Re: HOMESTEAD: Ray Carey's Democratic Capitalism

[John Médaille <john@medaille.com>]

At 06:21 PM 7/27/2005 -0400, Norman G. Kurland wrote:
>As I will point out, your analysis does not square with the facts.  The 
>original owner was a hard-nosed businessman and his price was at the high 
>end of what constituted a fair market price.  He got his money out of the 
>business and invested it in other securities.   Market forces were at 
>work.  Management, which was and still is first-rate, did not change at 
>the time of sale.

So then, the stock was priced at seven times earnings. If you know of any 
other stocks at that price, let me know.

>   The CEO retired several years ago with a nice ESOP distribution, and 
> the former VP has been CEO for about 10 years.  The company had no 
> pension plan at the time of sale.  With the company growing dynamically 
> and a work force ten times the original team, the average 10-year 
> employee has an ESOP account in the 6 figures.  What was key to the 
> buyout was the application of Kelso's pure credit concept.  This 
> company's history proves that, in the hands of good management, synergy 
> is at work between the productiveness of capital and the productiveness 
> of labor and capital pays for itself.

Yet, in 29 years, the price only tripled. That doesn't sound like good 
results. It is certainly not 14%/annum.

>You can sneer at the model,

I sneer at nothing. I point at that tripling in value over the course of 29 
years does not sound like good results. Does it sound good to you?

>but it works in the real world, as long as capital credit is accessible to 
>workers with no reduction in their take-home incomes. (In fact, the labor 
>incomes of Mid-South workers are at the high-end of their industry.)  No 
>magic was involved.  Only the power of capital finance.  Had no-interest 
>(i.e., service charge only) capital credit been available under section 13 
>of the Federal Reserve Act, as advocated in our book Capital Homesteading 
>for Every Citizen 
>(http://www.cesj.org/publications/capitalhomesteading/whatif-flyer.pdf) 
>and supported by Rodney Shakespeare, the loan would have been paid off 
>much sooner.

Right, with taxpayer help.


John C. Médaille

"A dead thing can go with the stream...
but only a living thing can go against it."
         -G. K. Chesterton
http://www.medaille.com/distributivism.htm
john@medaille.com

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