Wednesday, January 11, 2012

If Bain Capital were a ship, Gordon Gekko would be her Captain, sporting an eye patch, wooden leg and parrot.

Oil refiners have stopped buying oil from Iran, this was the headline today. Well really just on the spot market. Two thirds of the Iranian oil that refiners buy is on long term contract, and they won’t give that up unless forced to by an EU embargo. China continues to buy oil and doesn’t accept anybody else’s opinion on the matter. They have been buying less Iranian oil lately, but this is reportedly because of a pricing dispute. Since 2/3 of Iran’s oil goes to the far east, it sounds like Iran’s only problem is getting full price. The price is going up thanks to the US pressure on countries to not to buy from Iran, so they could end up getting just as much for their oil as now, or more.

Iran’s biggest problem is really the threats made by the US against any foreign bank who does business with Iran’s banks, the banks who do would be prohibited from doing business in the US, and this could make it hard for Iran to get paid for its oil. This could in theory include those huge Chinese banks in lower Manhattan. Obama might as well threaten the king of the moon, China will pay as much attention.

Just the same, the corporate media is squawking about $5 gas by summer because of the shortage of oil that the Iran embargo might cause. They don’t mention that the US’s biggest export is now fuel in the form of gasoline, diesel and jet fuels. The US gets less than 15% of its oil from the middle east, and none from Iran. If we would bring the USN home, that percentage would be even less.

Gold is falling again as investors are looking for cash, mostly USDs. Gold has lost $400/oz since its peak last summer. At the time I was getting all kinds of smart ass blog comments because I was saying gold wasn’t a good investment. (it’s still not)

The company that makes Twinkies is in Chapter 11 Bankruptcy again after only two years. They’re seeking to gut their union contracts; the reasons sited in most of the corporate news reports are high sugar and flour prices, even though these are down currently. Less reported is the fact that they carry massive debts they can no longer service despite interest rates trending near zero. Why, you might ask? To tell you the truth I didn’t bother to research it, rather I’ll make a shrewd bet. I’ll bet the 90 year old company who makes an extremely popular product that has literally an indefinite shelf life is in trouble because it has been looted by corporate raiders.

Over the past thirty years companies like this have been routinely looted by either their management, that simply takes not only all the profits, but all the assets of the company in the form of executive compensation. They are able to do this because the top tier of management is paid not what the company can afford, or what is required to find competent management, but what a compensation board (selected by management) decides other companies are paying. No matter how ridiculous this amount may be.

However, the more likely scenario for the downfall of a mature company that has a lot of assets but doesn’t pay much for dividends (ironically this maybe caused by the previous scenario), is that the stock can be had cheap. A company like Bane Capital will raise money (typically from foreign sources taking advantage of the exchange rate) to buy the controlling interest in the target company. This doesn’t need to be 51%, just more than any other interested party, like say the founders control. Once in control, they will replace the top management, or bribe them to go along with what amounts to grand theft.

The valuable assets of the company are spun off in separate divisions, or simply sold outright to China, and these “profits” captured by the new controlling interest. Once bled dry, the base company is then abandoned, still holding all of the debt, including the debt used to buy the company in the first place. This debt is what they call “corporate junk bonds”, and there are trillions of USDs of this garbage coming due in 2012 (the Mayan accountants foresaw this apocalypse).

Mitt Romney characterizes his activity at Bane as finding “troubled” companies and “restructuring” them. The same way a pirate ship “restructures” a fat merchantman into booty. They weren’t interested in “troubled” companies, they were interested in healthy companies they could loot. The current depression is largely the result of  thirty years of theft like this come home to roost.

These practices were decriminalized by Reagan, so it’s difficult to bring charges against the guilty. In fact they are normally seen as the captains of industry, or the masters of the universe. Really they are Gordon Gekko, of the  eighties movie Wall Street, played by Michael Douglas who famously intoned “greed is good”. In the movies he went to prison, not so much in real life.  In the old days of forgotten history books, these people would swing from the yard arm.  Today any sort of justice seems as made up as a pirate movie. It’s up to us to change that. www.prairie2.com

Monday, January 9, 2012

Running against Bain from left and the right

GOP Party Chairman Rancid Priebus was out on Fox Sunday trumpeting that Americans shouldn't vote for Obama since they aren't better off than they were three years ago. By that logic there are about 3 million Americans (the 1%) that should vote with their pocket books for Obama. They are not only better off, but the few thousand at the top have captured trillions of American's wealth. Yet they oppose Obama with a white hot fury and feigned righteous patriotic fervor. This is not because they bleed for the little guy that’s been left behind, they believe the little guy should pull himself up by his bootstraps. Not that they ever did, and they‘ve been stealing everyone else‘s bootstraps.

They feel threatened by Obama, but not because he has impeded them in any meaningful way so far. Although you must consider how bad things would be, if they truly had a free hand. They oppose him because he speaks the unspeakable truth every now and then. They are afraid people are catching on, and I'll point out again that even Republicans don't want to vote for Republicans. The way Bain Capital does business is actually being used against Romney by Republicans candidates. Not because they oppose such tactics, they’ve all gotten rich from the de-criminalization of piracy as a business plan, it‘s because it‘s the only way to get votes.

Fewer Republicans voted in the Iowa caucus than four years ago even though the number of registered Republicans is way up in that swing state.  New Hampshire isn't expected to be any better. The voters want that mythical Republican that will deliver on trickle down economics, make free trade work, "spread the wealth" (oops, something Obama said) and make us safe from terrorism by killing Osama Bin laden (more oops than Rick Perry).

Even Republicans are getting tired of the empty rhetoric, Obama passed the Republican alternative to Hillary Care (to be fair, it also has a lot of protections the Republicans didn't offer). Small business used to the base of the Republican Party, but people like Mitt Romney have driven them out of business.

People on the right will cling to their guns and religion only so long. The kids and the grand kids are living in the basement but the Republicans are telling them to pull themselves up by their bootstraps. All the while cutting local police, fire protection and closing schools. Their jobs have gone to China, and it's starting to sink in how this happened. They're worse off than three years ago, but three years ago they were worse off than eight years before that, and the same people are back telling them the same things.

Obama started talking about the end of outsourcing in his Saturday radio address. It's still just talk, but it's the right kind of talk. It could be just part of Obama’s strategy of running against Bain Capital, he isn‘t proposing anything to stop them. That part will be up to the rest of us. www.prairie2.com

Sunday, January 8, 2012

Are you better off?

GOP Party Chairman Rancid Priebus was out on Fox Sunday trumpeting that Americans shouldn't vote for Obama since they aren't better off than they were three years ago. By that logic there are 3 million Americans (1%) that should vote their pocket books for Obama. They are not only better off, but the few thousand at the top have captured trillions of American's wealth. Yet they oppose Obama with a white hot fury and righteous patriotic fervor. This is not because they bleed for the little guy, they believe the little guy should pull himself up by his bootstraps. Not that they ever did. 


They feel threatened by Obama, but not because he has impeded them in any meaningful way. Although you must consider how bad things would be, if they truly had a free hand. They oppose him because he speaks the unspeakable every now and then. They are afraid people are catching on, and I'll point out again that even Republicans don't want to vote for Republicans. Fewer Republicans voted in Iowa than four years ago even though the number of registered Republicans is way up in that swing state, and New Hampshire isn't expected to be any better. They want that mythical Republican that will deliver on trickle down economics, make free trade work, "spread the wealth" (oops, something Obama said) and make us safe from terrorism by killing Osama Bin laden (more oops than Rick Perry).  


Even Republicans are getting tired of the empty rhetoric, Obama passed the Republican alternative to Hillary Care (it also has a lot of protections the Republicans didn't offer). Small business used to the base of the Republican Party, but people like Mitt Romney have driven them out of business. 


People on the right will cling to their guns and religion only so long. The kids and the grand kids are living in the basement but the Republicans are telling them to pull themselves up by their bootstraps; all the while cutting local police, fire protection and closing their schools; their jobs have gone to China; and it's starting to sink in how this happened. They're worse off than three years ago, but three years ago they were worse off than eight years before that, and the same people are back telling them the same things.


Obama started talking about the end of outsourcing in his Saturday radio address. It's still just talk, but it's the right kind of talk. Like Thom Hartman says, we need to create a big parade that Obama can jump out in front of. The occupy/99% movement is an excellent start. 


In other news that might make those canned goods become important: the Chairman of the US Joint Chiefs of Staff acknowledged  today the Iran does in fact have the ability to block the Strait of Hormuz. Well duh, it's only two miles wide, large bore mortars could easily take out an oil tanker nearly a quarter mile long. If the USN should attempt to transit the strait or get any where close, Iran has hyper-sonic anti ship missiles that there is no defense for. Iran would be vulnerable to an all out air campaign if the US is willing to take the losses from Russian made anti-aircraft missiles. 


Then there is the question of what will the USN do if China shows up with its fleet to break the blockade. The right wing knee-jerk response doesn't need to be spelled out, but reality is something else. Iran is not Iraq, the US is not vastly superior to the competing military technology. WWIII doesn't have any winners, at least not any of those who don't have deep bunkers. Hey, right winger, how deep is your bunker? That stick house you have in the gated community isn't hardened, is it?