Yesterday, the New York Times, quoting their usual "unnamed sources who spoke on the condition of anonymity," reported that federal prosecutors do not expect to file criminal charges against MF Global CEO Jon S. Corzine or any other top MFG officials because they could only find evidence of incompetence, not criminality. Apparently there is no penalty for stupidity in the loss of over $1 billion of customer funds. In this day of electronic transfer of money, no one seems to be able to trace the computer click that sends funds from one IP address to another. Corzine himself says he has no idea how a billion dollars walked out the door unnoticed and doesn't know where any of the money is.
After examining all the evidence for 10 months, Obama's federal prosecutors could find no evidence of criminal activity. But there are too many dots to connect for this story to die. The futures brokerage industry has long considered segregated customer funds sacrosanct. Under Corzine's direction, those customer funds were used to offset losses in MFG's massive investment in European debt. Corzine was considered an investment genius by Democrats. The video below, shows an embarrassed Jon Corzine standing on stage and sheepishly accepting praise heaped upon him by Vice President Joe ("They're gonna put y'all back in chains.") Biden in early 2009. Biden says that the first person that He and Obama called after the election for financial advice was Corzine. Could this be true or is it just Biden saying dumb things again? Corzine had already been run out of Goldman Sachs by the stockholders and out of the governor's mansion by the New Jersey voters. But Biden called him the smartest guy I know.
What's even more shocking is Corzine's status as one of Obama's elite bundlers. According to the official BarackObama.com website, Corzine raised over $500,000 for the Obama campaign in the first quarter of 2012 - while under investigation by Obama's justice department. Will the Obama administration actually indict one of its own top fundraisers? Will they really drop a case where over $1 billion of customer money has gone missing? If this isn't crazy enough, Forbes is reporting that Corzine is planning to start a hedge fund. Who's going to put their money in that?
Friday, August 17, 2012
Tuesday, July 10, 2012
No Doritos for You
Midwest farmers in the U.S. Corn Belt are getting wacked with a double whammy this summer: no rain and 100 degree temperatures. This is the perfect storm as corn enters the critical pollination phase of the growth cycle. There’s talk of comparisons to the 1988 drought which cost U.S. farmers 45 percent of their crop. Smaller crops mean higher prices and guess who pays – you do, of course.
In spite of planting over 96 million acres (the largest crop in over 75 years), corn prices are racing the thermometer toward record levels. And it’s not just corn; soybeans and wheat prices (think bread) are soaring like condors over heat thermals as well. That means even the peanut butter and jelly sandwich you’ve been eating because you lost your job during the recession is going to cost you more.
Corn prices have increased almost 50 percent since mid-June, only a few weeks ago (see the above chart). The Ag research analysts are rolling out their usual explanations attributing the problem to La Niña and El Niño weather patterns and the global warming alarmists are saying I told you so. But there are further complications exacerbating the problem: other global corn producers including Russia, China and Brazil are looking at potentially similar poor harvests. With more than seven billion hungry mouths around the world to feed, the grain markets may make even the oil markets look stable.
In spite of planting over 96 million acres (the largest crop in over 75 years), corn prices are racing the thermometer toward record levels. And it’s not just corn; soybeans and wheat prices (think bread) are soaring like condors over heat thermals as well. That means even the peanut butter and jelly sandwich you’ve been eating because you lost your job during the recession is going to cost you more.
Corn prices have increased almost 50 percent since mid-June, only a few weeks ago (see the above chart). The Ag research analysts are rolling out their usual explanations attributing the problem to La Niña and El Niño weather patterns and the global warming alarmists are saying I told you so. But there are further complications exacerbating the problem: other global corn producers including Russia, China and Brazil are looking at potentially similar poor harvests. With more than seven billion hungry mouths around the world to feed, the grain markets may make even the oil markets look stable.
Monday, April 30, 2012
Regulating oil speculators
Running for office? Worried about high gas prices? Need a scapegoat, someone to blame? Yes, it must be those greedy commodity traders in Chicago and New York who are running up the price of oil and making a fortune at the public’s expense. But, is that true?
Anyone looking for a headline to promote themselves is attacking the nefarious “oil speculators” these days. President Barack Obama, seeking support from American gasoline consumers - a massive constituency to be sure - recently announced his intention to impose more regulations on the futures industry. On his top-rated cable news show, The O’Reilly Factor, Bill O’Reilly has repeatedly blamed oil “speculators” for the rising price of gas at the pump and has also called for more regulation. At a Senate hearing, Washington Senator Maria Cantwell said excessive oil market speculation is behind skyrocketing prices burdening American families and businesses. But Obama and Cantwell are both up for re-election in November and O’Reilly lives off his TV ratings. With drivers increasingly irritated by each uptick in prices at the pump, the melding of these groups is a perfect storm of headlines, anger and calls for government controls. Do futures traders put up no money at all as O’Reilly has claimed? What are the facts?
Any trader who buys (takes a “long” position anticipating higher prices) or sells (takes a “short” position anticipating lower prices) must provide funds to meet margin requirements in his trading account before being able to place an electronic order. These margin requirements are mandated by the Commodity Futures Trading Commission (CFTC), set by the exchanges and enforced by the member brokerage firms. In the case of oil futures, that requirement is $6,885 of the value of the contract. For gasoline, the requirement is $9,900 per contract. Because of the volatility of oil prices and the greater risk to the trader (and, consequently, to his brokerage firm and to the exchange itself as the final guarantor of performance), the margin requirement for energy contracts is higher than for most other commodities. For example, the margin requirement for the widely held LIBOR interest rate futures contract is $574 per contract; for the Board of Trade’s popular corn contract, the margin requirement is $2,363.
Some traders argue that if margin requirements are increased, smaller traders will be driven from the market risking manipulation by well-financed large traders. Is that what Obama and O’Reilly want? It would also decrease liquidity, the lifeblood of the American futures industry. Increasing margin requirements is like increasing taxes: it makes it more expensive to do business and, therefore, impedes business. Most knowledgeable observers have been critical of O'Reilly and Obama's war on free markets. Lest we forget, for every "speculator" that paid a high price in the futures market, some other "speculator" who thought he was wrong sold it to him.
Anyone looking for a headline to promote themselves is attacking the nefarious “oil speculators” these days. President Barack Obama, seeking support from American gasoline consumers - a massive constituency to be sure - recently announced his intention to impose more regulations on the futures industry. On his top-rated cable news show, The O’Reilly Factor, Bill O’Reilly has repeatedly blamed oil “speculators” for the rising price of gas at the pump and has also called for more regulation. At a Senate hearing, Washington Senator Maria Cantwell said excessive oil market speculation is behind skyrocketing prices burdening American families and businesses. But Obama and Cantwell are both up for re-election in November and O’Reilly lives off his TV ratings. With drivers increasingly irritated by each uptick in prices at the pump, the melding of these groups is a perfect storm of headlines, anger and calls for government controls. Do futures traders put up no money at all as O’Reilly has claimed? What are the facts?
Any trader who buys (takes a “long” position anticipating higher prices) or sells (takes a “short” position anticipating lower prices) must provide funds to meet margin requirements in his trading account before being able to place an electronic order. These margin requirements are mandated by the Commodity Futures Trading Commission (CFTC), set by the exchanges and enforced by the member brokerage firms. In the case of oil futures, that requirement is $6,885 of the value of the contract. For gasoline, the requirement is $9,900 per contract. Because of the volatility of oil prices and the greater risk to the trader (and, consequently, to his brokerage firm and to the exchange itself as the final guarantor of performance), the margin requirement for energy contracts is higher than for most other commodities. For example, the margin requirement for the widely held LIBOR interest rate futures contract is $574 per contract; for the Board of Trade’s popular corn contract, the margin requirement is $2,363.
Some traders argue that if margin requirements are increased, smaller traders will be driven from the market risking manipulation by well-financed large traders. Is that what Obama and O’Reilly want? It would also decrease liquidity, the lifeblood of the American futures industry. Increasing margin requirements is like increasing taxes: it makes it more expensive to do business and, therefore, impedes business. Most knowledgeable observers have been critical of O'Reilly and Obama's war on free markets. Lest we forget, for every "speculator" that paid a high price in the futures market, some other "speculator" who thought he was wrong sold it to him.
Sunday, April 01, 2012
New hot commodity: Grains and the "free" markets in Chicago
The U.S. Department of Agriculture surprised the futures markets this morning with a report showing that stockpiles of corn fell 8 percent from a year ago – more than analysts were expecting. As a result, corn futures for May and July delivery rose by the $0.40 daily limit to near $6.50 per bushel. Projected acreage for soybeans and wheat planting was less than 2011 and so prices for those commodities are also much higher. With oil over $100 per barrel and gasoline at the pump flirting with $5.00 per gallon, what does this mean for commodity prices if the U.S. economy ever heats up?
In the robust economy of the 1990s, corn could barely get over $2.00 per bushel and now it’s more than three times the 1990s rate! What changed? Looking at the iTrade price chart of corn on the left, the position marked in red shows the last corn futures price under $2.00/bushel. That was in 2005. Today corn is limit bid at $6.44 and looking for an offer. But what happened in 2005?
In 2005, there was a significant transforming event: the Chicago Mercantile Exchange and the Chicago Board of Trade became “corporate.” For over 100 years, the Chicago exchanges were owned and controlled by its individual members. The markets are now mostly traded by corporations, the memberships are owned by corporations and, in fact, the exchanges themselves are now corporations. In an age where there are cries that oil prices are rigged by corporate speculators, can the same thing be happening to other commodities like corn, soybeans and wheat?
For years, the Chicago futures pits were hailed as the last bastion of open and free markets – a challenging environment of raw capitalism where fortunes were quickly made and lost based on the sheer resourcefulness and energy of individual, entrepreneurial traders. But times have changed. Just as corporations have taken over Las Vegas gambling, they have also taken over the Chicago commodity speculation markets. The CFTC (Commodity Futures Trading Commission) is supposed to be in charge but the CFTC still cannot find over $1.6 BILLION in customer funds that Jon Corzine was responsible for protecting at MF Global!
This is the first in a series of reports on the subject of the “free” markets of the Chicago commodity exchanges and how prices can quadruple even with no demand.
In the robust economy of the 1990s, corn could barely get over $2.00 per bushel and now it’s more than three times the 1990s rate! What changed? Looking at the iTrade price chart of corn on the left, the position marked in red shows the last corn futures price under $2.00/bushel. That was in 2005. Today corn is limit bid at $6.44 and looking for an offer. But what happened in 2005?
In 2005, there was a significant transforming event: the Chicago Mercantile Exchange and the Chicago Board of Trade became “corporate.” For over 100 years, the Chicago exchanges were owned and controlled by its individual members. The markets are now mostly traded by corporations, the memberships are owned by corporations and, in fact, the exchanges themselves are now corporations. In an age where there are cries that oil prices are rigged by corporate speculators, can the same thing be happening to other commodities like corn, soybeans and wheat?
For years, the Chicago futures pits were hailed as the last bastion of open and free markets – a challenging environment of raw capitalism where fortunes were quickly made and lost based on the sheer resourcefulness and energy of individual, entrepreneurial traders. But times have changed. Just as corporations have taken over Las Vegas gambling, they have also taken over the Chicago commodity speculation markets. The CFTC (Commodity Futures Trading Commission) is supposed to be in charge but the CFTC still cannot find over $1.6 BILLION in customer funds that Jon Corzine was responsible for protecting at MF Global!
This is the first in a series of reports on the subject of the “free” markets of the Chicago commodity exchanges and how prices can quadruple even with no demand.
Saturday, February 25, 2012
Gas Prices :-(
Gasoline has been a hot commodity for years and prices are spiraling out of control again. On Friday, February 24, gasoline futures for April delivery on the New York Mercantile Exchange settled at $3.32 per gallon. That price plus taxes, which vary based on where you live (I add about 70 cents per gallon for suburban Chicago), is a reasonable estimate for where pump prices should be. Currently, the national average is $3.63 with a wide range from Denver’s $3.08 per gallon to San Francisco’s $4.31. These are record high prices for February and portend a very expensive summer driving season. So what’s going on?
Tension in the Middle East has provided speculators with an opportunity to bid up the price but the world’s economies are not exactly over-heating. So what’s the problem? No one seems to know and, if the average driver buys 50 gallons a month and the price goes up a dollar per gallon, the $40 per month savings that both parties spent so much time and political capital on in Congress by passing the payroll tax cut legislation last week will have been for naught.
A few days ago, President Barack Obama said "We know there's no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight." Overnight? What about the last three years! The pump price for regular gasoline when Obama took office was $1.84 but has since increased by almost 100 percent. No more off-shore drilling, Alaska drilling or Canadian pipeline. No free oil or even a price discount from Iraq even though we spent over one trillion dollars and suffered over 36,000 killed and wounded American soldiers while liberating that country. Did they ever even say thanks? Americans struggle to pay for transportation at home while our Arab “allies” build indoor ski slopes in the desert because they can’t think of anything else to do with all the money we keep sending them.
We have learned that commodity prices can be high and stay high without strong demand. In the 1990s when the U.S. economy was strong and unemployment was low, oil traded at $10 a barrel and now it’s $110. Corn was around $2 and now it’s over $6. At these prices, we can’t afford to have the economy start growing and drive commodity prices even higher!
Tension in the Middle East has provided speculators with an opportunity to bid up the price but the world’s economies are not exactly over-heating. So what’s the problem? No one seems to know and, if the average driver buys 50 gallons a month and the price goes up a dollar per gallon, the $40 per month savings that both parties spent so much time and political capital on in Congress by passing the payroll tax cut legislation last week will have been for naught.
A few days ago, President Barack Obama said "We know there's no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight." Overnight? What about the last three years! The pump price for regular gasoline when Obama took office was $1.84 but has since increased by almost 100 percent. No more off-shore drilling, Alaska drilling or Canadian pipeline. No free oil or even a price discount from Iraq even though we spent over one trillion dollars and suffered over 36,000 killed and wounded American soldiers while liberating that country. Did they ever even say thanks? Americans struggle to pay for transportation at home while our Arab “allies” build indoor ski slopes in the desert because they can’t think of anything else to do with all the money we keep sending them.
We have learned that commodity prices can be high and stay high without strong demand. In the 1990s when the U.S. economy was strong and unemployment was low, oil traded at $10 a barrel and now it’s $110. Corn was around $2 and now it’s over $6. At these prices, we can’t afford to have the economy start growing and drive commodity prices even higher!
Monday, January 30, 2012
Commodity traders lose the will to fight
Tomorrow, January 31, 2012, is the deadline for submitting claims to the MF Global bankruptcy trustees. If you don’t ask, they won’t give your money back. Go here to file your claim.
And, where is it all the money anyway? Is it still a mystery or is it gone? Someone has $1.2 billion and no one has been charged with any crime! Trading volume – and, hence, brokerage firm and CME revenue - is down significantly as are customer funds deposited with trading firms. Not only was money stolen, but a key United States industry has been maimed.
Why isn’t Corzine in jail? Where’s Obama?
Not only was MF Global’s demise apparently rigged, the markets, themselves, are being rigged by the federal government. Federal Reserve Chairman Ben Bernanke (whose middle name, Shalom, means “peace” and “welfare” in Hebrew) has declared war on the free market system by promoting corporate welfare with his low rate crapshoot. He wants to force the federal funds rate to remain at, effectively, zero for the next THREE YEARS! Good luck CME in getting any action in your once dominant 90 day LIBOR contract.
There are less than a handful of occutards remaining outside the Chicago Board of Trade these days. There has been no impact on corporate greed from this once-promising movement as it has degenerated into a bunch of self-indulgent, disorganized, dirty, destructive mobs with no focus and no message. And where is the Tea Party on this? Nowhere. Only the gold hucksters are making money on commodities now.
And, where is it all the money anyway? Is it still a mystery or is it gone? Someone has $1.2 billion and no one has been charged with any crime! Trading volume – and, hence, brokerage firm and CME revenue - is down significantly as are customer funds deposited with trading firms. Not only was money stolen, but a key United States industry has been maimed.
Not only was MF Global’s demise apparently rigged, the markets, themselves, are being rigged by the federal government. Federal Reserve Chairman Ben Bernanke (whose middle name, Shalom, means “peace” and “welfare” in Hebrew) has declared war on the free market system by promoting corporate welfare with his low rate crapshoot. He wants to force the federal funds rate to remain at, effectively, zero for the next THREE YEARS! Good luck CME in getting any action in your once dominant 90 day LIBOR contract.
There are less than a handful of occutards remaining outside the Chicago Board of Trade these days. There has been no impact on corporate greed from this once-promising movement as it has degenerated into a bunch of self-indulgent, disorganized, dirty, destructive mobs with no focus and no message. And where is the Tea Party on this? Nowhere. Only the gold hucksters are making money on commodities now.
Sunday, November 20, 2011
Should Jon Corzine be in jail with Bernie Madoff?
On June 29, 2009, high-profile Wall Street broker Bernie Madoff was sentenced to 150 years in prison for illegal use of customer funds. This year, the financial implosion of once-mighty MF Global (MFG) managed by another high-profile Wall Street broker, Jon Corzine, has revealed that over $600,000,000 in “good faith” customer deposits from his MFG brokerage firm are missing and were presumably used to purchase risky, junk-rated national debt from some of the European Union’s so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain).
“Section 4d(2)3 of the Commodity Exchange Act ("Act") provides among other things that: (1) customers' funds shall not be commingled with the funds of the FCM; (2) an individual customer's funds may, for convenience, be commingled with the funds of other customers for deposit with a bank, trust company, or clearinghouse; (3) customers' funds may be invested in obligations of the United States, in general obligations of any State or any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the United States; and (4) the Commission may prescribe by rule, regulation, or order the terms and conditions under which these things may be done.” This quote from the Commodity Exchange Act specifically forbids two major criminal actions taken by Corzine’s MFG: customer funds were co-mingled with MFG’s capital and then invested in obligations that were not guaranteed by the United States.
Corzine's action, undetected by numerous responsible regulatory authorities from the CME Group to the Futures Industry Association (FIA) to the federal government’s Commodity Futures Trading Commission (CFTC), was clearly illegal. Even after the CME, whose stock fell sharply after the MFG bankruptcy filing and is trading near its 52 week low, provided an infusion of $300 million, MFG customers have still not recovered their funds. Is this condition systemic? Is customer money safe in any commodity futures brokerage account? The government and the exchanges are still trying to find the customer money that was stolen from the previously considered sacrosanct “segergated funds” accounts. Only that will restore confidence in the futures industry.
“Section 4d(2)3 of the Commodity Exchange Act ("Act") provides among other things that: (1) customers' funds shall not be commingled with the funds of the FCM; (2) an individual customer's funds may, for convenience, be commingled with the funds of other customers for deposit with a bank, trust company, or clearinghouse; (3) customers' funds may be invested in obligations of the United States, in general obligations of any State or any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the United States; and (4) the Commission may prescribe by rule, regulation, or order the terms and conditions under which these things may be done.” This quote from the Commodity Exchange Act specifically forbids two major criminal actions taken by Corzine’s MFG: customer funds were co-mingled with MFG’s capital and then invested in obligations that were not guaranteed by the United States.
Corzine's action, undetected by numerous responsible regulatory authorities from the CME Group to the Futures Industry Association (FIA) to the federal government’s Commodity Futures Trading Commission (CFTC), was clearly illegal. Even after the CME, whose stock fell sharply after the MFG bankruptcy filing and is trading near its 52 week low, provided an infusion of $300 million, MFG customers have still not recovered their funds. Is this condition systemic? Is customer money safe in any commodity futures brokerage account? The government and the exchanges are still trying to find the customer money that was stolen from the previously considered sacrosanct “segergated funds” accounts. Only that will restore confidence in the futures industry.
Wednesday, November 09, 2011
MF Global can't find $633 million of customer funds
Is it possible that over six hundred thirty-three million dollars of customer money is nowhere to be found? MF Global accountant résumés are easy to find on Linked in, though. MFG's auditor, an independent accounting firm hired to sign-off on the accuracy of the books as a protection for stock holders, is PricewaterhouseCoopers LLP. How did they miss $600 million? Was anyone doing their job there?
It's also an embarrassment for the CME, the world's largest futures exchange, who has the responsibility to audit customer funds at its member firms. After it's rebirth as a publicly traded "for profit" corporation in 2002, the CME became more interested in customer deposits to cover margin requirements rather than in total customer deposits. In fact, when over 50,000 MF Global customer accounts were transferred on Monday to other clearing firms (primarily R.J. O'brien and Rosenthal Collins Group), the positions were transferred but only the funds required for margining the positions were transferred from MF Global customer funds. In other words, traders who were under-margined were more likely to get all their money whereas traders with extra funds in their account received only that portion of their money that was required to margin the transferred positions.
The Chief Financial Officer at MF Global is 34 year old Henri Steenkamp who spent his previous eight years as an employee of MFG's "what-$600-million?" auditor, PricewaterhouseCoopers. But there are plenty of others with oversight that dropped the ball on behalf of customers, too. There's the Securities and Exchange Commission (SEC) who, along with the FBI, is "investigating" things at MF Global. Then there's the Commodity Futures Trading Commission (CFTC). And what about the Futures Industry Association (FIA) that gets a piece out of every customer trade that takes place. Is there anyone looking out for the customer now? According to the 1970 Securities Investor Protection Act, brokerage customers are to be at the front of the bankruptcy payback line. The current thinking is that some of the customer segregated funds are just "gone" and customers of MF Global will not get all their money back. Sounds like a potentially big payday for lawyers coming up, though.
It's also an embarrassment for the CME, the world's largest futures exchange, who has the responsibility to audit customer funds at its member firms. After it's rebirth as a publicly traded "for profit" corporation in 2002, the CME became more interested in customer deposits to cover margin requirements rather than in total customer deposits. In fact, when over 50,000 MF Global customer accounts were transferred on Monday to other clearing firms (primarily R.J. O'brien and Rosenthal Collins Group), the positions were transferred but only the funds required for margining the positions were transferred from MF Global customer funds. In other words, traders who were under-margined were more likely to get all their money whereas traders with extra funds in their account received only that portion of their money that was required to margin the transferred positions.
The Chief Financial Officer at MF Global is 34 year old Henri Steenkamp who spent his previous eight years as an employee of MFG's "what-$600-million?" auditor, PricewaterhouseCoopers. But there are plenty of others with oversight that dropped the ball on behalf of customers, too. There's the Securities and Exchange Commission (SEC) who, along with the FBI, is "investigating" things at MF Global. Then there's the Commodity Futures Trading Commission (CFTC). And what about the Futures Industry Association (FIA) that gets a piece out of every customer trade that takes place. Is there anyone looking out for the customer now? According to the 1970 Securities Investor Protection Act, brokerage customers are to be at the front of the bankruptcy payback line. The current thinking is that some of the customer segregated funds are just "gone" and customers of MF Global will not get all their money back. Sounds like a potentially big payday for lawyers coming up, though.
Thursday, November 03, 2011
Too Big to Work: MF Global and Bankruptcy
The modern business world of IPOs and M&A has produced mega-entities in the fields of banking, insurance, communications, health care and other critical industries. Too often, drastic and expensive action has been required to save the public from the consequences of poor – and, in some cases, criminal – management of organizational monstrosities that are said to be “too big to fail.” The 2009 government bailout of AIG, GM, Chase and other major American firms is the latest and most dramatic example of this dangerous concept. Perhaps the real problem is that these companies are “too big to work” – too big to be managed.
On Halloween, the markets were spooked when MF Global, the country’s largest commodity broker, filed its bankruptcy papers. There were frantic, last minute, middle-of-the-night attempts to find buyers and even to find customer money! How could this happen? What went wrong? The most efficiently run organizations have always been those run by individual entrepreneurs. These are the people that know their business intimately. They know their product; they know their employees; they know their cash flow. In many cases, they have to reconcile their operations to the market on a daily basis. Obviously, there are certain advantages in economies of scale when related businesses merge. But, when a corporation gobbles up competing firms and becomes an economic blob with armies of employees that require a multi-tiered management structure because it extends itself into diversified global markets, it becomes too big to work and bad things start to happen. Costs go up, quality goes down and competition is crushed. Instead of being bailed out, these giants should be broken up before their cancerous growth destroys our economic body.
MF Global and Jon Corzine represented the worst of all possible combinations: an organization that became too big to manage being managed by a man who was too small for the job. We can only hope that we are not similarly at risk on a national scale with our federal government.
On Halloween, the markets were spooked when MF Global, the country’s largest commodity broker, filed its bankruptcy papers. There were frantic, last minute, middle-of-the-night attempts to find buyers and even to find customer money! How could this happen? What went wrong? The most efficiently run organizations have always been those run by individual entrepreneurs. These are the people that know their business intimately. They know their product; they know their employees; they know their cash flow. In many cases, they have to reconcile their operations to the market on a daily basis. Obviously, there are certain advantages in economies of scale when related businesses merge. But, when a corporation gobbles up competing firms and becomes an economic blob with armies of employees that require a multi-tiered management structure because it extends itself into diversified global markets, it becomes too big to work and bad things start to happen. Costs go up, quality goes down and competition is crushed. Instead of being bailed out, these giants should be broken up before their cancerous growth destroys our economic body.
MF Global and Jon Corzine represented the worst of all possible combinations: an organization that became too big to manage being managed by a man who was too small for the job. We can only hope that we are not similarly at risk on a national scale with our federal government.
Wednesday, September 07, 2011
Food Stamps at Restaurants Now?
Free food from the government has gotten so big with over 47 million food stamp recipients that restaurants now want in on the action. And, recently, it was discovered that 30,000 students at the University of Michigan had figured out how to game the Supplemental Nutrition Assistance Program (SNAP as it is now called) and get free food. One big party as long as the rich guys keep paying taxes and the Chinese keep lending money for a zero percent return. Life is a SNAP!
Food Stamps at Restaurants?.
Food Stamps at Restaurants?.
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