just want more chips put onto the table?


I thought so.


~Tot1
P.S. I am working on the "Student / Student Loan" story, which has the exact same setup, but the student doesn't get to walk away like the Banker or the Campaign Contributor. 
Late edit: I'm also working on the "Groupon" story where early investors cash out prior to the IPO and then double up when the IPO finally releases.
  

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