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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: paul_philp who wrote (52244)	7/20/2002 5:07:59 PM
From: Stock Farmer	Respond to of 54805

Paul - as I mentioned, I misunderstood your post. Perhaps "not for the first time", you misunderstood mine? LOL. As far as incentives for risk taking are concerned, personally, I believe success is its own incentive. Where we create opportunity for fraud and deceit is when we create incentives to benefit from risk that is dis-associated from success itself. For example, allowing insiders to take away more in "incentives" than the economic production that their risks have delivered. Beyond that superficial observation, the main thesis of my stance is openly offered: there's enough non-cash flowing freely in opposition to the free cash flow that a lot of economic engines are running backwards. But nobody really notices. Perhaps we disagree, perhaps not. Personally, my investments are placed accordingly. Time will tell if this was wise or foolish. As far as your dismissal of "co-incident facts" (bad things happening vis-a-vis stock options), there are many arguments which seem to have the same flaws for which you render criticism. For example your assertion that The post-bubble periods that become long term economic depression ALWAYS happen because of* reactionary populist government interventions.* . Emphasis mine. Perhaps my proper response should be "if it wasn't <government intervention> it would have been something else"??? LOL... refuting of baseless assertions with baseless counter assertions is so easy. But circular in logic, tangential to a path of agreement, and wearying. Actually, standing aside from mere bantering, I agree with you, I think. History is littered with co-incident facts. If not A, then B is easy to say in hindsight. Except we rarely get a chance to not the A and then see that B does indeed occur. Or we can look back and observe that actions X have always led to Y and deduce therefore that X defines a path to Y. Except often when we try X for ourselves we fail to reach Y, and blame it on some other factor Z. Which finds itself closer to the topic of the thread than I know how to articulate effectively. I make no claim of cause and effect in regard to stock options - i.e. that stock options are the cause of the bubble. That being said, it does appear to me that unreasonable up followed by unreasonable down is not a process that is facilitated by widespread understanding throughout. Thus I point to symptoms of collective misunderstanding. Myths and legends and masks and untruths. Cause is tangled in a Gordian knot of many threads. The strange accounting for stock options is merely part and parcel of the process. So in the same breath it would be just as imprudent to rule out the obvious misuse and misunderstanding of this clever ruse as amongst the candidates for causative factors. Linear extrapolation of nonlinear growth might be another factor. Clever shills playing to naive over simplifications and dogmatic beliefs a third. Willingness to suspend disbelief while getting what we want fits in there somewhere too... and greed and fear and ignorance and guile and sloth and ambition... so many things. I am not claiming to divine a simple cause by looking in the rear view mirror. Merely observing on what IS happening, and what the implications ARE, and how individually a particular factor is adding or subtracting to the net vector force impinging upon us. And what we might do to compensate. And it is not at all obvious to me that stock option accounting is working to counteract the kind of economic misunderstanding that contributes to bubbles and their aftereffects. Nor is it inconsistent that the sector which has recently grasped these things with both fists is experiencing the bulk of the bubblicious effects. So while I am not setting forth an argument for primacy of cause, I am pointing to a "coincidence" which is incidentally also highly aligned from a directional perspective. And suggesting that we make our own adjustments accordingly. Clearly you are a student of the history of bubbles. And we both observe that in the aftermath there is generally a ground swell of public angst that leads to countermeasures to the imputed causative factors. Which countermeasures often miss the mark and appear obviously counterproductive in hindsight. Like beating an unruly child. This is not inconsistent with human nature, IMHO. The reaction of a society to exogenous shock is predictable. Witness your post to condemn my post to Mike, for example. Cooler heads often prevail, but sometimes not and we end up with government intervention which leads to its own causes and effects. For example, the government of the Outpost has declared by rule that observations from certain persons are "illegal". As noble and justified in purpose as Smoot and Hawley might have felt in the '30s, perhaps, but protectionist legislation nonetheless... a microcosm of society with its own fractal dimension... we act out in miniature the very drama upon which we observe. Pretty cool! Predictable, yes... but preventable? Perhaps humanity should have the collective wisdom to rise above our natural instinctive reactions. But by our own regrettable actions we (me, you, others) have demonstrated that is more easily said than done. So perhaps if not McCain then it will be some other Senator with some other solution. General public sentiment requires something to have been done wrong, and this wrongness to be righted, and the opportunity for future wrongness thwarted. And so with this noble goal in mind, we will see various legislation pass. And with or without legal sanction, socially we will place straps and restrictions on the free flow of commerce. Which will perturb the status quo and lead to undesirable unanticipated consequences... But it will not prevent the next bubble because it does not go to the heart of the matter. When it comes to bubbles, outlawing ignorance and greed is beyond our ability at the moment. It seems common understanding is difficult enough to achieve <g/ng> John