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Needed in 2009: More Failure
Tweet Share on Facebook December 31, 2008 Comment (131)In his new autobiography, 1,000 Dollars and an Idea, entrepreneur Sam Wyly praises the privations of failure. As a child, his family fell into poverty when his father's grocery store went bust. The experience "taught me at an early age that failure forces you on to another path," Wyly writes. "You have to go in search of new opportunities." His father found new opportunities, selling insurance and running a newspaper. And Wyly became a billionaire building a string of companies including Bonanza Steakhouse, Sterling Software, and Michael's Arts and Crafts.
Lots of entrepreneurs succeed on account of failure. Sometimes it's their own failure, which teaches invaluable lessons. Sometimes it's the failure of others, which creates new opportunities. Quite often, it's both.
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Best Move of 2008: Letting Lehman Fail
Tweet Share on Facebook December 30, 2008 Comment (118)It's conventional wisdom on Wall Street that the biggest government mistake of the last year was letting Lehman Brothers fail. I guess the barons of capitalism still don't get it.
Here's how the Wall Streeters see it: The March 2008 government bailout of Bear Stearns—if you can call a $2-per-share fire sale a bailout—sent a signal that the feds would not let a big investment bank go down. When Lehman started to sink in early September, the presumption was that the government would prevent an all-out liquidation because of the collateral damage it might cause throughout the financial system. By that logic, when the feds stepped aside and Lehman filed for bankruptcy on September 15, investors were so shocked that credit froze worldwide and the stock markets went into a record plunge from which we still haven't recovered.
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More Welfare For Really Rich Guys
Tweet Share on Facebook December 30, 2008 Comment (16)Just in case anybody's keeping track, the government has now appropriated $9 billion in bailout funds to some of the richest folks in America. This would be Cerberus Capital Management, the private equity fund that owns majority stakes in GMAC and Chrysler and whose chairman is John Snow - the last Treasury Secretary before the current one, Henry Paulson.
Cerberus is a worthy supplicant because it's flat out of money - hahaha, just kidding! Cerberus actually has plenty of money, courtesy of a secret list of well-heeled investors. And that's not even counting the personal stash of billionaire Stephen Feinberg, the company's founder and CEO. No, Cerberus is a worthy supplicant because of the 35 or so companies that it owns, its two auto-related properties are really hurting.
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9 Reasons This Recession Will Be Good
Tweet Share on Facebook December 26, 2008 Comment (29)Recessions are lousy - as Americans have learned about 10 times over the last 50 years. But they’re also necessary. Prosperity tends to produce a lot of economic sediment, like unneeded purchases and excessive debt, that coagulates like gunk in a pipe. A good recession flushes it out. It also washes away things we need, like jobs and businesses. But on the whole, the “troughs” in the business cycle - recessions - help refresh the economy and keep it healthy.
There will be plenty of pain in 2009, as employers cut more jobs, the unemployment rate rises toward 8 percent or higher, and shellshocked consumers curtail spending even more. But beneath the dismal headlines will be some hopeful trends. Here are some of them:
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How the Feds will Govern GM and Chrysler
Tweet Share on Facebook December 19, 2008 Comment (44)The federal government has rescued banks, insured a huge insurance company, and stepped up as a lender of last resort. Now, with its bailout of the auto industry, it's the functional equivalent of a bankruptcy judge, too.
By agreeing to loan General Motors and Chrysler a combined $17.4 billion, the government keeps the two companies on life support during the worst car-industry downturn in decades. But the deal also gives the two companies a tight, three-month window to prove how they'll get competitive, become profitable, and pay back taxpayer largesse.
[See the cars that drove Detroit's customers away.]
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The Chevy Vega: the Worst Detroit Car Ever?
Tweet Share on Facebook December 19, 2008 Comment (174)It didn't start as a contest. But as readers have weighed in on the numerous lousy cars that have driven the Detroit automakers to the brink of bankruptcy, it's become an irresistible question: What's the worst car ever built by General Motors, Ford, or Chrysler?
Odds are it wasn't built in the past 10 years. For all the criticism aimed at Detroit, the carmakers have actually turned out some decent rides lately, like the Ford Fusion, Chevrolet Malibu, and GMC Acadia. But it's obvious that a long, sad parade of Detroit Disappointments over the past four decades has alienated millions of car buyers, many of them permanently. And now, with Detroit dialing 911, many Americans don't even want to pick up the phone.
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The Cars That Drove Detroit's Customers Away
Tweet Share on Facebook December 19, 2008 Comment (382)When I wrote recently about 10 cars that sank Detroit, I was too stingy. Apparently, there are way more than 10.
Hundreds of readers wrote to ask how we could have left the Chevy Nova off the list, or the Pontiac Aztek, or a number of other models that left a long legacy of buyer's remorse.
Many of Detroit's notorious bombs date to the 1970s and 1980s, and the car companies' offerings are much better today. But car buyers have long memories--and many remain unmoved by the current plight of the Detroit automakers. General Motors and Chrysler are now at the government's mercy, in need of billions in federal aid just to stay afloat. If they don't fulfill tough government demands, Chrysler could be forced into bankruptcy by early April, GM by early May. Ford hasn't asked for bailout money, but it's bleeding cash too.
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Is Chrysler Shutting Down for a Month, or Forever?
Tweet Share on Facebook December 17, 2008 Comment (19)Chrysler calls it an "adjustment." After the last shift on December 19, all of its factories will close for an extended holiday vacation. "Impacted employees will not return to work any sooner than Monday, Jan. 19, 2009," the automaker said in a statement.
If I were one of those impacted workers, I'd make sure to gather up all the personal stuff in my locker, and maybe grab an impromptu memento or two. Because this sounds like a break that might never end.
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Why I Deserve a Bailout
Tweet Share on Facebook December 17, 2008 Comment (57)To: Tim Geithner, Bailout Decider, U.S. Treasury
CC: Ben Bernanke, Bailout Buddha, Federal Reserve
CC: Santa Claus, just in case
Dear Sirs: Please be advised that I am changing my status from ordinary American consumer (OAC) to bank-holding company (BHC) in order to qualify for funds from the government’s Troubled Assets Relief Program. Since I couldn’t find the official application form, I’ve listed my qualifications below:
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5 Risky Assumptions for 2009
Tweet Share on Facebook December 15, 2008 Comment (20)For many Americans, 2008 was a year of hard lessons. We learned that things we've taken for granted for years, like easy credit and solvent banks, can evaporate with little warning. Unthinkable developments—like the collapse of once mighty corporations—actually happen. We've even begun to question one of the core tenets of life in America, the virtue of homeownership.
[See the 10 Worst Assumptions of 2008.]
As economists might say, we're re-evaluating our assumptions, the core beliefs we use to make choices and plan our lives. And while we're at it, we should be careful about our expectations for the coming year, which could be even more challenging than 2008. As the recession deepens and job losses mount, here are some of the riskiest assumptions we could make in 2009:
