How To Profit

Last week saw the final step in closing a deal that would have made me a decent amount of money in the short run and, potentially, a great deal of money in the long run. I could have ignored my principles and my gut thereby finalizing the details of the deal. Or, I could have stood on principal, followed my gut and likely caused the deal to crash and burn. I stood my ground.  It crashed and burned. I feel really good. If making money is the measure of success, I failed. But if the measure is what was ethical, legal and honest then I scored big. This deserves an explanation.

I had been in negotiations with the creator of an app.  He was trying to raise seed money; first round investors. Even if you’ve got a great product or service, which this guy seems to have, that first round of fundraising is always a challenge. After all, you’re doing it with no profits or sales to back up your claim of value. And of course, the developer always thinks the value of his product is worth gazillions and the investors always think it’s not. There was a target amount to be raised by a date certain and I was trying to reach that target by that date. One week prior to the deadline I had succeeded in securing an investor willing to put up 50% of the target. Further, I had contacted an additional investor who had an interest and, if terms were agreeable, was willing to put up twice the target amount in addition to the 50% I had already secured.

Terms. The magic word.

You see, from the first presentation that I attended as a potential fundraiser, the terms for potential investors were vague and changeable. In fact, whenever the developer was asked the terms, he repeatedly said, “everything’s negotiable.” Trouble was, what he said and what he did were inconsistent. When it came to terms he was inflexible and demanding. In fact, he was dictatorial in his delivery. Further, he refused to put anything in writing.

I am a lawyer. Terms in writing, even offers to contract that are yet subject to negotiation, need to be in writing. This is not a quirk of mine. This is standard legal and business practice. Further, this developer was refusing to put in writing even the terms that pertained to me as a broker.

I grew up watching my father, a successful entrepreneur, make many a deal on a handshake or someone’s word. I am “of that school” even though I am also a trained attorney. So, in this particular instance, sharing some common cultural background with the developer and wanting to believe the best of him, I was proceeding as if on a handshake.

But things started to not feel good in that “gut” I spoke of earlier. I call it intuition but it’s the same thing. It’s an internal instinct and “caution” light that goes on which says, “Pay attention. Something is out of alignment and doesn’t feel good.” It was the developer’s continuing refusal to commit to writing along with his increasing disrespect towards me and my investor’s rights the more certain he was that the investor was on board and the closer we got to closing the deal.

Three days before the target deadline, the developer sent me an email with terms. They were not the terms repeatedly discussed and those which were there were woefully inadequate and poorly defined. The email closed with a “take it or leave it” directive and a demand that I not respond with any counter-offer or other terms. I was to reply simply “Yes” or “No.”

Well, there’s the kiss of death to a lawyer. Under the best of circumstances I am unlikely to not have something to add! And these were definitely not the best of circumstances. So I replied with a detailed explanation of terms as my investor believed them to be based upon representations made to him (and me). Further, I set forth in detail why those terms were in everyone’s financial interest.

I received no direct reply. However, three days later, on the target date deadline, I received a call from a third party involved in the fundraising who informed me that the developer’s “team” had advised him to accept the terms as I had forwarded them. However, I was also told he was in another city that day trying to raise other money.

Well, we were at a deadline set up by the developer, not me. He had not replied to my email of three days prior. My investor was calling me to ask why there was no contract to sign as this was the target date. So, I sent an email and text to the developer at 5PM stating that if I did not have confirmation in writing by 6PM of an agreement to terms and proof of the remaining 50% of funds raised as per the budget that my investor’s offer would have to be renegotiated once the 6PM deadline passed. At 6:35PM I received a scathing email from the developer who suggested that his lawyer contact a third party in the fundraising and attempt to negotiate the close of the deal. The last sentence of the email was , “But I am completely okay with us not doing business.”

We did not do business.

I could have let the refusal to commit to writing go; I could have ignored the ever changing terms; I could have disregarded the firm deadline; I could have overlooked the increasing disrespect; I could have seen grey everywhere instead of seeing black and white. After all, a lot of money was potentially in my future. A lot! As in similar to owning early shares of Apple or Uber.

But I think letting all that go is one of the primary ways this country got itself into the economic mess it’s in. Without principles we are lost. Without principles, it’s impossible to know when to leave the room…or the deal. Without principles money isn’t our means of transaction, it’s our god.

The terms should have been set forth, committed to writing and respectfully negotiated back and forth until the point of mutual agreement. The deadline, set by the developer, should have been able to be counted on and honored by all sides. The manner in which communication was exchanged should have been respectful and not demeaning.

I feel sorry for people who do not know the core principles that form the basis for their existence. These are my principles. So when they were not met, it was easy to know when to leave the room and the deal. I do not have the money that was a part of that opportunity but I have my self-respect and I have not added to the decline of values and principles that so many in our nation bemoan the loss of. I am not part of the problem I am part of the solution. It’s a different kind of profit that I made on the deal…but profit none-the-less.

Carole (contact@carolegold.com)

A Fidget Spinner Without a Plan

If you are a parent you certainly know what a fidget spinner is. They are everywhere. A year ago no one had even heard of them. Yet, walk into any gas station and you’ll find them displayed right out in front. What happened? People started buying and companies started supplying without any guidance or plan. Money was to be made! This is the beauty of the free market. It perceives what people want and then others move in to supply that demand.

So why, in any problem related to the public good, do politicians and the media clamor for “a plan?”  Why do they go endlessly in search of a plan that will fix infrastructure, public education, healthcare or whatever needs correction? Why does there always have to be a plan? Why don’t we deal with issues the same way the market dealt with fidget spinners?

Healthcare has been contentious for years. Admittedly, a certain segment of the population was uninsured or un-insurable (albeit it a small one proportionally speaking ). So, the politicians decided to come out with a plan to fix it. The Affordable Care Act (so misnamed!!!…also dubbed “Obamacare”) was forced upon us all so that every person in the U.S. could get insurance. So how come even with a law and a plan, there are still millions without insurance?

One of the key parts of the Obamacare plan was to insure people who had pre-existing conditions. Previously, one of the biggest criticisms about insurance is that if you had cancer no insurance company would cover you. The often unpalatable reality is that this is exactly how insurance works. Insurance is defined as “A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.” If you already have the loss (i.e. cancer) it is not an insurable item. This is no different than someone getting into a car accident then attempting to buy auto collision insurance after the fact then demanding damages and/or loss payment from the insurer!

The sales pitch was that with the Obamacare plan, even those with a pre-existing conditions would be covered. However, this is not insurance. Its a subsidy. Someone else must provide the funds to pay for a subsidy which is, essentially, a give-away. Those burdened with that obligation, it turns out, are people who get sick the least and have the least amount of money…the young.

(Lest anyone think I am hard-hearted, such an approach can include provisions for that relatively small number of persons truly destitute or who have pre-existing conditions.  Its simply a scare tactic and red herring to say that if you are opposed to government run healthcare you want to see the poor, sick and elderly die. In fact, if you’re opposed to greedy, lying politicians making personal life decisions for you and others, you’re probably more rational, informed and compassionate than not).

The young, to whom I refer,  are finally beginning to understand their economic predicament as it relates to Obamacare. The  have begun to revolt. Yet, last week,  Congress n its infinite wisdom, refused to repeal Obamacare. Naturally, Obama along with many other Democrats, was elated. Most of the media critiques went like this: “The Republicans hate Obamacare but they have no plan of their own.”

The success of Obamacare rests on the young but they don’t like paying for things they don’t use. Look at the cable business which relies on bundled services. Cable subscriptions are in serious decline because the younger generation hates paying for one hundred channels when they only watch six. They don’t understand why they are paying to watch M.T.V and the History Channel, for example, when they only watch H.B.O. They get it. They only wanto pay for things they use. Well,  Obamacare, like cable TV,  is premised on the notion of bundled services. If they are already unwilling to pay $30.00 a month for HGTV, what makes the proponents of Obamacare think they will pay for healthcare services for people they do not know and services from which they receive no benefit?

The members of the mainstream media are also big proponents of getting the government involved to fix the issue and selling the plan to the public.

Sixty Minutes entire show format revolves around investigating  problems that society can’t solve and then asking why nothing has been done to fix them.  John Stossel, the libertarian pundit on Fox started off as a Left-leaning journalist reporting on the evils of big business just as Sixty Minutes still does. He would do reports on how these entities had failed the public at large and needed to be reined in. Plans and government regulations needed to be expanded to fix whatever the issue was. But as time went on, Stossel realized that he was the one causing the most damage. He came to the conclusion that over time free markets correct and provide the needed product or service at the best price. No amount of reporting he did ever solved the problem.

Perhaps the real fault in government plans is that those elected to Congress who devise them have rarely ever run a business or successfully worked in the private sector. They are novices, at best, and ill-equipped to deal with the realities and practicalities of what it takes to supply goods and services.  The premise that government needs to supply “plans” to fix the problem is a false premise that always results in loss of individual rights and freedoms.

In the real world, individuals faced with a problem in their lives needing a solution tends to figure it out for themselves. No group meetings, no theory, no pilfering of someone else’s financial resources to solve their problem.

Markets aren’t perfect. But history verifies that nothing distributes scarce resources more fairly and efficiently than free markets. We already have government run healthcare at the Department of Veterans Affairs Hospitals and it has failed miserably. Let’s put patients in tandem with their treating physicians in control of healthcare and let freedom work.

 

Steve

sleeclark@gmail.com

 

Obama’s Redistribution Of Wealth

Want to know how Wall Street and the select few got rich and keep getting richer? Well, in a new book out this coming week titled The Chickenshit Club by veteran financial reporter Jesse Eisinger (highlighted by the Huffington Post…hardly a bastion of conservative news) Eisinger details the cowardice and/or sheer incompetence of the Obama Justice Department to go after the real abuses by corporate America following the 2008 meltdown. Its the ultimate redistribution of wealth…Obama style. Read the full article here:

 

Amazon on Steroids

If Amazon was a country, the U.S would place trade restrictions on it for illegal dumping. Illegal dumping in trade occurs “when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production.”

We permit Amazon to do what other countries are denied the right to do: dump their products into the U.S. Why? Because it would kill many of our industries. Often times, foreign companies receive massive assistance from their governments. One example, Airbus in Europe is subsidized by government funds which helps it stay competitive with Boeing. If we allowed these private/state owned companies to operate freely here in the U.S, domestic companies would not be able to compete.

Amazon is not owned by the government; however, due to the nature of capital markets, it has massive advantages over its competitors. The genesis of this advantage stems from the banking  crisis in 2008.

During 2008, many banks were shut down and/or merged. As part of the bailout and mergers, terms set by the Federal government barred banks from continuing to carry risky assets on their balance sheets. Then, the Federal Reserve infused the banks with billions of dollar in bailout money. The regulations put in place restricting trading by banks while loading them with money, caused the banks to begin buying and investing in things that were “government approved.” The banks bought billions of dollars in government bonds and other “approved investments” that would not raise the ire of the federal regulators.

What happened as a result?

Many legitimate small businesses and startups were frozen out. Why lend one million dollars to a startup if the regulators were going to complain? So the banks stopped lending to smaller firms and only invested in “sure things.” Asset managers and fund managers figured out the game and started mimicking what the banks were buying, thus only buying the safest and surest of investments.

Enter Amazon.

Recognizing that it had the opportunity to raise billions of dollars, Jeff Bezos went on a buying spree…buying out Amazon’s competitors and making massive investment in its infrastructure. It wasn’t that Amazon was making a ton of money. It wasn’t. What it had was access to the capital markets, something its competitors did not have.

Infused with cash, Amazon kept on tightening its profit margins lower and lower which was effective in driving its competitors out of business. Amazon is literally killing the retail industry and the malls that support those retailers. Malls across America are dying and some analysts have estimated that 50% of all malls will be closed within ten years.

Here’s the point. Many of these retailers are small business owners and have no access to the capital markets and, therefore, must make a profit.  In contrast Amazon, which has access to billions of dollars of capital, is not pressured to make any money and so lowers its margins to the point where it freezes out its competitors.  As stated earlier, the U.S. would never allow a country to operate so brazenly knowing the goal to be crushing domestic competition in order to make more money and monopolize the industry. But the rules appear to be different for Bezos and Amazon.

Larry Kudlow once said “profits are the mothers milk of all business” yet we obviously live in a time where the rules no longer apply. At some point this anomaly that allows Amazon to operate on minuscule margins with access to unlimited capital will end. The market will turn rational at some point and demand a return on the billions that was invested into Amazon. However, by that point, all serious competitors to Amazon will have been wiped out and it will be free to charge you whatever it wants.

I am a capitalist and a libertarian at heart; but what Amazon is doing is mercenary and illegal…or needs to be. Amazon is skirting the laws barring monopolies and participating in the perversion of our current capital markets, which have not been fixed since the 2008 crisis.  Amazon should be reigned in and broken up before its too late. We are literally letting one company destroy the fabric of our economy by rapidly destroying the retail industry in order to assure its own survival.

Many Amazon supporters claim that Walmart was guilty of many of the same things that Amazon is doing. I disagree. Sam Walton started with one store, limited access to capital and built has empire one store at a time. His success was based on profits and reinvesting those profits back into his company to buy more stores.

What Walton did was something available and accessible to all Americans. He had no special advantage or received no special treatment. Amazon currently has an advantage shared by only a handful of companies: unlimited access to capital. With this advantage, those few are literally laying waste to the American retailer and, to a greater extent, the personal liberty and equality of access inherent in free market choices.

Steve

sleeclark@gmail.com

 

 

An Amazon On The Loose

Where are Jeff Bezos and Amazon heading and why should it matter to you? Well, as if this quote from Bezos isn’t revealing and disturbing enough, read this entire article. Being silent in the face of infringement upon personal freedom is acquiescence and results in voluntary enslavement.

“Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member you are being irresponsible.”  Jeff Bezos

READ HERE: http://www.huffingtonpost.com/entry/americas-amazon-problem_us_59443b5be4b06bb7d2731cba?ncid=engmodushpmg00000004   

Amazon Branches Out (or further into our lives)

The first step in being scanned as you leave the grocery store. Amazon has the capability to allow you shop and as you leave the store its technology will scan everything in your cart and charge your card on file. No line. No cashiers.

Some amazing changes are ahead of us for good or ill, and only time will tell how we continue to apply and permit the technology to improve or control our lives. It will really be up to us as to where we allow it to go. Read here: http://www.zerohedge.com/news/2017-06-16/amazon-buy-whole-foods

What Has President Trump Done Now?

President Trump just announced his decision to pull out of the Paris Climate Accord. He set out, with specificity, the reasons why. The economic disadvantages it imposes upon the United States, the intentional redistribution of wealth from U.S. taxpayers to other signatories who have fewer obligations yet greater freedoms to pollute, the imposition upon U.S. autonomy in making its own energy decisions, and its infringement upon the freedoms given us by our Constitution.

I thought the speech was great. To paraphrase Michele Obama, “Today was not the first, but it was certainly one of the days I am proud of my country.”

But, I have a dear friend who is as distraught as I am happy. She believes that the decision to withdraw is grave error because it’s all about “protecting planet earth.” On this she and I are in agreement. It is important to protect the planet. Where we diverge is that the Paris Climate Accord is the way to do that.  My friend voiced two strong opinions. I’d like to address them both.

First, that since we already committed or “gave our word” it’s important that we keep it.  As lifelong friends, she knows how important I think integrity is so keeping one’s word is high on my list…just not at the expense of one’s life. And certainly not when the word was given by those who will only experience the benefits…not given by those who will suffer the consequences of being bound to it.

The Paris Accord disproportionately binds the U.S. economically. It restricts our autonomy and harms our workers. Those elitists and politicians who negotiated it will be on the receiving end of its profitability and inside deals on carbon credits. Those who had no say, the average working American, will bear the financial burden and become the beasts of burden by being forced into less available and lower paying jobs as a result of more jobs going overseas.

So, if you commit me to something about which I had no say, and that to which you commit me is antagonistic to my well being, don’t expect a friend of mine who shows up and who has the ability to undo what you bound me to… not to do so. That’s what President Trump did. He undid what former President Obama did and what Obama did was not in the best interest of this nation. However, and more importantly, it was not in the best interest of the planet. This is what I would have my friend understand.

One more behemoth bureaucracy will solve nothing. That is what the Paris Accord is in its present condition. It is the latest iteration, this time global, in concentrating too much power in the hands of too few in order to enslave the many.

If you spend billions, perhaps trillions, of dollars to allegedly reduce the temperature of the planet by a fraction of one degree over the next 25 years…but allow one polluting member (China) to burn enough dirty coal in 5 years to negate the benefit…well…who gets happy from that deal?… other than the Al Gores of the world who can afford to create and trade on a carbon credit exchange.

Saving the planet is no different than any other moral issue. You cannot legislate morality and you cannot pass binding agreements that demand we become the stewards of the earth that the Book of Genesis demands us to be.

Whether its moral acts toward one another or toward the planet, they will only come through an awakening of our consciousness and a change of our hearts. Such things happen “one consciousness and one heart” at a time. When enough of them have been so awakened and so changed that we reach a tipping point in our collective consciousness…well…that’s when we will save each other and the planet. Not because Angela Merkel, Barack Obama or any other elitist with a political agenda contractually binds us to.

As I listened to President Trump today tell the nation the realities of the really bad deal we committed to, I kept thinking of that line from “A Few Good Men” when Nicholson says, “You want the truth? You can’t handle the truth.” Today, if you took the time to listen, President Trump told you the truth about the Paris Climate Accord. You say you want the truth? If you’re angry, it’s because you can’t handle the truth.

A Hedge Fund Manager Ahead of the Curve?

It takes a lot of courage to face the truth. Often, its easier to just go along to get along. But this Australian hedge fund manages seems unwilling to go off the impending cliff with the other lemmings. So maybe what he’s chosen to do is worth contemplating.

 

“We think that there is too much risk in this market at the moment, we think it’s crazy,” Altair CIO Philip Parker said: “valuations are stretched, property is massively overstretched… Let me tell you I’ve never been more certain of anything in my life.

Read the full article here: http://www.zerohedge.com/news/2017-05-29/market-crazy-hedge-fund-returns-hundreds-millions-clients-citing-imminent-calamity

Carole

The Rich Tap Out

Even though Connecticut is considered one of the richest states  in the US given the amount of hedge funds in the state, tax revenues are continuing to decline. But lawmakers this time around are acknowledging there is a limit to how much they can keep on demanding from the wealthy.

See the article here at the Wall Street Journal

 

Steve

Political Idol Worship

In my Facebook feed, I have lots of friends that have a picture of the First Family as a way to honor them and show their love for our previous president. I suppose their reasoning is that the Obama’s are a great example of what a family should be. Sorry, but the whole notion disgusts me.

The whole adoration of a President and his family sickens me because it implies that they are somehow superior to us, know more than us and should therefore be granted more privileges to govern in a manner they see fit. The fact is all tyrants believe they are somehow superior to the people and, once given unlimited power, tend to act in the cruelest and most oppressive manners.

It reminds me of the British propensity for endlessly fawning over the royal family. It takes no hard earned talent to become a royal. It a simple case of winning the genetic lottery. At least today it is. In centuries past, to become and remain a member of the royal family, one had to be willing to be ruthless, deceitful and the willing to use unrestrained physical force. The members of the royal family today are the direct descendants of some of the most vile people to have ever governed. They lived and prospered off the backs and works of others by benefiting from their ability to control, kill and enslave. Think I’m wrong? Henry VIII was just one example. He ruled England from 1509-1547 and was directly responsible for over 72,000 executions during his reign. This number does not include the numerous citizens he killed during wars with France.  Ironically, the premise of the television show  “Game of Thrones” is how European houses ruled their countries. The show’s popularity is partially based on the cruelty and depravity of its rulers.  Still, the British love their royals!

In the U.S, there is a movement called “reparations” which demands that African-Americans  be compensated for the crimes committed against them by their government. The hard part of reparations is determining a suitable payment plan for a group of immigrants with no long lineage to speak of.  Yet in England, there is no call for “reparations” even though those alleging wrongdoing could, in fact, trace their own lineage and that of their oppressors, back to some past King or Queen who committed great atrocities. There are no calls by the British people or their heirs for lands or lives lost as a result of the actions of past royals. There is only love for their descendants because the British people are committed to tradition and awed by the mystique of royalty.

The irony of political power is that people who would be best at its use avoid it like the plague…while those who seek it tend to be flawed, twisted individuals such as Hitler, Stalin and Castro: leaders who killed millions of their own through misuse and abuse of power. In modern U.S. history, aside from perhaps Ronald Reagan, Harry Truman or Dwight Eisenhower who I would argue were called to power, the majority of U.S. Presidents have taken steps within the political system to amass, deploy and in some cases, hold on to power during and after leaving office. (Obama is so soon after office globe trotting for hundreds of thousands of dollars in speaking fees in order to remain in the limelight and keep a firm grasp on the illusions of fame and relevance). Returning to a life of ordinary citizen, as exemplified by George Washington, is simply not in Obama’s playbook.

My outlook, generally, on politicians is that they tend to be some of the most unprincipled and immoral people around. Bill Clinton remains beloved by Democrats but I doubt any of them would leave their teenage daughter alone in a room with him. What bothers me are the rose-colored lenses with which the Left looks upon its chosen leaders, especially Obama.

Like any other political operative, Obama should be closely watched and monitored lest he destroy our country even now, out of office.  When he first ran for the U.S. Senate in 2004, his competitor Jack Ryan, had his sealed divorce records mysteriously released and was forced to withdraw from the race as a result. During his time as a community organizer, Obama spent most of his time working with Acorn; but, that organization had to be dissolved once they were caught engaging in major voter fraud. These are actions we should we should condemn, not condone, and certainly not ignore. Yet, for the Left nothing negative can be associated with Obama lest it be racist…and nothing negative about him gets media traction.

People have mistaken me as a Republican based upon my criticisms of Obama; but, I am not a Republican.. I am for any politician that believes in my Constitutionally protected freedoms, less regulation and less taxation.  Given that criteria, I am able to support very few politicians.

Barack Obama’s treatment of the Tea Party, the Justice Department’s investigations into their tax status and his use of the IRS to silence his critics makes Richard Nixon’s crimes pale by comparison. For many, Nixon will always be considered a pariah while Obama continues to be cast as a saint. Both of them should have been treated with scorn for their abuse of power. Yet, the Left’s vision is obscured by blinders as it continues to adore a President who ignored the Constitution, used government agencies as political weapons, and set back race relations to the 1950’s.

The Tea Party was created as a grass roots movement to stop many of the policies Obama wanted to implement. In Kim Strassel’s book , The Intimidation Game, the author details the vigorous enforcement and harassment of individuals who tried to create legally permissible political action committees supporting The Tea Party between 2010-2012.  Political Action Committees (PAC’s) are the best way for citizens to address their grievances towards the government. It is the ultimate check upon public servants by individuals. The effective silencing of the Right during this period essentially shut down The Tea Party. Kim Strassel’s conclusion is that Obama silenced them because they represented a real threat to his reelection. Had they been allowed to freely operate, the 2012 election might have turned out differently.

We live in challenging times of radical and rapid change.  We also live in sad times when the Left can view The Tea Party as being more of a danger to their well being than the threats posed by radical Islam. This fact alone should tell you how far we have fallen.

If we are unwilling to view all politicians, regardless of party affiliation, with a general sense of distrust and confer upon them the degree of scrutiny they deserve from us, we may well look back upon these difficult times as having been “the good old days.”

Steve

sleeclark@gmail.com