An Election Editorial

Hey all!

To paraphrase Winston Churchill (poorly):

Show me a young person who isn't liberal and I'll show you a coward. Show me an old person who isn't conservative and I'll show you a fool.

Maybe it's all the stuff out there that comes with an election, but I just have to get this off my chest:

After you've been around the block a few times, there are some "new" ideas that you just know won't work. You don't have to give them a try... ...You don't have to be "open-minded". You've just seen it before and you know how it's gonna end.

Think about the recent crisis in subprime loans. Now, take a look at this article from 1999.

Fannie Mae Eases Credit To Aid Mortgage Lending
By Steven A. Holmes, New York Times, September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

...

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' [Emphasis Added]

[see entire article here]


If you read the whole article there is plenty of blame to go around. But there is no rocket science here, is there?

This crisis was a long time coming and as predictable as a train's path. Every ten years or so a new batch of young geniuses comes up to tell us that it is now safe to do stupid things and, with about the same frequency, people get pulled into a fad of following the "new" logic because "we're smarter now". (Yep, as a former "genius" I remember believing that.)

So, as a gentle reminder, here are some principles that we might want to keep in mind:

• A business that is losing money is generally a bad investment.
• If you sell something for less than it takes to make it, you won't "make it up on volume."
• Lending to high risk debtors at regular rates creates losses greater than any premium you may receive for making the loan. (Doing so at higher rates, AKA "Loan Sharking", is another matter... )
• Even poorly functioning markets operate better than markets controlled by bureaucrats.
• You cannot tax your way to prosperity.
• Wealth redistribution... ...doesn't. (It just destroys the wealth for all.)
• Rare indeed is the path to success that is both simple and easy. Usually, the path to success is neither. (And "success" isn't about money!)
• Generally, those offering a "free lunch" are either ignorant or dishonest, (and they are counting on you to be the same.)
• America IS sometimes as bad as "they" say. ("They" just don't tell you how much BETTER it is than any of the alternatives.)
• We aren't smarter than the generations that came before us. (Believing that we are is anectodal evidence that we're less intelligent.)
• You will never know or understand all of the risks you are exposed to, (let alone mitigate them,) so it is generally a bad idea to put all of your eggs in one basket.
• If the prize-winning stallion you just bought looks like a duck, waddles like a duck and quacks like a duck... buy Duck Chow. (That "horse" ain't gonna touch the Stallion Chow.)

The nicest thing about understanding these rules is that they will also help you understand how blessed we are... ...in spite of ourselves.

What rules would you add to that list?

God bless America? He already has...

- An Unclean Vessel

PS. On the other hand, I also recall an old President/CEO of General Foods(?) who said that when a young manager came in with an idea that he, (the President,) was sure would never work, he would still give that manager a small budget and a chance to make it go.

He said that was where they usually found their most popular new products... Maybe the only infallable rule of thumb is "There are no infallable rules of thumb."