ERIC'S THOUGHTS & MUSINGS
Saturday, February 20, 2010
It is refreshing to see the ideas of Austrian economics applied to investment management. John Hughes, president of Quantum Capital Management, stated the following in an interview on the Nightly Business report--he was interviewed on February 5, 2010, by Tom Hudson, of NBR:
TOM HUDSON: Volatility is back on the menu for investors this week certainly, the indices hitting those new lows for the year back on Thursday before the rebound today. Tonight's "Market Monitor" guest though, John Hughes. He's president of Quantum Capital Management of New Jersey. John welcome back to NBR. It's nice to see you.
JOHN HUGHES, PRESIDENT, QUANTUM CAPITAL MGMT.: Good to be here Tom.
HUDSON: The jobs picture improving just slightly in the last month. Is this a signal to get back in the market?
HUGHES: It's a positive signal if you believe that this is a cyclical recovery. We believe that it is a structural problem that's going to take some time to work its way through.
HUDSON: What's the structural problem?
HUGHES: Well, the Austrian economist von Mises said a long time ago that prices send signals. We believe that 25 years of ever-increasing debt at ever-decreasing costs, lower and lower interest rates, have sent signals that have led to mal-investment, mal-investment in the types of education that people pursue, the types of investment that people make. And it will take time for this reeducation, retraining process, reinvestment process. And if we -- if we continue to run better than trillion dollar deficits, it will certainly retard this dynamic process that is capitalism.
HUDSON: So with that kind of grave view in terms of the economy and I classify it as a grave view --
HUDSON: How does that shape your investment philosophy in 2010 and beyond?
HUGHES: There's nothing like the safety and comfort of a cheap stock.
HUDSON: Are there cheap stocks still on the market?
HUGHES: There are always. Certainly they're not as plentiful as they were in March of 2009, but there's always something to do.
For the rest of the interview, here is the link.
Sunday, June 28, 2009
When I went to Mises University, in 2001, I had no idea I was going to meet perhaps the greatest economist walking the planet. Mises University, back then, had core lectures and elective lectures. The first elective lecture I attended was one in which Dr. George Reisman was the lecturer. To say the least, he blew me away. Dr. Reisman's command of Austrian economics was (and still is) stunning. Thereafter, I made sure to attend every one of Dr. Reisman's lectures for the duration of that wonderful week of Mises University.
During Mises University, each instructor made his books available for sale. Dr. Reisman and his wife had a table set up with the purpose of selling his book "Capitalism." It is a book whose size is intimidating--this 1,046 page book has dimensions of 8.5 inches, by 11 inches, by 2 inches in thickness. Intimidation aside, I purchased the book. To be sure, I had Dr. Reisman autograph the book (dated August 10, 2001).
Eight years later, I am finally reading this book--I'm on page 398. To say the least, this book is a masterpiece. Anyone who wants to learn REAL economics should purchase "Capitalism" and take the time to read it. Remember, George Reisman earned his Ph.d studying under the great Ludwig von Mises.
If you want to purchase "Capitalism" go to George Reisman's website: http://www.capitalism.net/. Besides, it is a great website full of insightful essays.
Sunday, January 11, 2009
It is about time that the mainstream media has written a negative article regarding the destructive nature of stock buybacks. Ultimately, how can weakening a company's balance sheet enhance shareholder value? It can't. Now, many companies are regretting they ever undertook stock buybacks.
As the attached Bloomberg article conveys, Macy's, Gannett Co., and the New York Times Co. are suffering financially due to undertaking leveraged stock buyback programs.
Personally, I hope the New York Times goes bankrupt. This is a shameful company that publishes "fashionable" pro-statist garbage. How wonderful that its fashionable financial management may be its downfall. Good riddance.
Monday, November 17, 2008
So Citigroup is going to terminate 53,000 employees (article here: http://biz.yahoo.com/ap/081117/citigroup_jobs.html). One must wonder if such a huge bloodbath could have been avoided had Citigroup's top managment not been so reckless with the company's balance sheet? After all, between 2001 and 2007, Citigroup repurchased over $30 billion of its own stock. If this cash was still sitting on Citi's balance sheet, could it not better weather the current financial storm? Would it not be able to gain market share at the expense of other recklessly-managed financial institutions? Alas, Citigroup followed the herd and bought back stock in order to manipulate its stock price so as to maximize the compensation of those employees who had stock-based compensation packages. Because of such an irresponsible stock buyback program, tens-of-thousands are losing their jobs. The directors and officers of this company should be held accountable...but that's not going to happen.
Saturday, October 18, 2008
Isn't it funny that Bank of America's top management has decided that it is a bad idea to buy back stock thereby squandering precious cash. Instead of throwing away $3.75 billion, via stock buybacks (announced a couple of months ago), B of A is trying to raise $10 billion through a common stock offering. What a novel idea. Perhaps Wall Street is finally figuring out that cash isn't trash. Here's the link to the article: http://www.startribune.com/business/30531249.html
am an ardent believer in a 100% gold standard and, thus, I am an
adherent to Austrian economics (the pro-market, anti-statist school
of economics). I firmly believe that a free society can exist only
under conditions that include an absolute respect for private property
rights, the right to self-ownership, a negative rule of law, and
a 100% gold standard. It is no wonder why I am a paleolibertarian.
My intellectual heroes include Austrian economists Ludwig von Mises,
F.A. Hayek, Murray N. Rothbard, Hans-Hermann Hoppe, and Roger Garrison.
In 2000, I wrote a lengthy paper about the
interesting similarities between Austrian economics and the emerging
science of complexity (which seeks to understand spontaneous order).
Human prosperity (thanks to capitalism) is at its maximum when
Adam Smith's "invisible
hand" (a metaphor for a capitalistic spontaneous order) is not
tied by the shackles of central planning (which includes monetary
central planning as practiced by the Federal Reserve). In other words,
a free-market/capitalist society is a spontaneous phenomenon. Therefore,
in turn, less government means more prosperity/liberty and vice versa.
Along these lines, I must include a fabulous quote from Murray N.
Rothbard (as found in his book Man, Economy, and State):
Directly, voluntary action - free exchange
- leads to the mutual benefit of both parties to the exchange.
Indirectly, as our investigations have shown, the network of these
free exchanges in society - known as the 'free market' - creates
a delicate and even awe-inspiring mechanism of harmony, adjustment,
and precision in allocating productive resources, deciding upon
prices, and gently but swiftly guiding the economic system toward
the greatest possible satisfaction of the desires of all the consumers. In short, not only does the free
market directly benefit all parties and leave them free and uncoerced;
it also creates a mighty and efficient instrument of social order. Proudhon,
indeed, wrote better than he knew when he called 'Liberty, the mother,
not the Daughter, of Order'.
With the U.S. government's reckless spending and massive debt accumulation,
I see economic chaos just around the corner. How in the world can
the United States' government meet its massive debt and entitlement
obligations? One thing is for sure, no fiat currency experiment has
ever succeeded. Thus, the dollar will meet the same fate as all other
fiat currencies; death by inflation. Indeed, these obligations will
be met by printing massive amounts of dollars. The invisible hand
will be amputated to rescue the body politic. People will suffer.
Perhaps my bringing back into print The Hyperinflation
Survival Guide: Strategies for American Businesses, will help
alleviate human suffering. Dr. Swanson (the book's author) and
Harry E. Figgie, Jr. (the book's sponsor) deserve a lot of credit
as they understand that businesses must survive in order to continue
serving people. There will be economic instability, as wrought
by inflation, and this book will prove to be a valuable manual
to help businessmen survive the chaos.
I look back upon my education with fondness.
I have a B.A. in Business Administration (Cum Laude) from Washington
State University and also have an MBA (4.0 GPA) from Boise State
University. With the intellectual "tools" provided
to me by Austrian economics and paleolibertarianism, in retrospect,
I chuckle at the pro-statist biases exuded by the professors at the
two aforementioned universities. In turn, I have gone through a process
of "unlearning" the pro-central planning/Keynesian curricula
that dominated most colleges and universities when I was in school
(and are ever more so today). Nevertheless, my experiences at WSU
and BSU, were wonderful due to the excellent people I met in the
wonderful communities of Pullman, WA and Boise, ID.
Every once in a while, I get the urge to write an article. To date,
I have had articles published by LewRockwell.com, by KarenDeCoster.com,
and by The Tocquevillian.
In the meantime, my day job is that of a surety bond underwriter.
This has been my profession since 1984.
Contact Eric Englund