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Just Your Standard Bull

published: October 3rd 2008
by: Michael Sturgess

These are uncertain times indeed. Today’s news seems to be filled with bail-outs, buy-outs, freeze-outs, close-outs, you name it. If you think you’re in the loop, you’re really out. If you want something, they’re out of it. It’s all smoke and mirrors these days. Nothing is as it seems. And just because they said it was so—doesn’t mean a cotton pickin’ thing!
    During the past week, we have listened to news sources on TV talk about the proposed, and now failed $700 Billion bail-out of our financial institutions and the effect it has had on the stock market. Cited as the major culprits are poor lending practices, sub-prime loans, failed mortgages…the list goes on. In recent days, I have picked up on a few sources that are also talking about questionable accounting methods. You know the story—creative accounting. The practice of making things appear to be one thing when they are often something different altogether.
    The problem I see with making a portfolio of troubled mortgages look “better” than they really are is that sooner or later, we tend to forget what is truth and what is fiction. It’s like telling a lie. If you tell the lie enough, you run the risk of forgetting which is the lie and which is the truth.
    It’s sort of like departmentalized accounting. Have you ever heard the scenario when one department or division of a company is deemed profitable where perhaps another operates at a loss. For tax purposes, accountants will saddle the profit center with additional expenses and burdens that make it appear less “profitable”, thereby making the divisions or departments that are less apt to make a profit look better than they really are.
    The major problem that arises here is that people tend to forget over a period of time what the true picture is and what the real books look like. Now, let’s say that as time goes on and the business climate changes, you find yourself in a situation where the division that once was the “loser” becomes the bread winner and the department that was the big gainer finds itself obsolete? Without true accountability, failure is sure to follow.
    I count myself fortunate when it comes to accounting. I have found over the years that when you only have two nickels to rub together, it makes it easy to manage your financial empire. The popular thing to be asked these days is how much have you lost in the stock market lately. I can truly say with pride that I haven’t lost a great deal in the market these days. Of course, what I conveniently forget to say is that the crash that occurred six or so years ago took care of most of it!
    So, let’s go back to the proposed bail-out debate. I truly wish right now that we had a polling feature on SouthernLivestock.com. If we did, the question I would like everyone to weigh in on is should be or should we not use tax-payer dollars to bail out these financial institutions? Should we prop up the system or should we let the system correct itself? I have heard compelling arguments both ways and I can honestly say that I haven’t totally made up my mind which way I would vote.
    One argument says why on earth would anyone want to send more money to a company or institution that is proven to be poorly managed? The other argument says if we don’t do something, we all pay with little or no available credit. And if we do use taxpayer dollars, do we also run the risk of further devaluation of the dollar? Will today’s dollar look like the peso did in the 90’s?
    Another issue I can’t seem to get over is why our system allows for government sponsored enterprises like Fannie Mae and Freddie Mac to actually donate monies to political parties or candidates. Cor-rect me if I am wrong but doesn’t that mean a government enterprise can choose to support a candidate not to my liking? Does this mean that the US Postal Service or even the USDA can also contribute to campaigns? If that is the case, who gets to choose what candidates are supported? And it certainly goes without saying that if they contribute to campaigns, then a considerable part of their annual budget must go to lobbying those same elected officials, right? It seems as if taxpayers are already paying for more than they bargained for.