FLAT EARTH FRIEDMAN’S WEALTH IS VANISHING

CLICK HERE LARGE PRINT EDITION:  FLAT EARTH FRIEDMAN’S WEALTH IS VANISHING 

The Cave of Wealth and Death has many residents.  These are all elemental gods and goddesses.  The goddesses are, by far, the most annoying and difficult characters in the mythological regime there.  There is Libra, guardian of the Gates who is the one we fear to meet because she is very stern and quite moral.  Then there are the Inflation/Depression twins.  These creatures love infinity and zero.  They are lightning goddesses, too.  

There are others: Derivative Beast is the union of banking gnomes and the Infinity/Zero goddesses.  Then there is Risky.  She wants us to do dangerous things for the fun of it.  Then there is her twin, Safety.  Aside from them there is this other dire set of goddessess: the Fates and the Furies.

Oh, you do not want to meet them in a dark alley.  They are usually silent, when I was young, I called them, ‘Watchers’ because they haunt our dream world and when manifest in the waking world, make our lives hellish.    The ancient Greeks took these vulture-type goddesses very seriously.  They coined a word to describe what gets these red-eyed denizens of the darkest corners of the Cave of Wealth and Death agitated: Hubris [ὕβρις].  

 

If there is any man on earth who deserves a nightmare visit of these terrible ladies of the night, it is Mr. Friedman who gets to reign on  the New York Times editorial pages.  For years, I have made fun of this loopy and very dangerous man.  If the goddesses grant me one wish, it would be for this guy to be as poor as I was when my family had to live in a tent for ten years!

 

And so it is: the goddesses heard and agree, he needs to be brought down a few billion pegs.  So they unleashed the Derivatives Beast and it roared into action and ate nearly all of Friedman’s vast wealth.  This man who is one of the biggest, most brazen bellowers for ‘free trade’ is now learning the hard way, his way was the way to hell, not eternal wealth.

 

Thomas Friedman’s World Is Flat Broke: Politics and Power: vanityfair.com

That’s because the author’s wife, Ann (née Bucksbaum), is an heir to the General Growth fortune. In the past year, the couple—who live in an 11,400-square-foot mansion in Bethesda, Maryland—have watched helplessly as General Growth stock has fallen 99 percent, from a high of $51 to a recent 35 cents a share.

 

He lost 99% of his wealth?  This is good news.  I wonder if he will finally figure out that he was a fool, a knave and a bastard?  He is totally at fault here.  The mess that ate up his wealth is the same that is eating all wealth: too much debt.  The organization that allowed this beastly man to live in a mansion and ride in a private jet and lecture us little people from his high perch was all based on debt.  

 

I have virtually no debts.  I worked very hard and suffered a lot of privation in order to gain this tiny victory.  So few of us can reach this goal!  It took me all my life, too!  This guy, on the other hand, reaped great wealth by going deeper and deeper into debt.  Namely, the organization that fed him and his wife and kept them cozy was based entirely on red ink.  This is the man who mocks people like me, for warning everyone about the flood of red ink.  Let’s look some more into the collapsing Flat Earth Business of the Friedman family:

 

Insiders Charge Into General Growth – Barron’s Online  August 7, 2007:

Over the past 90 days, three senior executives and a director have doled out $46.6 million to acquire 803,000 shares, according to Thomson Financial data. They have spent $46.1 million to purchase 790,500 shares on the open market and $427,500 to exercise options for 12,500 shares…..

The purchases began in May with the stock priced at around $63 and continued as the stock fell to around $46 last week. The options were priced at $30.94 to $47.26 apiece.

Jonathan Moreland, director of research at InsiderInsights.com, says that General Growth’s “insider profile has consistently been bullish and it has generally paid off for investors.” But right now, he says the technicals are “still looking pretty gruesome” for REITs and financial stocks in general, despite positive insider signals….

Freibaum’s buys indicate that he feels the stock “is oversold,” but it is difficult to pinpoint when the stock will bottom out given fears over the credit market, Silverman adds.

Meanwhile, Chief Executive Officer John Bucksbaum, a member of the Bucksbaum family that founded the REIT in 1954, bought 20,000 shares for $1.09 million on June 19….

On Aug. 1, Deutsche Bank Securities analyst Lou Taylor attributed the recent pullback to debt-market turmoil and mutual-fund redemptions despite a solid quarter. He moved General Growth to the top of his Buy list with a $65 price target.

Earlier this week, Credit Suisse analyst John J. Stewart named General Growth a top defensive play, but noted that its Las Vegas assets added an element of volatility. (See Investors’ Soapbox, “New Metrics to Find the Right REITs,” Aug. 6, 2007.)

Moreland says the stock is a “perfectly good candidate if you are a long-term investor right now, and it will be a good candidate to get into when the technicals improve for a short-term investor.”

 

Several things here: note how the experts were totally off base.  Anyone who paid to read the Barron’s brainiacs discuss business were misled very badly.  All the pros were being misled.  Here is my own story from August 7, 2007:  Money Matters: Hedge Fund Midas Touch Turns To Lead

So it is with money men: once they manage to use the power of magic to conjure money out of thin air, they then want everything to freeze up with them holding all this fragile number-magic wealth so they can be rich forever! But if they do this, they cause a depression and everyone becomes very, very poor in actuality. This leads to political instability and the destruction of those holding all the money. In other words, the desire for eternal wealth and power leads to heads being chopped off or a total collapse of a society. 

Back to the Bears Stearns story: when the magicians goofed and their magic failed, they had to admit they had nothing but a zillion debts and in order to save themselves, they had to make an accounting only the numbers say, ‘You are now a totally poor person’ and they hate this. At first, they admitted the real numbers but then the reaction was, all the investors ran to get their money out so they closed the doors to the bank vault. Then they told investors, they will pay themselves first and the investors last.

 

This entire Culture of Life article from 2007 is an important read. I explain magic numbers and the magic of making money out of thin air and how this all connects with ancient religions and how this was beginning to bedevil our super-wealth upper 1% class.  They were entering into a huge battle with massive, religious and magical forces that are far smarter and much more relentless than mere humans.  

We, poor humans, live only a short while on this lovely earth.  These creatures, on the other hand, live forever, in the case of Lady Luck.  The goddesses of Infinity and Zero [Depression] are also extremely old.  Only they didn’t exist except maybe as the two dice held by Lady Luck.  This is an interesting idea, actually.  

 

Lady Luck rolls her dice.  They just came up as snake eyes for Flat Earth Friedman.  And these dice are actually an expression of the capacity of Infinity and Zero interacting with random chance.  In the Universe, everything has natural dynamics.  Things don’t disappear.  They change their relative positions or expression of their dynamics.  For example, a photon unit, once it flows from a star, will travel for eons and eons and it is still something that exists until it hits something and changes that something even if it is very slight.  

 

The entire Universe has a birth point and presumably, a death point.  And between these lies all the goddesses and their dynamic systems.  It is very peculiar that these same systems work in the mini-economic realm run by mere humans.  Let’s go back to General Growth stock’s withering on the vine:

 

General Growth stock plummets under debt stress | HonoluluAdvertiser.com | The Honolulu Advertiser

The nation’s second-largest shopping center company, which owns or manages more than 200 regional shopping malls in 44 states, has $1.2 billion in debt coming due this year, and the credit market crisis has led analysts to question whether General Growth will be able to refinance its near-term obligations….

 Standard & Poor’s Ratings Services on Monday lowered its corporate credit rating on General Growth by a half notch from BB to B+, signifying that it believes the company has the capacity to meet its financial commitments but that adverse economic conditions will likely impair its ability to do so….

Jeffrey Laverty, an analyst at Oscar Gruss & Son, in New York, who has a “sell” rating on the company’s shares, said restructuring “is inevitable” for General Growth.

“It’s more than likely they get wiped out,” he said of General Growth shareholders.

 

Couldn’t these clowns operate on less debt?  Didn’t they ever hear of living within your means?  😛  Of course not!  They think they can simply get more and more loans to infinity.  This means the Goddesses who control inflation or depressions waken.  ‘Oh, he wants infinite wealth?  HAHAHAHA!’ yells Infinity as she takes off in search of new fresh meat.  As this organization that funneled amazing amounts of imports into our country via the whole ‘consumer culture’ business goes under, let us wave Flat Earth Friedman goodbye.

 

May he and his books be buried six feet under.  His wife’s stock fell over 60% today and is now officially ‘penny stock’.  The graph below shows a classic bubble/bust profile:

 

GGP Stock Charts – General Growth Properties, Inc Stock Market Charts 

 

When stocks were at $70, I bet old Friedman felt like a king.  Well, I hope he enjoys his new pauper status.  Maybe he can write a book about how great it is to be protected rather than ravaged by exterior forces.  Maybe this fool will connect more than two dots and figure out how his wife’s stocks became a bubble.  For what we are looking at is where just one part of the massive Japanese carry trade lending flowed: to any organization willing to sop it up.  This flood of funny money is now vanishing and so all the stocks that fed off of it are falling off the exact same cliff.

 

Bloomberg.com: Yen Rises on Speculation G-20 Will Fail to Boost Global Economy

The yen also advanced against the Australian and New Zealand dollars as uncertainty about the outcome of the meeting prompted traders to pare purchases of higher-yielding assets. The dollar may fall for a second day against the euro before a report that may show U.S. retail sales declined by the most since the 2001 recession.

“I’m looking for the yen to strengthen against the dollar,” said Takeshi Tokita, vice president of foreign- exchange sales in Tokyo at Mizuho Corporate Bank, a unit of Japan’s second-largest publicly traded lender. “No one is sure what will come out of the G-20. It’s likely that the U.S. and Europe won’t see eye to eye on many of the problems the global economy is facing.”

The yen rose to 97.10 per dollar as of 9:53 a.m. in Tokyo from 97.68 late yesterday in New York. Against the euro, it was at 123.99 from 124.78. The euro was little changed at $1.2772. The yen may fall to 95.50 today, Tokita said.

 

At the Bank of Japan, they openly talk about how the yen, when it is stronger than 102 to the dollar, is fatal to export profits.  They are desperate to keep it above that.  120 to the dollar is ideal.  Japan can then under sell all Asian and US competition.  During all of 2006 and 2007, the yen was very weak and limped along at around 120 or worse.  Then, on 7/17/7, the yen began to get stronger and stronger.

 

If we look at this yen graph, we can see that the weakest point was just before July, then it has become relentlessly stronger over the last year.  So if we look at the Friedman graph and this one together, we see an amazing thing: the Japanese carry trade began to violently unwind exactly when the Friedman organization hit its peak with the stock selling at nearly $70 a share.  There is even a strong upsurge in August of this year in these Friedman stocks and this coincides with the yen weakening briefly.  But after August 15th, the yen shot through the roof as the carry trade unwound with amazing fury.

 

The yen suddenly hit 91 to the dollar which was pretty amazing, on that same day.  And of course, the Federal Government had to step in to stop people from shorting poor Friedmania’s properties.

 

TrafficCourt » Short Selling Banned on General Growth

September 23rd, 2008  General Growth Properties was added to the list of companies that are now being protected against short sales. What started as a list of banks is becoming diverse very quickly.

So, someone contacted Paulson and asked to be put on the Goldman Sachs ‘anti-short’ list?  

 

When that list came out, I was aghast.  I thought is was waving a red flag in front of a bear.  Well, a pot of hunny, as Bear of Little Brain would suggest.  Since September 23, all stocks have had a rough ride.  Especially the non-growing General Growth.  Now, let’s go back to Japan to see how things fare there:

 

Winter to-buy list: hot-water bottle, humidifier, lap blanket

According to a survey conducted by the Ministry of Environment, since the introduction of the government’s Warm Biz campaign in 2005, the number of people who say their offices have lowered thermostats during the winter has increased. In 2007, 52% of survey respondents reported less heating in their offices, up 21 percentage points from two years earlier….

“It doesn’t take much space under my office desk,” an office worker in her mid-20s said in explaining her recent purchase of a hot-water bottle from the Loft Co. store in Shibuya Ward, Tokyo, for 3,150 yen…..

Meanwhile, online sales of hot-water bottles took off during summer due to some companies, apparently nonadherents to the Cool Biz campaign, cranking up the air conditioning. Online retailer Kenko.com Inc., which specializes in health products, sold six times more hot-water bottles in September than it did the same month last year. Especially popular was San-Yo Engineering Co.’s Yutaron, which sells for 2,100 yen. It can remain warm for about eight hours after being heated in a microwave for three to four minutes…..

Lap blankets have also been faring well. At Ryohin Keikaku Co., which markets the Muji line, blankets made of high-moisture-retention microfibers are selling well. Early October sales of the blankets, which retail for 1,575 yen and come in four color options, jumped 160% year on year.

This is just amazing.  Office workers were told, they will get little air conditioning last year.  Now, they will be told, they must work as if they are in the former Soviet Union.  Japan will ruthlessly strangle anything that serves the masses there.  If necessary, starve people if this brings profits to the export companies that dominate and utterly control Japan.  

 

And look at the prices of these goofy things!  A hot water bottle that costs $22?  (Sorry about the earlier errors)  Huh?  And the $32 water bottle at the beginning of the story: Japan has strange pricing, don’t they?  Thanks to Friedman, here in the US, we have cheap Asian goods.  But in Japan, they have very expensive JAPANESE goods.  And these things are stuff like hot water bottles.  At ridiculous prices.

 

President to Defend U.S. Capitalism Before Financial Summit – washingtonpost.com

In remarks prepared for delivery at a policy gathering in New York, Bush also calls on other nations to resist protectionism in responding to the crisis and vows that the United States will “help show the way back to economic growth and prosperity”……

In laying out the causes of the current financial crisis, Bush cites a “massive inflow of foreign capital” into the United States, which led to easy credit in the housing market and the packaging of questionable loans into complex mortgage-backed securities. The decline of the booming U.S. housing market then ignited the crisis, exposing “outdated regulatory structures and poor risk management practices” in financial institutions in the United States and Europe, he says.

Now, Bush says, actions to address the crisis “are having an impact,” and “a measure of stability is returning to financial systems around the world”….

“At the same time, we must recognize that government intervention is not a cure-all,” Bush says. “For example, some blame the crisis on insufficient regulation of the American mortgage market. But many European countries had much more extensive regulations and still experienced problems almost identical to our own.”

He adds: “History has shown that the greater threat to economic prosperity is not too little government involvement in the market — but too much. . . . Our aim should not be more government — it should be smarter government.”

 

Bush is going to finish his demolition job. We must all thank him.  A guillotine going away present, perhaps.  Well, he won’t be punished for doing a slap-bang job of bankrupting America.  Maybe he can join his old buddy, Clinton, on the executive lecture circuit.  Explain to everyone, how to turn Central Growth into Chaos Crater.  A big hole in the ground.

 

Note how he explains that Europe had more rules and regulations and still fell off the same Japanese carry trade cliff.  Well, duh.  The whole planet is falling into this debt pit. As for the ‘outdated regulatory structures’: these old fossils from the Great Depression were nearly all removed by excited Republicans and a few Democrats.  Who needs these old rules!  And so off everyone rushed to get rich quick via the magic of lending money  in infinite amounts to anyone on earth.

 

The entire concept of ‘governance’ is all about these things:

1. Balancing the books.  Not once every century.  Balancing the books annually.
2. Avoiding anything that goes to infinity or zero.
3. Understanding how bubbles look on graphs.  When the regulators see this in any place such as stocks or housing values, etc, they are to crack down on lending since all of these happen thanks to excessive lending.
4. If it sounds too good to be true, it is a fraud.
5. The earth is finite so money must be finite, too.

 

Even patience is not infinite.  The only thing that is infinite is Lady Luck.  She was here before Creation and will remain behind after the Destruction.

 

FEEL FREE TO EMAIL ME AT emeinel@fairpoint.net