Gabriel’s scarcity rent - it’s management stupid!

Following with the article Financial weapons of mass destruction unleashed in the US (the party is over) that I recently wrote, it seems like the liquidity storm is enjoying some calm. Not a bad thing when liquidity is the tip of the solvency iceberg, and when investors need a break in the increasingly bearish market.

Yes, it all began with an excess of funds that permitted spending in excess. And from that excess, excessive and ultra sophisticated imaginative investing products were made. The trouble is that they were so complicated that the risk wasn’t understood enough, or simply ignored. Now the risk has resurfaced again and debt ratings are on its way down.

In that scenario we had several options: to cut the excessive spending or to find new lenders. Looks like we’ve encountered some new ones.

The first are the public lenders, also known as monetary authorities. By increasing the monetary mass, and providing low-term credit to low rates, we have financed ourselves. Not a bad thing to do if we were a socialist economy, which we are not. But time will say if we have many other options. I fear we don’t.

Wait, there’s still another option. The ones that actually created the liquidity bubble are coming to our rescue. After all they are the ones benefiting from selling 100$ barrels of dark oil. And now they can come to rescue our banks, our real state using sovereign funds. Suspiciously these new lenders remind me a lot of the old ones…

Both refuel the shrinking bubble in the hope of inflating it again, but in the meantime the true inflation is rising and growth going down the slope. Either we finance ourselves or we trust in opaque investment artefacts coming from non-democratic countries.

But this time, if we are being refinanced, it will be either at higher rates or lower prices, there’s no way to ignore the risk.  Are we really aware of the costs of refinancing? Are we facing the real issue here? Reality tends to be stubborn.

It supposedly began with a bubble. Just another bubble like the one I described on The South Sea Company (or how Sir Isaac Newton spurned the dismal science). The bubble was fuelled by an excess of liquidity. It had to end someday. We learned the word subprimes. We knew it had to mean trouble.

Liquidity injections were administered and succeeded. But they were just patches for a bigger problem. And then they asymmetrised the risk: there were institutions willing to provide liquidity when needed, to reward higher risks, to stimulate the economy further up and away from reality. Until the moral hazard was too huge.

And then it ended too abruptly. The wells of money simply drained and, those whose business was to ensure the efficient distribution of liquidity between the different players just became inefficient. From excess to world wide scarcity, even for sound projects. It became a financial crises.

Few crises have been so focused on the financial system like this one. Because that’s what’s really in trouble here, the whole financial system. I began in the UK with Northern Rock, now nationalised thanks to Alistair Darling. In the meantime Daniel Bouton from Societe Generale didn’t know what was happening in his bank until he lost more than his reputation. And the Swiss face value is also in an all-time-low: just take a look at UBS and Credit Suisse (also First Boston).

But where really is too darn hot is in the US. Bearn Sterns is in flames, expiring his final breath. Bought by $270 million, it was valued about $20.000 million one year ago. A 85-year-old Wall Street institution simply died.

And those that bought companies using leveraging, namely private equity, now see the liabilities piling on top of the roof. Take a look at Blackstone: their profit for the last quarter was less than a half of what was expected, and dropping. Of course its value is dropping too.

We gave it complete freedom. They took it. They invested again and again in the same risky assets, albeit chopped and transformed so they didn’t look like they were the same: collateralised debt, mortgage insurances, mortgage reinsurances, credit swaps and all kinds of derivatives that were the same dog, different collar.

And when the system was in trouble: more liquidity. Await for some more in the next days. New bolts and flashes from the Fed to try to contain it all. But no regulations… in any case it would be too late for that. And always paying a huge price in inflation… until that game is not longer possible.
The dollar’s dropping. The safe heaven for savings all over the world that financed the US debt has ended. If you add up the soaring energy prices, and the huge public deficits, the US credibility is under minimum. The country risk is dangerously rising… no more overspending, no more cheap financing, the party is over.

One of the great aportations of Schumpeter was his approach to the Economy from different points of view, not just from a mathematical, technical or mechanical one, but from the diverse social sciences: human history, sociology, anthropology and even psychology.

I love his concept of the business cycles. They are based on the creative destruction idea. That’s the process that the entrepreneur leads, supported by innovation, to destroy the old way processes were run and substitutes them for new ones. Destruction and creation both at the same time. That means a whole cycle: birth and death. That was in 1911.

But Schumpeter wasn’t the only one talking about cycles. Kitchin also did, in1923, from Harvard. His cycles were bigger than the already well known seasonal cycles, lasting for approximately four years. They were to be known as stocking/destocking cycles.

The legend says that Rothschild had already discovered the cycles before, on Wall Street, around the beginning of the XXth Century. But, instead of making his name famous, decided to use them to fill his pockets. A group of investors followed and, with the help of mathematicians, they found a 41-month investing stock cycle in 1912. If they became rich, they didn’t become rich enough: as of today we don’t know their names. And the cycles are still named after Kitchin (slimmed down to 40 months).

Later, new longer cycles were supposedly discovered: Juglar cycles, around 9-10 years and Kuznets cycles, around 15-20 years…

And there are also Kondratiev waves, around 48-60 years, and the most disputed of them all. There are supposedly a few Kondratiev cycles identified: The Industrial Revolution (1787-1842), The Bourgeois Kondratiev (1843-1897), The Neo-Mercantilist Kondratiev (1898-1950?) and the The Fourth Kondratiev (1950?- 2010?). The numbers with interrogation marks are of course just approximations written long ago. Could we be close to the end of the Fourth Kondratiev? In any case the projections didn’t know anything about subprimes, wars or energy prices. And Nikolai Kondratiev was a Soviet economist (not that the fact discredits him but he was kind of eager to prove that Western capitalist economies were susceptible to high performance volatility opposed to planned ones).

But, even not having any cycle under his name (an injustice from my point of view) it was Schumpeter who already identified and described the four phases of every cycle: boom- recession-depression-recovery. It’s the existence of the four phases that converts a fluctuation into a cycle. A stubborn aspect of reality that tends to repeat itself (not only in Economy though). This page of the National Bureau of Economic Research about Business Cycle Expansions and Contractions is interesting enough.

Yet again cycles catch so many off-guard. It’s interesting to see…

The subprime crisis has arrived. Yes, many anticipated so. That’s what happens when economy depends on expectations. They take some time to change and, when they change, they do it abruptly. Like those subprime mortgages that have transformed from “hot products” to “hot potatoes”.

Overall is not a matter of solvency but liquidity. I agree, tell that to those that will not be able to afford the mortgages, maybe up to 500.000 people in the US. But investors do not worry much about them. Investors just get scared and they stop pouring endless capital… until they start to do the same somewhere else.

Because companies still report record earnings and the price of gold has been rising non-stop. That means that the machine is still working.

But let’s not be too complacent. A wider crisis can still arise. If gold is “hot”, ABS are cooler than ever. ABS are asset-backed securities, financial products made up of mortgages and things alike that are covered by a real asset, such as your home. These are a way for banks to get cheap financing and externalise risks, because the default risk is transmitted by the ABS, while it wouldn’t be with debt, for instance.

If banks get increasingly difficult to finance, they will transmit this additional cost to companies and consumers. And that’s an entry point to generate a widespread crisis. Central banks should add additional liquidity to the system by lowering rates, but that seems unlikely given their current policies.

But, what about private equity? Now it will be more difficult for them to get cheap capital to finance, that’s for sure. But that doesn’t mean they have no future. On the contrary, they are now more needed than ever, because they are the ones to provide that leaning, that additional shakedown that companies needed in times of more expensive credit.

Remember, there’s much more to private equity than leveraged buy-outs, they have an important role in the markets, and that means they have an important role to play in this new situation.

PD: I read this morning in “The Economist” that the US were thinking of “relief measures” for the crisis. Then I changed to a Spanish newspaper and read about the Popular Party (centre-right and opposition and presumed liberal) to propose the right not to pay mortgages during a year for the unemployed. Alarmed by both news I couldn’t help the thought: regulation must ensure that the system is not abused but, let the market regulate itself. Although some regulations will be painful, it’s the most effective way we’ve come to know.

My readers (thank you for being there) already know that Blackstone is a private equity firm that I like and I’ve been following lately (See China and Blackstone: bad news for capital markets, good news for private equity).

I’ve always visualised private equity firms as a way to avoid the market’s constraints, and the firm’s constraints also, to be able to make longer term moves in order to ensure efficiency and the emergence of sunk benefits inside the firm (See Defensive strategies from private equity).

The funny thing is to see how a private equity firm just decides to go public. In any case, makes a lot of sense to me. At least the market recovers part of what has been taken off it. ($4.13 billion are a nice prodigal son to welcome home)

And Blackstone decided to do just that and went public last Friday.

Graph source Yahoo Finance

This graph is from IPO-day. If you read the news, it was a success, as the PR guys and gals are saying: biggest US IPO in the last four years, executives going mega-rich and all that stuff.

And I concur that it was a success. But not a wild success: a mild one.

In the picture, the trade for Friday: the share ended up at $35.06, far higher than the initial price of $31, a 13% more… of course it went up, it was already over-subscribed. But, take a second look, it didn’t go that far up. The Fortress Investment Group went 33% up in its IPO last February, and it wasn’t as sexy or hyped as Blackstone.

Things are changing. As I have also written before, cheap money is going scarce. (see Rates keep raising: is this the end of cheap money?) And maybe we’ve reached the peak. Bond’s yields are going up too.

Let’s take a peek at the market:

Graph source Yahoo Finance

The graph is the Dow Jones Industrial Average Index over the last year. The two curves below are the Relative Strength (RSI) and the Money Flow (MFI).

The RSI measures the internal strength, the momentum, and it’s indicative when the security reaches a high and the signal fails to reach one. It’s not as low as it was in March’s crisis, but it’s in the second lowest for the last year.

The MFI also measures momentum but takes into account volume as well as price. In this case it has shown repeatedly how the market was loosing strength, thus slowing the slope, so there is a divergence there. In any case it would be worrying if this signal went below 20%, which has not happened.

But my point is that things are not as bright as they were before. And probably things will be harder from now on. If these guys were discounting new highs, they could have waited for a better moment. But they decided to go in now. There must be a reason for that. Behind the curve probably we will find a bumpier road, not the accustomed highway they’ve enjoyed until now.

And, just another thought, another interpretation from a different perspective: is it sustainable that private equity firms enjoy a 15% tax rate while public companies are at 35%? Doesn’t seem quite fair. There’s a hard debate on this and proposed changes on legislation on the way… is Blackstone equity already discounting the conclusion of the debate? (or at least the uncertainty)

Last food for thought today: KKR has also announced it will go public. (yummy, yummy)

Some days ago I started writing about bubbles with the post Tulipmania, XVIIth century. Today I want to resume this journey throughout the major bubbles of the economy. Hopefully we’ll reach some conclusion together (I already have thought of some, and some are unexpectedly positive), or even see some bubble burst (probably).

We jump is from 1593 to 1711, from the Netherlands to England: the South Sea Company.

But the story begins somewhere else, earlier, with this king that was said was under a spell:

It’s 1700 and we are in Spain. King Charles II (Carlos II el Hechizado) has just died. He has been ill for almost all his life. He was 38, but looked much older.

But he has been the king of the biggest empire in the XVII century. An empire spread around the world that has splashed Europe around with his colors. An empire that imported tons of precious metals and discovered that the excess of currency also meant higher prices (hyperinflation). An unsustainable empire, thought to be very rich, but nonetheless an aging empire.

But Europe’s bound to change a lot after Charles II. Different powers were pushing at each other. And the rivalry of two families: the Habsburgs (Charles II was one of them) and the Bourbons.

And the prey is the Spanish Empire in Europe, not only Spain but also the Low Countries and parts of Italy. And, as vultures, the different European nations take sides in the Spanish Succession War.

The Bourbons win this war in Spain, but not in Europe. The initial plan had been to unite Spain with the emergent France, but Phillip V of Spain is forced to resign his post in the French line of succession.

He retains Spain’s overseas possessions but renounces to the Spanish Netherlands and the Spanish Italy both to Austria and Savoy, and Gibraltar and Minorca to Great Britain. France also cedes many colonial possessions overseas, but their borders are not changed.

All this is written and signed in the Treaty of Utrecht, 1713.

The South Sea House in Threadneedle Street

Why is this important for a company like the South Sea?

The company is established in 1911 by the financiers John Blunt and George Caswall, backed by Robert Harley, Lord Treasurer. It’s a time of war. The company is granted exclusive trading rights with South America if they take over the national debt caused by the war and consolidate it. Somehow it’s established as a sort of parallel organisation to the Bank of England.

After the war Britain is in debt for more than £10 million. (yes, 1713’s Pounds, not 2007’s). All that debt is funneled through the company transforming short-term debt into stock. In exchange the government is committed to paying £576,534 perpetually, that is roughly a 6% return.

But a trade company needs more than an annuity to exist. That is also provided by the Treaty of Utrecht. In it is also established that the Kingdom of Great Britain and Ireland will be able commerce with Spanish South America (something that they already discounted when founding the company). The South Seas company is able to send one trading ship each year.

Astonishingly, the company fails to do any trade for the first four years. Nonetheless it has the backing of the British Government, which soon converts a further £2 million in stock. No actual business, but a promise of a bright future (sound familiar?).

The company is also granted the exclusivity over the Spanish Asiento. That means being able to sell 4.800 slaves per year to the Spanish colonies. In 25 years they make around 70 voyages and sell 30.000 slaves. Only 4.000 perished in the journeys: that means being quite efficient for a slave trader.

Stocks going up…

But the company is not good enough at trade. What they are increasingly good is into transforming public debt into shares. And they manage to give away enough shares to important people (and rebuy them when they have increased enough) so that most politicians are interested in supporting and backing the South Seas Company. That is, to drive value up.

1719 is a good year for the South Seas company. They offer to buy half of the British national debt: £15 million. That means £15 million more in shares. But demand’s pace keep up. There’s a huge interest in their shares. After all they continuously rise and lucky owners feel they are richer every day.

1720 is going to be known as the bubble year. Not only will witness the skyrocketing of the South Seas but also the appearance of many similar ventures. The price per share will go from £100 to £1,000. People of all kinds will buy, selling whatever they have, going into debt, it’s the South Seas frenzy!

The fall follows the rise

The last idea that the company has is to lend people money to buy the shares. But the money has to be returned. And there is no other way to return it than selling shares again. Until it all collapses and the shares fall back to £150 in september. A great loss for most investors. And from that to obliteration.

Sir Isaac Newton

What about Sir Isaac Newton? Well, he won a lot of money with the South Sea when he sold it, but the shares kept rising and rising. Until he couldn’t resist the temptation to buy again. At the highest price. In the next week they plunged. He lost £20,000.

I can calculate the movement of the stars, but NOT the madness of men

Jonathan Swift also lost a fortune. He wrote Gulliver’s Travels, a satire about the British society. The cons fled somewhere else with their fortunes but, for Britain, the consequences of the crash lasted for a century.

Those of you who read me know my ideas about private equity and how it has become an increasingly efficient way to invest the “big bucks”. I wrote about this in China and Blackstone: bad news for capital markets, good news for private equity.

I have to confess I like the concept of private equity. Although private equity firms probably wouldn’t considering hiring me, I’d hire them to increase efficiency. Their whole business is about efficiency gains: buy some under-performing firm, use your credibility to increase debt to pay the buy-out, make it perform again. If the gains are similar to the costs, the company is yours… *for free*.

Of course I’m exagerating. That’s a simplification, but, for comparing purposes, what happens if you compare their strategy to the diversification strategies undertaken by big companies? We have extra resources, we are not really interested in giving them away to our investors, or owners, so we are going to buy some business out of our core knowledge and know-how to have less risk and at the same time less yields.

Why should anyone do that? Well, managers would say there are synergies to be gained, but, as you know, sometimes those synergies never make it out of the power-point file.

The real reason to do that is that the managers need to keep busy, and need content to present in their next shareholders meeting, probably speaking about another business they don’t know anything about. (Fortunately, neither the shareholders)

Are they paid to do this? Are they suitable to do this? Hell, no!

Not so long ago, they were pretty relaxed and calm because nobody would object anything to that strategy. Even shareholders didn’t see that it was easy to reduce their risk just diversifying investments in different companies instead of diversifying core businesses.

If the investor can diversify by himself, companies shouldn’t try ventures alien to their business.

Then, why were the big companies so unperturbed just doing that? Because they were huge. Or at least too big for hostile takeovers.

And then came KKR with RJR Nabisco (See article about KKR here), and Cerberus with Chrysler (See article about Cerberus here), starting a series that could end with ABN Amro or who knows what. Being huge is not safe anymore.

A new signal emerges from markets. It’s the end of diversification. It’s time to concentrate on your core business. For public companies there’s only one protection strategy for private equity. And it’s no longer to be huge, now you need to be efficient instead.

Barbam propinqui radere, heus, cum videris, praebe lavandos barbulae prudens pilos
(in latin, if you neighbour is being shaven, do get your beard ready)

*Efficiency will save you from private equity*

Got an interesting non core business? Let it go. Otherwise private equity will come for you, and spin it off you.

Inside the non-efficient companies lie a lot of unused resources that justify the gains private equity need as an excuse to assault them. If only those companies could use those same resources for protection…

But that would mean being efficient again. That would mean ruthless reestructuring. That would mean hard and painful decisions. That would mean having to face change, sometimes radical change. That would mean challenging established authority. In short that would mean working more and better.

One last problem about leaning and trimming yourself: why do it yourself when private equity can do it more efficiently than you? (And market seeks efficiency, somehow)

Yes, interest rates are soaring. The ECB raised rates two days ago 25 basic points to 4% as expected. That was the highest rate in six years. You know how I like using images, here is the picture of the last year:

Why has the ECB risen the rates again? Fear of inflation as usual. Europe has been growing faster than the US and that means that industries will approach production peaks and probably companies will face more pressure to drive salaries up. But only probably, because that hasn’t happened yet. The European Central Bank bets to put pressure down even before it’s needed. Or is it?

We’ve seen so much liquidity lately, so many money. The quantity of money has been growing steady, more than ever. You can see it in this graph I made with data from the US Federal Reserve, 1959 to 2006:

M2 and M3 are common metrics or measures for money. While M2 represents physical currency, bank reserves, current accounts, saving accounts and small deposits, that is the money that is available to domestic economies, M3 also includes bigger certificates of deposits (above $100,000), Eurodollars and repos.

You might ask, where has that liquidity gone? That’s why I chose to draw the red curve: M3 without M2, that is the money that is not in the hands of domestic economies. As you can see it has been growing at a hectic pace. This is the money that has been refuelling the economy, making stocks soar, gone into funds, hedge funds, private equity or debt.

So maybe, after all, central banks were not thinking of us when raising taxes, but in those huge quantities of money that are not in the hands of domestic economies.

And with money being more expensive, we’ll probably see trouble in junk bonds, too-risky capital and excessive leverages, subprime mortgages, the riskiest places where the bulk of the money has gone to.

Rising taxes mean that the most vulnerable parts of the economy may suffer. We’ll see the definitive end of many bubbles, maybe mortgages, junk bonds, overpriced shares or excessive debt can be the match that lightens the next crisis. And that can mean trouble for our pockets too.

One thing for sure: rates will keep soaring, I have no doubt. One way to know what the market thinks about it is using the Euro Interbank Offered Rate, Euribor. If you follow that link you can get the daily Euribor rates in a range from one week to twelve months, that is the rates that first class Euro banks offer each other. Euribor is representative enough of the Euro money market.

The red curve was in January, the blue curve is now. So far the market has been predicting well the increases for the last six months. The arrow marks the value for borrowing Euros for six months six months ago and compares it to the actual value. As you can see, it’s rather close to the current value.

Well, in fact it’s higher because there is a smoothing effect: when you are paying to borrow for six months you are paying higher (or lower) for the last months, but closer to the current rate for the first months, so you get an average of both.

So, looking at the blue curve, the market predicts additional increases for the next months. And the slope is even steeper slope, that means no sign of stopping to be seen in the next year. The rates will keep rising on the long run.

It’s been ten years from the last monetary crisis. Maybe the next one is getting closer. That would have central banks change their mind about rates.

A few days ago I wrote about KKR and the three men behind that acronym. Now it’s the time for another company that lies in the private equity niche too, but, as you will see, plays its cards quite differently. In this article I’ll focus on the difference between them.

the original Greek Cerberus, a dog with three heads that guards the world of the dead and won’t let you in

Cerberus Capital Management was news just three weeks ago, when they announced they’d buy Daimler’s 80.1% stake in Chrysler for $7,400 million. Three months before the company had announced the laying off of 13,000 employees, after the red tape exceeded $1,500 million for 2006.

Not very good times for Daimler and Crysler. That was the end of a transatlantic marriage that lasted since 1998 and cost $36,000 million.

As you know, good times for private equity, bad times for inefficiencies and for corporate social responsibility: more laying offs ahead. More trouble in the Motor City: Detroit. And of course unions abhorring of letting private equity in, unions such as the United Automotive Workers and their leader: Ron Gettlefingers, warning about the dangers.

worried about the takeover? when this man speaks, Motor City listens

But something strange happened. Ron Gettlefingers, after some months sending the leave-Chrysler-alone message decided to back up the take over. Why? Who convinced him and how?

this is the man from Cerberus that convinced Gettlefingers: John W. Snow

What did Snow promise? Three things: to keep the same management team (I’m not sure that is a good idea after $36 billion having gone down the drain), to keep his three brands (well, without further analysis, looks sensible to think about consolidating the strongest only), and no further lay-offs and contract negotiations to be held this summer with the unions (which doesn’t mean that they’ll succeed either).

Will they be able to deliver? who knows.But that’s not the point.

They have credibility or, at least, they have a very different style. Cerberus managers are not perceived as elitist billionaires -and that’s a difference with KKR. Cerberus founder Steve Feinberg was son for a steel’s salesman, graduated in politics in Princeton while playing a lot of tennis. It has been said of him: “While other hedge-fund managers are collecting fine French wines and flying around in private planes, he drives a Ford truck and drinks Budweiser.” (Follow this link to a Businessweek article for the source)

most appreciated piece of art in Cerberus headquarters

It is said that the most valuable piece of art that is stored in Cerberus headquarters is a poster by the Fugees. Feinberg himself drives a pickup and wants no personal publicity. Half of their staff are ex-managers, a big number when compared to other companies that heavily relay on consultancies.

remember the one on the left? from US vice-president to Cerberus vice-president

Dan Quayle is also in Cerberu’s team as vicepresident. Not famous for his literacy or his perfect spelling, but close to the people. The same style that has made George W. president twice.

So, which are the main differences between the way of doing business of KKR and Cerberus?

• Cerberus are perceived as peacemakers, not as hard negotiators. Got nervous union leaders? they just hop on a plane and talk face to face plain conversations, making trust, opening bridges. As Buzz Hargrove, president of the Canadian Auto Workers (CAW) said on Feinman, “He gave us all letters that said there will be no job losses. He was very genuine, not some highfalutin billionaire. It was real talk.”
• And a financial difference: they don’t use leveraged buy-outs. That way the cost of borrowing money keeps lower. And, guess what, they talk to creditors too, giving them a lot of information and letting them participate. That makes trust too, and the more the trust, the less the borrowing costs also.
• Not worried about quick returns either. Let things take their time.

So, money is not everything, is it?

If you have read me before you know that one of the things I’ve been asking myself is whether Economy is a solid enough science to lead us to the truth, whatever that might be. I thought about it in the previous post “Is Economy as a science solid enough to define what’s true and what’s not?“, and end up talking about the Lucas critique.

Well, I have to say I began being sceptic, thinking that Economy was not stable enough to be called a “science”, but slowly changed my mind.

And like a coin, now I think there are two sides to Economy: science and art.

The “science side”, is it solid enough to reach the truth? Yes it is. We’ve been discovering a series of laws, economic laws, that deserve being qualified as “natural laws”, that rule the production and distribution of wealth. It’s just like Chemistry that is able to understand and describe how the elements interact and combine. The applications? Those can be done in so many different ways…

And there is the “art side”, a side that Chemistry doesn’t have (maybe I should rethink that too). In Economy the distribution of wealth can be designed in so many different ways. For sure Rawls and Nozick would do it in two very different ways. But not only them but each of us would be creative in our own way. As in every art, some might even be better artists than others.

Because those natural laws that work from the shadows even made perfectly (?) planned economies to have cycles, as Kitchin, Juglar, Kuznets, Kondratev or the cluster innovations of Schumpeter –yes, again- and Mensch. Even with the cycle denial by Milton Friedman, we still have bubbles: technological bubbles, housing bubbles, internet bubbles, biotech bubbles, stock bubbles (I think we could be in one of those now) again and again.

painting political ideas in a blank canvas

Good artists will try, from their posts, to use their tools (call them fiscal policies, monetary policies or whatever you wish) to create something nice that responds to their personal perspective or even to their ideals. Sometimes seeking social justice –whatever its definition might that be –sometimes just seeking self profit –a great way to create wealth too-, or just seeking to predate other’s resources.

Now to the conclusion: the part of Economy that is a science will help us understand the world, drawing solid conclusions, reaching objective truths. The part of Economy that is art will let us use those basic laws to build something of our own, to create.

Economy’s nature is a dual one.