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Tuesday, May 15, 2007

 

Murdoch and the WSJ

What if Rupert Murdoch and News Corp. take over the WSJ? Well, that would be a back door way of owning stock in my favorite paper, since I am already a NWS stockholder. I have looked at possibly opening a position in Dow Jones many times but it never seemed to be so attractive as an investment. However, that is really beside the point. The question from the standpoint of someone who reads the WSJ cover to cover 6 days a week is what would the impact on the Journal's product be under News Corp ownership. Many readers have written letters expressing their virtual panic on the subject. The Bancroft family also appears to be instinctively opposed to the deal, regardless of the economics.

I have mixed feelings. I think Fox News has maintained pretty decent integrity while avowedly fulfilling its conservative mission. On the other hand, the New York Post is a pretty awful tabloid, and its news coverage, such as it is, is pretty slanted. The WSJ has been really good about walling off its news division from its editorial pages. (The NY Times once was the model for objective news reporting,but no more. Now its WSJ.) I guess I would be concerned that serious journalists won't want to work for Murdoch, and over time, WSJ would be negatively impacted. So I hope the Bancroft's don't sell, but I wouldn't blame them if they did. Dow Jones is not a real profitable performer and the outlook is worse. And by the way, Barron's is no great shakes as a business weekly as it is.

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Loyal redwavemusings readers will recall its series on the looming insolvency of social security and medicare. (If not, you can find those posts in the archives). Our point was that these programs represented unfunded liabilities and demographic trends were frightening. One solution was to eliminate the cap on income subject to social security taxes (as in medicare). Social security taxation is not only not progressive, it is regressive in that higher incomes are subject to lower percentage tax rates. Of course, this is recommended only in conjunction with my flat tax proposal based on the AMT calculation, but with a sharply reduced tax rate. Also, the programs promise more than we can deliver. To return Social Security to its original mission of providing only a basic ground floor pension, all future COLA's should be permanently eliminated.

Anyway, as if I needed corroboration, the May 9 edition of the WSJ included a fine op ed piece by the aptly named Thomas R. Saving called Medicare Meltdown, that made the same point concerning the systems' economic non-viability. Here are some excerpts, in case you missed it (what? you don't read the Journal cover to cover?) :

A recently released report by the program's trustees found that within seven years Medicare taxes will fall short of Medicare expenses by more than 45%...The projected cash flow deficits in these two programs are staggering. For Social Security, the trustees estimate the 75 year burden on general revenues at $6.7 trillion. For Medicare, the comparable burden on general revenues is $24.2 trillion, even after allowing the current transfers to grow with the economy. Until a few years ago, Social Security and Medicare were taking in more than they spent...That situation is now reversed, and last year the combined deficits in the two programs claimed 5.3% of federal income tax revenues... By 2030, these two programs will require almost one out of every two federal income tax dollars... Eventually, the deficits in these two programs will absorb the entire federal budget...

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Quite a while ago, I questioned whether our country still has the stomach and patience to succeed on the battlefield as out parents, "the greatest generation," did. Washington's rush to plan an Iraq retreat even before the surge level troops are all in place is a perfect example of what I was questioning. Not that this is unprecedented. Our own generation undermined the Vietnam effort while it was still in progress. Though the strategic rationale in both cases could fairly be questioned, there is no doubt that the very public tactics of both anti-war movements provided aid and comfort to the enemy, causing them to believe (rightly) in the Americans' lack of true commitment to the fight. And no war effort can be successful without total commitment.

If true, this will be a real problem for our foreign policy now and in the future, regardless of which party is in power, since the threat of US force will have no real credibility.

One other thing - I don't know if there really should be rules of engagement in war, but I was always uncomfortable with our objections to chemical warfare given our own use of "yellow rain" in Vietnam. This is especially sad in view of the shortened life expectancies of many veterans who fought that war. We all know Vietnam vets who suffered premature cancers and were delayed victims of that war. It's long past time that we did two things - first apologize for our use of chemical weapons in Vietnam (both to the Vietnamese and to our own veterans) and second, take the gloves off and let our soldiers fight the way you are supposed to in war - with total commitment and no inhibitions, using conventional weapons, and understanding (but without apology) that there will be collateral damage and civilians impacted. And vowing once and for all, that if any future wars are to be fought, that that is the way they will be fought, in fairness to the kids doing the fighting.

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On 5/9, I sold 100 shares of TMO out of my IRA for 52.36, originally purchased for 17.00 on 11/23/98. On 5/14, I took advantage of Cardinal Health's offer for VAS to sell my 58 shares at 43.11. These were shares that were spun off to me from TMO, which I just kept though I never expected them to be worth much of anything.

Forget the headlines you are reading about new records for the Dow. This upside market move ended two weeks ago, as anyone who follows the broader averages can tell you. Usually this kind of divergence where the blue chips outperform the broader averages signals the onset of a meaningful correction. Since this is the third year of the Presidential cycle, i expect we'll finish the year up, but that doesn't mean that we won't have some pretty bad months along the way.

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