Bailout Nation or 'Failout' Nation…I say Bring Back FAIL!

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  • on November 30th, 2008

FAILURE is good!

My witty friend Barry Ritholtz who is a fantastic writer has a new book coming out called ‘Bailout Nation ‘. Such a great title for the times and it should do big numbers. I expect a free signed copy though Barry…

As catchy a title as it is given the times, it focuses on the wrong issue. I hate the word ‘Bailout’. It is becoming too American.

Michael Lewis has a new book coming called ‘Panic: The Story of Modern Financial Insanity’

If you ask me, ‘Panic’, like ‘Fail’ is good. It cleanses. It leads to learning. It flushes the weak. It does it all pretty fast which is the best part. Bailouts are slow motion death delayers. For the few that work, the cost overall can’t possibly be known and measured by either side. Checks and bailouts and regulations have immeasurable costs .

We need to bring back ‘FAIL’. Failing leads to improvements. Bailouts lead to systematic problems and rotting. Have you flown lately ? Have you driven a Pontiac? Have you gotten your recent Citibank Dividend check? Have you EVER had a pleasant experience at a fucking care dealership. An auto bailout won’t make that experience any better for years to come. Airlines get bailed out and therefore, the weakest survive to compete against the healthy. The industry does not advance at the speed it should.

How do we learn from AIG and Citibank unless with every dollar we bail them out with, management is forced to explain what exactly is the asset and the thinking behind the asset when they bought it and what they have learned from their mistakes. That’s what we need to teach and FAST. Instead we read that AIG management snuck in CASH bonuses this weekend . PAAAAATHETIC.

For the most part, these are all BROKEN systems and companies. We have been suckered into believing that bigger is better and that if you get to be too big too fail, you won’t fail. Sarbanes Oxley has kept small companies out of the public market and we have been left with mergers, roll-ups and bloated executive pay as a result. In essence, this current meltdown. The cost of regulation and past bailouts has led to costs today that are now immeasurable by anyone. Forget the problem we are creating with today’s bailouts. OK – just a hint from the Economist on Government debt

You know where I stand on the subject…be ‘Too Small to Fail’. Do one thing and do it better than anybody and make sure you have runway to do it for as long as you think you can be passionate about it because it’s going to be FUCKING hard going up against the system that is broken.

I believe WE have the power. We the consumer, even the small ones. You don’t have to own equities with your savings or retirement money. You can just SAVE it and invest in yourself and your kids. You don’t have to spend beyond your means using a Capital One card or shopping at Best Buy or even WalMart. As Seth Godin says:

It’s simple, I think. In a world where consumers have so much power, we now have two responsibilities:

* If you don’t like what an organization stands for, work actively to spread the word and force them to change

and

* If you will miss a product, a service, a book, a site or a professional when they close up shop, stand up, speak up and bring them masses of new business.

We get what we promote.

We are a nation of ‘Failers’ and that is why we RULED for so long. Go watch Bill Murray’s Speech in ‘Stripes’ (the MUTT speech). We should not be scared to fail. Our government has slowly moved towards deciding who is allowed to fail. It is why I have slowly moved away from equities over time to the point where at maximum I have had 30 percent invested in stocks the last 6 years. I can’t shake my love for equities, the action and the people so I have focused many of my private investments and time to equities and the markets. Luckily, so far so good.

The big money in the stock markets is voting with their feet. Liquidate and hide out. You can’t blame the smart money for leaving the equity markets all together. They left Japans for the last 20 years and I sense we are on the same path. No predictions just a sick gut feeling. In the end, I will let price be the final arbiter and get long when the prices tell me too.

PS – I love this interview with Jim Rogers

Jim is hell bent on saying the meltdown in real asset prices is from forced liquidation. Basically, I am small enough that I could give a rat’s ass why there is selling, there just IS! I hope to have his wealth problems one day where I am’Too Big To Be Nimble’ :) .

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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