Friday, August 22, 2008

Lessons Learned

Last night I attended the screening of a truly fine motion picture at Austin's premier art-house cinema. The film was a subtly nuanced perspective on the absurdities of racial injustice and a scathing, unwavering attack on the potential destructive power of the dark side of capitalism.

Not only that, but Blazin' Saddles is a hoot.

A little low comedy never put anyone's eye out, and this movie is still hysterical and dead on, even after 30 years. You just don't see any good racist westerns anymore. It's a damn shame.

But this blog is about bidness, so let's get down to it.

Here are the lessons investors can glean from this classic movie:

The townsfolk's first reaction is always to lynch the sumbitch.
Sheriff Bart rides into town to a hero's welcome and finds himself looking down the barrel of a gun less than a minute later. We see this all the time on Wall Street: A white knight will appear to save the company, and by the end of the next quarter he's the most hated man in town. Not because of what he's done but for what he is -- a savior, maybe, but also the embodiment that something is wrong, and it shouldn't be.

Surely this happened -- and is happening -- to Merrill Lynch CEO John Thain.

Thain -- a shrewd operator -- did the exact same thing Clevon Little does in the movie. When everyone points their guns at him, turns his own gun on himself, too. Thain waded in like John Wayne and bet $11.5 million on himself, buying MER shares at their ebb just days after selling a huge asset at 22 cents on the dollar. Wall Street was ready to string him up. In the end, though, it was obvious Bart was the right sheriff, and I think that's the unmistakably conclusion with Thain. He's done an admirable job looking over the lynch mob's pitchforks and seeing what the real goal is.

Government can solve nothing. It will only make matters worse.
Hedley Lamarr was obviously corrupt and sought only to exploit his office for personal gain. He wanted the town of Rock Ridge to make a fortune and used his position as attorney general to advance his nefarious scheme -- willing to sacrifice his office, the law and even the lives of others. We've seen this time and time again in 72-point type above the fold.

Now, low scandals and base motives are one thing, but the real problem with government is not corruption, it's incompetence. The federal machine is too awkward, clumsy, tone deaf and stiff to execute a perfect pirouette in Wall Street's ballet and pull off a true command performance. When government is not tripping over its own shoelaces, it's missing its cues.

We should be thankful for this -- it keeps Uncle Sam's brain trust from mucking too many things up too often. But when things get really tough, we have to know that when we ask the government for help, we are putting ourselves at the mercy of its corrupt Hedley Lamarrs and the incompetent William J. Lepetomanes.

The marketplace has to solve its own problems. Government cannot provide solutions, it can only attempt to postpone the inevitable.

Railroads are good investments.
Hedley Lamarr was corrupt, but he could still spot a good investment when he saw one.

Railroads make money. Ask Warren Buffett. His latest SEC filing shows that Berkshire Hathaway's stock portfolio is in the proverbial shitter. The only bright spots are his relatively recent stakes in Burlington Northern, Norfolk Southern and Union Pacific.

BNI, the only major play of the three, increased $500 million in the second quarter, almost enough to staunch the bleeding from Buffett's (I'll say it: "idiotic") holding in American Express. That position took a $896 million bath in the last quarter alone, half the $1.6 billion shellacking Wall Street gave Buffett's Coca-Cola stake.

The last point I learned from Blazin' Saddles:
It's completely absurd, it's totally shocking and the ending doesn't make any sense.
This is always a good thing to keep in mind, both in investing and in life, such as dealing with one's former spouse. But I digress. You've got to deal with whatever happens, regardless of how crazy, zany or nonsensical. It's easier if you keep a sense of perspective -- and a sense of humor.

In the end, Clevon Little and Gene Wilder are whisked away in a limousine.

May it happen for you, too.

1 comment:

Amy said...

Government hardly has the patent on incompetence - and the banking sector has proved that in spades. They made loans to people who couldn't pay 'em back. They repackaged the loans. And then resold them to THEMSELVES. I mean even a three card monte huckster can keep track of the money card.

I did love your Blazing Saddles methaphors however. But what does the farting represent? And is Hillary Clinton Lili Von Schtupp?