Monday, May 12, 2014


The term “bureaucracy” refers to administration by a multi-tiered hierarchy of trained, nonpolitical professionals guided by written rules (thus minimizing discretion). Historically it referred to governmental administration, but nowadays the term is applied to the administration, in the characteristic bureaucratic form, of any institution.

An institution has a mission. But the people who compose it—the bureaucrats—have personal concerns: income, power, job security, promotion, easy working conditions. There are tradeoffs among these elements of a job; in particular, income is traded off against job security, easy working conditions, and other, often nonpecuniary, benefits.

A bureaucrat is someone who thinks they are an elitist but are not. Recently this writer has had numerous encounters with bureaucracy, both in a professional and academic environment. Bureaucracy tends to work well only when it is performing relatively simple, highly familiar tasks, far removed from the entrepreneurial risk common in highly competitive fields.

It is not obvious what the solution is, especially since bureaucracy is both a necessity of and a plague upon large private as well as public institutions, including corporations. It is well known that in successful private corporations staff tends to build up until an economic downturn or other shock forces the corporation to cut staff in order to minimize costs. Until that happens staff tends to swell. Managers, their compensation geared to the span of their control, push their superiors to authorize an increase in staff, while the managers’ subordinates seek to make themselves indispensable by hoarding information and fostering personal relationships with colleagues, or sometimes with influential suppliers or customers of the corporation. For in private as in public institutions the possession of critical information is a personal asset of great value, typically hoarded by its possessor. And so it may be very difficult for even able administrators to obtain the information they need for optimal management. The bureaucracy yields up its private hoard of information only reluctantly. in exchange for autonomy, security, and privileges.

Despite the problems of bureaucracy that I have been sketching, it must be on balance an efficient means of administration or it wouldn’t be so pervasive in both the public and the private sectors. This is a depressing reflection, because bureaucracy is a function of complexity, its pathologies are amplified by complexity—and complexity is growing throughout our governmental and commercial institutions.

Simply put, bureaucracy is a pain in the a _ _.

Thank you to The Becker-Posner Blog.

THANKS FOR THE MEMORIES – Mr. Ron Clark, City of La Verne Finance officer is retiring this year after 28 years of service to the community. We had the pleasure of hosting Mr. Clark to lecture one of our M.B.A. Finance courses not too long ago. His expertise and fiscal responsibility were evident. We wish him much health and happiness in his retirement.

THE BIG MONEY: HEDGE FUND RICH GET (MUCH) RICHER - The world's 25 best-paid hedge fund managers took home a combined $21.1bn, 50 per cent more than in 2012 ... At a time when rising inequality and corporate pay is generating increasing debate on both sides of the Atlantic, David Tepper, the founder of the US hedge fund Appaloosa Management, was the world's highest earning hedge fund manager last year. ...

He took home $3.5bn and topped the list for a second consecutive year after wagering on the recovery of the US airline industry, according to the annual survey by Institutional Investor's Alpha ... Steven Cohen, founder of SAC Capital, was the second highest earning hedge fund manager, in a year when his firm was forced to pay a record $1.8bn fine to settle an insider trading case and close his fund to outside investors.

ALIBABA FILES FOR GIANT IPO - The Chinese e-commerce behemoth AlibabaGroup filed paperwork last Tuesday in the United States to sell stock to the public for the first time, in an embrace of the global capital markets that represents a coming-of-age for China's booming Internet industry. ... 'Alibaba is the fastest-growing Internet company in one of the fastest-growing economies in the world,' said Sameet Sinha, an analyst with B. Riley & Company ... 'They are like an Amazon, an eBay and a PayPal.' In the filing, Alibaba said it intended to raise $1 billion in an initial public offering - a figure used to calculate its registration fee. But the company is expected ultimately to raise $15 billion to $20 billion, which would make it the biggest American I.P.O. since Facebook's $16 billion offering in May 2012.

When it makes its debut on the New York Stock Exchange or the Nasdaq market, Alibaba is also expected to have a share price that could value the company at roughly $200 billion - more than the market value of Facebook, or eBay, although still trailing that of Google or Apple. The immense size of the offering means that Alibaba shares will probably find a home in a broad swath of mutual funds and pension funds - and thus indirectly in the portfolios of small investors around the world.

Wall Street has been eagerly awaiting the Alibaba I.P.O., seeing it as perhaps the best chance yet to buy into China's growth.

NBC LOCKS DOWN OLYMPICS - NBC Universal agreed last Wednesday to pay $7.75 billion for the exclusive broadcast rights to the six Olympic Games from 2022 to 2032, highlighting with that staggering sum the supreme value that media companies are placing on live event programming in a market disrupted by modern viewing habits ... As more viewers consume media on their own schedules ... broadcasters regard live events as the only content that compels most viewers to watch in real time, as one vast audience, without filtering out advertisers.

The Olympics have long been NBC's most prized possession, but ESPN has used its billions of dollars in annual subscriber fees to build a portfolio of enormous deals for live sports, and Fox, CBS and NBC have long-term agreements with the [NFL] ... NBC is, to an extent, using its successful Sochi template and planning to adapt along the way. An average of 21.4 million viewers watched the Sochi Games in prime time. But there were also 62 million digital users and 10 million live online video viewers.

ALL-CASH MORTGAGE DEALS ON THE RISE - All-cash home purchases are on the rise again - buoyed by retirees instead of pure speculators - signaling a shift in the way Americans view homeownership and in the mortgage market. During the year's first quarter, 33 percent of the existing homes sold in the U.S. were purchased entirely in cash. That was up from 31 percent for all of last year and 29 percent in 2012 ... Cash sales began rising sharply in the aftermath of the housing bust, mainly due to the voracious appetite of professional investors using cash to buy heavily discounted homes to rent or flip.

Now, the all-cash sales reflect a fundamental change as the housing market continues to heal. Economists and real-estate agents say the rebound in all-cash deals is bolstered by retirees who are using the equity in their existing homes to buy different homes to downsize or for rental income ... Economists and housing-market observers say mom-and-pop investors remain active in the home market even as institutional investors rein in their buying.

SPRING GARDENING - Every season brings a different set of chores in the garden. Spring is an exciting time for gardeners as preparations are made for the bounty and beauty of the garden as it awakes from winter hibernation. It can also, however, be a bit overwhelming to know how to prioritize your gardening time at this time of year. Here is a helpful list of chores that should be tended to in the spring.

For early blooming shrubs such as forsythia and viburnum, prune them as soon as blooms have passed. Early spring is also an ideal time to prune your roses.

Remove spent flowers from bulbs, but leave the rest of the plant as is for the time being.

Pull weeds from your beds and borders before they have a chance to take hold and spread.

Tend to your compost if it has been neglected over the winter. If you do not have a compost bin, spring is a great time to start one.

Garage Refrigerator
Make sure there are plenty of “cold ones” in your garage refrigerator. We find that a nice lite beer is good for spring gardening chores. Our choice – Michelob Ultra Light.

Spring is a good time to prepare your tools for the oncoming gardening season and to make any necessary repairs or new purchases. You will be happy you have done so when summer sets in.

Spring is a great time to add new plants to your garden. Be sure, however, that all threat of frost has past. Plant such things trees, shrubs, hardy annuals, and summer blooming bulbs.

Fertilize & Mulch
Fertilize and mulch beds and borders. Spring is also a good time to fertilize fruit trees. If you applied heavy winter mulch for protection from the cold, you will need to clear it away.

Stake plants that may be prone to wind damage during the unpredictable spring weather.

Lawn Care
Spring is the best time to start a new lawn from seed. For established lawns, you should start mowing in the spring, but don’t initially cut the grass very short for the first few times.

Of course, whether you start these chores in early, mid, or late spring depends on the climate where you live, taking in to account such factors as when the threat of frost has past or when the ground is thawed enough to dig. I hope these tips will give you a good idea as to where to focus your attention in your garden this spring. Enjoy!


Dear Rink Rats:
What does it take for a new graduate to get hired at an Investment Banking firm?

Leveraged to the Max.

Dear Leveraged to the Max:
The odds are tough: entry level positions for undergraduates and MBAs this year amount to less than 3% of 100,000 applicants.

The first step is usually attending an on-campus networking session or getting an informal meeting with an alum who has connections at a firm. Don’t forget the thank you email!

The next step is getting invited to a first-round interview. Rink Rats advice: “Demonstrate a passion for financial services.” Then cross your fingers you will be invited to a “superday”.

What’s a superday? A day of one-on-one interviews with employees in a particular division or group. Do not be late. Do you know where your firm’s stock is trading that day.

Did you make it? The company calls candidates with job offers. Large investment banks such as Goldman Sachs typically pay first-year analysts out of college a base salary of $70,000. The annual bonus can be equal to that amount. Good luck.

Rink Rats.

COMMENCEMENT 2014 – The coming week notable Commencement addresses:

May 12 – John  Lewis, U.S. Representative: Emory University
May 16 – Michelle Obama, First Lady: Topeka, Kansas High Schools
May 16 – Tony La Russa, former manager St. Louis Cardinals: Washington University
May 17 – Terry Gross, NPR host of Fresh Air: Bryn Mawr College
May 17 – George Wynton Marsalis, musician: Tulane University
May 18 – Christine Lagarde, Director International Monetary Fund: Smith College
May 18 – Peyton Manning, Quarterback Denver Broncos: University of Virginia
May 18 – Cecile Richards, Planned Parenthood President: Barnard College
May 18 – Grace Potter, musician and Susan Talve, founding rabbi of the Central Reform Congregation in St. Louis: St. Lawrence University

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Stephen Colbert (50), Harvey Keitel (75), George Lucas (70), Jim Nantz (55), Mort Sahl (87), George Strait (62), Mark Zuckerberg (30).

RATINGS AGENCIES BOOMING AGAIN - Six years after getting a failing grade for their role in the financial crisis, credit-rating firms are at the top of the class. Riding a global bond boom, the two biggest U.S. firms, Standard & Poor's Ratings Services and Moody's Investors Service ... this month are expected to post record first-quarter profits. Fitch Ratings said in its annual filing this month that 2013 was 'one of its best years ever.' ... Beyond the spike in bond deals, the resurgence is due largely to the absence of major changes to the industry since the crisis: The business model, in which debt issuers pay for ratings, remains in place; regulations proposed years ago are yet to be implemented; and new competitors have gotten little more than a toehold.


NHL Stanley Cup Playoffs: Round Two winners – Boston over Montreal in six, Pittsburgh over New York Rangers in seven, Chicago over Minnesota in five, and L.A. Kings over Anaheim in six.

NBA Playoffs: Round Two winners – Indiana over Washington in seven, Miami over Brooklyn in five, Oklahoma City over L.A. Clippers in six, and Portland over San Antonio in seven.

TRIPLE CROWN – The Swami's Preakness Stakes picks: (1) California Chrome. (2) Dynamic Impact, (3) Ride on Curlin, (4) Danza, (5) Kid Cruz.

2014 Season to date (26-29), ouch!

MAJOR LEAGUE BASEBALL POWER RANKINGS – We are at the quarter pole of the MLB season, our top five Power Rankings of teams:

(1). Detroit Tigers – Cabrera an off year thus far, but still the best team in baseball.
(2). San Francisco Giants – the Dodgers wish they were this good.
(3). Baltimore Orioles – Earl Weaver would be proud.
(4). Milwaukee Brewers – Milwaukee Brewers…am I dreaming???
(5). Oakland Athletics – Top starting pitching at a cheap price.

The Bottom Three –

(28). Chicago Cubs – Hapless.
(29). Los Angeles Angels – Even with Mike Trout, they stink!
(30). Los Angeles Dodgers – Overrated and over paid.

MARKET WEEK - A busy week for economic numbers gets off to a slow start today, with only the federal budget statement for April on today’s agenda. Economists are looking for a $114 billion shortfall for the month when that number is released at 2 p.m. ET. 

The pace of corporate earnings slows down considerably this week, with few names of note on the agenda for this morning. Rackspace (RAX) and Elizabeth Arden (RDEN) are among the companies set to release their numbers after today’s closing bell. Later this week, quarterly numbers from Wal-Mart (WMT), Deere (DE), Macy’s (M), SodaStream (SODA), Kohl’s (KSS), Applied Materials (AMAT), and J.C. Penney (JCP) are out, among others.

DRIVING THE WEEK -  Treasury Secretary Lew arrives in Beijing this evening ... President Obama today will hold a bilateral meeting with President Jose Mujica Cordano of Uruguay in the Oval Office ... NFIB survey Tuesday at 7:30 a.m. expected to rise to 94 from 93.4 ... Retail sales at 8:30 a.m. Tuesday expected to rise 0.6 percent, 0.5 percent ex-autos ... Empire state survey Thursday at 8:30 a.m. expected to rebound to 6.0 from 1.3 ... Consumer prices at 8:30 a.m. Thursday expected to rise 0.3 percent, 0.1 percent ex-food and energy ... Industrial production at 9:15 a.m. Thursday expected to be flat ... NAHB housing market index at 10:00 a.m. Thursday expected to rise to 49 ... Housing starts at 8:30 a.m. Friday expected to be lilted changed at 982K ... Univ. of Michigan consumer sentiment at 9:55 a.m. Friday expected to rise slightly to 84.5.

Next week: The System and words of the month.

Until Next Monday, Adios.

Claremont, CA
May 12, 2014

#V-4, 213

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