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Poetry

My family’s poet laureate, Harris Gardner, presented the following at the 50th birthday party held in honor of my nephew, Jason Scolnick.

Sword of a Troubadour

To Jason Scolnick on his 50th Birthday

From your realm of Self,
Your mystical music beguiles
Murmured harmonies of the spheres.

May your desires and dreams
Exceed those of Don Quixote;
May your songs soar to the frontier
Of the firmament and stun

A chorus of angels into mute wonder.
May your lyrics purify the ocean
To sustain the life that flows below.
Ranks of waves will render thanks.

May your strain be your weapon’s
Honed edge to lead the advance
Against any qualms that may
Rein in resolve, Raise your guidon!

Lift your music’s sabre;
Let its vibrant voice be heard.
As you set sail to further explore
Your mind’s hope-filled horizon,
Know that inspired labor will prevail.

Harris Gardner

Thought for the day

Is it foolish to think that anyone, especially Congress using a political process, can wisely determine where and how much economic aid should be provided to businesses or individuals?

The intended and unintended consequences may be worse than if Congress does nothing.

Stock Buybacks

Reading just headlines some have pointed out that there is an HBR article that says stock buybacks are dangerous for the economy/

https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy

But it is the swapping of equity for debt that is the warning from the HBR article. We have this moral hazard for corporation management because the Federal Reserve is manipulating interest rates. The cost of equity capital for a company is approximately the reciprocal of the P/E ratio. So for a stock with a P/E of 15, the cost of equity capital is 1/15 = 6.6%. With debt capital only costing 3% or less, management is enticed to take on the risk. The problem is that taking on debt requires them to make regular interest payments, while equity capital can suspend dividends whenever they want. Taking on debt to buy back stock is bad. Distributing cash also reduces the a company’s chances to weather a downturn so management needs to consider that before a buyback. But investing the money into growth activities for the company that don’t work out also reduce the safety of the company.

China growth

Bernie Sanders and others tend to give kudos to China for their spectacular growth. Would the growth have been possible if the west had not already achieved a developed economy? Seems much of China’s growth is due to a process similar to arbitrage. Rather than entrepreneurs having to devise new products for customers, Chinese businessmen only had to figure out how to convert underused human labor into more productive activities. Producing goods for which there were already known customers. Not to disparage what they have done, but rather realize it would not have been possible, if the rest of the world had been at the same level of development as China. Maybe inequality is a good thing for lifting people out of poverty.