So there's been a lot of noise lately about stock options and whether they're a good idea or a bad idea, with the liberals and conservatives predictibly screaming across the ideological chasm, and the sense getting lost in the meantime.
Well, here's a little explanation for those of you who slept through this part of CorpFin 101.
Why do we use stock options? Stock options are a solution to the principle-agent problem, which is a fancy way of saying that the professional executives who run companies have conflicts of interest with the shareholders who own said firms, and we can't just rely on the executive's altruistic sense of what is right and good to bridge the gap, any more than we can hope that if we sing Kum-bah-yah enough times Bin Laden will sashay out of whatever hole he's hiding in and stick a daisy in the rifle of the first Green Beret he sees.
We can't watch the bastards every minute; after all, we've got jobs and kids and bathrooms to regrout and the Lord of the Rings DVD we haven't even looked at. Think of a big corporation, say Exxon, as the equivalent of a gas station whose owner is on an extended vacation. When the cat's away, the mice will play.
While liberal commentators would have you believe that the sixties and seventies were a halcyon era of corporate responsibility and managerial modesty, they were also the era of bloated conglomerate empires, seven-figure expense accounts, and the Chrysler bailout. Managers, believing that forcing American consumers to buy whatever crap they made was their God-given right, were less concerned with innovation or competitiveness, and more concerned with building immense private fiefdoms for themselves, from which their vassal lords would bring them tribute in the form of junkets, three-martini lunches, and ludicrous perks suh as a corporate jet to fly you to the Tasti-Freez.
They also failed to optimize shareholder value, because their risk-reward profile was far different from the shareholders. When times were good, they were unwilling to take potentially profitable risks, because they weren't going to see much of the upside, while the downside meant they would lose their jobs.
When times were bad, they were willing to take insane risks, because hell, they were going to lose their job anyway, and if there was any chance that that bionic tweezer could turn things around, why not try? After all, they were going to lose their jobs anyway. Why leave assets to be repatriated to all those ungrateful shareholders when there was still the possibility that the CEO's corporate jet might be saved?
Stock-based compensation is meant to align the interests of the managers with those of the shareholders, by making a substantial portion of their compensation dependant on the share price.
So why didn't stock options work as well as we thought?
Well, for one thing, stock prices are an imperfect measure of a company's worth; the managers of a company, unless they are deluding themselves, always have a better picture of the actual health of a company than outside investors. This difference between insider and outsider knowlege is most pronounced over the short term.
Which brings us to the real problem: the risk-reward pattern of stock options is not identical to that of shares.
To understand why, we need to look at the relative compensation patterns of equally-valued stock and stock-option compensation packages. You there in the red shirt! Take your mouse off that "Back" button. This is important! You can look at naughty pictures later.
Let's look at two executives, both getting $1 million in salary, and $4 million worth of stock-based compensation.
Executive A, who we'll call Annabelle, is getting 4,000 shares valued at $100 apiece.
Executive B, who we'll call Belinda, is getting 16,000 options to buy shares at their current price of $100, excerciseable within 3 months.
[Why don't they get the same number of grants, you ask? Because we're not trying to equalize grants; we're trying to equalize the expected value, or the probability-weighted value, of the compensation.]
We'll assume, for the sake of the model, that we have perfect knowlege of probable outcomes, and that there is a 50% chance that the stock will be worth $50 in three month's time, and a 50% chance that it will be worth $150.
Wake up! We're through the boring part. Okay, so in three months time, what happens?
Annabel's stock is worth either $2 million or $6 million. Expected value: $4 million.
Belinda's stock options are either worthless, because the stock price is lower than $100; or very valuable, as she excercises her options at $100, sells them at $150, and pockets an $8 million profit. Expected value: also $4 million.
And now you know how to do an expected value calculation. Isn't that exciting? I'll wait while you run out to phone your friends.]
Now, what does this tell us?
First, that Belinda is now willing to take more risks than Annabelle? Why? First of all, because Belinda's grant is all up-side. If Annabelle takes a risk that could put the company out of business, she loses everything. Belinda, on the other hand, loses no more if she puts the company out of business than she does if she just misses her earnings targets by a little; either way, she can't cash in.
The second reason is even more interesting. It's something called loss-aversion. What does that mean? It means that we'll do more to avoid losing what we have than to get more. This can lead to unhealthy risk-taking behavior. But it also leads to personal sacrifice and hard work to preserve the value of what you have. The executive with stock wants to avoid losing money more than the executive with options wants to gain it.
So in two important ways, the stock-option holder's interests are not aligned with those of the shareholders.
So why do we use stock options instead of stock grants Two reasons: taxes, and financial accounting. Stock options allow you to play with the timing of expenses on both in order to maximize value.
Even more importantly, stock options don't show up on the balance sheet. Oh, they show up in the notes. But who cares about the notes? They don't show up in analysts model or the almighty EPS the same way that stock grants would, and that's the important thing. I'd explain the exact difference to you, but if you fall asleep that suddenly you might hurt yourself when your head hits the corner of your desk, and I couldn't live with that.
So what should we do? You may not be aware of this, but Harvey Pitt is not knocking down the doors of Live From the WTC's editorial board to seek our opinion on this crisis. However, here is our opinion:
1) Change the accounting for stock options. Yes, we know that Black-Scholes has issues with long-term stock options, but not as bad, in our ham-fisted opinion, as the current valuation method.
2) Change the term and the blackout periods so that executives can't sell immediately after they excercise.
3) Eliminate the practice of re-pricing options, where an executive's pet board gets to decide that the stock decline wasn't really his fault and he should get to make a profit off his options anyway.
4) Preferably, move away from options and towards either a stock grant with a lengthy blackout, or the elegant solution proposed by Mindles H. Dreck: base compensation on the company's stock's outperforming stocks in it's industry sector; after all, we don't want the executive to benefit or be penalized by changes in the sector, but for how well said executive manages to maximize profits given market conditions.
So I was reading an editorial about the Southwest Airline fat scandal. For those of you who aren't familiar with this tempest in a tinpot, Southwest Airlines told overweight passengers that if they didn't fit into their seat (as measured by the objective standards of a) needing to raise the armrests in order to fit or b) needing a seatbelt extender), and the flight was full, they'd need to pay for that extra seat they were taking up.
The editorial was written by a member of the fat acceptance movement who, unsurprisingly, desired the repeal of this rule. Of course, she had a hurdle to get over, which is that while she's trying to fight Southwest, there's the fact that the extra girth doesn't bother the flight crew -- it bothers the person sitting next to the overweight person, who is sacrificing a third of their seat to their neighbor's Big Mac attacks.
How insensitive of me. It's not that overweight people are unhealthy; they're just unlucky. 'Fraid not; most fat people are fat because they are eating more calories than they burn off. Oh, there are exceptions, but according to the doc I interviewed for my last Salon article, metabolic disorders account for less than one percent of the overweight -- and as it happens, I am blessed with the most common of these, hypothyroidism. You pop your Synthroid like you're supposed to and the weight comes off. I'm sorry, but eat more, weigh more; it's not a mysterious formula.
Now, of course, everyone is entitled to weigh as much as they want -- but I don't see how that translates into an entitlement to take up space that other people have paid for. Losing weight is hard, but so is spending seven hours jammed against the wall of an airplane because your neighbor is spilling over into your seat.
The fat acceptance woman tried to get around this by proclaiming that she didn't want to take up her neighbor's seat; she wanted Southwest to make the seats bigger. Of course, she doesn't want to take anything from regular ol' folks like you and me; just the greedy corporation who wants to penalize her for her weight with no good reason.
Sorry, that won't fly. To see why, we have to take a look at a little airline economics. That's right, it's time for another timely lesson at Jane Galt U!
Try to make your gleeful clapping a little quieter; it's disturbing the people in the other cubes.
Our subject today is that age-old question: Why can't they just make those [Censored] seats a little [Expurgated] bigger?!
As with most questions that start with "Why can't they just. . . " the answer is cost.
The airline industry is an interesting kettle of fish. Ever wonder why you never get the same price twice for a ticket? That's because airlines are, or so their shareholders light-heartedly hope, extremely adept at upending their customers to shake every last nickel they're willing to pay out of their pockets. It's called price discrimination, and while it sounds scary and mean, it's actually a form of corporate socialism whereby business travelers subsidize your Hawaiian vacation -- so shut up and be grateful.
To see why this is, let's look at the major cost components of a given flight.
There's the guys running around in khakis and golf shirts back at headquarters nattering about revenue-per-passenger-mile and other things that make us dizzy and slightly nauseated with boredom when we dwell upon them too long; have to have 'em, if only so there's someone to appear in the commercials explaning the company's last plane crash, so we all have to kick a little into the kitty to support them in the style to which they'd like to become accustomed.
There's the landing slots at the airport, which are very valuable and handed out in a byzantine procedure which no one, including the airlines, entirely understands.
There's the airplane itself. Every time you use the airplane, it takes a little more wear and tear. Imagine that there are a fixed number of miles that an airplane can travel, even with great maintenance; you've just dipped into the mileage piggy bank and spent a little of it, decreasing the value of the airplane in the process. This is known as depreciation, and now you know what that mysterious thing is you've been hearing about all these years.
That maintenance doesn't come free either.
There's the jet fuel. This is an enormous component of airline expenses, which is why every time Saudi Arabia sneezes, airline stocks catch cold.
There are ticketing and baggage systems and union negotiators and Commodore Lounges, and the slow-normal girl who you talk to when you have trouble with your frequent flyer miles. . . all these things have to be paid for out of the revenue from flights.
Then there's labor. Oh, boy is there labor. Every time the flight attendants go on strike for higher wages, guess who's picking up the tab?
From the point of view of the flight, all of these things are fixed costs; whether you carry one passenger or three hundred, they stay pretty much the same.
There are also variable costs on each flight, costs that vary by the number of passengers on the plane, but you're not going to offset your jet fuel costs with fantastic savings on cocktail napkins. Almost all the cost of every flight is fixed.
That means two things. First, the airlines want each flight to be as full as possible. And second, because the number of passengers is limited by the number of seats, they want to shake as much revenue out of each passenger as possible.
It also means that there is a lower limit on the number of passengers that a flight can carry and still break even. The numbers I've heard with our new, more stringent security regulations, are around 73% of the current, tightly seated, capacity of the airline. Obviously, not all flights make money; some are used as loss leaders, to sell into the lucrative business market. Still, on average, the planes have to be pretty full just to break even on an operating basis, which is to say, leaving aside investment and financing costs. And for the airlines to actually make money, which is by no means a regular occurrence, they have to be fuller still.
Can you see where this is going?
Fewer seats mean the airlines can carry fewer passengers. Which means that they have to get more money out of each passenger who flies. Let's look a one aisle plane. The aisles are as small as they're going to get; for starters, if they were any narrower, our friends in the fat acceptance movement couldn't get down them, much less the beverage cart. So where is that extra roominess going to come from? You know the answer; from removing a seat. In each seat bank. In a standard one aisle plane (three seats to a side), that would mean cutting the carrying capacity of the airplane by a third. As you may notice from some simple arithmetic, this means that at current prices, the plane would lose money even if fully loaded.
So how do the airlines finance this goodwill gesture? From the vast corporate vaults where they store their ill-gotten gains? Brother, find me a consistently profitable airline and we'll talk. Post 9-11, the idea is ludicrous. No, they'll get the money from you and me.
In other words, rather than losing a third of our seat, we'll lose more of our hard-earned cash. And why should we do this? So that the fat acceptance folks don't have to bear the costs of their weight alone. Where do I sign up?
I'm not entirely unsympathetic. I'm 6'2 and all leg, and I don't fit into normal airline seats; I spend the entire flight with my knees wedged around my ears. I hate flying with Wagnerian passion. It's miserable, time consuming, and it makes my ears hurt. I can tell you stories about unsympathetic short people that would make your heart bleed. . . and no matter how much I diet, those extra inches won't seem to come off.
And sometimes I ask myself why they can't just give me a couple of extra inches of leg room when it's not my fault I'm so damn tall. And as with most questions that start off "why can't they just. . . " the answer I give myself is cost.
Because I don't want to pay more for my tickets. And I'm damn sure that you don't want to pay more for my personal comfort.
Xerox was one of the early innovators in the recent trend towards declaring mind-bogglingly large accounting errors.
However, like many early adopters, they found themselves eclipsed by late-comers with more refined technology: WorldCom and Global Crossing are setting new records in accounting disclosures.
But don't count Xerox out yet -- the company's a fighter. They just came back with another $1.9 billion charge for improper accounting.
I meant to blog this outstanding article by Arnold Kling, whose site you should be stopping by every day for a beautifully balanced view of the economic news. But I forgot. Luckily, I remembered again, and here it is.
Arnold offers some good reasons why blogging isn't a fad, and then goes on to talk about how the market could compensate it. Personally, I know the tip jar's been a little light these last few months, and I'm all ears.
In related news, Live from the WTC hereby threatens to unilaterally sever diplomatic ties with Switzerland unless they send the editorial board four fondue pots, a racelette cooker, and 17,000 pounds of gruyere. We will be awaiting the response in our Secret Bunker.
Well, from my recent post we all know how I feel about the establishment clause; it was designed to protect religion, not surgically remove it from the public square. Even beyond this, I find it hard indeed to see why parents executing private choices to pick religious schools for their children is an unconscionable "establishment" of religion, and I heartily disapprove of the people going to court to try to argue that the way in which other people choose to educate their children somehow violates their freedom of religion. All in the name of "the children" -- the ones they want to maroon in failing schools so the teacher's unions can have a few more years of life. Ick.
WorldCom's in a big mess, and many of you have questions about it, so I thought that I would, in my ham-fisted, amateur way, attempt to answer them. Most of your questions run something like this:
What the [Expletive Deleted]!!!!!!!
Good question. Let me see if I can answer that.
One of the driving forces at the end of the nineties was that most research analysts were rather like fiancees. They had developed unrealistic expectations of the future based on the very short, and unusually rosy, period through which they had just lived. In the case of the equity analysts, they had begun to feel that they were entitled to see beautifully rising earnings each and ever quarter even though it was clear that if one extrapolated their expectations into the not-so-distant future, Toys 'R Us would be producing more revenue than the entire US economy. Much like a fiancee who is told that she should not expect her prospective groom to indefinitely continue to give up his best friend's superbowl party in order to escort her to the mall, research analysts got very cranky when they were told that their dreams of infinitely expandable earnings might be a tad unrealistic.
Like prospective grooms, CEO's were very anxious to please the equity analysts, because they were very afraid that if they didn't meet expectations, their beloved would start throwing the wedding china at someone's head. Ha-ha, no, what they were really afraid of was that the analysts, and the shareholders who listened to the analysts, would hammer their share price. Of course, this would lower the value of their stock-based compensation. It might also lower the value of the rest of their compensation -- to zero, when the angry shareholders kicked them out. CEO's have wives, and wives say things like "You'd better not expect to hang around here all day, because the servants have work to do, and I'm not having you interrupt my bridge party, so if you lose your job at WorldCom, you'd better start talking to the assistant manager down at the Tasti-Freez ASAP." This combination of greed and fear bred an unhealthy willingness to shade the truth.
However, shading the truth just created more problems. Like the bridegroom who attempts to assuage his demanding fiancee by cancelling his tee-time in order to drive her to her hair appointment, they found that meeting unreasonable expectations once simply established more firmly in the analysts minds the belief that their expectations were reasonable and deserved to be met, and thereby worsened the tempest that would follow if such expectations were, for any reason, disappointed. CEO's were further incented to cheat, and each round of cheating both increased the size of the "adjustment" that would be necessary next quarter, and increased the consequences that would follow if the adjustment were not made. CEO's were praying for a boom to bail them out, much as the internet boom rescued AOL from its shoddy accounting in the mid-90's. When the boom failed to materialize, eventually the scam got so large that it could no longer be hidden, and the entire house of cards came tumbling down.
Does that answer your question?
What, exactly, did WorldCom Do?
Well, when WorldCom started feeling the heat, they looked around for ways to increase revenue. Unfortunately, what with all this competition stuff in the telecomm area, they found the same thing that you have probably found when you looked for ways to increase your revenue: that it's would require more effort than you care to expend. So they started looking around for ways to reduce costs. And just as with your last cost-cutting drive, this too foundered on the rocks of self-interest, so rather than trying to actually reduce costs, they sought ways to look like they were reducing costs, figuring that, as in most relationships, it doesn't matter what you feel inside, as long as the other party buys your act.
Specifically, WorldCom took one of its biggest expenses and changed it from an operating expense to a capital investment. The expense was the fees that they paid local carriers in order to complete long distance calls; they treated it, accounting-wise, as if it were the same thing as building new fiber capacity or putting up a new switching station.
So either way, it says they spent money; what's the difference?
The difference is in the accounting. Normally, when a firm spends money to provide a service, that money is recorded as having gone out the door, poof, hit the road jack and don't you come back no more. This is what's known as an Operating Expense, or what a layman would call "What I'm spending to stay alive". Capital Expenditures, on the other hand, produce a corresponding asset on the balance sheet: whatever the money purchased, such as land, machinery, or valuable fur-bearing trout farms. This is what a layman would call "My investments".
Think of operating expenses as your grocery bill; you spend the money, you eat the food. Your net financial position has deteriorated by whatever your grocery bill was this month.
Capital expenditures, on the other hand, are like buying a house. On the one hand, you've got less cash in the bank, and probably a hefty mortgage to boot; on the other hand, you've also got a house, which is presumably worth at least what you paid for it. Your net financial position doesn't change; you've simply changed your asset base from cash to house.
We, as wage slaves, are accustomed to thinking of income in a very narrow way: what we got paid. But the root idea of an income statement is to capture the change in the financial position of the company, otherwise known as its net assets: its assets (things is has, or has a reasonable expectation of getting, like factories or accounts receivable) minus its liabilities (things it's pretty sure it's going to have to give to someone else, like debt payments or accounts payable). Okay, breathe, little butterfly. You don't have to understand all the jargon; all you need to know is that when you record something as a capital expenditure, you don't record any net change in your financial position, because the decrease in cash, or increase in debt, is balanced by the asset that you are supposed to have purchased with your cash or debt; while when you record an operating expense, the decrease in cash, or increase in debt, is not counterbalanced by another asset, so that your net financial position gets worse; in other words, you lose income.
Clear? Next question.
Is this legal? Do we need to fix the law, or what?
Not hardly. You don't need another law for this one; it's quite clear. Capitalizing the fees they paid to local carriers to complete the calls made on their long distance network is the equivalent of your trying to tell your banker that the groceries you bought are actually a capital expense because they're, you know, in your house. Accruing mold at the rate of 1% a day, no doubt.
It's totally illegal, not even a vaguely close call, at least according to my CPA buddies. We don't need a new law; we need to find the executives who did this and throw them in the pokey for a long time.
I'm Confused
Don't worry; that's a common feeling in the post-millenial angst zone. Have you tried herbal tea?
What if I have other questions later?
Just shoot 'em along to janegalt -at- janegalt.net and I'll see what I can do about answering them.
So an appeals court just ruled that its unconstitutional for students to be led in a Pledge of Allegiance that contains the words "Under God". And I know that you all rushed to your computers with the burning question: "What does Jane think about that?"
Well, on the one hand, I think that the words "Under God" don't belong in the Pledge. It's more sonorous without them. Go ahead, try it: "One nation, indivisible, with liberty and justice for all." And it doesn't belong in a nation where not all the people believe in God.
On the other hand, what the hell is wrong with our country that this kind of stupid liberal hissy fit gets raised to a constitutional case? I mean, c'mon. . . "my kid can't be exposed to the word God, because they might be so contaminated by it that they'll never recover, and there's no reason that I should teach her to skip the "under God" part, because why the hell should I be expected to display a little moral courage?" Okay, I'm ranting, but why are we wasting time on this? Is having those words in the pledge what the Founders were worried about with the separation of Church and State? No, dear, they were worried about burning heretics, not burning cheeks from the shame of Not Fitting In, as if never feeling uncomfortable were some sort of implied constitutional right.
And think of what else this implies. It means we can't ever have anything said in class that might disagree with someone's religious beliefs; bye-bye, evolution. It means that we have become a nation of such pantywaists that the mere word God can send both coasts into a swooping faint. Oh, I think the court should uphold him. And then I think we should all dedicate a tiny portion of the rest of our lives to making fun of the idiot who brought this suit until he's ashamed to show his face in decent company.
WorldCom just reported the largest accounting fraud in history -- a $3.6 billion fraud in which expenses were charged as capital expenditures, which is, for the unitiated, a big no-no. It's also, curiously enough, similar to what Amtrak did in leveraging capital assets to cover operating expenses. Wahoo! Dorothy, get in the storm cellar!
So InstaPundit has his own Watcher: InstaPunditWatch.
However, for a site designed to fact-check InstaPundit's ass, there's curiously little, y'know, fact checking:
Instapundit Watcher will let slide the crack about being an affiliate of Warblogger Watch, though she won't deny their efforts helped inspire this site.
More interesting is how Instapundit reacts. He calls Instapundit Watcher a "parasite", which she learned in school is usually defined as a hanger-on, a toady, a sycophant. Instapundit Watcher defies anybody to call her that. That title better fits some of Instapundits warblogging friends, especially the ones with the oh so clever variations on the "-pundit" theme, aka the "I want Instapundit's traffic" crowd.
I don't know what college Instapundit Watcher attended, but my dictionary defines a parasite as "something that resembles a biological parasite in dependence on something else for existence or support without making a useful or adequate return". Which I think more than adequately describes a site called Instapundit Watcher.
There have been a lot of dumb corporate decisions in history. But somehow you knew that the dumbest was going to have to come from the same chaps who located two of their stores on either side of my building: one between 93rd & 94th, and one across Broadway between 94th & 95th. No, I am not making this up: they have two full service stores a block from each other. It gives whole new meaning to that immortal analyst pitch "It's like the Gap with coffee!"
[That's a little -- heh, heh -- in joke. The Gap is in trouble because they massively overexpanded when they were hot, and then had to retrench. -- ed.]
Yes, the folks at Starbucks have outdone themselves this time. I don't know whether they thought it was hip, or they just didn't notice. Either way -- dumber than a bag of hammers, folks.
This Washington Post article makes the good point that we're blaming Amtrak for failing to fulfill the impossible task we've set it: run a bunch of impossibly unprofitable passenger routes through every whistle stop that has ever been served by passenger rail in every powerful Congressman's district, while not losing money like a lottery winner in Vegas.
However, I must take issue with the core assumption that running impossibly unprofitable passenger routes is something that every right-thinking citizen supports. Consider this telling quote:
Just about everybody is in the game: The Office of Management and Budget, the Federal Railroad Administration, several congressional committees, a consortium of banks that extend Amtrak credit, the rating agencies and a crew of auditors. The only constituency without a voice seems to be the hundreds of thousands of passengers in the Northeast Corridor, California, Chicago and elsewhere who will lose their mode of transportation if action to save the rail system is not taken immediately.
As far as I can tell, the only constituency without a voice is the large number of people who have never ridden the train and have no intention of starting, and yet are expected to dole out their hard-earned dollars in support of the abovementioned impossibly unprofitable passenger lines.
Or consider this treasure:
Under a starvation diet of subsidies, Amtrak still has produced the nation's first high-speed rail system [Which would be even better if it, you know, ran at high speeds -- ed.] and has kept a federally mandated unprofitable national route structure in business [Fantastic! There's nothing like keeping unprofitable operations in business to make a nation great -- ed.]. To balance this high-wire act, it has deferred maintenance and leveraged assets within its control. [Journo-speak for "It's mortgaged itself to the hilt to cover current operating expenses", behavior that would land a private CEO in a lot of hot water, if not the pokey. -- ed.] Passenger revenue has grown 44 percent in the past five years; expenses have kept pace with revenue until this year.[If you can't grow your passenger-to-expense ratio in a year when your major competition turns into a gigantic flying bomb, when should we expect improvement? -- ed.]
Or, you could just feast your eyes on this:
Highway users rely upon a highway trust fund generating more than $30 billion a year. Since Sept. 11, the aviation industry has seen a $17 billion loan-guarantee program added to an already significant government investment. Yet Amtrak, requiring a bare minimum of $1.2 billion a year, is budgeted to receive $521 million.
1) The highway trust fund is generated from passengers using the highways, which is how we'd like to see our trains be funded, thank you very much.
2) A loan guarantee is not the same thing as a direct subsidy because it is
a) One time b) Worth less than $17 billion even in a worst-case scenario because a dollar tomorrow is worth less than a dollar today c) Probably not going to cost $17 billion, because it is unlikely that every single airline will declare bankruptcy.
3) Go figure? We're not giving Amtrak any money because NO ONE IN THE COUNTRY WANTS TO RIDE THE TRAIN! You've probably noticed this, manifested in the lack of passengers on most of your trains.
Which is, of course, why he wants to hold them up at gunpoint to get more money. Imagine if Johnson & Johnson could do this. "Toothpaste sales are down! Quick, taxpayers, pay us for not making toothpaste!"
Take Amtrak out in the yard and shoot it quietly, then carve it up and give the pieces to teh needy. Or some such. But stop wasting our money.
Stanley Kurtz is saying that our military preparedness is nowhere near where it needs to be. Critical absence? Manpower, and a refusal in political quarters to either issue a call for volunteers, sweeten the pay, or allow creeping consideration of the draft. Which is all the more scary because John Judis is pointing to a resurgent German nationalism, which means God knows where we'll be fighting in ten years.
Question: if we have to go kick Germany around again for the same kind of scary nationalism they evinced in the 30's, would anti-war folks here
a) Oppose the war because Germany's in Europe, and Europe is better than America, and who the [expurgated] do we think we are, anyway?
b) Support the war because Germany's territorian ambitions threaten their supply of moody French anti-American screeds?
Sigh. Daddy Warblogs is reporting that Neale Talbot of WarbloggerWatch has entered into the discussion of InstaPundit's visitor statistics with that tired old lefty chestnut: "[Name your discussion of something's size] is a proxy for penis size". Honestly. Psychiatry has moved past Freud -- why can't the left? Besides, which, even Freud admitted that sometimes a tree is just a tree. Every time I hear someone drag that old saw out, all I can think is "Oh, snore. Hasn't this person read anything since 1971?"
Which reminds me of a story.
I was working on a move at an investment bank. They were relocating into a beautiful new building with glass-fronted offices that reflected the 90's open office aesthetic without actually requiring the MD's to mingle with the proles. So, as is usual with relocations, chaos prevailed on the first day -- people who couldn't print, login, use their computers, what have you. I was just starting out in the industry, and as low man on the totem pole, was running around like mad trying to get everyone fixed.
So in the middle of all this I got a call from one of the MD's, who we'll call Ted Tyler. He was a large, burly Aussie with a flaming temper when he didn't get what he wanted, and I was quaking as I ran, not walked, to his new glass office. I am sure my voice trembled as I asked him what the problem was.
"This [expletive deleted] [censored] monitor," he said, gesturing to the piece of equipment in question. I stared at the monitor. It appeared, to my inexperienced eyes, to be working perfectly. I tapped it, moved the mouse around, turned it on and off, and still couldn't see a problem.
"What exactly is wrong with it?" I asked tenatively.
"It's too [expurgated] small!" he said. "I was walking around the floor and I looked into all the other offices and their [expletive deleted] monitors are much bigger than mine!"
"So you want another monitor," I said, simultaneously relieved and somewhat bewildered.
"[Censored] right, I do."
"How big a monitor would you like?" I asked.
He removed his cigar from his mouth and regarded me. "Oh, I want a big monitor. I want the biggest monitor you've got. I want a monitor twice as big as any other monitor on this floor."
I saluted and marched off to order him the largest monitor available -- a 31-incher designed for graphics stations and priced around the level of a mid-sized car.
