The Unsinkable brian cork™

Brian Patrick Cork is living the Authentic Life

2009 was a great jump-shot

December24

I’m moving from being pleased to being satisfied.

You can read about that in some detail, mind you here: being pleased or being satisfied.

Joanne and the girls are thriving. Haley Anne and Emma Jo are both “main-streamed” and in public school (quite an eye-opener for all of us). We’ve had to endure an epic drainage-oriented story with the house. But, our united sense of humor remains intact. The soccer season was quite successful with both the teams I coach realizing league championships (http://shockers.wordpress.com/). It looks like I’ll be climbing Mount Rainier this June. So, training for that has begun in earnest (albeit with some reservations – and, a lot of push-back from Joanne)

We had a remarkably robust year where many of my theories of and around business were both sorely tested, and ultimately proven. So, I am feeling very good about 2010. The newest version of our website should go live in two weeks as we wrap-up video testimonials. I’ve gotten involved with several universities around centers for innovation and entrepreneurship. And, the Accelerator has exceeded all expectations, thus far. We are now looking for 10,000sf for phase II.

Balanced, while on edge, might be a good summary.

If you are reading this, and many of you do; thanks for being part of my life.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

running with the Bulls and driving Cattle

October28

Back in 1977 Grandad said to me: “You can be a leader or a follower. Leaders know whom to follow at critical points in their lives. But, don’t ever be the wrong leader of followers”.

That requires some careful thought, and much more perspective.

Over the summer of 1988, while teaching me how to first listen and then sell (while also teaching me how to sail in Santa Monica Bay) David Sugarman, my “Jewish mentor” advised me, in that brilliant sepulchural baritone of his: “don’t bother buying a stock you might ever want to sell.”

“Trust in human nature”, he added.

These, strategies (they might be foundational philosophy /1) if you will, then required careful thought, research, informed decision-making and maturity to pull off over a lifetime.

Through the Spring of 1999 I remember the DOW breaking 10,000 for the first time with it’s delicious opportunity to revisit and contemplate David’s words.

Under pressure of very awkward and highly suspect circumstances, the market began it’s dark and ugly descent towards 6000 last year, and I decided to hold firm to Grandad and David’s, always great and evident, wisdom.

Every where I went, the only talk you could hear was about how low the DOW might go. It reminded me of the whole OJ Simpson ordeal. It’s all anyone seemed to want to focus on.

I could easily draw a correlation between the two topics. However, as a Prudent Gentlemen, I don’t see the point as it reduces the advantage, and lessons the potential effects and opportunities now relative to Laws of Natural Selection.

I will, however, offer an example, with the hopes loyal readers of this Blog harken and, perhaps remember when the next test rears itself.

I first listened to, and then observed, a local and hapless friend defy common sense and guidance, as he sold off all of his investments, leveraging both a dirth of intelligence while timing his decision to match, perfectly, mind you, the very bottom of the market. He was firm in his convictions and determined to panic. The chap was convinced the market was going to “crater (a clever and dramatic, albeit meaningless terms financially)”. I had told him there were many reasons – most of them built-in, while others were easily psychological (although both cleverly manipulated) that the market would not go below 6000. You can read more about that here (but, there is more elsewhere), and on this very Blog. Do it!

In any event, he bought into the frantic mooing to be found permeating the internet, and stampeded with so many others, failing to see the buying opportunities, and sold into a crashing market designed to fatten the wallets of the happy minority.

That fellow was a follower. And, he might have actually been a leader of followers (he was a bad example of something, or maybe a good example of a bad thing), to make his plight all the worse.

Today he’ll wring his hands and tell you that his wealth managers “screwed” him, as they misled “everyone (typically this is what thirteen year olds say in the absence of empiric evidence)” regarding their research abilities and understanding of market trends. I’ll wager they had been telling him to sit tight. The storm always abates, and the market always comes back.

Just like the current market will.

Because you can trust human nature (make sure you read that aforementioned post). And, try it from the view of a Heterodox. Consider it a Kobayashi Maru, and literally, an opportunity to Kill that Bear./2

This is an obvious point, but the only people that “lost” money in the stock market are those that panicked and sold into a down market. Conversely, there is new wealth, big money, being created, on paper, by people that have been buying stocks up for the past six months.

I have, and with good reason, cause to make another stand, right here, and say we’ll break back up, and through 12500, by the end of the First Quarter of 2010.

Do some leading research. Maybe you begin with why are the banks really hoarding all that cash?

Peace be to my Brothers and Sisters.

Brian Patrick Cork

1/ There is some agreement, therefore, that philosophy is based on method, and is rational, systematic and critical, or characterized by logical argument.

Intrinsic Character: Philosophy can be distinguished from empirical science and religion. The Penguin Encyclopedia says that philosophy differs from science in that its questions cannot be answered empirically, i.e. by observation or experiment, and from religion, in that its purpose is entirely intellectual, and allows no place for faith or revelation.

2/ From the Movie: “The Edge”.

what next America?

January27

As I have already stated on this Blog, 2008 was a financial crisis, affecting mostly “Wall Street.” 

Looking ahead, what can we expect for America?

2009 will be the year “Main Street” gets hit. 

Mind you, 2009 will be awful for A LOT of people.  But, I believe it can be pretty good for some people focused on Best Business Practices, clear thinking, opportunities and having a plan.

But, generally speaking, the damage to the real economy so far is trivial to what will happen over the next two years.  There will be two big stories.

Business bankruptcies

Going into 2007 we knew that our financial sector was unusually strong, well-managed with strong balance sheets.  False!  Going into 2009 we know that our non-financial business sector is well-managed (outside of some weak sectors, like autos), with strong balance sheets.  Expect to be disappointed and astonished yet again.

Triage

That is a VERY scary word.

Everybody wants bailouts.  Worse, the expectation of bailouts means that few preventive measures will be taken.  This referred to as “moral hazard”.  We see this, for example, at work in California – which is already de facto bankrupt.  But, nobody gives an inch.  No lower government spending; no lower government wages; no reduced government employment; and, no higher taxes (there is more; but, you get my drift). 

Why compromise? 

Well… The Federal Government will not let California go broke.  Or the auto companies.  Or the universities.  Or the banks and insurance companies.  Or millions of households (not actually sure about that one yet).

There is not enough money to bailout everybody.  Triage will be necessary.

I have seen this under the worst possible scenarios.  But, you can probably relate to it in terms of what Kate Beckinsale does with lipstick on the foreheads of the wounded at Pearl Harbor (but, it is one of the most gripping scenes in the 2001 movie). 

To wit:

  • Those who will die anyway:  no treatment. 
  • Those who will recover anyway:  no treatment. 
  • Those will will recover only with treatment.

Making these harsh decisions might be President Obama’s greatest challenge. He may have one of the toughest jobs ahead of him since Truman.

Looking beyond the downturn, what can we expect?

The consensus confidently – almost to a man – anticipates inflation, against which the Federal government will fight either successfully (optimists) or unsuccessfully (doomsters). 

This is, however, absurd. 

People are already preparing for this “inevitable” outcome by owning mostly short-term debt.  As the end of the downturn approaches — inflation can only manifest itself in times or full employment or via a currency crisis — everyone will (should) take strong measures.  Even elderly ladies in Peoria will own inflation-protected bonds, short-maturity bonds, and hoard gold bars in their basement.

These measures will foreclose inflation as a workable option.  As the government is forced to either issue vast amounts of short-term debt or monetize the debt, inflation becomes useless as a tool.  Short-term debt becomes an albatross during inflation:  interest expense skyrockets as interest rates soar.

Seriously.

Hyperinflation always remains an option – as does atomic war and mass suicide. 

However, none of these are “solutions” in any meaningful sense.  

Seriously.

With a history of vast deficits behind us, and larger deficits ahead (from baby boomer’s retiring), the government will choose Door #2:  default.  We will just not pay all our obligations.  This is historically the most common solution.

How we decide who to pay — and how much to pay — will test America as it has seldom been tested.

  • Do we pay our foreign debts?
  • To what extent do we renege on promised social security and medicare benefits?
  • To what extent do we raise taxes vs. defaulting?  

The big unknown

The recession of the late 1920’s became a Great Depression due to a series of public policy errors. 

Most seriously:

  1. Many nations abandoned the gold standard too slowly, and
  2. The nation with the largest trade surplus wrecked the world trade system.

America was the culprit (for #2),  enacting the Smoot-Hawley Tariff Act in 1930.  We can only guess at the equivalent of mistake #1, but the prime candidate for #2 is China devaluing the RMB to boost its exports. 

More later.

Remember what Hemingway thought of Spain.  Go read those books.  Spain can be defended.

“Sons Gonna Rise” by Citizen Cope.

Peace to my Brothers and Sisters.

Brian Patrick Cork

Full of Magic Beans

December30

My God Brother Steve called me “Bean Bean”. Here is a link to the story. Many of my friends refer to me as “Bean”, or “The Bean”. In fact, most call themselves “Brian’s Beans”.

I call people I like or admire (some times both) “Human Beans”.

So?

Most seem to think I know what I talk about. And, it seems like magic.

It certainly feels like magic.

In any event… As promised in my prior post “Question everything and accept Nothing”, here is some critical thinking, and potential economic predictions…

WARNING:  This may come across a tad grim.  But, I promise to be more playful in the next few weeks.

My guess, looking through the economic fog that currently surrounds us, is that the global economy is on the edge of a major event.  I am thinking of something in terms of a waterfall-like decline. 

Chaotic, tumultuous, steep.  As we go over the brink – let’s admire the view.  Here are (some of) my forecasts for 2009.

The past two years were phase one of the downturn:   a financial crisis affecting Wall Street, banks and brokers.  The next two years will be phase two:  a sustained decline affecting “Main Street” — industry, commerce, retail, governments, etc.

This is me, again, thinking in terms of the Laws of Natural Selection.

So, there will be “selective success” in-and-amongst Main Street – backing up through banks and Wall Street.  … You know, manipulation and related shenanigans. But, this is how it always works.  And, needs to work. America likes progress.  So, if members of the House and Senate want to keep their seats, they must needs deliver.

So…  Barack Obama will invoke all manner of interesting stimulus.  This will probably start in the first quarter with banks pumping money into the marketplace with private equity and Venture Capital in hot pursuit.

This is when and where the rich get richer (never mind Democratic ideology – that is all hog-wash any way) and the shrinking middle class becomes all the more befuddled.

It id likely going to be a front; but, it will be jarring nonetheless. January will start the first quarter with a bang.  

(1)  A hail of pink slips (but mostly redundant workers that can be replaced with contractors) as most businesses seek to reduce headcount by 5% – 10% — and seriously affected businesses do much more.    Like retail, as they close their marginal stores.  I think the unusual number of layoff announcements during the December holidays foreshadowed the main event,

(2)  Retail bankruptcies.  The extraordinary number of retail bankruptcies during the Christmas shopping season sets the stage for the tsunami hitting in the first few months of 2009.   See “Retailers Brace for Major Change“, Wall Street Journal, 27 December 2008.

The big stories for 2009

The primary theme of this downturn has been the unexpected breaking of “links” — components of our economic system.  One such, the opening act of the crisis, was the mass failure of mortgage brokers starting in December 2006.  The a long series of banks, investment banks, insurance companies, and the government-sponsored enterprises followed them into collapse — or forced marriages (mergers and acquisitions) /1, or life-support on the government’s teat.

Cork: So what will be the surprises for 2009?

(1)  Many non-financial firms will collapse (meaning that their functioning is seriously disrupted due to financial problems).  Some of this is expected:  in the auto, retail, and construction industries.  Most will be unexpected, big and small.  Some will result from banks cutting off their loans (anecdotal reports suggest this is happening now to small firms).  Some will result from revenue declines.  This will drive many small and medium banks over the edge, following their larger cousins.  There will be lots of bankruptcies as 2009 runs and even more in 2010.

(2)  Many local governments and agencies could collapse, perhaps even some states (e.g., Michigan, California [again]).  More bankruptcies, although this might be a 2010 story — however (this is where it REALLY gets interesting) this will be strongly mitigated by Federal aid and Wall Street /2.

(3)  The recession will spread from the developed nations (most now in recession) to the emerging nations. 

  • For example, watch China, as most experts expecting GDP growth of 4% – 8%.  Outright decline is possible, and would force everyone (optimists       and pessimists alike) back to the chalkboards to revise their calculations.
  • Watch the oil exporting nations, many of which will run large fiscal deficits.  Iran needs $90 oil to balance its budget, Algeria $56, Saudi Arabia $50.  Mexico has forward sold much of its 2009 production; after that the deluge if oil prices have not recovered.

Cork again:  What about the government?

The primary implication of the above (well considered) speculation is that the Obama Administration starts behind the curve.  The major factor will be when (or if) they update their OODA (observation-orientation-decision-action) loops to run as rapidly as events — responding to current events instead of (like Bernanke and Paulson) the situation as it was 3 months ago.  

I am confident that this will happen at some point in the downturn.  Perhaps they might eventually understand the overall processes at work, and act preemptively (look for preemptive Presidential pardons.  This is a tip that government and Wall Street “understand” one another).

In the next few weeks I will (unless I get distracted and forget) sketch out why government policy will not help much during 2009 (NOTE: fiscal policy might be the big story for the US economy in 2010).  However, in brief – and, in my opinion, the window for Congress to act was November and December.  Bold action could have buffered (not prevented) the shock, as described here on 7 October /3.  But, I think that window has closed.  However, the recommendations remain valid; if implemented during the next few months, they will help in late 2009, and (on a large scale) in 2010.

Meanwhile…  I bet we haven’t even begun to consider the nightmare and madness all this means for poverty-strickened nations like Africa in terms of even larger-scale starvation, disease and war. That will signal a real tipping point when shredded economies have no choice but to turn on one another just to survive. More on this later.  But, look at a world map and consider what naval alliances could be formed.

Lets listen to “Don’t Stop Believin'” by Journey and “Mad World” by Gary Jules – NOT Tears for Fears.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

____________________________

1/  However, this has also given us our first legitimate World Bank candidate.  Gotta love the Illuminati.

2/  You know the drill…  Buy low, sell high.  The survivors will own even more than they imagined before this all began.

3/  A significant day – always chock full of signs and portent.

What’s All This About?

"What am I looking at?", you might wonder.

Lots of stuff.

Meanwhile, here, I discuss events, people and things in our world - and, my (hardly simplistic, albeit inarticulate) views around them.

You'll also learn things about, well, things, like people you need to know about, and information about companies you can't find anywhere else.

So, while I harangue the public in my not so gentle way, you will discover that I am fascinated by all things arcane, curious about those whom appear religious, love music, dabble in politics, loathe the media, value education, still think I am an athlete, and might offer a recipe.

All the while, striving mightily, and daily, to remain a prudent and optimistic gentleman - and, authentic.

brian cork by John Campbell





photos by John Campbell

 

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