Monday, November 20, 2006
Milton Friedman and other musings
Milton Friedman was the economist who got it right in the 20th century. When I was in college, of course you studied Samuelson and his treatment of Keynesian economics in Macro. The monetarists were considered some kind of flakes, appealing only to crackpot conservatives and anti-government types. Perhaps some of their ideas would have application in Micro, but Keynes, multipliers, and the Philips Curve explained what you needed to know about Macro.
To some of us though, there was something intriguing and elegant in the work of the monetarists, and to those who actually read Friedman and his disciples, there was the ring of truth. As Keynesian solutions reached their performance nadir during the Carter administration, and Paul Volcker was forced upon him as Federal Reserve Chairman, markets moved with M1 and M2 weekly figures, and the monetarists began their ascendancy. During the Reagan administration, when Volcker was kept on, we saw the success of the monetarist experiment. That was followed by the success of their spiritual cousins, the supply sider's like Laffer and Rutledge.
In fact, Friedman always preferred a mechanical approach to money supply management, as opposed to allowing the Fed to feel its way. This was true even as he acknowledged the successes of the Fed Chairman and his successor, Alan Greenspan.
But Friedman contributed much more than his Nobel winning economics brilliance. He jump started the school voucher movement, a unique way to allow the poorest children access to the best schools; he advocated a libertarian (not to mention sensible) approach to narcotics policy; he re-popularized the work of Hayek for a new generation, and the worthy goal of spreading freedom around the world. For a beautifully written appreciation, read his student, then senior colleague, Thomas Sowell's op ed piece in the WSJ.
Not all of Friedman's ideas are yet ascendant, but I predict more of them will be within the next decade. He was the giant in his field in his time, as was Peter Drucker (management) and Sir John Templeton (investments).
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The recent WSJ editorial on the Democrats' goofy division on trade issues is right on the money. If the Unions drive the D's to a protectionist stance, they will do a lot of damage, not just here, but also to the poorest countries of the world.
On the other hand, Republicans in Congress continue their self - destructive ways, keeping their failed leadership team (minus Hastert, of course) in place and continuing to oppose the President's enlightened immigration stance. There is xenophobia emanating from both parties, but its impact on Republicans will be much worse, because the media will assume it has overtones of bias.
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On 11/15, I bought 200 shares of ADPI, a new name, at 19.26 for the taxable account. On 11/16, I sold all 500 shares of my NG position for a price of 16.06, just above Barrick's increased takeover offer. 300 of the shares were purchased for 8.69 on 11/10/05 and 200 on 10/23/06 for 15.10, all in the taxable account (discount commissions make short term gains like that possible). Enough was enough, and I have taken the stock off my buy list. This was a low stakes game of "chicken" since all of the company's mineral properties are non-producing, and who knows when they will ever start producing. Sometimes you get to sell these things to greater fools, and if the next fool also makes a few bucks, more power to him. But I am out of this crazy stock.
To some of us though, there was something intriguing and elegant in the work of the monetarists, and to those who actually read Friedman and his disciples, there was the ring of truth. As Keynesian solutions reached their performance nadir during the Carter administration, and Paul Volcker was forced upon him as Federal Reserve Chairman, markets moved with M1 and M2 weekly figures, and the monetarists began their ascendancy. During the Reagan administration, when Volcker was kept on, we saw the success of the monetarist experiment. That was followed by the success of their spiritual cousins, the supply sider's like Laffer and Rutledge.
In fact, Friedman always preferred a mechanical approach to money supply management, as opposed to allowing the Fed to feel its way. This was true even as he acknowledged the successes of the Fed Chairman and his successor, Alan Greenspan.
But Friedman contributed much more than his Nobel winning economics brilliance. He jump started the school voucher movement, a unique way to allow the poorest children access to the best schools; he advocated a libertarian (not to mention sensible) approach to narcotics policy; he re-popularized the work of Hayek for a new generation, and the worthy goal of spreading freedom around the world. For a beautifully written appreciation, read his student, then senior colleague, Thomas Sowell's op ed piece in the WSJ.
Not all of Friedman's ideas are yet ascendant, but I predict more of them will be within the next decade. He was the giant in his field in his time, as was Peter Drucker (management) and Sir John Templeton (investments).
------------------------------------------------------------------------------------
The recent WSJ editorial on the Democrats' goofy division on trade issues is right on the money. If the Unions drive the D's to a protectionist stance, they will do a lot of damage, not just here, but also to the poorest countries of the world.
On the other hand, Republicans in Congress continue their self - destructive ways, keeping their failed leadership team (minus Hastert, of course) in place and continuing to oppose the President's enlightened immigration stance. There is xenophobia emanating from both parties, but its impact on Republicans will be much worse, because the media will assume it has overtones of bias.
------------------------------------------------------------------------------------
On 11/15, I bought 200 shares of ADPI, a new name, at 19.26 for the taxable account. On 11/16, I sold all 500 shares of my NG position for a price of 16.06, just above Barrick's increased takeover offer. 300 of the shares were purchased for 8.69 on 11/10/05 and 200 on 10/23/06 for 15.10, all in the taxable account (discount commissions make short term gains like that possible). Enough was enough, and I have taken the stock off my buy list. This was a low stakes game of "chicken" since all of the company's mineral properties are non-producing, and who knows when they will ever start producing. Sometimes you get to sell these things to greater fools, and if the next fool also makes a few bucks, more power to him. But I am out of this crazy stock.
