Lessons on Redistribution
"If you give the employer the freedom to fire his workers, chances are he will hire more of them. If a government subsidizes something, chances are you will get more of it than you ever counted on."
Dr. Edward Yardeni, President, Yardeni Research
I remember this quote above from a luncheon I attended sometime in the mid 1990's that was hosted by Dr. Yardeni. I have always remembered, likely due to its simplicity, and also because of the profound truths that lie behind the quote. I was reminded of this again as news headlines announced a video had been found in which President Obama, back in 1998, announced that he "believed in redistrubution." Redistrubtion of wealth sounds great in theory. Take excess wealth from those who do not need it, and use it to lift the fortunes of those who are trapped in poverty. I only have a minor quibble with redistribution of wealth: It does not work. A terrific analysis on the actual consequences of redistribution came out earlier this week from Thomas Sowell. I thought of the Dr. Yardeni's quote, because redistribution of wealth is actually subsidizing poverty. If the government ever subsidizes poverty, through redistribution of wealth, I believe the inevitable result is poverty beyond anything we ever imagined.
Dr. Yardeni's website (www.yardeni.com) is a treasure trove of economic information, although his commentary and analysis are only available to institutional investors at a hefty price.
Trivial Pursuit
In 1896, Charles Dow first published an index of companies that he thought were a good representation of the overall stock market. This index, which had 30 companies in it, came to be known as the Dow Jones Industrial Average. Of the 30 original companies in this index, only one of the originals remain. Which original company is still in the Dow Jones Industrial Average today?
Answer: General Electric, which was originally founded by Thomas Edison.
Continual Amazement
I continue to be amazed at Apple. With today's release of the iPhone 5, once again we see long lines of people waiting to be among the first to have the phone. I admit, I do not get it. What is the appeal of getting the phone on the very first day it is released? I applaud Apple as they are truly a great American success story. They continue to command premium prices for their products, even with a struggling economy. I remember being an analyst who followed this stock, thinking that when Steve Jobs temporarily left the company in 2007, that was the end of Apple's run. Earlier this year, Apple became the highest market capitalization stock in US history. Hard to believe this company was on the verge of extinction in 1999. Microsoft had eaten their lunch in operating systems, capturing over 90% of the market, with MSFT domination in the corporate market. I still look back to that time and remember that Sun Microsystems attempted a "takeover" of Apple by offering less than market value for the stock (more like a "take-under"!). Where is Sun Microsystems today? Oracle rescued it from the scrap heap.
Weekend Predictions
If you are a gambling person, this looks like a great weekend to bet on the underdogs. It started last night with the Giants win over Carolina, after being a 2 1/2 point underdog. Other underdogs I like to cover this weekend include Michigan, California, and closer to home...the KC Chiefs, the Missouri Tigers and the Kansas Jayhawks! So just take all my predictions for what you paid for them.
Finally, congratulations to the Shawnee Mission East Lancers varsity football team, which defeated defending state champion Olathe South last night 3-0. Lancers are now 4-0 and have served notice that they are a real contender this year in the Sunflower League, and perhaps the state!
Until next time...take care!
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