The (negative) power of quarterly reports

All the turmoil we are seeing in the markets lately are, in my opinion, caused by short term thinking. CEOs are so tied to short term quarterly thinking they are willing to do anything to make their companies look better. This includes over leveraging and huge debt burdens which look nice on paper, but are really just the tip of a giant ice burg. Then Wall street only really looks at the quarterly numbers and doesn't really rate a company on it's long term viability, only on its most recent quarter. Completely missing the 90% of the iceberg below the surface.

This seems really strange to me. I wish there was another financial report for the sane people in the world. Every year a company should have to come out with a "ten year report". If I could see one of those every year I would have a lot more confidence in these companies as I would at least feel like they are thinking of long term survival. Thinking for the long term, just like I want to invest for the long term. Then all bonuses should be tied to ten year results. This golden parachute thing is ridiculous. You get a bonus even though you caused the company to tank a few years later? What kind of mindless knucklehead thought of that?

So, what we really need to keep our economy on track is a long term mindset. A yearly "ten year report" and all executive bonuses time to the companies financials ten years in the future. Wow, I would go "all in" with a company like that!

Link between war and credit crisis

This is a great article about the ongoing debate on a link between the war and the credit crisis.

Those price increases are self-perpetuating, Stiglitz argues. Oil-rich Persian Gulf states are so awash in money that they are not sure what to do with it all. By holding back oil production, they make more off what they do produce and keep their greatest asset -- oil -- in the ground as they search for ways to spend their cash.

That cash, through state-owned sovereign wealth funds, has flowed into stocks, bonds and other investments, creating incentives for lenders to offer low-interest loans, many of which have now gone sour.

But that is only one factor, by Stiglitz's accounting. The federal government has sunk deeply into debt, first with tax cuts, then with accelerating war expenditures that have easily topped half a trillion dollars. That limited the government's ability to keep the economy on track through tax cuts or domestic investments, so the Federal Reserve Board used low interest rates and the free flow of money to keep the economy growing. Cheap credit sparked rash loans, a housing bubble and the current crisis.

If you go into debt to allow yourself to spend more in hopes that your spending will fix your debt problems you are in for a tailspin. It just seems that our government has been printing more money for the past 30 years as a way to alleviate budget and economic crisis's. That doesn't seem like good policy to me.

I think investment and economic development is good policy, but that seems to have turned into giving your political friends money for development that doesn't always develop anything. I don't have a solution, but a little more honesty and openness at the top would lead to a lot more honesty and openness in the general population. Leadership through smoke and mirrors and divisiveness has lead to more and more of the same and that is 'waste'. We used to be a country where people cared about each other. That was what made us great. Now we just look for ways to own a fancy car no matter the cost to those around us.

Shaky economy and sub prime fiasco

I heard this NPR show last night on the way home and it was very very interesting. Makes me understand why I was holding GLD and SLV for the past year and really makes me more nervous that I'm no longer holding something with some tangible value.

Our Confusing Economy Explained

http://www.npr.org/templates/rundowns/rundown.php?prgId=13&prgDate=04-03-2008&view=storyview

It is a long 40 minute interview with economist Michael Greenberger who puts this stuff in really plain language that still seems a little confusing. The bottom line, was Bear Sterns the end of the trouble in the market or the canary in the coal mine?