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I've decided to relocate my personal blog to Wordpress.com. That site address is located here.

Che Guevara - The Passionate Marxist

Recently I became aware that many people today don't know who Che Guevara was, what he stood for or how he died. This became clear to me last night when my wife and I were browsing the aisles of Blockbuster Video, finding a two-part film on Che's life. My wife admitted to me that she really didn't know anything about Che.

Most people recognize his image because it has become an iconic "brand" for promoting a variety of populist causes. We rented the movies.

Che: Part One covers the period of the Cuban Revolution. Part Two is a portrait of his Bolivian misadventure that resulted in Che's violent death at the age of 39.

While the movies are entertaining, it helps greatly to know something about the history of Cuba to understand the backdrop that created Castro's Cuba. I highly recommend the book Havana Nocturne by T.J. English as an interesting primer to the corrupt conditions leading to the ouster of the dictator, Fulencio Batista.

The early formation of his ideas can be better understood by reading his book, The Motorcycle Diaries, an autobiographical account of a trek he made though South America in his early 20's. A recent (2004) biopic is also available about this formative part of Che's life.

Ernesto Che Guevara is a mythical figure in the history of human struggle. While I completely disagree with his prescription for improving the plight of the poor you have to admire him for his dogged determination and the purity of his beliefs.

Che was an intellectual and man of action. Time Magazine put him on the cover of their August 8, 1960 issue, also naming him to the Time 100 list of the most influential people of the 20th Century.

A writer, poet, athlete, adventurer and Marxist Revolutionary, Che is a riveting historical personality. But, being interesting doesn't make his political and economic philosophies effective.

History has shown that the Marxist/Communist experiments of the 20th Century were not successful in raising the standard of living for the poor in these counties. Che's brief involvement with civil government responsibilities were not successful and ended in failure.

I do think that Che should be remembered.

I would have loved to debate Che, talk about the books he was reading, and argue the merits of free markets for rising standards of living.

It's unfortunate the a figure with Che's combination of intellect, romanticism and courage became the product of the corrupt governments of South and Central America.

The foreign policy decisions that our country has made during the last 60 years have contributed to turning passionate people against the United States government.

Che is the the world's most interesting poster child of this phenomena.

Tools You Should Use

I’ve been using a few tools that I’ve found to be very helpful. Diigo, Zotero and Evernote. All of them have had recent version upgrades which improved each application.

Diigo is a web book marking application similar to Digg or Delicious but with a big difference. Diigo allows you to highlight and annotate web pages. It also saves that annotation so that every time you visit the site you see the notes from your previous visit. Give Diigo a try. Tool-bars are available for FireFox and Chrome.

Zotero is a Firefox add-on application that allows you to create bibliographical lists of books, newspaper articles, magazine articles, music, etc. Zotero makes this very easy. For example, if you found a book on Amazon that you may want to purchase, Zotero makes it easy to create a bibliographical reference of the book with a single button click.

Evernote is a popular note taking and web clipping application. I use Evernote everyday to clip articles off the web for later reference. What’s really cool about evernote is that it indexes everything that you clip. Even the writing on a sign in a picture placed in Evernote is indexed.

In addition to the web version there are iPhone, Blackberry, Palm Pre, Windows Mobile, Windows and Mac versions of the software. All versions sync with the website. Imagine taking a photo of a menu you like and have Evernote index the entire menu contents.

I’ve been using all three of these programs for over a year and have found them to be very useful.

Full Disclosure: I am not affiliated with any of these companies nor have I received any gifts or payment of any kind from Diigo, Evernote or Zotero.

Photo from Flickr Creative Commons by: Phillip Torrone

In Response to Charley and Dalton

I posted on Facebook No Skin in the Game which was a copy of an August 14, 2000 press release from Wells Fargo posted on Cafe Hayek this week.

Dalton and Charley seem to be concerned about the age of the article. My purpose in posting the article was to illustrate the concept of risk and what happens when the concept of risk and loss are removed from the equation.

Wells Fargo was touting a then-new loan program subsidized by California Housing Loan Insurance Fund (CaHLIF) and Freddie Mac, which allowed teachers working within the state to purchase a home with a minimal down payment of just $500. Who could be against helping teachers?

At the time a new California teacher was earning an average of $29,000/year and the average wage for an experienced teacher was $44,000/year. In a state like California these wages certainly make it difficult for a single teacher to purchase a home.

Frankly, the wages seem reasonable for 9 months of work per year. I also presume that teachers get married and have spouses that work. But, The California State Government came to save the day by providing taxpayer-funded subsidies, with the help of Freddie Mac (Federal Money).

Why I don’t like these programs

When government subsidizes programs like this it implicitly places a bet that the value of the asset purchased will always exceed the debt incurred to purchase the asset.

The bet they are placing is with your children’s future income stream. They don’t tax us now to pay, they borrow the funds from the China, India, and other foreign entities. Taxing you now might raise questions of fairness and cost.

Over the past two years the housing bubble caused by programs like this (there are many) like all bubbles, burst.

I would argue that the Federal Government sigificantly contributed to the run-up in housing prices, well beyond what would have happened under normal circumstances.

Many homes purchased in the last 5 years are now worth much less than the debt incurred to fund the purchase.

Buyers who took the plunge facing the double whammy of the loss on the value of their home and a higher monthly payment due to escalation clauses in the mortgage loan contracts they knowingly signed.

These higher payments are not the result of increasing market interest rates. They were built into the original loan. In other words…by contract the borrower had to know the payments were scheduled to increase at a specific future date.

These borrowers now face two options. 1) continue to pay for the home based on the original contract agreement or 2) default on the loan, walk away from the house and rent some place to live at a much lower cost.

Of course, that would be very difficult choice to make if you invested $10,000 of you own money in the down payment.

But, if you original down payment was subsidized by the Federal Government these borrowers have a less painful set of circumstances to consider.

Many borrowers faced with the reality that they can’t afford the scheduled price increase and the drastically reduced value of their “investment” decided to default on their loans.

The media seem to think this is a phenomena confined to Subprime Mortgages. It’s not.

No Skin In the Game is a term that I used to hear bankers apply in the evaluation of business acquisitions. Bankers always want the buyer to invest a signicant sum of their own money. They know this insures a form of “committment” on the buyers part because the cost of failure is jointly shared by the borrower.

When government takes the skin of the borrower out of the equation the risk of loss is sharply diminished.

I believe without question Federal Government subsidies work. When the government gives away money, people spend it. But, this comes at a cost. We get more of something than market demand would ordinarily produce.

To continue to support the inflated value of housing, more subsidies are required. A cycle emerges that is economically unsound.

It’s easy to blame greedy bankers. The real problem is government meddling in the marketplace. Banks are “too big to fail,” so the government uses more of your children’s money to bail them out.

When will it end?

The Federal Government creates nothing of value. It reallocates. In most cases during the last 40 years your government has chosen to pay for it reallocation using funds borrowed from future generations.

That’s a cowardly act. Our children don’t have a voice today.

Photo: Flickr Creative Commons > NTD Barrage Ballon, Nevada Test Site ACE-57-5806

My Moleskine Cahiers Customer Monthly Notebook (The Little Dukie)

Being somewhat of a nut about any kind of planning tool, electronic or paper, I’ve had my share of failed experiments over the past 28 years. Every new system generated a burst of planning energy in me mainly because “new” planning tools are always fun.

I have used or continue to apply in some way David Allen’s GTD, Franklin Covey, HipsterPDA, Palm Pilot, Outlook, EverNote and OneNote. Unfortunately, when the novelty wore off of my primary planning (note/task) tool, my review habit tended to suffer.

I think David Allen’s “review” habit is very likely the single most important attribute of any planning system and you really can’t beat the convenience of electronic tools for indexing, search & scheduling activities.

When it comes to compact calendar and task tools David Seah’s blog has been an inspiration. I adapted one of his compact calendar designs to fit my system. Finally, I really love Moleskine notebooks. My particular model of choice is the Cahiers 3 X 5 Squared Journal.

So, a few years ago I started playing with the idea of creating my own hybrid planning system. I wanted to incorporate the best of the paper and electronic methods available. I find most of my creative thoughts are stimulated by paper and pen.

The end result of my experimentation resulted in what I call my “Little Dukie” custom monthly planner. The criteria for my planner included the following:

1. Compact and paper-based

2. Utilize EverNote’s indexing of scanned images for long-term reference/retrieval of my paper-based notes and task lists

3. Can’t be boring and must incorporate some level of artistic quality to the appearance of the work.

4. Include a small paper/custom annual calendar for quick reference of important dates for planning purposes only.

5. Outlook is my primary meeting scheduling tool working in conjunction with my Blackberry.

The Cahiers notebooks are 64 pages log and include a back flap that’s the perfect size to slide in a few spare business cards. This is the perfect size for a 30 day custom planning notebook.

Photos of some of my Little Dukie note books can be found on my Flickr site.

Go here to find detailed assembly instructions and create your on version of the Little Dukie custom monthly planner.

Please email me if you come up with any interesting variations of your own. I’d love to here your ideas.

Photo art by Alexander Farto (aka Vhils)

Down the Rabbit Hole We Go

Like Alice in Wonderland the saga just gets stranger by the week. Now one of the bailout victims is filing suit against the FDIC. It's not who you might think.

The shareholders of Wamu's parent company apparently feel they could have received a better payout in the open market. Who knows. It's going to be difficult to establish a fair value for the assets while the government is doing everything it can to prop up home values.

The latest salvo by the Federal Reserve Chairman Ben Bernanke makes the Fed a direct purchaser of US Government Debt thereby providing another avenue to prime the pump.

Unfortunately all this comes at a pretty stiff price. Debasing the currency isn't a good long-term or short-term strategy for dealing with overvalued assets. It's analogous to the factory owner who builds excess inventory to keep his people busy during a recession "hoping" that demand will quickly return to previous levels. The cash runs out and the people loose their jobs anyway. The additional inventory causes excess supply, lower prices, lower margins and possibly kills the company. In the end, nobody has a job, including the owner.

Governor Mark Sanford of South Carolina provided a pretty sobering piece in the Wall Street Journal. Mr. Sanford explains when you start programs based on temporary federal aid, your likely to have difficulty paying for it at the state level in a couple of years when the federal funding goes away.

I think we need more people in government who embrace the free market and also consider the consequences of current actions on future generations. Blaming greedy "Wall Street" for this big mess is the worst kind of populist tripe.

The Federal Government and the Federal Reserve created many of the conditions that caused this mess through manipulation of the interest rates in an attempt to prevent the last financial "crisis" following 9/11.

Everything being done to stimulate the economy and deal with the troubled assets is wrong-headed. We're putting a huge fiscal burden on our children and its just not right.

Photo by Phoebe Marple-Horvat from Flickr Creative Commons.

AIG: What $170 Billion Buys You

This morning we have more news of what $170 billion in our taxpayer bailout "investments" purchase. The case in point is AIG's disclosure last night that they were compelled to pay over $165 million to executives who are responsible for the companies overall financial difficulty. Just one of the many posts this morning can be found here.

While I'm sure this will be front page news all week and that senior AIG management will have to yield to the public outrage that will follow, clearly the bailout enables this sort stupidity. Because the government has chosen to prop up the weakest links, we should expect more of the same and continued massive public investment.

I took the time to review AIG's quarterly conference call data. They knew what was going to happen in mid 2007, but nobody wanted to acknowledge reality, especially those whose bonuses would be affected by it.

If you want to follow the chronology look over the investor presentations here and pay particular attention to the May 9, 2008 conference call cover sheet which includes the tag line, The Strength to Be There.

Illustration by Mike Licht of NotionsCapital.com vis Flickr Creative Commons.