Sunday, April 26, 2009

Schooling vs. Education
Charity Auctions vs. TARP and PPIP

For some of us, as repayment for our multiple sins, this is the season for the benefit parties and auctions of many worthwhile charities. When meeting people at these events for the first time, often one of the opening conversational gambits is “Where did you go to school?” (meaning college), or what they think is the same question, “where were you educated?” As an unrecovered analyst I try to be precise in my answers. To the first question, I state somewhat sheepishly, Columbia College in Columbia University. (The proceeding comment has to do their left-leaning or perhaps left-falling inclinations, which we can discuss another time.) On the other hand, when asked where I got my education, I reply proudly the racetrack and the U.S. Marine Corps. The distinction that I make is one is exposure to other people’s thinking as compared to education, the practical lessons that can be applied to life. Actually what I should have said was that I graduated from college in 1957, but my education continues everyday. Lessons from this weekend are an example.

Ruth and I have just returned from a very successful “Auction by George” at Mount Vernon the home of our first and greatest President, George Washington. In these very troubled economic times, a near record amount of money was raised to be used to continue to restore the property and to benefit future generations of school children. We are particularly pleased that a special fund raising effort was initiated at the party to place, I should say replace, a portrait of our first President in I believe, 40,000 class rooms, along with appropriate learning materials. But I am getting ahead of my lesson plan for this blog.

My good wife commented to me that the items that got the most spirited bidding were not various elements of historic merchandise, but offers of unique experiences. Some of these were lunch with the “talking heads” of the leading news channel, a live back stage visit during another news broadcast, and the ability to have a character named in a forthcoming historical novel. These were special experiences that were being offered, perhaps never to be repeated in one’s lifetime. One particular “unique experience” item attracted such spirited bidding that a second session was awarded to the very close under bidder. We also noted that some merchandise did not sell at the expected prices and were bid back by their owners.

The value of education as mentioned already, is the lessons that one learns in one sphere of activity that can be applied to another. Much of the conversation these days at gatherings in DC is about the economy. In NYC and environs it is about “the market.” The presumed link between the two topics is the various government intervention programs. If one applies the lessons from the Saturday night charitable auction to Monday morning investment positions, one could well postulate that the ability to borrow from the government to buy troubled assets on a nonrecourse basis is a unique experience which may raise the value and possibly the price for these mortgages and other loans. The concept of only being at risk for my investment, not the 5-6 times leverage utilized, is unique and has an appeal similar to highly leveraged fixed income oriented hedge funds. If the prices to be paid for troubled assets are too low, they will be withdrawn. On the other hand if demand is so strong as to raise prices high, additional supply will be forthcoming.

In these cases the raising of capital for such worthy causes as Mount Vernon, American school children and the over-leveraged banking system are worthwhile. As the bidding Saturday night produced near record results, let us Republicans, Independents and Democrats become pleased with the results of the government sponsored auction. Remember in earlier days governments raised money through lotteries (as many do today).

Perhaps most importantly, I hope to increase my education every day and wish my readers the same good fortune.

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