I am really amazed at the two-bit writers that are always whining about the loss of jobs. Indeed, there is much that is amiss in the US in regards to job losses, and there is much to be discussed and criticized, but the problem is that these so-called, libertarian Kings and Queens of Received Opinion do not know what they are talking about. With no background or knowledge in business/finance/accounting or otherwise, they actually think they have found some "Third Way" in between the Buchananite Protectionists and the Free Marketeers, at whom they angrily shake their finger. Of all things, they use the high-tech sector as an example for job loss, a sector in which companies operate on the most corrupt business models in all the land: those business models that come directly from the Leftist, anti-free market, Ivy League-MBA sewers. There is nothing "free market" about many of these financially corrupt, debt-laden, high-tech companies, and perhaps if some of the Third Way'ers could actually read financial statements, a 10K, and the 10Qs, they might actually have a clue as to what they are writing about. Some libertarians are so desperate to play the ultra-contrarian role that they step their feet into mighty sticky you-know-what just to be seen and heard on the issue. They don't know, and they don't know that they don't know. It is making libertarians look downright inept in regards to business.
For instance, someone sent me this piece about "greed being good," and it uses Jack Welch to prove out that thesis. The issue with Jack Welch was *not* greed. Surely, the contrarian-libertarian position is that greed (self-interest) IS good, and of course, that is my position, but someone who understands business, finance, and business models would distinguish between what is greed and what is not, and what is moral self-interest and what is not.
The problem was not downsizing. Such simplistic reasoning is mind-boggling as well as Republican-like. Downsizing was a 1980s/90s issue that received tremendous backlash, however, understanding that downsizing bureaucratic, corporate behemoths was/is necessary is hardly much of an issue any longer, except with the extreme, anti-business Left. Jack Welch's real problem was that he, like many others in corporate management nowadays, raped the balance sheet, screwed the shareholders (modern lingo would say "stakeholders"), and walks around a fat cat, his pockets a’jingling. Then there’s that slight matter of fiduciary duty, wherein company managers, as custodians of a company’s assets, must not violate the trust of the shareholders. But libertarians seem to think that defending any and all "capitalists" is the libertarian thing to do, in spite of the moral corruptness (as well as big-government socialism) of Wall Street. READ THE FINANCIALS. And I don't need to mention the business model problems of Tyco, K-Mart, FAO Schwartz, WorldCom, Halliburton, Enron, and a zillion others, do I?
Very briefly, a summation of the anti-free market, Ivy League-MBA mentality is this: Cash is trash. Indeed, use other people's money to buy things via massive borrowing. Many of these debt-laden, high-tech companies live off of their fruitful IPOs, have little or no cash, no profits (huge losses, in fact), negative retained earnings, and engage in unethical accounting because the Big Four (top 4 accounting/CPA firms) go along to get along. Look at Palm: massive quarterly losses, negative retained earnings, and riding its capital surplus - thanks to a boom market perpetuated by the Fed - and sinking slowly with a balance sheet that any Haaaarvard MBA’er would love. Then look at its close price - adjusted for dividends and splits - from April of 2000 to December of 2003. A grotesquely tumbling stock price indeed.
And how about the nearly-bankrupt Ford Motor Company? It rides high on its financing arm instead of automobile sales revenues, and it is criminal that it pays dividends instead of retaining those earnings. The shareholders are the losers. But why does Ford pay dividends? Because the Ford family is so thoroughly ensconced in upper management, paying dividends on the stock that they hold helps to ensure that they all stay very rich at the expense of stockholders.
Then there’s a company like Microsoft, which of course, has overvalued stock, but at least Gates follows the Warren Buffett philosophy of “Cash is King.” Microsoft's balance sheet typically has 3x the cash necessary to pay off current liabilities and long-term debt. This is without calculating in the receivables and other assets. Its current and quick ratios are outstanding, as is its working capital per dollar of sales, though the Ivy League Debt Worshippers on Wall Street would say it isn’t using cash effectively. You see, Microsoft typically has little or no long-term debt.
Hint, hint: look at the balance sheet and the P & L statement. Learn about the cash flow numbers, revenues, non-recurring write-offs, interest expense, goodwill, and DEBT numbers. Know the important ratios. Look at the leverage. To understand the financials is to understand the type of business model (which is almost always reflected in the balance sheet) being used. How can one write on this stuff without having such vital information?
