100 Money Experts You Should Follow and Learn From on Twitter |

The link is an great resource for twitterers who provide expert advice on numerous financial issues.  I am honored to be on the list.  

100 Money Experts You Should Follow and Learn From on Twitter |

NHL Lawyer Serves Up Meat Loaf - Bankruptcy Beat - WSJ

I have taken a bit of a break from blogging about bankruptcy, and have been diverted to politics, namely health care and Joe Wilson. That being said, I love the NHL case in Phoenix. In particular the attorney for the NHL, Tony Clark, who seems to find more obscure pop culture references that I can--this is, after all, how I evaluate brilliance. First, it was Seinfeld--please see my earlier post here Seinfeld Theory Argued In Coyotes Case - Bankruptcy Beat - WSJ --now Meat Loaf (the singer not the dish).

Trying to prove a point, he explained that unlike the Meat Loaf song, 2 out of 3, was bad. Unfortunately, the Judge was not a fan of Mr. Loaf, and Mr. Clark was forced to explain his joke (never a good idea). Trying to explain Meat Loaf, Mr. Clark could only come up with the fact that "he is a big fat guy" who may or may not be around. Then he tried to smoothly remove his foot from his mouth (also an indication of intelligence) by saying he may no longer be fat. Well, he was close. Mr. Loaf, like many of us, fights an up and down battle with weight, and is still around (doing movies and commercials).

NHL Lawyer Serves Up Meat Loaf - Bankruptcy Beat - WSJ

Hoping that Joe Wilson's blurt will unleash President Obama's inner black man.

A good friend of many often humorously quips that people have a moral obligation to live up to their cultural stereotypes. In that light, he believes that Irish should be able to hold their alcohol, Asians should be good at math and science, and Jews should be good with money.

African Americans have their own unique perspective, having made it through forced slavery, Jim Crow, and finally, a belated acceptance into the American Dream. Their culture is more dynamic, heterogeneous and diverse then most ethnic groups, though not any less forceful. It provides them a unique understanding of the force of federal power, and empathy for the disenfranchised.

One reason I supported Barack Obama was his background; though in the interest of full disclosure, based on the aggressive prodding of my wife, my 9 year old daughter, among other, I voted for Hilary in the Minnesota Caucus. I was hoping that his life experiences as a black man would give him a unique prospective in leading what is truly a multi-racial nation. He was approximately my age, and I had insight on his life experiences, due to may college roommate, an African-American engineering student from Edina, MN. For despite his success, in and out of the classroom, there were still little symbols of institutional racism; such as the times the police had to talk to his date, as a black man was seen walking into our place with a white woman.

My reason for my belief that Obama's life experiences as a black man would make him a better President is not only humanitarian, but also economic. After all, in a flat world, cultural diversity, empathy and adaptability is as crucial to remaining competitive as tariffs. A multi-racial President that understood what it is like be an outsider, both here and abroad, gave him a unique prospective on the challenges that American businesses face in the ever changing world. Moreover, unleashing the power of all Americans is essential in competing in the international economy--we don't compete against each other, but with people thousands of miles away.

Americans embraced this non-traditional candidate with a non-traditional name, and elected him with over 53% of the vote, showing we truly live in a post-racial nation. That being said, it doesn't prove that pockets of residual racism doesn't exist. President Obama must have taken this election as a huge obligation, with a real desire to show that he could and would be the President of all America; even the America that did not believe that a Black man would or should hold the prestigious office as President.

If the Birthers haven't proven this strategy flawed, if the Right Wing talk show hosts, who protested his speaking to school children(about such controversial topics as being good, and working hard) didn't prove this strategy wrong, I really hope that Congressman Joe Wilson's unprecedented shout of "you lie" during Wednesdays speech will finally prove to him that a group of people exist that he will not sway, regardless of his good intentions, and oratory skills.

Mr. President. Over 60% of Americans support this President. Of the remaining 40%, a majority of them sincerely disagree with his proposed policies, and are an important check against your power. With regard to the remaining minority, such as Glenn Beck, Rush Limbaugh, Sean Hannity, Joe Wilson, and their sycophantic supporters, I different strategy is required.

First, ignore them. Let them eat air time on cable television and radio exercising their free speech rights, but DO NOT allow them to impact the national debate. Don't respond to them, mention them, or give them any encouragement for their irrational, angry, and untruthful rhetoric.

But turning the other cheek will not be sufficient to win this battle. You are the President of the United States, and the Democrats control both houses of Congress. As such, please do what Marcellus Wallace did to the racists in Pulp Fiction, please go"medieval on their ass." Not by responding to their anger, but by passing your agenda, without their input. By standing up for the weaker among us without regard to the bullies who would maintain the status quo.

I believe we have reaching a tipping point in this argument. The President's response to the comment was encouraging; as the clip in my previous post shows. His jaw went stiff and his eyes went sharp. This was not the cool, calm President, who seems to enter every fight by walking straight into the middle, head up, arms down, looking to diffuse not engage. This was a man who had seen this before. Despite being the smartest man in his college class, he had been treated like this. Despite his Harvard law degree, he had been treated like this. Now, despite being the President of the United States, leader of the free world, a marginal Congressman from a small state has shown what he really thought of him. I hope he wakes up with anger and I hope he uses that anger to positive ends. I hope Joe Wilson has unleashed Barack Obama's inner black man.

YouTube - GOP Rep. to Obama: 'You Lie!'

 

Home - Gegax Advisors

I came across this blog post by my friend Tom Gegax with regard to executive pay.  This blog post was written on June 12, 2009, and I am somewhat embarrassed that I did not read this before.  That being said, I think it has more relevance now, than it did when it was written.  After all, just 3 quarters after Henry Paulson gave his Dr. Evil speech " I need 1 Trillion Dollars or we are all going to die," Goldman Sachs, which received 10 billion dollars of TARP money was giving out over 1000 bonuses in excess of $1,000,000.00. 

Those are do not study history are doomed to repeat it, but this isn't history.  For g-ds sake, it isn't even recent history.  It is the present.  Corporate America has an addiction, I would call it "greed" but I almost agree with Gordon Gecko in that greed is good.  Greed, when properly directed, can lead to innovation, improvement of processes, advancement of technology.  This isn't greed, it is a pathology need for money you aren't entitled to.

As a bankruptcy attorney, many of these businesses will no doubt wind up in my office.  Maybe I should follow the pathology of the CEO's and encourage this type of behavior.  Then again, it has to stop somewhere.

Home - Gegax Advisors

Why Joe Wilson is a Racist and Republicans Who Object to Obama's Health Care Plan are Patriots

I created quite a ruckus on my Facebook page this morning with the following posting:

"Two observations from last nights speech. First, President Obama's oratory skills will be what sells American's on the need for national health care. Second, there is still a strong undercurrent of racism at the highest level of media and politics."

While not mentioning Joe Wilson by name, I received over 15 comments(more than my biting commentary on who should have won last year's American Idol), some arguing that Joe Wilson's outburst showed the existence of overt racism, and some arguing vehemently that objection to Barack Obama's admittedly liberal agenda does not make them a racist. I agree completely with both of these statements, and they are anything but mutually exclusive.

First, with regard to Joe Wilson, I don't see how his outburst can be seen as anything but overt racism. The only question is who he is prejudiced against; African-Americans or Latinos. If the outburst was merely an uncontrollable reaction by a Southern white congressman who seemed to wake up after a 8 month slumber to find the country he loved taken over by an African American President, his hatred is focused against African Americans. In contrast, if his outburst is directed at the the phantom benefit of health coverage (god forbid) to the hard working undocumented members of out society, this uncontrollable anger against a group of people who can't vote and have no Constitutional rights, it is squarely directed at Latinos.

I don't know what is worse, anger at an African American in a position of power, or anger at 12 million nameless, faceless individuals who are currently handling the least desirable jobs in our immigrant nation (at the encouragement of corporate America) without full benefits of citizenship. Personally, I think that later, as Obama has proven to have shoulders broader than the city that birthed his political career. Regardless, this is a man unsuitable to public life, who should resign, or hopefully will be voted out by his constituents.

Now, getting to the fact that opponents to Obama's health care plan are patriots. I was amazed at how many of my conservative friends were concerned, I believe sincerely, that their opposition to the President creates the inference they are racism. Obama is a politician, a Democratic politician, who is the leader of a liberal progressive movement. Obama's race provides him no special status. In fact, Obama has argued for a post-racial look at our world; one in which he would be subject to the same standards of any of the previous 43 Presidents. As such, he should be subject to all the criticism, disdain, jeers, anger, etc. that any President would be. For conservatives and Republicans to exercise their right to dissent is patriotism, pure and simple. More than that, it is the responsible conduct of a minority party. Now I could argue that conservatives labeled any dissent from our march to war in Iraq as treason (Ann Coulter even wrote a book on that), but that really isn't the point.

I believe that guaranteeing health care for all American's is a moral imperative. That being said, I don't have an answer to how that goal should be accomplished. Applying the best that free market has to offer, while removing inappropriate and market-destroying profiteering, should be a part of the final plan. Conservatives have much to offer in formulating this solution. I believe that Obama's speech was an attempt to engage them in the process. A rogue Republicans inappropriate outburst with regard to a point which really isn't central to the debate distracted us from the real arguments. That is generally what racists do.

Death of Ted Kennedy

I have thought long and hard about whether, and how, I would comment on the death of Senator Ted Kennedy. There is no doubt he was an incredibly effective and powerful senator, and was integral in the passage of some incredibly important legislation. In addition, he was a man of who faced almost unfathomable tragedy, from the death of all three of his brothers, a plane crash, and bad health. Ultimately, however, he was a man who used his position of privilege and wealth to avoid responsibility for the death of another person. Like Robert Byrd's membership in the KKK, that incident is something that will, and in my opinion should, define his life.

However, there is no question that instead of dwelling on his life's limitations, he worked to overcome his past by doing great works for the public interest. His talent was the ability to craft and pass legislation with long lasting human benefits. Civil Rights was one of his focuses.

It was this arena in which his death has irony, poignancy, and in my position, is being under reported. President Barack Obama will be giving the eulogy at his funeral. The first major piece of legislation that Senator Kennedy pushed was the 1964 Civil Rights Act. A Bill that was intended, and did in fact, give African American's basic human rights in the United States. A bill that was in trouble at the time of the death of his brother, Jack Kennedy. Ted used the outpouring of grief to change the tenor in Congress, and push that bill through. 45 years later, the 45th President of the United States was sworn in; our first African American President. That was, and in an exclamation point on the success of that Bill.

Today, we face another civil rights issue, that being access to affordable health care. Without health care, noone is free from the fear of sickness without care. There was no more passionate Senator in favor of access to health care than Senator Kennedy. From Medicare to schip, Kennedy is was always pushing for increased access for all to health care.

Wouldn't it be wonderful if some senator and congressperson, from either party, took up the mantel of health care reform and used the death of Senator Kennedy to fulfill is mission and goal. In 45 years who will be giving his or her eulogy?

Are we really so miserable? | Salon Life

Salon.com, my favorite online magazine, asks the question of whether we are really so miserable.  After all, 1 of 10 American's is on anti-depressives.  Is this a new age of discontent, where we drift through life without meaning, wondering why we exist.  Blaming an obscure 1997 law which allowed drug companies to advertise, the article labels this companies as pushers with high priced marketing campaigns.  The article quotes a 1947 play, "the Age of Anxiety" and wonders whether we have simply replaced the bottle with what is in the bottles.  

There is some truth to this.  The marketing campaigns of drug companies have made consumers quite "knowledgeable."  As my friend, a urgent care physician notes, I don't diagnosis and prescribe any more, I give my patients what they "demand."  This is not a good trend in medicine with people self diagnosis and demanding, instead of seeking counsel and guidance from their physicians.   With drugs so readily available, it is possible, as Salon notes, our family doctor is replacing our friendly bartender. 

I look at our current situation as a bit different, however.  The current economic downturn should have brought our society together.  After all, in 1947 we had just clawed our way out of a recession and defeated Nazism.  We were probably due to a letdown.  In our current situation, by reverse analogy, we should be banning together, our minor mental concerns (and I am not making light of serious depression) pushed aside for the task of making ends meet in a very difficult economic society.

Quite the opposite, instead of pulling together, we are focusing on our differences.  We have seniors after all, who are already on national health care, protesting access of uninsured Americans who haven't reached the Golden Years.  At that same time, the 47 Million uninsured quietly suffer the lack of insurance without any visible anger; possibly aided by some form of anti-depressant.  Maybe if they felt a greater control over their lives, with guaranteed access to health care, and access to financial safety valves like bankruptcy, they would be off the drugs and out in force. 

 

Are we really so miserable? | Salon Life

Corporate vs Personal Bankruptcy Attitudes | Tamela Rich

Interesting blog post from Tamela Rich about the differing attitudes between personal and business bankruptcy.

Specifically, she wondered why there is such a stigma on individuals filing for personal bankruptcy as opposed to almost adoration for business that use bankruptcy as a financial tool.  This is an interesting and tough question, and deserves some analysis.

The reality is that there is a lot of mythology in business bankruptcy.  Most people really don't understand what is going on, and it seems quite above them.  That way, when it is used like a tool by the likes of Donald Trump, most people just shrug their shoulders, and strive to be that sophisticated.

In contrast, everyone can relate to someone filing personal bankruptcy.  Even people who make a good living often live hand to mouth at some point, and feel the financial cliff which is always lurking.  When someone choose to use bankruptcy to get out of a bad financial situation, they are demonized for not making good financial decisions. In my opinion, this relates to our culture of scarcity, which believes that what someone else is able to acquire is something that I can't have.  This "envy" is based on a belief that our society has limited resources.  If someone "else" files bankruptcy, it is affecting what "I" have.  In reality, the opposite is true, in that bankruptcy allows a crippled financial participant to get "back in the game."

To a lesser extent this is what is going on in the health care debate.  There is a belief that if everyone has access to health care, people with health care will someone loose what we have.

An efficient capitalist system does not require "losers" who are desolate, without food, clothing, health care, etc.  Quite the opposite, the healthier our population is, the more prepared we are as a society to compete globally.  We figured this out when the Russians launched Sputnik; and our current public education system is proof of what we can do.  To a lesser extent, personal bankruptcy is a necessary and important tool to assure that all members of our society can participate.  

Corporate vs Personal Bankruptcy Attitudes | Tamela Rich

My Article in Minnesota Bench & Bar on Counseling a Financially Distressed Business Client; Beyond the purely legal!

http://www.scribd.com/doc/18502559/Bench-Bar

Please read my new article in the Minnesota State Bar Association magazine Bench & Bar on counseling a financially distressed business client. Instead of dealing with the purely legal aspects of restructuring, it addresses the psychological, practical and spiritual issues that individuals in financial distress face.

I, along with my partner, Tom Wallrich, will be giving a seminar at the MNCLE Annual Closely Held Business Institute on August 20, 2009, called The Practical, Ethical and Psychological issues of representing a Business in Financial Distress. This seminar will be a panel discussion with Tom and I leading a licensed psychologist, a workout specialist, the former head of the Minnesota Lawyer's Board, and a brand expert through hypothetical situations.

See the brochure here.

http://www.minncle.org/materials/seminars/44210.pdf

Backstreet’s Back (In Court) - Bankruptcy Beat - WSJ

The Backstreet Boys launched my favorite, and yours, music revolution in the late 90's, the "boy band."  Now, the Backstreet Boys are trailblazing again, this time with regard to preference actions in Ponzi schemes. By way of background, Lou Pearlman, the manager of, among other groups as the BSB and N'Sync, was charged and convicted of criminal fraud in the form of a Ponzi scheme, and was sentenced to 25 years in jail.  An involuntary Chapter 11 bankruptcy ensued.

Now, the trustee in the bankruptcy case is pursuing fraudulent conveyance actions for all payments that were made to investors in Pearlman's ventures.  This is more than a novelty, as it could signal how other Ponzi schemes, such as Maddof and Petters, will be treated. It has been argued that as a Ponzi venture is by nature illegitimate, all payments to investors in those schemes are deemed in furtherance of the fraud.  This allows a trustee to pursue those payments as fraudulent conveyance, either under Bankruptcy Code Section 548 (with a two year look back), or under state court fraudulent conveyance statutes (most likely the adoption of the Uniform Fraudulent Conveyance Act), which can have a much longer look back (as much as 8 years). 

To make matters worse for the investors, these statutes do not necessarily require the showing of an action intent to defraud.  Instead, what is generally required is proof that the transfer was made without adequate consideration while the debtor was insolvent.  As the payments were not paid pursuant to a valid investment, it can be argued that no consideration was paid for the transfer--insolvency is easy.

If the Trustee is successfully in this case, expect this to embolden other trustee's across the country in similar schemes.  So it is possible that the BSB will be breaking hearts in both decades.

Backstreet’s Back (In Court) - Bankruptcy Beat - WSJ

SENATE DEMOCRATS LOOK TO REVIVE CRAMDOWN PROPOSAL

As the foreclosure rate continues to climb, Senate Democrats are taking a second look at a failed proposal to allow the modification of troubled borrowers' mortgages in chapter 13, Dow Jones Daily Bankruptcy Review reported today. At the hearing before the Senate Judiciary Subcommittee on Administrative Oversight and the Courts today, Sen. Richard Durbin (D-Ill.) called on the Senate to adopt the proposal he's been championing since 2007 that was defeated in the Spring of 2008 and then in the Senate earlier this year: allowing bankruptcy judges the power to cram down the mortgages of homeowners in chapter 13 bankruptcy. Subcommittee Chairman Sheldon Whitehouse (D-R.I.) warned that failing to allow cramdowns this time around would exacerbate the economic downturn. Yet opponents of cramdowns, including Ranking Member Sen. Jeff Sessions (R-Ala.), argued that allowing cramdowns would create troubling consequences both for lenders and for future borrowers. ABI Resident Scholar Prof. Adam Levitin of Georgetown University Law countered that lenders wouldn't punish borrowers with higher prices as long as cramdowns didn't cause them to lose more than they would in a foreclosure. However, this isn't possible, he said, because bankruptcy law requires that creditors recover at least the same amount of their claims in a bankruptcy as they would in a liquidation or foreclosure. Mark A. Calabria, director of financial regulation studies at the Cato Institute, said such efforts wrongly assume that the foreclosure crisis was caused by predatory lending practices that created so many subprime borrowers. Rather, he claims that the crisis was actually caused by the combination of falling home values and what he called "negative income shock," including job losses.

As all my loyal readers know, I am a big fan of mortgage cramdown legislation, as it allows owner occupied real estate to be maintained by the homeowner. While this creates a short term loss for the banks, it forces them to have their books reflect reality. Good Senator Durbin! Let's get this done.

Portions of this post were contributed by David Asmus, Esq. from the Hinshaw & Culbertson, St. Louis Office.

Cubs Bankruptcy illustrates efficacy of a 363 sale.

The Cubs prospective bankruptcy is a good illustration of how Section 363 of the Bankruptcy Code can assist in complicated and multi-dimensional businesses.  The Cubs is a good business and makes money.  The ivy covered walls of Wrigley Field are a beautiful backdrop to a great baseball experience, and occasionally, I say occasionally, good baseball.  The bad news is that the Cubs are owned by the same company that owns the Chicago Tribune, which while a great paper, is not a profitable business.  To make matters worse, there are bank loans of the Tribune Company which  secures the Cubs.  So, how can you sell the Cubs without either paying off all the secured claims of the Tribune Company or getting the secured creditors consent?

Section 363. 

Section 363 allows a debtor to sell assets over existing liens if the Court approves the sale. 

Section 363 (f) provides that: The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if—

(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;

(2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;

(4) such interest is in bona fide dispute; or

(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.

In the case of the Cubs, like most 363 sales, the sale would most likely be approved under section (5), which is really a "catch all."  Also, Court's find "bona fide" disputes often.  Regardless, the Tribune Company would be able to sell their most valuable asset.  In fact, the threat of bankruptcy, will most likely force the secured creditor to consent. 

So, have a valuable asset that you need to sell over excessive liens.  Can't get the secured lender to consent.  Use section 363 to leverage the secured lenders, or if they won't agree, file bankruptcy and sell the business in a bankruptcy court authorized sale.

And I didn't ever use any baseball metaphor.

Could Chapter 11 Help the Chicago Cubs Turn the Page? | Bleacher Report

GM pledges 'new beginning' as it exits Chapter 11 - MarketWatch

Sometimes I feel like Obama supporters, me included, expected him to be the next political Babe Ruth, but instead he turns out to be the next Wade Boggs; the greatest singles hitter of all time.  I mean this man seems incredibly efficient, but sometimes without imagination and passion. 

Take, for instance, GM's recent emergence from bankruptcy.  As a bankruptcy attorney I am amazed at the efficiency and effectiveness of the quick exit of GM from it's Chapter 11 bankruptcy.  It is clear that the entire bankruptcy was well conceived and perfectly executed.  It was a classic bootstrap restructure, where the secured obligations, including the government, were converted to equity, and the unsecured debt, to the tune of about 40 billion, was essentially extinguished.  This will fit neatly into a bankruptcy textbook one day. 

That is the good news.  The bad news is that GM is essentially the same company now that it was when it filed Chapter 11.  Not in terms of it's debt structure, which is imminently improved, but in it's technology.  There was no "Manhattan Project" for a new propulsion system, no green mandates(all of the talk of a green GM is really nothing more than a marketing piece), nothing risky, challenging or controversial.  In fact, the talking heads on Fox News, which find fault in his Harvard Educated diction, had nothing to say.  Why, because it was without incident.  The Obama administration has simply fixed the broken company. 

Maybe I shouldn't complain.  For now, 3 million auto related jobs are safe.  This is another shelf placed underneath a falling economy.  This was a solid single against arguably the best pitcher in baseball (the figurative disaster of an economy and the administrative morass of one of the largest companies in the world), but I was hoping for a big swing, and maybe a home run. 

GM pledges 'new beginning' as it exits Chapter 11 - MarketWatch

Strike three for Lenny Dykstra: Former Met files for Chapter 11 bankruptcy protection

In a fairly sad story that barely made the major newspapers, former Met and Phillies outfielder, and stock prognosticator, Lenny Dykstra was forced to file a Chapter 11 bankruptcy to shield his already dwindling assets.  This wasn't a shock to anyone with a premium cable channel, who saw the Real Sports exclusive in which Lenny tried to convince Bernard Goldberg that he wasn't broke as he had almost $1,000.00 in his wallet.  It was really a sad visual image, one of a former professional athlete taken down by the real world of finance.

This story would not be novel or shocking if Lenny Dykstra had just been a former athlete.  The sad truth, is that former athletes are prone to financial troubles, and one report had over 70% of former NBA players filing bankruptcy within 10 years of the end of their career.

But Lenny Dykstra wasn't your average former athlete, as  had a second career, one after baseball, that of a high finance, stock picking extraordinare.  Yes, the hard-nosed instinctual ball-player, was a regular on CNBC, regularly extorting his genius as a finance guru.  This part of his life, interestingly enough, got no mention in the news today, and I doubt, will get little comment on CNBC.

This, my friends, is the real story.  Lenny Dykstra, as with Jim Cramer, got sucked into the finance porn vortex--albeit from different universes.   As entertainment and business news blurred to an indiscernible pulp in the 1990's, Lenny Dykstra was the perfect front man.  Articulate in the Joe the Plumber type of way, forcefully, certain, and believing in stocks with a faith-based furry, he was Everyman who wanted to make a million.  And he did it, first with car-washes, then with stocks, and melding personality and instincts all in one, finally, as a celebrity.  As a commentator he was perfect, all financial machismo, without the momentary glimpses of humanity and reason you get with Jim Cramer; you know, the every once in a while where he recognizes he is an emperor without clothes.

Now, with his financial life in ruins, the cameras forgetting he even existed, and even his wife gone, he gets to face the financial world like everyone else.  That is, with confusion, fear and uncertainty.  I would hope that this is a lesson to all, that entertainment and money don't mix, but doubt that other than this rather unread blog, anyone will comment on it.  In fact, rather than use this as an example, I am sure that CNBC, FOX or some other channel that claims to give you the inside scoop on the world of finance is desperately searching for the next instinct based, charismatic, former athlete to add to it's day-time lineup.  Where is Dennis Rodman anyway?  

 

 

 

Strike three for Lenny Dykstra: Former Met files for Chapter 11 bankruptcy protection

UK's Riversimple, China-based Horizon Fuel Cell debut 2-seat, hydrogen car prototype - WXIN

In a back page story on most almost defunct newspapers, a British company, with the assistance of a former Porsche executive has developed a car propelled by hydrogen which will be leased for the sum total of $315.00 per month, which includes all of the necessary fuel.  Imagine that, $315.00 per month for not only the car but the gas.  Oh yeah, and the vehicle produces exactly 0 emissions.  0.  The carbon footprint on this vehicle also 0.  Need for oil from hostile countries that fund and train terrorists with designs on destroying us..0 too.  Money in the pockets of greedy oil executives and oil companies... 0, 0..0 and 0.  Oh, I digress.  The response to this revelation and product that should have been hailed as something close to a cure for cancer, ho hum....., let's get back to Carrie Prejean 

 

Why no fanfare, excitement, government assistance for this remarkable company? Because this product does not fit within the existing  automobile infrastructure.  Same with Germany and Japan, the other two countries that build most world cars.  This is an example of how subsidies business can and will destroy innovation.  We don't need better cars, we need consumers to continue to purchase are bad cars.  Innovation is messy, it requires retraining and retooling.   Current auto executives will be out of work and we can't have that.  With the U.S. government essentially owning the means for 2/3rd of U.S. auto production, we are in a unique opportunity to capitalize on this new technology.  There really is no other option, or hope.

UK's Riversimple, China-based Horizon Fuel Cell debut 2-seat, hydrogen car prototype - WXIN

Commodity v. High Tech: How we need new technology in automobiles

I think you will notice that most of the companies that have filed bankruptcy over the past 9 months are producing commodities as opposed to high tech products. In fact, many high tech companies, including RIM and Apple are actually doing quite well. In contrast to lots of the other negative news out there, I think this is actually a good sign. Moreover, if the government takes note, it will encourage it to take the right steps with regard to the ongoing automobile bankruptcies.

A commodity, as defined by Webster's dictionary is:

A physical substance....... which is interchangeable with another product of the same type, and which investors buy or sell, usually through futures contracts. The price of the commodity is subject to supply and demand. Risk is actually the reason exchange trading of the basic agricultural products began. For example, a farmer risks the cost of producing a product ready for market at sometime in the future because he doesn't know what the selling price will be.

High tech proprietary products, however, are not subject to the same economic principals as commodities. For instance, Apple has essentially been able to set the price of Iphones for the last few years. As such, it is generally better for a company to be selling high tech proprietary products, as opposed to commodities.

Alas, all products become commodities. Even Iphones are having significant pricing pressures as competitors such as the Palm Pre enter the market.

The genius of the U.S. capitalist system is that it has always provided the greatest incentive for the creation of high tech proprietary products. That is why we lead the way in early industrialization, the computer revolution, and the information technology boom. Unlike our European counterparts, we were not hamstrung by entrenched businesses and the business interference of royalty that were able to mold the laws and markets to encourage the continued purchase of their outdated and fungible products.

In contrast to the U.S., look at countries that really heavily or solely on a commodity based economy. Take for instance, Saudi Arabia. When the price of oil drops, so does Saudi Arabia's economy.

Unfortunately, while we have benefits by a diverse and fluid economy in which new technology is always replacing tired commodities, some businesses have worked against this dynamic system to stack the deck in their favor. Many of our industries have promoted laws and regulation that encourage the artificially inflated prices for their commodities. There is no better example of this than the pharmaceutical companies. The same companies that created lifesaving drugs during the first half of the 20th century, but morphed into sales, marketing and lobbying companies during the second half. Name one drug that has cured anything over the past 25 years. Can't, can you? However, you can probably name 5 diseases that didn't exist 25 years ago, and the corresponding drug that can "cure" it. Yes, I know, we are all grateful that "restless leg syndrome" has been eliminated from our life. All of this culminated with the Medicare Prescription Drug Modernization and Improvement Act, signed into law in 2003, which made it a crime to negotiate with the drug companies for lower prices.

Applied to the automotive industry and the recent bankruptcies, a substantial part of the vehicle has become a commodity. Don't cry to much, as the industry has had almost a century of operating as a high tech businesses with the same technology. That is why Hyundai has one of the top luxury cars in the world, the Genesis, at such a cheap price. The reason for this, is twofold. First, that the existing infrastructure is set up to make the internal combustion engine. I have blogged about this in detail, as well as the need for the government to facilitate a move to new technology. The second, is government incentives that encourage consumption of petroleum. This lead to GM tabling the eclectic car, though it had an over 12 year head start. This needs to be eliminated immediately. If higher gas taxes aren't palatable, substantial investment in new propulsion technology is crucial. After all, the Pruis, which is the only production car with a high tech engine is selling like crazy. Why? Well there is a certain amount of brand status, but also because it is a silent engine. This was emphasized on the show Weeds, where UTURN, the local drug dealer outfitted all of his couriers with Prius, so "no one knew when they were coming." If the current automotive bankrupties are done right, we can revolutionize the automobile with high tech proprietary technology, no one will know that America is coming, and we will rule the next generation of car manufacturing.

Seinfeld Theory Argued In Coyotes Case - Bankruptcy Beat - WSJ

Could it be any cooler!  A bankruptcy lawyer in the Phoenix Coyote bankruptcy used a Seinfeld reference in the case--despite his wit, he lost.  Specifically, it was the returning the jacket for "spite" episode--which should have been as good of a reason as any to return a jacket.  I think that Seinfeld is significantly metaphoric, and there are a number of episodes that could be used in a legal case.  For one, I like the rental car episode, where despite the " reservation" there was no car.  Jerry noted that anyone can "take a reservation," but having the car is the hard part.  This is true in all types of cases, where anyone can make a representation with regard to a number of things, though it is a rare few that can come through on them.  Also, who can forget the final episode where Jerry and the gang were convicted mostly because the were of bad character.  As Baboo testified to, "you are bad man, a very bad man."  I have had the occasional client who lost a case simply because he or she was a "bad man."   Anyone else who can come up with a Seinfeld episode with legal parallels get's extra credit.  Come on, now!  Let's hear it.

Seinfeld Theory Argued In Coyotes Case - Bankruptcy Beat - WSJ

Article - WSJ.com-GM stock to be worthless.

Business psychology is absolutely amazing to me.  GM stock was trading at over $1.00 a share just  prior to the "imminent" bankruptcy filing.  It is still trading at over $.25 per share.  There is absolute no reason for this.  Any attorney will tell you that except in the most exceptional cases, common stock in a company that goes through a Chapter 11 bankruptcy is worth nothing.  There is a legal concept called the absolute priority rule--which must be adhered to in a bankruptcy plan--which requires that higher priority claims be treated "better" than lower priority claims.  As such, if the unsecured creditors receive less than the full value of their claim, the common shareholders must receive NOTHING.  GM was never going to be a 100% plan.  Despite the application of this fairly basic legal concept, it has taken the WSJ to break this story.   This proves a number of things, one being the stock market is entirely unrelated to rational business and legal concepts--suddenly ENRON's desire to trade in the weather doesn't seem that crazy.  However, rational markets should not allow this.  Finally, along with Britney Spears' proclamation that "I am not that innocent,"  the truism of GM stock worthlessness is revealed.

Article - WSJ.com

Illinois Bankers Association - Workshops

Tom Wallrich and I will be speaking at the Illinois Banker's Association Annual Convention in Las Vegas on the case study of a real estate workout.  

During their workshop presentation, we will focus on a case study of an actual real estate workout involving a national residential builder/developer and a national lender. The case study begins with pre-default loan management, analysis of the default process, continuing with negotiation and preparation of the forbearance agreement, dealing with interim management and control issues, and proceeding through foreclosure and post-foreclosure issues. This session also deals with the application of extraordinary remedies such as receiverships, involuntary bankruptcies and Chapters 7 and 11 bankruptcies. In addition, we will examine the bank’s resultant ownership of the collateral and its marketing, resale and ultimate final disposition.

Illinois Bankers Association - Workshops