Putting My Money Where My Mouth Is

My car needed servicing. Regular servicing to be sure, overdo for an oil change, replacement of air filters, windshield wipers worn out when it's been raining pretty consistently for the past two weeks (we really needed it and I have no problem with it continuing as long as we get some sun time to let the steam rise on the weekends). The thing that nagged at me was the squeaking noise that seemed to be emanating from the wheels and was telling me I had a brake issue developing. Some things I will let go for a while, like a general washing of the vehicle, or changing oil somewhat beyond 5000 miles instead of at 3000. But tires and brakes have to be right or they become dangerous very quickly.

So as soon as I had more than an hour to spare, I went to my dealer (who does oil changes as cheaply and quickly as any quick change specialist and allows me the chance to gaze longingly at the Ferraris next door) and told them what to look for and then call me before starting any work. I was gonna wander. By the way, in addition to the necessary servicing, my car is on a lease which is up in 4 months, and I was also already on the verge of crossing my yearly mileage allowance, which I knew would happen the day I got the car not quite two years ago. The gas tank was on fumes. Ok so maybe I had some ideas when I got there.

Instead of going to the Ferrari side of the shop, I went to the regular side and immediately saw my salesman Husein, from whom I have bought every new car I've ever bought, and who came right up and greeted me by name. This means I've seen the guy once every year and a half or so for six years, exactly 4 times, today being the fourth. I would like to think I am just that memorable a guy, but honestly, I think Husein is just a talented salesman and has learned the art of memory. At that moment the call came from the service department that the brakes were weirdly shot and everything altogether was going to run between $400 and $500.

My intent was to essentially do a straight swap and exchange the '07 Honda Civic I was driving and extremely pleased with, with a new one and keep the same payment, extended terms, more mileage and no cash out. Apparently my return customer status granted me a little juice since my credit score though excellent in normal times, was just under the current ridiculous line for top-rated credit. They gave me the top rating anyway. Sure maybe that was a car sales hose job, but I came in with an idea of what I wanted anyway so they could puff my ego all they wanted. I retained the power of no which is the key to any bargain oriented negotiation. As long as "that one" isn't "the only one" or the stuff that dreams are made of, you can walk away and go anywhere else and get another version of the same thing, or maybe even the exact same thing, especially if it's a car you're talking about. Yes my current car wasn't going anywhere without the servicing, but Husein didn't know that.

So Husein had me hooked up pretty quickly and assured that it would be a smooth transition from one Civic to another. I was hoping that the 2010s were in because I expect that I may wish to get out of this car before the new lease expires because I hope that the economy will improve, bringing my fortunes with it, and my kids are growing and hopefully inspiring me to make roadtrips like I did with my family as a kid. So I was thinking ahead to my best trade out value and having a 2010 will be better than a 2009. No luck there, the 2010 Civics weren't out yet. Oh well.

We went to go look at the cars in the lot and choose a color. I was leaning towards a sharp looking silver, although there was an interesting red one as well. For a variety of reasons though I can't say I will ever allow myself to buy a red car. Can't have black where I live because the heat makes it truly hot enough to sear flesh, and then there was the same blue I already had, which seemed boring now. But there was one that was such a dark blue it was nearly purple; pimpin for sho' and my kids would love it, but it had a black interior, which is even worse to have around here than a black exterior.

So I was about to say ok on the silver when as an aside I asked about a hybrid. Was there anything comparable in my price range? "Well," says Husein, "there's the Insight, which is about the same with a smaller rear than the Civic but besides that, more or less the same for your purposes. But it's a more expensive car because of the demand and limited production." So I asked him to see what he could do, and he comes back with a price $70 a month more than my current payment. So he figured it was out of the question because I'm really tight right now as a real estate guy in this economy.

But I thought about it a moment. Gas is already popping $2.50/gal again and slowly drifting higher. I'm of the opinion that the current crash in oil prices is temporary as the notion of peak oil is real as is increasing Chinese and Indian oil demands. I think we'll be looking at $4.00/gallon again for good sometime in 2010. I'm also unusual in that probably 90% of my driving is not on the highway. I'm basically the prime driver for a hybrid. At 40 mpg in the city, it almost doubles what the Civic gets. I will be cutting my gas consumption in half. That savings will essentially make up the difference in the monthly car payment, shifting from the oil company to the car manufacturer. If I get any break at all on my insurance for whatever reason, I'm ahead of the game. And my kids can say their daddy is cool 'cause he reduced his carbon footprint (if that's how they would describe it at kindergarten and pre-k). And I can give a little room to stretch my hippie proclivities while being a Mighty Liberal, all at once. As long as the speakers sound good, basically, I'm good. The deal is done.

San Fran Gran Says Spies Lie, Makes Them Cry

Let's be clear here (again). Our government is not allowed to torture. That is the law. Waterboarding is torture. If members of our government wish to authorize torture then they must be prepared to accept the consequences of breaking the law. Whether the technique is effective or not is irrelevant. If they do not wish to take the consequences for authorizing torture then they either refuse to authorize the illegal act, or they get the law changed so that it is no longer illegal.

If I want to drive across the country quickly, doing it at 200 mph in an Indy car would be the best way to do that. But it's illegal so if I do it, I better expect to get pulled over at some point (probably by a helicopter or after I crash). And if I tell Nancy Pelosi I'm going to do it, whether she says it's ok or not, or whether or not she remembers that I told her doesn't matter either. I make the decision and I engage in the act, I'm the one who broke the law, not her.

So stop the whining and get on with the prosecutions.

Go Ahead and Spend Time in a Desert of Your Own Creation

I haven't been posting as much lately because business has picked up during the day and I've been engaged in other mind-distracting enterprises during my down time. But this article passed by my eyes a few minutes ago and I wanted to post a blurb while it is still fresh in my mind.

So Oklahoma wants to try to opt out of the federal government's spending and bailout plans. I say let them try it out for a while and see how it feels. Perhaps some readers can send me updated info on this but a few years ago I was doing a little research and confirmed that for the most part, red states like Oklahoma, among the reddest of them all together with Utah, Wyoming, and Idaho, receive significantly more federal tax dollars in grants and services per capita than they pay in. It's not even close. Big Blue states like California, New York, Massachusetts, New Jersey, and purplish Florida pay in way more than they get back (and if you split Florida down by its relative red and blue areas, the pattern is maintained).

The bailout strategy initiated by the prior Republican administration but continued by the current Democratic one may indeed be questionable if you look at it in terms of saving the individual banks concerned. They were DOA and have now become zombies with the infusion of federal money. But that wasn't really the strategy of it. The strategy was to save the entire economic system from sudden collapse. The bailout was an emergency parachute to stop the crashing of the world economy. That it was set up to be a slush fund for the folks who caused the crash in the first place is just another example of how the Bush people did business and failed, did politics and failed, and gave not a rip about anyone worth less than a few million dollars.

So if the fine representatives of the people of Oklahoma wish to exercise their Constitutional 10th Amendment rights over the actions of a federal government exercising its authority under the Commerce Clause of the Constitution, then let the legal battles commence. Good luck to the yokels. Let's cut them off from the largesse for the duration and hold the funds in escrow and see how they do.

It's a nice idea and would be fun to watch from the sidelines, but it probably violates the 14th Amendment right to Equal Protection under the law. On the other hand, could this be considered treason? Maybe that's a bit much. Oh well. Let the children rant then.

Government 101: If It Walks Like a Duck…

A law exists which strictly bans a particular act without exception. Deciding to break that law is not a policy decision, it is a criminal act. When the law in question comes from an international treaty which has been ratified by the government of the United States, then those who engaged in the act must be charged with crimes against humanity. If those who engaged in the banned act did so on direct orders from their superiors in the government, then those superiors also must be charged with crimes against humanity.

Changing the name of a banned act from “Torture” to “Enhanced Interrogation Method” does not turn it into something else. As George Carlin observed, “Shell Shock,” “Battle Fatigue,” “Operational Exhaustion,” and “Post-Traumatic Stress Disorder” are all the same thing. As Shakespeare noted, “a rose by any other name would smell as sweet.” And finally, as Cheech and Chong explained, if it looks, feels, smells, and tastes like shit, don’t step in it. In all too many ways this nation intentionally stepped in it and members of the former administration rubbed the entire world’s faces in it for years like the bullies they are.

Machiavelli’s nostrum that “the ends justify the means” is not how the United States operates. If we are a nation of laws, if our current administration wishes to re-establish that principle as a fact declared to the nation and the world, if Donald Rumsfeld, Alberto Gonzalez, Condolleeza Rice, Colin Powell, Dick Cheney, and George W. Bush believed they were correct by intentionally deciding to authorize, in the name of the United States, the use of techniques long-recognized as torture, against anyone, then that principle should be tested in the wide open light of day in a court of law, for all to see. Any principle worth following must be able to withstand any challenge brought before it or it should be discarded. If the notion of a former vice president and president in the dock is a bit uncomfortable, so what? No more uncomfortable than those, guilty and not guilty, who were subjected to acts deemed inhumane by civilized nations.

The rule of law is not a convenience that can be ignored at will or there is no law. By his constant TV and radio appearances, Dick Cheney is daring the current administration to put him on trial. That is what bullies do. Arrest him, try him, and the rest of the “policy makers” of the former administration, and if they are found not guilty, acknowledge it. If they are found guilty, put them in jail for the rest of their lives and let all who come again into high office know that We The People as a nation are indeed as good as the Constitution which embodies it.

Whither Brain Drain: Where Are The Smarty Pants Guys Gonna Go?

One of the lead articles in today’s NY Times, and a topic of discussion on This Week with George Stephanoupoluffugus regarded how the limitations on compensation and bonuses for executives in bailout receiving banks is causing a brain drain in those institutions. Yes folks, the geniuses that brought you the world financial meltdown are taking their collective balls and going home. Or, if not home (to their palatial estates in Connecticut), to other banks which didn’t take the bailout funds and are thus not restricted in their modes of compensation, or to other investment entities. What are the likely results of this so-called “brain drain”?

For those who go to other, still healthy banks, the cycle may repeat unless the strict regulation necessary to reign in the aggressive risk-taking which caused the crisis is finally put in place. Here we see a potential for more real danger. The folks who engaged in these behaviors are a type which is at once needed for the functioning of the upper reaches of a sophisticated capitalist regime. But at the same time, those types are so smart and so aggressive in their desire to turn profit at almost any potential cost that serious regulation is needed together with vigilant enforcement and constant revision to keep them from running rampant as they have for the past eight years. Without it there is continued great risk of systemic threat like that which we are experiencing today. For that reason the regulations in place since the New Deal were created, and with their gradual repeal or failure to enforce, we see a return to catastrophic financial panic of a sort which was a common and expected part of the business cycle from the birth of the nation until the Great Depression. This is all easy and obvious and greatly discussed.

The interesting part is that some of these aggressive financial geniuses will go where they more properly belong. They don’t really belong in high finance and banking which, for all its potential for risk and reward, should really remain an area of relative conservatism and risk aversion in approaches to money management. Instead, I’m hoping that many of these folks return to the world of venture capitalism. Here they can invest huge risk into big ideas with the money from people who know fully the chances of failure as opposed to the average 401K guy on the street. We need big investment in big ideas to finally get done the things which need doing in this economy so we can start competing again and maintain ourselves as the location of choice for research and development. Sure most big ideas fail. For every Google and Amazon there are a couple dozen pets.com but again, the investors there know what they get into at the start. And Amazon lost ungodly amounts of money for years before turning a profit.

I’ve made reference to my belief that the current crisis isn’t one of credit but one of value. Contrary to the operating philosophy of the past generation, Wall St. does not create value, it makes promises of future value which in reality are just hopes. If the big brains leaving Wall St. do indeed go into venture capitalism, they may then be engaged in creating something of value instead of manipulation promises of a particular future size into ones of bigger potential future size. If that happens, the financial crisis will eventually shake itself out and over time, the downward slope of the banking industry will meet up with the upward slope of value creation and both can then begin again to increase and hopefully improve the value of all of our lives.

The Biggest Travesty of Capitalism

I just got done watching this 12 and a half minute video on you tube and wanted to see if I could encourage my readers to take a look and comment. There are as many ways to slice and interpret the numbers as there are people attempting to do it. That said, this is a pretty negative review of the current version of the government's plan to deal with the toxic assets on banks' books. As far as I can tell, it's a more sophisticated, complicated (nefarious?) means of doing what Hank Paulsen's TARP plan was originally intended to do. I think it's important to keep in mind while watching this or giving attention to anything involving "toxic assets" is to remember that these things aren't abstractions, but at the most basic level are real things which we can all relate to, namely, home mortgages on houses which are worth more than the houses themselves are worth now, the same with commercial loans on office buildings and malls in the same spot as the home loans, and car loans, school loans, and credit card bills belonging to people who can't afford to pay them back.

I hope to get some thoughtful responses from you.

The Biggest Travesty of Capitalism

Capitalism 101: Chinese Drywall

This is a story that will probably be huge very soon but since I’m in the real estate business I’m hearing about it just before it breaks big. It seems since at least 2003 the real estate building boom resulted in a shortage of domestically produced drywall for home interiors. As with so many products, alternative economical sources were found in China.

Well guess what, like pet food, and children’s toys, and baby formula, the product was substandard to the point of functional inadequacy. It seems the Chinese drywall contains an excess of sulfur compounds which are having some rather serious effects after a period in the homes where it was installed. Sulfur, for those of you familiar with rotten eggs, the stench of hell, or the atmosphere while crossing the bridge over the Savannah River in the 1970s because of the paper mills (don’t know if they’re still there but it’s one of the intensely remembered experiences of my youth as the family drove back and forth from New Jersey to south Florida), is extremely unpleasant to say the least. Folks with the Chinese drywall are now subject to that smell always and throughout their homes because of the seeping fumes from the degrading poor product. As well, studies are underway to determine if the fumes are also causing damage to metal inside the walls themselves. Electrical wiring and plumbing are said to be eroding from the emanations from the walls.

While discussing this with a fellow traveler yesterday, he declared that the Chinese are at war with us already and we just don’t know it. It’s a delicious and nefarious conclusion to draw; deeply conspiratorial, but way too subtle to be of any value whatsoever. The truth, more than likely, is much more mundane and therefore uninteresting to anyone not fascinated by arcane matters of political and economic history.

China is a nation in the very early stages of an otherwise rapidly expanding manufacturing and capitalist economy and political landscape. Until twenty or twenty-five years ago, China was a desperately poor, overpopulated, agrarian society which flung around communist ideological statements from time to time usually to the grave detriment of its own citizens. But in the past couple of decades China has been in a headlong rush to modernize and with its command structure in government, together with the unfathomable human resources it has available, China has become the manufacturer of choice for cheap, mass-produced items at most non-heavy material levels for the United States.

Much of the growing commercial relationship between the US and China occurred under the radar during the 90s but has come out in the open in an ever-increasing level in this decade. We’ve noticed mostly when we’ve heard reports, which seem to happen more often these days, of dangerous or tainted goods coming from there which should never have been tainted in such ways much less at all. But I reject the notion that this is a war because that suggests some level of intent in a coordinated effort to destroy an enemy. My historical understanding tells me instead we are simply witnessing what happens when commercial productivity outstrips the institutional ability or philosophical desire of governing bodies to oversee that productivity.

China now is where the US was around 1890 in relative industrial development. The place is just so incredibly large that in this era it has been able to bloat even faster than the US did 120 years ago. Industrialists rush headlong into the activity that anyone in commerce does, they try to make as much money as quickly as they can. This is done by manufacturing and selling as much of their product as quickly and efficiently as possible at the lowest possible production cost so as to maximize the profits. If there aren’t any rules or no one available to check to see if inexpensive industrial chemicals are mixed in with baby formula to give the appearance of higher nutritional values, then an unscrupulous capitalist will do it to improve the bottom line.

Sure he probably gets caught down the line but by then it’s too late for the babies who have died, or the homeowners whose homes smell like a giant egg fart. Enforcement is for after the crime has been committed. Regulation prevents it from happening in the first place. In the absence of rules, the most aggressive will work the hardest to make the most money. That’s human nature. That’s capitalism. Nothing can change that. It can be tempered by a well-conceived regime of regulation followed by a stringent code of law which is rigorously enforced. When things like that happened in the US often enough at the end of the 19th century, efforts to create minimum standards and inspect for them came into effect. The degree to which they are brought to bear defines the politics within which that capitalism functions. From Communism on the left to totalitarianism or fascism on the right, and everything in between, capitalism is the way of man. China needs to do a better job of controlling its capitalists and our capitalists need to be better controlled before bringing Chinese crap over here which can be made just as easily at home. And the same goes for folks selling false financial promises from Wall Street throughout the world and peanut butter at home.

An Outrageous Proposal

Just read this brief post by Matthew Yglesias regarding the reaction by fellow Repubelicurs and the press to the emptiness of the GOP “alternative plan” to Barry’s impending budget proposal. At the end he writes: “I’ve never really seen political reporters get outraged before about the fact that a policy document makes no sense in the past. It was a curious outbreak of substance among the press corps that I don’t think was particularly foreseeable.”

I will keep my fingers crossed first that this latest outrage grows legs and sticks around a while, and second, that it acts as a harbinger for the future both of reportage and Repube policy proposals.

In the first case, the so-called Repube alternative would be laughable if it wasn’t such a serious matter. It’s simply another restatement of the same talking points they’ve been blathering on about for years about less tax and spend government. To the extent that these ideas have been implemented, they have gone a long way towards creating the current economic disaster we are living through. They persist in putting fancy covers on the same empty rhetoric and propose absolutely nothing which might actually directly address matters as they exist now. As opposed to last week’s outrage about AIG bonuses, from a political standpoint, this one matters. The minority party has nothing to say about anything and doesn’t have even the balls to admit that there’s no point in doing anything except saying “no” to everything, just to be in opposition. And god forbid they admit there might be some value in something the Democrats propose.

In the second place, maybe, just maybe this absurdity will finally snap the mainstream media as well as the few remaining thoughtful Repubes into focusing on some actual substance instead of how it would be marketed to the public if there was actually anything to market. It would be fascinating to see what it would be like to really have some competing valid ideas.

I am hopeful, but not optimistic.

Hell No We Won't Grow

The ocean liner USS American Dream is heading for an iceberg which does not appear as if it will be affected sufficiently by global warming before we hit it. That is unless Captain Barry Obama can steer this unwieldy beast out of the way. Trouble is a lot of folk are scared of what happens if we look in the other direction, so they think we should hit the ‘berg and take our chances. But not our captain, no.

After opening his news conference with a barrage of clichés worthy of the worst American Idol music writer, the prez rather stiffly ran through a workman-like run of questions. To me he seemed like he had been interrupted from considerably more interesting meetings and I must say it’s the first time I’ve seen him look like he has better things to do. Of course he does have better things to do, but one of the things he has to do is to be the front man promoting his multifaceted program of not just fixing the economy, but doing so in a manner which puts the country in some semblance of proper footing to actually deal with the challenges of the times rather than argue points of empty political and cultural philosophy as we have been doing more or less for a generation or so.

I’ll state here flatly that the baby boomer years of rising to and having power — the 80s and 90s — were essentially a complete waste. I think that historians will look back at this period as colossal wastes of time, energy, and resources. Politically, the entire period saw no attempt to see ahead and innovate into the future with the great exception of the geek culture managing to create the internet and related technology revolution. But those folks, by their nature as geeks, were systematically shut out of activities run by the cool guys like Bill Clinton and Georgie Bush. So for now the best we have to show for that singular advance is the great speed and volume with which quality porn has become accessible to the masses. The iconic movie of the boomers will turn out to be Wall Street with Gordon Gecko’s famous declaration that “greed is good” the eternal mantra of the era. The generation generally spent its time sucking out the resources of the world, and now the post-Boomers, like Captain Barry, have to act like the cleanup crew after their lifelong fraternity party has come to its stale, beer, vomit, and used condom conclusion.

So here we are and Captain Barry said quite clearly, as he has been all along, that we now have no choice but to address the issues which have lingered for at least a generation, if not longer, if we wish to continue to be, much less to grow, as a nation. We must address health care, education, and energy, all while rebuilding our financial system, or likely we will lose the ability to ever address these issues in a comprehensive, interconnected, and sensible way.

This is about the kind of country we want to have going forward. It’s really about resetting the clock back to before Lyndon Johnson screwed everything up by focusing his political gifts on Vietnam instead of his War on Poverty. Ever since, it’s been cultural and political war; among differing versions of false conservatism and flamboyant niche nurturing. It’s been fake money and mortgaged futures. It’s been fear and quick riches. It’s been “gimme!” and “it’s mine!” (genuflecting to the ghost of George Carlin).

The president mentioned Pittsburgh in his opening remarks tonight. That city and its industrial output and work ethic used to define the American spirit and the American Dream. At some point in the past few decades that symbol became Las Vegas. Well boys and girls, it’s once again time to take a savage journey into the heart of the American Dream. If our politicians will allow us to take that journey, we may find the heart of the beast is still beating, and we’ll have the juice to steer away from the iceberg and steam ahead to a future we can still define.

The Outrage About Outrage

$165 million in bonuses was distributed among the staff at the Financial Products Division of AIG. Those are the good people who brought you the current financial panic and have resulted in AIG receiving $170 billion in US government bailout money (so far).

To the average guy a bonus is something you get for a job well done — an unexpected something, given by grateful bosses to hardworking, successful employees. Sports fans have come to know of bonuses as a means of generating incentive in players to meet high performance goals. A-Rod makes it 50 homers, he gets to spend a night in the cage with Madonna, that sort of thing. In the case of AIG, though, it sounds like these folks were rewarded for driving a respected international corporation and, by extension, the entire world economy, to the edge of collapse. Seems pretty outrageous. How could the government allow this?

I’m not going to try to parse the machinations of the deal to give these bonuses other than to say it seems to be a product of the prior administration (with some advise and consent by Ben Bernanke, Tim Geithner, and some others still hanging around the water cooler in DC). All the plans, in place before Barry came into office, are completely consistent with every other action taken by the former administration. They all had the effect of concentrating enormous amounts of taxpayer cash more or less directly into the hands of a relatively few number of hands at the top of the income pyramid while the entire edifice of political and corporate structure began to teeter below.

Here’s the thing, the guys at AIG getting these bonuses are splitting up one tenth of one percent of what AIG has received (so far). “Distasteful”, to quote the current straw man, recently appointed AIG chairman Edward Liddy, but not really all that outrageous. What I suspect will soon become the real outrage will happen as we start to understand more about where the $170 billion (so far) has gone.

The next meme to start popping up in the political and financial discourse will be “counter-parties”. AIG was primarily an insurance company which sold variations of just about every sort of insurance devised. A counter-party is the recipient of a check when a claim is made on the insurance coverage. In other words, if I have hurricane insurance on my house, then a hurricane blows down my house, I am the counter-party who gets the check from my insurance carrier to cover my lost house. Calling me a counter-party is a fancy way of saying I bought the insurance to protect myself.

This will become important because AIG has been infused with $170 billion (so far) basically to pay off claims on stupid risks taken by the Financial Products Department. They insured the stupid loans bundled together in instruments created by the banks. Most of the bad instruments are held by JP Morgan-Chase (Goldman, Sachs), HSBC (not a US bank), Wells-Fargo (Wachovia), Bank of America, and Citigroup. So really, the money that went to AIG (so far) theoretically is being used to pay claims against the debts (mortgages, credit cards, etc.) going bad at those banks. But wait a minute, those banks also received direct infusions in the neighborhood of $170 billion (so far) also.

From an accounting perspective, these companies have all been preserved after years of very bad management, taking huge risks, huge personal paydays for the folks who did the deals, and we are paying the bill for its failure. The phrase “privatize the profits, socialize the losses” was one I heard quite a bit while Randi Rhodes was still on the air and it’s starting to feel more and more like she was right. “They” get to keep the money when “they” make it, we have to pay for it when “they” lose (although that payment still goes to “them”). I understand and agree with the notion that in a severe recession/depression, the only viable source of capital infusion is the government. No one else is spending their own cash and in a world that revolves on the use and reuse of money only the government has sufficient resources to force a change. How that money gets spent is another issue.

What we are seeing now are the continuing consequences of the Bush administration’s outrageous philosophy come full circle. Barry was stuck with it on January 20th and in the absence of a signing statement to the contrary, he is bound by law to carry it out pretty much as he is doing. Personally, I’d feel better if every American instead, was instead given a portion of the $340 billion (so far) for specific use towards either their mortgages or their credit cards or some other bank originated debt. That way the banks are in the same spot as far as getting their cash infusion and at least the people are using their own tax dollars to wipe the debt off their own books. The debts now don’t go bad, AIG doesn’t have to pay the claims, and instead investigations into a foolish, probably criminally fraudulent insurance enterprise can proceed. Wouldn’t THAT be outrageous??