Thursday, July 25, 2002

I want to stop. I want to be stopped. But no -- LI is addicted to this kind of stuff. Karl Marx and his buddy, Fred, have surely had been laughing like crazy in Commie Heaven. From today's Business Week, the article on Enron's board:

"There are, in fact, almost no real consequences for company directors who fail on the job. Instead of skating by with liability insurance paid for by shareholders, directors who fail to exercise at least a minimal level of oversight should be forced to pay some of the damages, just as executives should. Shareholders have a right to expect directors, who at Enron were paid as much as $350,000 a year in cash, stock options, and phantom stock, to be engaged and active."

Now, as you know, readers, you don't get much for 350 thou a year nowadays. Hell, I'd spit on that kind of compensation. But the Wendy Gramm's of the world (my fave board member, Wendy. Tough as nails when it comes to defendin' that old time private enterprise system, with her hubbie doing his part in the senate) have such a sense of noblesse oblige that they are willing to stoop for those dimes and nickels and generally help out when called upon. And Enron came calling. But just because a company comes calling doesn't mean a girl has to drop everything to, like, investigate all the itsy bitsy affairs of a great big megacorps, does it? Here's two items that slipped right past the board:

"-- In 2000, over several meetings, the board's compensation committee approved $750 million in cash bonuses to Enron executives in a year when the Houston-based company reported net income of $975 million. In other words, the directors handed over an amount equal to more than three-quarters of reported profits to salaried managers--at the expense of the shareholders. Apparently, no one on the compensation committee had ever added up the numbers.

"-- The compensation committee also approved a credit line for Chief Executive Kenneth L. Lay that eventually reached $7.5 million, and then allowed him to repay it with stock instead of cash. Lay proceeded to use the credit line as an express lane for dumping Enron stock. He repeatedly drew down the line, sometimes daily, always repaying right away with stock. Doing so allowed him to delay reporting some stock sales for more than a year. The chairman of the compensation committee, Charles A. LeMaistre, told the Senate investigators that he did not think it was the committee's responsibility to monitor Lay's use of this credit line. If the directors had bothered to look, they would have discovered that as Enron's position became more precarious in the 12 months preceding revelations of its infamous off-balance-sheet partnerships, Lay extracted $77 million in cash from the corporation that he replaced with Enron shares."

And so another day ends, the world turns, and I reach for my Karl and Fred. Supposedly, the Dems are my secret companeros for this kind of reading. David Brooks, at the Weekly Standard, issued this wee warning that all might not be well for Bush if this kind of thing keeps getting publicized. Gosh.

"Still, the Democrats seem to think that there is this organized entity called Corporate America, made up of senior executives, Republicans, white country clubbers, and people who were cheerleaders and prom kings in high school. If they can get the rest of the country to hate these people as much as they do, then they will win elections. Because they have this category in their heads, Democrats see the corporate scandals as tainting the whole Republican party.

But Americans who have not been suckled on the "Marx-Engels Reader" do not carry these categories around in their heads. They perceive no one organized entity, Corporate America, that ruthlessly exploits another, Ordinary Americans. Most people believe, rather, that there are some dishonest people who have done horrible things in corporate America. But also that George W. Bush is an admirable man who is doing his best for the country, even though he once worked for a corporation, and has friends who are in business. In other words, they see the scandals as a crisis of character, not a crisis of capitalism."

Gee, it is all a matter of character, and not a matter of their pensions going bye bye. I don't know, call LI foresighted, but here's my prediction for this election year: Republicans are not going to run on the Let's Privatize Social Security issue. Because, uh, they first have to address that character crisis out there -- whcih obviously stems from liberal sex education and the like!

Wednesday, July 24, 2002


LI can't get enough (although our readers probably have had enough) of the continuing fallout from Enron. The difference between a celebrity scandal -- you know, like O.J. murdering Condit, while Robert Blake takes pictures, or the like -- is that the corp scandal grows richer and stranger the more you look into it. That's a bit of a problem for the fast forward public. We want our National Enquirer, dammit.

But the public, upon which is gradually settling the discovery that the loss of seven trillion dollars in the market wipes out ALL of the value accrued there during the high nineties, just might stay tuned for the exciting conclusion of a number of series.

We'd recommend the Tom Paine article on Rebecca Mark, the Enron exec who lost the company, easily, a billion or two, and was rewarded with stock options to the tune of 80 million dollars -- at least by some reports. We wanted to do a Glassman award piece on her coverage, but Jeff Stein beat us to the punch fair and square. We especially like Mark's end quote:

"I'm very surprised and saddened by [what has happened at Enron]," Rebecca Mark told a reporter recently, "and I wish them all the best."

Surprised, huh?

Media is slowly coming around to criticize its own pump and pump strategy -- LI did our post yesterday, went home, turned on NPR, and listened to a program on Marketplace that actually went through the same lines we'd just typed. One interview was particularly gruesome, with some honcho at CNBC, who claimed that the journalists weren't too blame -- no, it was the greedy culture. The viewers, they were to blame.

This reminds me of something I recently read in an essay by Ricky Jay, the historian of magic. Jay says that there is a reference to loaded dice, one of the first in English, in Roger Ascham's Toxophilus -- the Tudor era treatise on archery. Ascham records a cheater's trick. If the gull is winning, the cheater insinuates loaded dice into the game, getting the gull to use them. Then the cheater claims the dice are loaded. When they prove to be loaded, it shows that the gull has been cheating.

Well, that seems to be CNBC's idea, too. The Greed is good mantra is great, as long as the greedy are people CNBC reporters can toady up to -- but greed isn't for the vulgar, you know. So it is all their fault that the info piped through the biz media in the high nineties was ninety percent garbage.

In my last post, LI proposed awarding a Glassman to the worst business reporter -- the one that swallowed the most garbage, left uninvestigated the most shady sources of information, etc. After all, one of the reasons investors are leaving the market is that the press has proven to be as intellectually corrupt as the accounting firms or the upper, overpaid management of the various scam corps. To actually survey the business press over the last five years is a daunting proposition, given that LI has, uh, let's say a limited group of researchers to work with. Luckily, cyberspace gives us a vast trove of material with which to enthrall our lucky readers.

So, just at random, we chose to examine articles from Nelson Schwartz.

Schwartz, as you will doubtless not remember, was the man who wrote the article about the Enron bust last December that was entitled, Enron Fall out, wide but not deep. Ah, my cringing readers say, you are dancing on a grave there -- but sometimes I just get all jiggly when I go through the uplift and scam of biz reporting. I really do.

Schwartz, of course, was very busy during the high nineties. He dished out his "investigative" scoops, and they were indeed spectacular. As in spectacularly dumb. Here's a typical article from the May 4, 2000 issue. Entitled B2B Boom, this is what Mr. Schwartz tells us:

"Even after factoring out the hype, it's clear that e-business offers huge opportunities for the select group of companies that do manage to thrive over the long term. Banc of America Securities analyst Bob Austrian estimates that worldwide B2B electronic commerce will grow from less than $20 billion in 2000 to roughly $13 trillion in 2004--a 650-fold increase. That's an incredible growth rate, but the cost savings inherent in B2B transactions explains why it may not be far off. On average, corporations spend $100 on paperwork alone each time they make a purchase, Austrian says. Moving those transactions to the Web could slash costs by 90%, saving billions in overhead each year. Not surprisingly, traditional firms are investing heavily in hardware and software so they can do more buying and selling via the Net. A recent Goldman Sachs survey of 42 fortune 1,000 companies reveals that more than 40% plan to spend at least $500,000 each on new B2B software this year."

Now, let's contrast this with the latest figures on B2B, shall we? Here's Cyber-atlas, as of this month:

"Worldwide B2B e-commerce will total $823.4 billion by the end of 2002, eMarketer found, and the strong growth will continue through 2004.
According to eMarketer's "E-Commerce Trade and B2B Exchanges" report, Internet-based B2B trade will reach nearly $2.4 trillion by 2004. "

Mr. Nelson's source only mistook his market by, oh, 11 trillion dollars. To put Bob Austrian in perspective, perhaps Schwartz could have asked him questions like, hey, do you think it is healthy to do massive doses of LSD every day? But he didn't. Instead, he took at face value the idea -- or is it an idea? -- the fantasy that there was a 100 dollar savings in paperwork each time a business transaction was made. Hmm. So, each biz transaction that is made is equal to +100 dollars in cost? Schwartz has some story here, if this is true. The story would go something like: Capitalism is more than doomed! Marx didn't know the half of it! More at 11...

But why think, really, if you can write such pap for the nation's leading biz mag and get away with it?

Schwartz, actually, became a New Economy pentiti. He confessed, in an article published a year after his B2B extravaganza, that he might have been a wee bit credulous.

"Although I was always careful to warn readers, as well as Mom, of the risks of investing--even saying that certain stocks could lose all of their value--I too believed in the promise of the new economy. I wanted a piece of the action. And as hard as it might be to remember now, it actually seemed as if the Internet were going to change everything. So if that meant selling blue chips to buy names that could double in weeks or months, well, that was a heck of a lot more exciting than sitting on dead money. Besides, the people behind these Silicon Valley companies were a lot more exciting, even sexier, than the old economy's gray suits. Wouldn't you rather have dinner with HP's Carly Fiorina than with Phil Condit of Boeing?

As it turned out, what I thought of as dead money wasn't so bad. At least those stocks, when they go down, don't drop 80% or more like PMC-Sierra or Kana. There's something to be said for boring old blue chips that actually pay dividends, earn real profits, and maybe rise only 5% or 10% a year. And keeping cash in a money-market account may not be just for wimps and nervous Nellies."

Get the coyness of that confession -- yeah, he's bowled over by how sexy Carly Fiorina is, heh heh. When, of course, the question is making an elementary, an elementary, analysis of what you are being told. In other words, being able to smell bs. That is what journalists are supposed to do, right?
But not if their purpose is simply to pump the market. Like Bourbon Street shills, all that noise is just supposed to attract the gawkers, and strip them of their ready cash.
Oh, and now they wonder why the rubes aren't lifting the market when it has "bottomed'? Search me.

Tuesday, July 23, 2002


Well, Limited Inc is going to try to write a post.
We've been thinking of extending the Bubble concept. We've mentioned the Bush Bubble. But there is another bubble that floated, in the high nineties, that has come down precipitously. That bubble was made of Media hot air. If the stock market does level out into some seventies plateau, one of the reasons will be that the business press, both mainstream and specialized, has done an incredibly poor job of reporting on business in the last ten years. Business mags popped up, got fat, got thin and died, all without questioning or in any way investigating what now appears to be incredibly easy to expose shams in major corporations. We'd like to institute some kind of prize for sheer hot air -- a prize that would go to the most intellectually corrupt reporter. Unfortunately, we don't have any bucks to do this. However, we do have a name: We'd call it the James Glassman prize in misleading reporting, after the author of Dow 36,000 -- a man who is still giving his perky advice from the pages of the Washington Post. Some would argue with this choice of name. Some would rather name it after poor George Gilder, Mr. Telecosm. But G.G. smoked his own dope, as the Enron folks used to say. He went down with his picks.

The field is vast, n'est-ce pas? and it isn't like it has been culled or corrected -- when amnesia takes away the mendacity one published yesterday, so that one can continue to make ridiculous and optimistic statements today, there's no mechanism of natural selection that would finger the unworthy. Yesterday, for example, LI was sitting in a bar. The bar TV was turned to Fox News. Now, Fox TV sit-coms are known for their appeal to the prurient puer, but compared to the intellectual level on display during the news hour, the sit coms are straight from Einstein. The hour lighted on the liberal demon act of the day, California's new standards for car emissions, and a suitable shill from Detroit, disguised as a reporter, was given the spotlight. I mean, this guy was so from Detroit he should have been wearing an SUV chassis. At one point, he made a disparaging remark about Honda's hybrid cars, to the effect that they are losing thousands per unit.
Now, Honda does seem to be losing money, right now, on their hybrids, although the figures are as yet unknown. But the gall of a Detroit shill lecturing Honda, of all companies, was enough to make me spit my vodka tonic all over the place. As everybody knows, GM is moving their mammoths not through quality improvement, but through the game of zero percent financing. They can do this because they have effectively disintermediated from financial institutions that would have refused the gimmick. Eventually, though, GM's financing department is going to have to find a way to lay that rotten egg. Talk about losing money. To lose money trying to craft a new technology is honorable, and in the long run it pays off, if the tech is any good. To lose money essentially trying to bamboozle market share for car types that haven't changed in 10 years is not only dishonorable, but eventually GM will quietly try to make the Government pay for their massive bet. Why, one might ask, does this story not attract Fortune or Forbes or Business 2.0? Because it is a story that GM does not want told. Period.

Tomorrow, if we can, we are going to start our Glassman awards with a look at the reporting on Enron. Enron, it appears, is a bigger story than even we thought a couple of months ago, because some of the effects of it are just starting to kick in globally. Todays stories about the collaboration of the banks in Enron's perpetual, perpetually disguised, deals, is not going to be good news, now that the Fed is figuring out how to cover Citibank for its WorldCom exposure.

Monday, July 22, 2002

Limited Inc lost our computer last week. The video card, or something like that, gave up the ghost. While the computer is in the shop (oh, we feel like a bee without a stinger!), we are forced to rely on library supplied internet access.
Usually, this is how we write. We pull up an empty text from File, and we go around the net, putting our links and quotes in it. Then we put our comments around those links and quotes. Then we go to Blogger, and paste in a copy of our text. Then we go to the page, and see the text. This final stage has interesting epistemological implications, since it is the seeing that helps us find mistakes in the text. It is as if some malin genie in our head was flickering rapidly between reading and seeing.
Well, our m.o. has crashed, at least for a week, and we don't know what to do about it. We want to be sitting, Thersites like, as the Bush bubble starts to collapse -- you know, the Bush bubble approval rating. We personally think that a couple of trillion dollars vanishing in thin air, and the Republican core response (Dick Cheney's nice little grumble about how you can't pass a law to make the stock market go up about captures it) is going to be fun to watch. Alas, although we'd like to preen in crow feathers, hunt and peck, and generally croak out Nevermore, we aren't able to do that right now.

Sunday, July 21, 2002

One hundred forty years ago, Walter Bagehot, the Victorian founder of the Economist, wrote a book, Physics and Politics, in which he addressed one of the the burning questions of the day: why do some nations progress, while others stagnate, or even go backwards? After dismissing, for the most part, the day's most popular solution (inherited racial dissimilarities), he answered his question by adducing what we would now call the cultural paradigm. The most progressive nations, he thought, were those that could implement "conservative innovation - the matching of new institutions with old ones." Of course, to a self satisfied Englishman of Bagehot's stripe, at the very zenith of the British Empire, the obvious and champeen exemplar of conservative innovation was his won sceptered isle. Granting the parochialism of Bagehot's example, his statement of the issue is very much with us. It is a strange fact that, through most of the twentieth century, the map of progressing nations - those that possess both economic power and generate new technology -- increased by one: Japan. No African nations, no Middle Eastern nations, no South American nations, deserve to be added to that list.

V.S. Naipaul, the winner of the 2001 Nobel Prize for literature, has been among our most intrepid explorer of non-progressing nations in the last thirty years. His latest collection of essays, which includes an array of uncollected pieces, as well as literary journalism collected from three former books, does not reprint, curiously enough,"Conrad's Darkness", his most famous and intense treatment of the problems attending a writer of Naipaul's type in confronting a world that could still be described in terms consonant with Bagehot. In that essay, Naipaul coined his famous phrase about " half made societies that seemed doomed to remain half made..." Naipaul has set himself up as the scourge of the moral and intellectual corruption rampant among half made societies. He also beats with a stick the dupes of third world oppression in the West.

Naipaul's own status as the (now distant) product of one of the half made societies, Trinidad, secures his special moral position among the dupes, otherwise known as the liberal crowd who read the New York Review of Books. The grandchild of indentured Indian emigrants brought to Trinidad in the nineteenth century, during the boom years of the sugar plantations, Naipaul made his escape early, first to Oxford and then to a career as a writer of brilliant comic novels. Up until the seventies, his fame was mostly confined to England, where he still lives. In the seventies he became an internationally known writer. In novels like A Bend in the River and Guerillas, he took on the eschatological illusions of the revolutionary politics that was faddish in the sixties and seventies, showing, in the former, an African state pullulating with the decay of the old civilities and completely unable to produce an infrastructure to sustain it; in the latter, he tells the tale of bogus Black Power group in Trinidad that serves as the holiday fare for some camp followers of trendily leftist orientation, until it turns murderous.

Accompanying this output of increasingly disenchanted fiction was a series of books of literary journalism. It was probably the publication of The Return of Eva Peron with the Killings in Trinidad, in 1980, that tipped the balance in Naipaul's reputation. For the leftwing crowd, from then on, Naipaul was an arch-traitor to his race, the loyal subaltern in the Kipling mode, a Gunga Din for the age of Thatcher. For the right, he became an honorary member of the club, our man, so to speak, in the third world (although clearly and expressly a British resident), a Solzhenitsyn of the Third World, as Jane Kramer once dubbed him.

So one reads a subtext of defiance in the inclusion, in this book, of most of the 1980 book -- a challenge to the Edward Saids of the world. That note is continued in the book's postscript, Our Universal Civilization, which was originally a talk given to the conservative Manhattan Institute.

There are two essays from that period that display Naipaul's literary journalism in its best and in its worst light. Michael X and the Black Power Killings in Trinidad is an exploration of one of the lunatic dead ends of seventies radicalism. It obviously served as a template for Naipaul's subsequent novel, Guerillas. Naipaul profiles the hapless, and finally homicidal career of Michael X, born Michael de Freitas, a pimp and conman who established himself, with the help of some sympathetic lefty journalists, as a Black Power leader, first in England, and then in his native Trinidad. That heady time in the late sixties and early seventies, when John Lennon and Yoko were holding bed ins against the war, and flower children were practicing raising their fists in the international black power salute, is still worth cringing over. As Michael X began to believe his own con, he went the route of many a minor messiah before him and spilt blood -- first directing the killing of a white camp follower, 27 year old Gale Ann Benson, and then actually crushing the head of another of his followers with a stone. Naipaul recounts this story with a maximum objectivity, but the reader feels the anger behind the narrative of facts. It is an anger that, oddly enough, is aimed less at Michael X than at Gale Ann Beson. Her sin, in Naipaul's eyes, was to dress in African clothes, engage in an undignified sexual relationship with Jamal, one of Michael X's followers, and in general make herself so available to being hurt. Such availability, in Naipaul's eyes, stems, ultimately, from a security so global that Benson can't see out of it. She can throw herself into the part of fake African, white skin and all, because the world of Africans, to her, is ultimately unreal. This unconscious contempt is her corruption -- so that, Naipaul contends, "she became as corrupt as her master." You can spot the moralist by his exaggerations. Here the reader has to pause and remember that the sum total of Benson's crimes amount to dressing up in African clothes and calling herself, sometimes, by the ridiculous name of Hale Kimga. In literature, facts lead us inexhorably to symbols. The same is not true of life: while Benson might have symbolized, both to Naipaul and Michael X, the deep corruption of the colonial mentality, she was actually just a 27 year old woman who made some stupid and tasteless mistakes.

Naipaul's worst essay is probably his piece on Argentina. It is here that the methods of literary journalism do him a particular disservice. The literary journalist is looking to nail an atmospher, not a particular sequence of events. The sequence of events that span the time from Peron's return to the military dictatorship ostensibly provides the reason for Naipaul's essay, but you won't find any clear eventline here, nor even a hint as to how these things transpired. You will find, instead, scattered fragments of an interview with Borges interspersed with meditations about the Argentinian relationship to the land, the Argentinian acceptance of torture, and the prevelance of magical thinking in the country. Naipaul makes generalizations that are debateably absurd, such as his contention that more gifted men have come into the world from New Zealand than from Argentina, or poetically absurd, such as the contention that Argentina has no history, or absurdly absurd, such as Naipaul's contention that every Argentine schoolgirl knows "the brothels ... understands that she might have to go there one day to find love..."). Perhaps Naipaul's bilious portrait of the place was effected by his brief arrest. This is the longest essay in the book, with sections that have been added on in the years since it was first published. It is, however, a mess.

The global impression left by this book is that Naipaul can't really be read solely in the light of our two current political factions. One is struck again and again in this book by the teasing familiarity of Naipaul's themes: the scathing dismissal of superstition, the contempt for the placaters of power who cannot, themselves, create power, the criticism of magic, both as metaphor and social fact. Where have we seen these things before? The answer, in Western culture, is that these are old things. They constituted the program of enlightened men and women from Francis Bacon to Voltaire and Mary Wollenscraft. What drives Naipaul into a cold fury is the casual abandoment of the enlightenment program by those liberals while have enjoyed to the full the fruits of science and intellectual inquiry, who are quite content to abandon the non-progressing nations to different cultural standards of truth in the name of multi-culturalism. That abandonment, while seemingly a gesture of tolerance and generosity, actually seals the doom of half made societies, making it impossible for new institutions to match old ones. Instead, advantage goes to the despotic, the bullying, the thieves and rhetors, the Michael X-s who have actually achieved power. In his talk to the Manhattan Institute, Naipaul describes himself as a man who has gone from the periphery to the center. Oddly enough, the center, right now, is a mad scramble for the peripheries, as writers set up shop in the name of their ethnic identies, as though they were restaurants, or their sexual identities, as though they were dating services.

The ethics of integrity or the Baker at Dachau

    Throughout the 19th and 20th century, one stumbles upon the lefthand heirs of Burke – Red Tories, as Orwell called them. Orwell’s inst...