December 01, 2006
The price of everything and the value of nothing — Or, just what is something worth?
Michael Kinsley's November 21, 2006 Washington Post Op-Ed column puzzled me and has kept me thinking about it since I read it.
In it, he remarked on the passing of Milton Friedman as he mused on how it is that the stock market imputes value — and how such valuations are seemingly arbitrary.
I've always found economics baffling myself, so by no means do I style myself as able to refute or agree with Kinsley's thrust, but I nevertheless found it very interesting.
Here's his piece.
- A Capitalist Swindle
The death of Milton Friedman has been an occasion for celebrating the magic of capitalism, and fair enough. Capitalism is pretty great, and Friedman was its feisty defender when that was far from a universally held view. But let's not get carried away. There are things capitalism does not do well and other things that masquerade as capitalism at work and claim its virtues, but aren't entitled.
Capitalism is brilliant at setting the price of potatoes. But how good is it at setting the price of a large company? To all appearances, the stock market is capitalism operating under near-laboratory conditions. Financial markets deal almost entirely in electronic blips. Supply and demand can chase each other around the world with no actual goods to get in the way, and prices can adjust constantly and instantaneously. Yet the prices set in financial markets are patently wrong.
That is not my opinion. Well, yes, it is my opinion. But it is not only my opinion. It is held by America's financial leaders, though they don't put it quite that way. Actually, it is close to a provable fact. The free market cannot be setting the right price for financial assets such as shares of stock because often there are different prices with equal claims to be the product of free-market capitalism. They can't all be right.
Since around the time of World War II, company and union pension funds have been pouring money into publicly traded stocks. For the past generation the government has been encouraging people, through tax and other incentives, to do the same with their savings. President Bush, of course, wanted to do likewise with Social Security revenue.
The Web site of the Securities and Exchange Commission, which regulates stocks, offers the conventional explanation of why publicly traded stocks are a good thing. They are good for individuals because they allow people to share in the growth of the American economy. They are good for society because, by creating a market and setting a value for corporate shares, they make it possible for corporations to raise money by issuing shares in the first place. Publicly traded companies have long dominated the U.S. economy, and most Americans have money invested, directly or indirectly, in publicly traded stocks.
All of this depends, though, on the assumption that the stock market sets the right price for shares of big companies. But a whole separate part of corporate finance is based on the assumption that those prices are wrong. These special deals used to be called leveraged buyouts. Now they're called "private equity."
The details are different, but the principle is the same. Private investors buy a company from its public stockholders. They have a letter from an investment bank saying the price is a fair one. They usually have the support of management, or they actually are the management. The public stockholders have little choice. But time and again — surprise, surprise — the investment bank turns out to be wrong. The company is actually far more valuable! (And any bank that can't be counted on to get this wrong will not be in this profitable line of work for long.) Soon the company is sold at a large profit, either to another company or back to the public.
So free-market capitalism has decreed three different values for this company. One is set by the stock market: the value of all the company's outstanding shares, or "market capitalization." One is what the private investors are offering — usually a bit more than the market cap. And one is what the private investors sell the company for a blink of an eye later — which is usually a lot more than the other two. Which of these numbers is the true capitalist price? Which one represents the most sublime interaction of supply and demand? Anyone? Anyone?
Defenders of this procedure say it's not that the stockholders have been swindled. It's that the company is actually far more valuable in private hands because managers — even the same managers as before — can manage far better without the constraints of public ownership, with its meddlesome stockholders and nettlesome regulations. Maybe so. But if these deals aren't a swindle, then the stock market itself is a swindle. It does not maximize value for its working- and middle-class investors. The stock market leaves money on the table waiting for "private equity" to swoop down and pick it up. Furthermore, Milton Friedman was wrong and the other famous economist who died this year, John Kenneth Galbraith, was right: The free market in corporate shares doesn't produce well-run companies.
Many have asked how managers trying to buy a publicly traded company can possibly be trusted to represent the shareholders who are being asked to sell it. How can they even be trusted to run the company, if they're plotting to buy it with the argument that it can't be well-run under current circumstances? There are other nice questions: Did these managers happen to mention that they could not perform their jobs adequately as heads of publicly traded companies when the stockholders hired them for the job? If public ownership is a concept so flawed that the only way a company can prosper is to go private, how do the private owners explain their decision to take it public again? And so on.
But the big question is this: Either the stock market is a fraud on the public or these deals that dominate the business pages are a fraud on the public. Which is it?
What's a planisphere?
So I was kind of surprised to see it costs $59.
From the website:
- Planisphere Watch
This watch boasts a planisphere (starfinder) for the Northern Hemisphere that shows which stars are overhead at a given date and hour.
Dial glows for several hours after exposure to light.
Fits wrists up to 8-1/2" diameter.
Silver oxide battery included.
1-1/4" diameter face.
So even if you work nights and never get outside to see the stars, you can at least find out what's playing on the big screen.
Everest — 'The first nationwide funeral planning concierge service'
Mark Duffey is a founder and president of this Houston-based company.
Financial-Planning.com interviewed him and posted the Q&A online.
JazzIcons.com — '9 live concert DVD videos from the pioneers and legends of jazz'
Louis Armstrong, Count Basie, Chet Baker, Art Blakey & The Jazz Messengers, Ella Fitzgerald, Dizzy Gillespie, Quincy Jones, Thelonius Monk and Buddy Rich.
Iconic enough for you?
Nat Hentoff raved about these DVDs in his review in yesterday's Wall Street Journal; he wrote, "To this jazz enthusiast, this is like the discovery of a bonanza of previously unknown manuscripts of plays by William Shakespeare."
Here's Hentoff's piece.
- Jazz Concerts of the '50s to '70s, Now Seen as Well as Heard
For years, jazz musicians coming back from Europe have told me of being part of concerts — televised live by state-owned stations in Europe — that have been among the most deeply satisfying of their musical lives. Uninterrupted by commercials and produced without concern for competitive audience ratings, these gigs freed the musicians from time constraints. I've long regretted not having been able to see any of these performances, but now the first nine "Jazz Icons" DVDs have resoundingly arrived — produced by Reelin' in the Years Productions on the international TDK label, distributed in North America by Naxos America.
Filmed in Belgium, Norway, Sweden, Holland, Denmark and Switzerland from the 1950s into the 1970s, "none of these performances" — say the ceaseless explorers of Reelin' in the Years, David Pack and Phillip Galloway — "has ever been officially released, and in many cases, the material was never originally broadcast."
To this jazz enthusiast, this is like the discovery of a bonanza of previously unknown manuscripts of plays by William Shakespeare. Among the international icons and their sidemen are Louis Armstrong; Dizzy Gillespie; Count Basie; Thelonious Monk; Art Blakey and the Jazz Messengers; Buddy Rich; Quincy Jones; Ella Fitzgerald; and Chet Baker.
My recommendations among them begin with the DVD of the 1960 Quincy Jones ensemble, which Mr. Jones understandably called his "dream band." In the brass section (whose élan reminded me of Duke Ellington's "Braggin' in Brass" tribute to his horn men) are trumpeters Clark Terry and Benny Bailey and trombonists Quentin Jackson and Melba Liston (the latter long ago having proved that jazzwomen do have "chops"). And always going for a home run, there is Phil Woods on alto saxophone.
Also of historic and present joy are the 1958 Art Blakey and the Jazz Messengers with the thrilling (I mean the term denotatively) trumpet of Lee Morgan — with Mr. Blakey, as usual, on fire on drums. Also, the full presence of Thelonious Monk in a 1966 concert bears out what I tell listeners too young to have ever seen Monk — that he was almost as mesmerizing to watch as to hear.
On the Ella Fitzgerald DVD, there are two concerts (1957 and 1963) in which Ella, reveling in her incomparable mastery of jazz time and swiftly inventive wit, is backed on the earlier set by my choice of a "dream rhythm section": Jo Jones, Ray Brown and Oscar Peterson.
Dizzy Gillespie, too, was best seen as well as heard to get the full, flavorful impact of his delight in continually surprising himself during his 1958 and 1970 concerts.
Louis Armstrong, as Wynton Marsalis says of Satchmo's 1959 "Jazz Icon" concert, "is the most modern trumpet player we've ever heard and the most ancient at the same time... this DVD captures that intangible power and allows us to gaze upon it in wonder."
The Count Basie band of 1962 brings me back to that time when, going down the stairs into New York's Birdland, the swinging gusts from the bandstand below almost blew me against the wall. And Buddy Rich, who could have swung a military band, bursts into view with his 1978 big band, which he called, with manifest pride, the "Killer Force."
Also among these first nine "Icons," with more to come, are 1964 and 1979 performances by Chet Baker, whose trumpet playing and singing have, for me, been an acquired taste that I've not been able to master. But many have, and still do.
Not only are these performances previously unavailable — to most of us, unknown to have existed — and invaluable contributions to the history of the music, but they also serve as a much needed model of economic justice to jazz sidemen. Uniquely, in my experience, each sideman in these concerts, as producers Peck and Galloway note, is being paid directly — or if they're dead — via the American Federation of Musicians, through the musicians' estates. The reason that so many jazz sidemen who have been sidelined — for reasons of health or changing fashions — are often hard put to pay their rent is that sidemen do not get royalty payments from sales of recordings, and relatively few of them ever become leaders of bands or combos.
Also part of the care Messrs. Peck and Galloway have taken with these DVD additions to the jazz heritage is the quality of the sound in the remastering and the knowledgeable liner notes, which include both the commentary of jazz critics and some of the reminiscences of colleagues and family members of the icons.
In the Thelonious Monk booklet, Don Sickler — long associated with Monk and his family, and himself a trumpet player and an arranger of Monk's music — has this illuminating passage, quoting drummer Ben Riley, who's on the DVD:
"Monk lets the music breathe. He doesn't clutter anything up. He leaves space for you to create. John Coltrane said that playing with Thelonious Monk was like opening a door and stepping into a room, and there was no floor. So now you have to figure how to stand up on your own." (Duke Ellington, a major influence on Monk, used to say to a sideman asking for instructions on how to solo on a wholly new piece of Duke's music: "Listen, sweetie, listen!")
Having opened doors to a pantheon of jazz creators with this first series of "Jazz Icons," Messrs. Peck and Galloway are trying to make arrangements to get artists' and other clearances to release "an incredible 60-minute concert from 1966 with Ella Fitzgerald and Duke Ellington; various concerts of John Coltrane, Sarah Vaughan and (Rahsaan) Roland Kirk; and 90 minutes of live and in-studio concerts from 1964 with Charles Mingus and Eric Dolphy, filmed a few months before Dolphy passed away."
I heard about that Dolphy concert from one of Mingus's sidemen, who told me knowing that I had had the privilege of recording the often astonishing Dolphy: "Eric that day went beyond anything he's ever done before!"
Reelin' in the Years Productions does not focus solely on jazz. Messrs. Peck and Galloway have a library of more than 10,000 filmed performances from, they note, "over 30 TV stations that we exclusively represent from Europe, Japan and Australia." Among their previous releases are "American Folk Blues Festival 1962-69" and three James Brown "soul" concerts from 1966 to 1971.
Who knows? Maybe somewhere there is a recording of the legendary New Orleans trumpet player Buddy Bolden, whose horn on the streets could be heard for 10 miles — or so I was told by musicians there remembering tales of their boyhoods. If such a recording exists, Messrs. Peck and Galloway will find it.
World's Most Dangerous Airline
Long story short: "The chances of passengers being in a fatal accident today on an African airline are about 25 times greater than on a U.S.-based airline," according to Andy Pasztor's article in today's Wall Street Journal (WSJ).
The European Union (EU) earlier this year banned 92 airlines from entering European airspace "due to their failure to meet basic safety standards."
EU Transport Minister Jacques Barrot described those carriers as "flying coffins."
I like a little understatement on Fridays, myself — you?
Anyhow, choosing the worst of this frightening group is kind of silly: I mean, you're basically jumping with a parachute that may — or may not — open when you take your seat.
The Times of London listed the 92 in a March 22, 2006 article.
Note: It would probably be best not to simply print out the Times article to read on board your plane, especially if you're flying in Africa.
Here's the WSJ piece.
- Air-Safety Groups Seek to Cut Crashes in Developing Regions
With airlines recording unprecedented low accident rates in North America and Western Europe, global aviation-safety groups are set to release a comprehensive plan to reduce commercial-jet crashes in developing regions.
Slated to be disclosed Monday by the International Civil Aviation Organization (
Progress on safety remains "slower in some countries," so the latest effort is "a way to assure that we keep the confidence of the traveling public," Roberto Kobeh González, the head of ICAO, said last month.
Seeking to apply the most-effective safety techniques developed in the U.S. and Europe to other regions, the initiatives run the gamut from establishing reliable incident-reporting systems to installing advanced collision-warning devices in cockpits. Yet "due to the relative scarcity of financial and human resources" in developing countries, the document urges a "well-considered understanding of what safety benefits can be gained" over the long run from new technologies.
The plan doesn't spell out firm numerical targets and leaves the details of implementing it to regional groups. But more than ever, it holds out the prospect of a single safety standard regardless of where an airline is based.
The latest effort faces challenges, starting with ICAO's limited ability to force or persuade governments or national regulators to step up safety oversight. Lack of financial resources and trained personnel in many areas also could hamper progress. Calling public attention to safety shortcomings is the strongest tool available to the safety groups.
Historically, about three-quarters of all airline fatalities result from crashes in Africa and parts of Asia. According to Boeing Co., fatalities on its aircraft operating in Africa have averaged about 125 per year since the beginning of the decade. In some years, the toll has climbed closer to 400 victims. Other organizations that helped write the document are anticipating achieving a 25% reduction in African fatalities over the next few years.
"The first step to a solution is honestly realizing we have a big problem" in safety disparities between regions, according to Giovanni Bisignani, chief executive of the International Air Transport Association. For some African countries and airlines, "their safety record is an embarrassment for this industry," he told a conference in Chantilly, Va., in November.
The chances of passengers being in a fatal accident today on an African airline are 25 times greater than on a U.S.-based airline. They are roughly eight times greater on a Latin American airline. On a rolling five-year average, the global accident rate for commercial jets rose by about one-third in 2005 to 1.4 accidents per one million departures. And despite steady safety advances, the actual number of world-wide crash fatalities has stayed remarkably steady, averaging just under 520 a year.
The ambitious goals also must contend with an anticipated doubling of jetliners in use around the world by 2020, and potentially even steeper growth in global passenger traffic by then. Without significantly lower accident rates in developing regions, aviation officials worry a steady drumbeat of gruesome crashes could undermine passenger confidence everywhere.
Under preparation for 18 months with the help of pilot and airport groups, aircraft manufacturers, the independent Flight Safety Foundation and other experts, the report emphasizes "shared goals and methods," noting that many safety problems "are best addressed at the regional level."
Always Perfect™ Oven Thermometer
For a sec there I thought I was doing crunches with John and Jamie Lee.
But I digress.
From the website:
Always Perfect™ Oven Thermometer
Go enjoy the party.
Our oven thermometer with color-changing backlight lets you know when food is ready to serve.
No more guessing or cutting into food to check for doneness.
From chicken and beef to fish and lamb, this thermometer helps you perfectly cook up to nine types of food.
Simply select your target setting — Medium-Rare, Medium or Well.
The color-coded backlight and beep alerts notify you of your meal's progress: Green — just started; Blue — getting close; Purple — almost done; and Red — ready to serve.
Use as a regular cooking thermometer, too.
Things change fast.
When I first saw this item, last evening while paging through Brookstone's
paper catalog, it was priced at $85.
Just now when I went to post it, the price had dropped to $49.99.
What's that all about?
Gym Jones — Best-named workout facility in the world
It's an invitation-only workout center in Salt Lake City founded and run by Mark Twight, author of "Extreme Alpinism," that is "more torture chamber than Sports Club/L.A.; squats and dead lifts, not treadmill runs, supply the cardio," was how Robert Ito described it in a November 26, 2006 New York Times story about how the actors who would play Spartans in the film adaptation of Frank Miller's "300" trained there.
The article continued, "Under Mr. Twight's tutelage, the actors and stunt people endured a two-and-a-half month boot camp before the cameras rolled. The diet was brutal — meat, leaves and berries, Mr. Twight said — and the workouts even worse."
Like it says on the homepage: "Gym Jones is not a cozy place."
Though you'll never see me up on a mountain, I found Twight's book
completely engrossing — and said so.
Meet Mariska Hargitay
You know her as Detective Olivia Benson on "Law and Order: Special Victims Unit."
She won this year's Emmy for "Outstanding Lead Actress in a Drama Series."
She'll be at Bloomingdale's on 59th Street in New York City today, Friday, December 1, 2006, from 11 a.m. to 12:30 p.m., in Cosmetics on 1, signing bottles of Philosophy's new Joyful Heart line of shampoo, shower gel and bubble bath.
Sorry about the short notice and all: my crack research team just slipped this under the door a few minutes ago, even though the ad (top) appeared in yesterday's New York Times.
It's really, really hard to get good help.