Some interesting tidbits from Eddie Lampert’s letter to shareholders:
The two most important books that any student of current events should be reading in this environment are both by Friedrich Hayek, the esteemed Austrian economist. Based on events he witnessed beginning in the early part of the 20th century, Hayek wrote The Road to Serfdom as a warning to England and the United States against the damaging impact of socialist policies and The Fatal Conceit as a warning against heavy intervention in markets and society at large. Despite the almost universal belief today that more, but better, regulation is needed and that the role of the state needs to be not just temporarily larger, but permanently larger, Hayek’s writings and logic should give everybody pause as to the consequences of these actions.
As a country, we need to rebuild confidence and trust and to understand what happened. Whether by business or by government, the misdiagnosis of situations leads to poor prescriptions for rehabilitation and recovery. When the misdiagnosis is done at the federal government level and involves large parts of a national economy, the consequences can be swift and significant. The unintended consequences are often swifter and even more significant. As the leaders in our nation continue to evaluate and evolve the policies and rules of the game, we would all be wise to heed the cautions raised by Friedrich Hayek. I appreciate that the free market can be a difficult master and that there is an important role for government and regulators, but I hope that as we move forward the rules of the game and the methodology for changing those rules will be more consistent and fair than they have been over the past year. Those who desire to protect civil liberties in times of war appreciate the importance of laws protecting individuals and institutions. In times of economic and financial distress we need to be similarly vigilant in protecting economic and contract rights so that we can continue to have a system that functions properly. Attempts to threaten or eliminate those rights will chase away the capital and investment that our country needs to restore prosperity and to thrive in the future.
All in all, the letter sounds like the words of a very frustrated Chairman of a failing retailer. He seems to indirectly point the finger at short sellers, mark to market and the government as reasons for Sears’ failures while completely ignoring the fact that Sears is a half rate retailer whose sales have been cliff diving for 10 years. He implies that Sears would be better off if the government wasn’t tinkering with everything while forgetting that deregulation of the housing industry is exactly what got us into this mess in the first place. We gave the guards an 8 year lunch break and look at the riot that broke out. You can build the jail and throw the prisoners in there, but that doesn’t mean you don’t need guards to man the walls around it at all times. A stock market is no different. You can build the system, but someone needs to be there to police the participants when they become irrational. A laissez-faire approach to the market is a pipe dream. This idea that you’re either for Hayek or Keynes (as opposed to implementing components of both) is silly. The world is not black and white.