posted by Curt, on February 18, 2008 10:28 am

When I've had a spare moment lately, I've been reading a book on the history of financial speculation titled The Devil Take the Hindmost. It starts with the Tulip Mania in seventeenth century Holland, and talks about all the major speculative events up to the dot com bubble of the 1990s. I just finished reading about the railway speculation in 1840s England. I found some quotes from newspapers of the time that I thought pretty accurately described the economic attitudes of the last few years. Here are some of them:

There is not a single dabbler in scrip who does not steadfastly believe--first, that a crash sooner or later is inevitable; and secondly, that he himself will escape it. When the luck turns, and the crack play is sauve qui peut, or devil take the hindmost, no one fancies that the last mail train from Panic station will leave him behind. In this, as in other respects, "Men deem all men mortal but themselves."

And another:

It is only the play of children, trying to lift one another in the air at the same time . . . It is the simpler part of the public which is deceived.

One of the other things that was interesting about the chapter on railway speculation was that the author noted that it took "nearly two years for the full impact of the

And finally, ending with a quotation from none other than Bill Gates:

Gold rushes tend to encourage impetuous investments. A few will pay off, but when the frenzy is behind us, we will look back increduously at the weckage of failed ventures and wonder, "Who funded those companies? What was going on in their minds? Was that just mania at work?"

That seems to be just what people are saying right now.

Anyway, for anyone interested, I recommend Devil Take the Hindmost. If you have the inclination, buy it from Amazon. As always, if you use the link below, I get a referral fee :)

posted by Curt Bentley, on February 13, 2008 09:58 am

Our Securities Regulation Professor shared with us a story from a Dr. Seuss book that I hadn't heard before. This comes from the book "Did I Ever Tell You How Lucky You Are?" It is dedicated to all the business majors out there, the new crop of "bee watchers." Here it is:

Oh, the jobs people work at!
Out west, near Hawtch-Hawtch,
there's a Hawtch-Hawtcher Bee-Watcher.
His job is to watch . . .
is to keep both his eyes on the lazy town bee.
A bee that is watched will work harder, you see.
Well . . . he watched and he watched.
But, in spite of his watch,
that bee didn't work any harder. Not mawtch.
So then somebody said,
"Our old bee-watching man
just isn't bee-watching as hard as he can.
He ought to be watched by another Hawtch-Hawtcher.
The thing that we need
is a Bee-Watcher-Watcher."

WELL . . .

The Bee-Watcher Watcher watched the Bee-Watcher.
He didn't watch well. So another Hawtch-Hawtcher
had to come in as a Watch-Watcher-Watcher.
And today all the Hawtchers who live in Hawtch-Hawtch
are watching on Watch-Watcher-Watchering-Watch,
Watch-Watching the Watcher who's watching that bee.
You're not a Hawtch-Hawtcher. You're lucky you see.

In case you're interested, you can always get it at Amazon.com (remember, I get a referral fee :)):

posted by Curt, on January 16, 2008 11:29 am

It seems like the economy is the thing on everyone's mind these days. The Iraq War has really faded in to the background, partly because it has been shoved out of the picture by fears of recession but primarily (at least, according to me) because the troop surge has cut casualty rates to almost nothing (although there has been some bad news the past couple days).

Most people seem to accept the idea that the economy is headed for a recession, now. Poof! There goes the only potential bright spot of the Bush legacy--at least his immediate legacy. Time will tell as to how people think he did on terrorism. I know people think he has failed miserably now, but the passage of time has resulted in some pretty substantial shifts of opinion before.

The real question for me is: how long is it going to take before we really start to feel the effects of recession in Utah? By all accounts, Utah's economy is booming right now. People are still moving in and companies are starting up and things are generally good--at least that's what we're told. I, for one, am already feeling a pinch. Food prices are up, and gas prices don't feel like they've really gone down this winter (although they have receded from their high of $3.25 during the summer). Also, new home construction has basically slowed to a stop in my area of Provo (and I'm not sure it's any better anywhere else in the valley). It won't take long for these effects to start rippling through the local economy.

In any event, we will soon find out just how much of Utah's rosy economy of the last few years was driven by real estate. I suspect it is a substantial amount--more substantial than many people think. It seems like one of every 3-4 people I meet are either in the construction or real-estate industry. Both of those industries have been driven mainly be two things: (1) investment and (2) credit. Now, with the extension of credit coming back to earth and the flood of investment from California, Florida, Arizona, and Nevada becoming a small trickle, these industries are going to take a hit. This hit, combined with bad economic news from around the country will put us in the classic downward spiral. I think we're going to see some substantial negative effects here in Utah. Our economy here, like those in most other places, was built on property investment and consumption. The combination of the decimation of the residential construction industry with inflation is bad news for Utah--in my humble opinion.

As a final note, I find it instructive (and sad) to think back on President Hinckley's comments in the October 1998 General Conference. Here's a quote:

Now, brethren, I should like to talk to the older men, hoping that there will be some lesson for the younger men as well.

I wish to speak to you about temporal matters.

As a backdrop for what I wish to say, I read to you a few verses from the 41st chapter of Genesis.

Pharaoh, the ruler of Egypt, dreamed dreams which greatly troubled him. The wise men of his court could not give an interpretation. Joseph was then brought before him: "Pharaoh said unto Joseph, In my dream, behold, I stood upon the bank of the river:

"And, behold, there came up out of the river seven kine, fatfleshed and well favoured; and they fed in a meadow:

"And, behold, seven other kine came up after them, poor and very ill favoured and leanfleshed. . . .

"And the lean and the ill favoured kine did eat up the first seven fat kine: . . .

"And I saw in my dream . . . seven ears came up in one stalk, full and good:

"And, behold, seven ears, withered, thin, and blasted with the east wind, sprung up after them:

"And the thin ears devoured the seven good ears: . . .

"And Joseph said unto Pharaoh, . . . God hath shewed Pharaoh what he is about to do.

"The seven good kine are seven years; and the seven good ears are seven years: the dream is one. . . .

". . . What God is about to do he sheweth unto Pharaoh.

"Behold, there come seven years of great plenty throughout all the land of Egypt:

"And there shall arise after them seven years of famine.

". . . And God will shortly bring it to pass" (Gen. 41:17­20, 22­26, 28­30, 32).

Now, brethren, I want to make it very clear that I am not prophesying, that I am not predicting years of famine in the future. But I am suggesting that the time has come to get our houses in order.

So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.

We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.

I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.

My father was then president of the largest stake in the Church in this valley. It was before our present welfare program was established. He walked the floor worrying about his people. He and his associates established a great wood-chopping project designed to keep the home furnaces and stoves going and the people warm in the winter. They had no money with which to buy coal. Men who had been affluent were among those who chopped wood.

I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.

In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.

Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.

We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one's home. But no mention is made of interest.

President J. Reuben Clark Jr., in the priesthood meeting of the conference in 1938, said from this pulpit: "Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you" (in Conference Report, Apr. 1938, 103).

I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years.

No one knows when emergencies will strike. I am somewhat familiar with the case of a man who was highly successful in his profession. He lived in comfort. He built a large home. Then one day he was suddenly involved in a serious accident. Instantly, without warning, he almost lost his life. He was left a cripple. Destroyed was his earning power. He faced huge medical bills. He had other payments to make. He was helpless before his creditors. One moment he was rich, the next he was broke.

Since the beginnings of the Church, the Lord has spoken on this matter of debt. To Martin Harris through revelation, He said: "Pay the debt thou hast contracted with the printer. Release thyself from bondage" (D&C 19:35).

President Heber J. Grant spoke repeatedly on this matter from this pulpit. He said: "If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet" (Gospel Standards, comp. G. Homer Durham [1941], 111).

We are carrying a message of self-reliance throughout the Church. Self-reliance cannot obtain when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others.

In managing the affairs of the Church, we have tried to set an example. We have, as a matter of policy, stringently followed the practice of setting aside each year a percentage of the income of the Church against a possible day of need.

I am grateful to be able to say that the Church in all its operations, in all its undertakings, in all of its departments, is able to function without borrowed money. If we cannot get along, we will curtail our programs. We will shrink expenditures to fit the income. We will not borrow.

One of the happiest days in the life of President Joseph F. Smith was the day the Church paid off its long-standing indebtedness.

What a wonderful feeling it is to be free of debt, to have a little money against a day of emergency put away where it can be retrieved when necessary.

President Faust would not tell you this himself. Perhaps I can tell it, and he can take it out on me afterward. He had a mortgage on his home drawing 4 percent interest. Many people would have told him he was foolish to pay off that mortgage when it carried so low a rate of interest. But the first opportunity he had to acquire some means, he and his wife determined they would pay off their mortgage. He has been free of debt since that day. That's why he wears a smile on his face, and that's why he whistles while he works.

I urge you, brethren, to look to the condition of your finances. I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.

Remarkably prescient, huh? But what else would you expect from the Prophet. What I think is sad is that it is pretty clear that the members in Utah generally ignored his counsel. The house of the average member of the church in Utah today is more "out of order" than it was in 1998. We've had our 7 years of prosperity since 2001, and now the bill for our consumer debt is coming due.

I just hope it's not too high of a price to pay.

posted by Curt Bentley, on October 15, 2007 07:58 pm

Interesting story from Fox News -- the first of the Baby Boom generation filed for social security. I must admit to being a little taken aback . . . I had always thought my dad was part of the baby boom generation (even though I consciously knew he was not, since he was born in '42), and he has been retired for four years now. The fisrt of the baby boomers will turn 61 sometime this year. The youngest of the generation (born in '69, I believe) will be 38. So, for the next 23 years, they'll be beginning to retire. The floodgates are about to open.

While just about everyone agrees that social security is "broken," no one apparently can agree on how to fix it. The real question is what that means for people like me, part of the next generation. I really don't know, and to be honest with you, haven't thought about it much. I don't think I've contributed much to social security (given that I've been in school all my adult life). The only time I think about it is when it's in the news or when I get the informational letter every year around tax time.

It seems to me the most prudent course of action for individuals like me is to assume that social security will not be there. For people in their thirties, that's a viable option. We have enough time that, if we take retirement seriously, we'll be able to get along without social security . . . at least, that's what I think. I'm not planning to rely on it at all. The people who are really in a bind are the people at the tail end of the baby boom generation. Their in their early forties to early fifties. They may have planned on social security to finance a substantial portion of their retired life. It seems to me that we only really have to try and fix social security for those individuals . . . the rest of us can probably get along without it. Of course, such a decision flies in the face of the very principle that social security is "legitimated" on: that when you're young you pay in and when you're old you draw out. This makes it very easy for people opposing what seems like the commonsense solution--all they have to do is use this contradiction to get people really riled up politically. So long as they can do that, it will take a real emergency before the people will be united enough over the social security problem to prevent politicians from using social security as a divisive issue to generate political capital.

So what do I think this all means? I'm really not sure, but I suspect it means that we won't see social security reform until the system is pretty much bankrupt . . . likely right about the time that the middle of the baby generation retires (maybe ten years from now). Then we'll see just how reliant people are on social security. If they're not all that reliant, then the system might just go relatively quietly into the good night. If not, it should be an entertaining political battle. But, I'm planning on the death of social security within the next 25 years. If it lives, I'll get something of a bonus. But if not, I plan to take care of myself, by myself.

posted by curt, on October 10, 2007 12:12 am

Well, I just finished a research memo for a Professor here at the law school. I'm not sure that he meant it to take as long as it did, but I've worked pretty solidly on it for the last couple days. I've had about a total of 4 waking hours that haven't been devoted to it. It's such a complex memo, I'm not even sure how good it is. Still, it's a nice feeling to have it done, and I know that I've done my best.

Now, it's off to bed for me. Goodnight.

posted by curt, on September 24, 2007 06:11 pm

This is a test of my mod_rewrite functionality . . . just want to make sure everything is indexable!

posted by Curt Bentley, on September 20, 2007 11:42 pm

This is really just a test posting that I am doing.

I particularly want to see if my paragraph replace function is working the way if should be. I'm not sure that it will, but it might. I'm just going to type a little more, to stretch out this paragraph. That should be good enough.

Now, here comes the third paragraph--I hope that it indents OK. I want to see what happens when I only hit return one time. I think it will probably just ignore the return, and you won't even see it.

We'll see if that is in fact what happened.