cozcommunio

When the markets are de-leveraging like they are currently, some rich are getting poorer. The Carlyle Group (a firm that runs money for the super rich and politically connected)is a powerful Washington-based private-equity firm which currently is in the process of collapsing. The companies shares are down over 80% since problems were disclosed last week. The Carlyle Capital Corp. is heavily leveraged, in some accounts over 30 times. What this means is if they liked a position they borrow from investment banking firms with say only 3.34% money down (this gives them a 30 times leverage). If the position goes up in value they would score monster returns on their investment. The problem today is their investments are going down in value do the sub-prime and credit market problems. So they are experiencing monster loses and their bankers are demanding they put up more money. These capital calls are forcing them to liquidation positions into weak market. The firm is well known for the dozens of world political figures and luminaries it has employed and has as investors in the fund include George H. W. Bush and James A. Baker III. Carlyle’s current chairman is Lou Gerstner, former CEO of IBM and Nabisco. The Carlyle Capital Corp. is just one of the funds that the Carlyle Group runs. It is a mortgage investment fund. A year ago it was valued over $22.7 billion in the last year it has lost over 97% of its value. Here is a link to today’s Wall Street Journal a story:

http://online.wsj.com/article/SB120537974320632835.html?mod=hps_us_whats_news

The moral to the story is leverage can make you rich in rising market and it can make you poor in weak markets. Leverage is a double edge sword.

David Mamet in an article in The Village Voice “Why I Am No Longer a Brain-Dead Liberal” lays out how he understands that people in a free society can solve their problems better with limited government intervention. Mamet is probably one of the most prominent American Play writers in the last 20 years. Here is the link to the piece:

http://www.villagevoice.com/news/0811,374064,374064,1.html

In the article he calls Thomas Sowell our greatest contemporary philosopher. After looking and writing about the drama of life for the last 30 years Mamet gets it. He understands that we need freedom to plan and determine our own lives. Government needs to have a limited and defined role in the process of ordering everyday life.

Warren Buffet was answering questions on CNBC this morning. There were a number of email questions regarding his advocacy of higher taxes for the rich and why he doesn’t voluntarily give more money to the government. His answer was that his charitable foundation probably does a better job of allocating resources then the government would do. This comment begs the question of why we should have higher tax rates to give more money to an entity that will not do a good job of allocation resources. I agree with Warren here that the people who work and produce the resources should decide how to allocate the resources. I wish Warren always agreed with Warren and let people decide how to spend the fruit of their labor. Or does Buffet only want certain people to be able to make these decision?.

WFB Jr. is a good example of why I’m not a conservative. His self described mission was to “stand athwart of history yelling stop.” As a liberal I embrace life embrace change and want fight to define history for the good and virtue. Like Friedrich Hayek and Milton Friedman I do not consider myself a conservative. I have no pretense that I’m a Hayek or a Freidman but I’m fortune to stand on their shoulders. In Hayek assay Why I am not a conservative he talked about the liberal looking forward, based on courage and confidence, on a preparedness to let change run its course even if we can not predict where it will lead.

“This difference between liberalism and conservatism must not be obscured by the fact that in the United States it is still possible to defend individual liberty by defending long-established institutions. To the liberal they are valuable not mainly because they are long established or because they are American but because they correspond to the ideals which he cherishes.”

“The chief evil is unlimited government, and nobody is qualified to wield unlimited power.” Hayek

How important are labels? How do you think of yourself and how do others see you? Now that elitist socialists are leaving the label liberal to go to the label progressive can we take back liberal for the camp of limited government pro-liberty. Libertarian seems like such an awkward word. Its label value has been damaged by the LP. What about the label Free-market Liberal.

lib·er·tar·i·an

lib·er·al

2.	(often initial capital letter) noting or pertaining to a political party advocating measures of progressive political reform.

13.

of, pertaining to, or befitting a freeman.con·serv·a·tive 1. disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to limit change. 2. cautiously moderate or purposefully low: a conservative estimate. 3. traditional in style or manner; avoiding novelty or showiness: conservative suit. 4. (often initial capital letter) of or pertaining to the Conservative party. 6. having the power or tendency to conserve; preservative.