I have certainly advocated reading sources outside this country to improve one’s perspective. 

So click on Project Syndicate.  This is a compilation of columns from newspapers around the world.

Hungarian born Sarkozy won election with a whopping 84% of the electorate voting. He won on a 53-47 tally. He has opposed the 35 hour work week and promised to revive the sluggish economy.  I suggested  a few blogs back that this would be a decisive election for Western Europe which is in danger of being overcome by more free market economies of Eastern Europe.

Here is a European comment on the election.

Here is another suggestion that the French are drinking in the Last Chance Saloon.

Most impressive is that the whole thing, the run off and the general election, took a matter of weeks not months or years. Why can’t we do that?

A socionomic sign of a market top is the trashing of formerly worshipped celebs.  Lately we have had

a slew of them. Tom Cruise, Alec Baldwin, Don Imus, David Hasslehof, and now

the ultimate disgrace since Sophia Loren was jailed for non payment of taxes, yes,

Paris Hilton sentenced to 45 days for driving without a license.

She will report June 5 to serve her sentence, the ultimate reality show as her Mother put it.

Now I realize the angst and despair this will cause across campus.  Still, we must go on, finals will continue, and those that really learned managerial accounting….

Will quickly market

FREE PARIS NOW

t shirts as quickly as possible……

DLE

Her is the link to a new scholarship. It is available to Cedar Valley CC students. Thinking you might know someone who is interested, I put this up. Notably, the benefactor, Karrington and Company is interested in interships for our UNT Dallas students.  Remember that most firms hire from their intern programs.

I noted in Intemed Class Wed that Donald Trump was selling real estate seminars at $49 a weekend across the country.  This is amazing given that most real estate indices have collapsed, some mortgage firms are already bankrupt, and we have chronicled the sub prime meltdown here in detail.  I also suggested that this was a true sign of the end of the real estate mania. Actually this is sort of a variation on the ponzi scheme, only here the last person holding the cards loses, sort of like musical chairs.  Donald has been trying to peddle his money losing casinos, even getting Merril to look for a buyer.  Well I got this one right, click on the graph to see how investors voted on TRMP today. It is breaking its old lows. I will give the Donald credit, he knew when to sell to the public, but chances of unloading these losers, check out TRMP on finance.yahoo, are getting slim.

Heading for that interview, here are ten things to avoid in a recent Business Week Posting.

Meanwhile the big box guys are becoming well small box guys.  Actually Wal Mart started in smaller towns like Seminole Texas with small stores. They are just returning to their roots.

One of the amazing things about fraud is how easy it is to dupe peopel.  Jason submitted this story about a fellow who promised ‘security for those that did not like traditional banks.’  He then took client money and deposited it in a regular bank and actually conducted regualr business. Such fellows usually flee to a country without an extradition agreement.  Well, gee, the IRS is peeved claiming he did not have what he promised. 

What was it that Barunm said about one being born every minute?

Hugo Chavez makes good on his promise to nationalize the oil fields in Venezuela.  And he declares that the operation will no longer be open to foreign investment. If the Venezuelan group now in charge had the resources of Exxon, Conoco, Total, et al, that might work, but of course they don’t. 

Frankly from a socionomic standpoint, this looks more like a near top of the market move.  Takeovers were not happening at $30 oil but are happening at $65 oil.  The Saudis have never been able to run their fields, Mexico is actually experiencing reduced production as it soo will not allow foreign investment thru PEMEX. So this is another socialist boondoogle doomed to fail, and coming at what we now suspect is near the top of the oil market.  Capitalism works, period.

Matt Moore found the Mike Milken page which is at http://www.mikemilken.com. He glosses over his role as a junk bond manipulator. This was a unique time in corporate history when raiders could get the money they neede without going to a bank or insurance company. Here is the condensed story for example of what happened to Gulf Oil courtesy of wikipedia.

By 1980, Gulf exhibited many of the characteristics of a giant corporation that had lost its way. It had a huge but poorly performing asset portfolio, associated with a depressed share price. The stock market value of Gulf started to drop below the break-up value of its assets. Such a situation was bound to attract the interest of corporate raiders.

Its undoing as an independent company began in 1982 when T. Boone Pickens [17] , an Amarillo, Texas oilman and corporate raider (or greenmailer), and owner of Mesa Petroleum made an offer for the much larger Cities Service Company from Tulsa, Oklahoma. Gulf offered to be a white knight and take over Cities Service (more generally known by the name Citgo) to keep them out of the clutches of Mesa. Gulf terminated the Cities Service acquisition over a dispute regarding accuracy of Cities Service’s reserves and Cities Service was ultimately sold to Occidental Petroleum, and the retail operations were resold to Southland Corporation, the operators of 7-Eleven stores.[18] Gulf’s termination of the Cities Service acquisition resulted in more than 15 years of shareholder litigation against Gulf (and later Chevron).[19]

Mesa and a group of associated investors then turned on Gulf. They quickly acquired 11% of the company’s stock and engaged in a proxy war to get control of its board. Pickens made loud criticisms of the existing Gulf management and offered an alternative business plan intended to release shareholder value through a drastic slimming down of the Gulf operation. Pickens had acquired the reputation of being a corporate raider whose skill lay in making profits out of bidding for companies but without actually acquiring them. During the early 1980s alone, he made failed bids for Cities Services, General American Oil, Gulf, Phillips Petroleum and Unocal. The process of making such bids would promote a frenzy of asset divestment and debt reduction in the target companies. This is a standard defensive tactic calculated to boost the current share price—but possibly at the expense of long term strategic advantage. The target shares would rise sharply in price, at which point Pickens would dispose of his interest at a substantial profit.[20]

Gulf management and directors took the view that the Mesa bid represented an undervaluation of the Gulf business as a going concern and that it was not in the interest of Gulf shareholders. Gulf therefore sought to resist Pickens by various means, finally turning to Chevron to act as their white knight in 1984. Gulf divested many of its worldwide operating subsidiaries then merged with Chevron. The Mesa group of investors were reported to have made a $760m profit when they assigned their Gulf shares to Chevron.

The forced merger of Gulf and Chevron was a controversy that was widely discussed and was referred to the Federal Trade Commission (FTC). The FTC only approved the deal subject to strict conditions.[21] Never before had a “small operator” successfully taken apart a Fortune 500 company. The $13bn merger with Chevron would become the largest corporate merger in world history up to that time and at 2006 it still remains the second largest.[22] Chevron, to settle with the government antitrust requirements, sold some Gulf stations, a refinery in the eastern United States and some international operations variously to British Petroleum (BP) and Cumberland Farms in 1985.

Now, as Paul Harvey says, the rest of the story. When Pickens et al attempted to take over a company, the comapny immediately went into freeze mode or like Gulf turned to a White Knight. The White Knight was only white insofar as the execs made a lot of money on the buy out of their stock or hastily awareded stock options. For example, when Pickens group announced Phillips as a target, plans for shopping malls in Phillips home town of Bartels ville was canceled.

I happend to be witness to the situation at Gulf. The largest domestic oil field Gulf had was in Goldsmith TX between Odessa and Andrews, TX. Our small family owned company furnished maintenance services for that producing field. This made a living or business for hundreds of Gulf employees and contractors and their employees. Gulf stock had been trading at $30 a share forever. AS the article says, Gulf thought the bid by Pickens undervalued the company but they the directors certainly never got the stock over 40 bucks. Terrified that Pickens would fire all of them, they turned to Chevron. Chevron made the high bid of $80. Pickens et al made a fortune. I should have bought a jillion Gulf call options but did not. The result of course was that Chevron did what they have done with each purchse of Texaco, Gulf, and Unocal, they fired or transferred or retired all the Gulf employees. They fired or made the contractors bid for the work. The only ones that stayed bid at or below cost putting many out of business in a year or so. This of course helped Chevron recover their cost more quickly. We were out of business in short order. This is when operating a debt free business with plenty of cash in the bank pays off. Our employees of course were hard pressed to find similar work for similar pay. A huge recession ensued in the Permian Basin as oil prices plunged to $12. Thousands left the area never to return. I finally did that when oil went back to $12 in 1998.

Milken was able to raise money for just about anything for a while based on the takeover possibliities of a corporation. He and a few cronies like Pickens made a lot of money but tens of thousands of folks lost their jobs. I will grant that as the article says, when the stock dropped below break up value, someone would have taken Gulf over anyway, but it did not have to end so violently for all the innocent people who were guilty of doing nothing more than working hard and honestly every day, rather like the Arthur Andersen fiasco.

As you know I have been predicting worse than expected consequences from the real estate fallout.  Here is a Forbes article showing just how much the housing slowdown is affecting the overall economy.  I also read that home problems cause consumers to be averse to buying new cars, so the ripple is spreading, hmmm, boats too.

Meanwhile here is another lesson that earnings count.  Captial One Bank stock fell about 6% friday as the firm missed its earnings estimate. Oh it still made lots of money, just not as much as expected. The fallout continues.  The lesson here is that in my lifetime there is rarely a ‘soft landing’ from a hard fallout in the economy.