It's All Just a Matter of Trust

Amid all the blathering on in the press and the political world about the ongoing budget / Debt Limit battle, the essence of the problem at hand is (predicably) overlooked completely.

Ther real problem has nothing to do with taxes, spending cuts, entitlements, etc. Those could all be dealt with with little problem. All it takes is the motivation to do so. The problem is that those in charge on both sides of the aisle have over the past generation condcuted an all out campaign to discount and demonize the other. And by all out, I mean ALL-OUT. The mantra has been "there is no terrible way to win, there is only - winning"* No lie or distortion was seen as to much. Nixon, with all his dirty tricks, was little league - or a T-Ball league - by comparison to the deceitful, lying pack of coyotes that run things in D.C. now.

BUT... Time moves on, and sooner or later the game is up. Or rather NOW the game is up. NOW we need leadership, NOW we need men who, in spite of their differences, can trust each other to make a deal work. But those men (and women) are long gone. The Honor that the old ones carried is gone - for good - and the newcomers, some of whom still have Honor, are kept as far away from any real power as possible. So, the leadership, being small, deceitful, selfish men, the current batch of selfish idiots lack the abuility to fix themselves and the situation.

THEY CANNOT TRUST EACH OTHER BECAUSE THEY KNOW THAT THEY ARE NOT THEMSELVES TRUSTWOTHY AND THEY EXPECT THAT THE OTHERS ALL ARE TOO.

So like the mutinous crew on a ship of old, they threw the Captain overboard so that they could enjoy the power. But now they have discovered that the Captain was the only one who could navigate, and they are lost at see. The bright young scrawny kid swabbing the deck has some idea how to navigate, and could save them, but to put him in charge would make them all seem like the weak, bombastic, selfish fools that they are. Better, think they, to remain lost and die at sea with your ego intact, deep in denial, than to have accept your own miserable failure.

God Help Us All...

ON THE SHOULDERS OF GIANTS

Recent economic news about the problem brewing of a "Lost Generation" prompts me to write on a subject which I have been contemplating for some time now - or is at least closely related thereto. The problem, as described in some detail here and here, that the older generation of workers in this country isn't going anywhere - thus "plugging the system" and not leaving any job openings for the youngest (entry level) generation.

It is time to examine the whole concept of retirement - or at least the modern version. It is obviously understandable that as we age, our abilities change, especially in more physical endeavors. Yet that would seem to lead on toward changing jobs over a lifetime - not quitting entirely. But what has developed in the US (at least) is the idea that, in the middle of a productive life, one should just give up and enjoy 100% leisure for the remaining part of your life. Worse yet, given modern life spans and pension plans, that may amount to 25% or more of a productive life. This leads to things like the "30 and out" process I see among some colleagues, wherein, having finished college at - say - age 22, they put in their 30 years and at the ripe old age of 52 years old, retire and spend the next 30-plus years doing nothing other than "killing time" and playing.

Any objective reading of the situation has to show the insanity and absurdity of such an arrangement. First, in many fields, the 50-some years old are the best, most educated, valuable part of a work force. To take a 55 year old engineer, or manager, or teacher, etc. and put them "out to pasture" is to discard 15 years of their most knowledgable, productive time. To be replaced by a 20-something "greenhorn" who will need years of learning to be as productive as the old-timer they replaced.

Economically speaking, a society - or civilization - cannot succeed where one fourth of the productive value of each (or most) member is simply discarded. It unsustainable - period. THe only reason is has worked out this way for the past two generations is that they have been the beneficiaries of the unbelievable economic growth and thrift which was produced by their ancestors in the past 100 years. They are the ones who have been standing on the shoulders of giants. But as the markets tank and the economy stagnates that model simply no longer works. This system will have to be discarded - sooner rather than later. And when, here in the United States, millions of "baby boomers" are facing the reality that they may actually have to work years longer than they thought, sooner may actually be now.

The tantalizing side story is centered around the fact that the "boomers" are completely oblivious to the fact that they ARE "standing on the shoulders of giants". They think THEY did it all! And more than anything, that reality, which they by-and-large refuse to face is about to be thrust upon them - aggressively - by the generation under 40 who are about to refuse to "pay the freight" for their insanely wealthy parent's generation. I may be wrong - and I hope that I am - but this is going to get ugly.

Middle class running as fast as it can Rex Nutting - MarketWatch

I am completely aware of my own limitations as a writer - painfully so at times.

Painful because there are so many times when I observe things which I desperately feel need to be expressed on paper (or LCD), but can never quite make the words I spit out express the meaning I am trying to convey. And because of that, when I see a "real" writer put out something that expresses so well what I am seeing or thinking, I really appreciate it...

This column does just that. Enjoy

Middle class running as fast as it can Rex Nutting - MarketWatch

Making Sense

After months and months of reading (and hearing) so much "irrational exuberance" (i.e. crack-smoking) from the so-called "business press". FINALLY some one makes a little bit of sense.

READ THIS

The truly amazing thing is that the fourth estate has been able to blow so much smoke for so long about the alleged "recovery". This mindless optimism can only be explained by either a true malice and intent to misinform or a complete insular within-the-Wall-Street mindset - only getting information from other insiders.

In Praise of Smokestacks

Tough Times, these are. Tougher in some ways than those of the past. Yes, the thirties were awful, and in a pure economic sense, I cannot compare my situation to those my grandparents faced. I, for instance, have a stable job - as does my wife. But I am also aware, due to my personal contacts, that there are MANY people who are lacking. Lacking less in strict material terms, but far more spiritually.

Back then, there was at least hope - the prospect that some day, the factory would reopen, the smoke would start pouring out of the smokestacks, and they would be back to work. Here in 2010, only the most ignorant or naive think that that will ever ever happen. This time, the fires were doused - permanently. To be replaced by new fires far over the sea. When things (or IF things) get rolling economically, it will be the Chinese smokestacks that will again be showing the telltale smoke of economic prosperity. Here in the USA we will remain (barring unforseen circumstances) in the backwater of economic activity. A once proud nation of honest, hard working people trying to create an economy by doing each others' laundry. You don't need a PhD in Economics to see that that simply will not work. That PhD may in fact preclude you from seeing that simple reality. The whole gospel of the "modern, service-based" economy is now and in fact always was an illusion - pure bulls**t is more like it. Someone, somewhere ultimately has to produce a good of some kind or the whole system grinds to a halt.

In the world of physics -You CAN"T use an electric generator to run an electric motor which turns the axle of the generator. You need to have an outside power source somewhere to get the whole thing started and to keep it moving.

That power source in economic terms is PRODUCTION. Even in, as in an agricultural society, the product is just food and related products, there is still something being produced which was not there before. And ultimately, the producer of that product is the one who generates the economic (directly of indirectly) need for every other good or service. We are no longer a purely agricultural economy - we are an industrial one. An that is where the smokestacks come in to play. The smokestack is the classic symbol of economic production. That smoke means that someone inside is producing something. Which means that you can start to run an economy. Smoke = Work, No Smoke = No Work .. for ANYBODY!

Which leads to a (true) story I heard once of a family during the darkest depths of the depression. The father had made a good living for his family running an upscale clothing store in New York City in the 1920's, selling suits to the "investor class". When the crash of '29 more or less eliminated his customer base, he sold all of his assets, and he and his family boarded a steamer to Florida. Disembarking, he bought an old car, packed the family in, and began to work their way throughout the southeast - on the road, looking for work, like east coast "okies". For months they moved from city to city, looking for any place wit any sort of promise - to no avail. Then one afternoon, they saw the city of Winston Salem, NC - home of the RJ Reynolds Tobacco Company - far off in the distance. And there was SMOKE coming out of the smokestacks. Seeing this, he turned to his wife and children and said "see that smoke!?! there's work here". A few weeks later, he had opened a small store, selling work clothes to the factory workers. And that is where they remained.

So bring on the Smokestacks, because I - we all - need what they meant then, and still mean today - there's WORK here.

Ya Think????

Reuters this morning features this story:

Soros sees no bottom for world financial "collapse"

The essence of which (the "money quote") being: "We witnessed the collapse of the financial system. It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

Soros knows that what we had been living through for the past several decades was not real prosperity. It was a synthetic prosperity built on synthetic wealth, and all based upon everything was more valuable than it really was. A sort of "mark to market" mentality permeated the world economic vision. All leading to the equally false idea that, if you paid $100,000 for a house three years ago, and it was appraised for $200,000 now, you had just "made" $100,000. Which meant, of course that you "take out" that equity and pee it away on vacations and new TV's. I was personally chided by friends and business associates over the "folly" of letting all that equity "go to waste".

To me, the truly amazing - TRULY AMAZING - thing is hearing the various talking heads on TV (or the internet) going on about "the bottom" and so many stocks being such "bargains". I have never seen a group of people living so deeply in denial. What we are living through is a fundamental change in our economy, or rather our economic system. The essence of this is of course the (FALSE) idea that, for example, the value of General Motors was many multiples of the "book" value, because it was a known fact that GM would grow so far in the future. Well, guess what, it isn't. Just like the value of a horse is equal to what it can do for you (pull a plow, for example), the value - TRUE VALUE - of any company is what it does NOW. Sure, you can anticipate growth, but remember that it is ANTICIPATED value, not real, present value.

Only now the world's conciousness has woken up to the fact that this was all ANTICIPATED value. And unless and until the PAPER assets of the world fall back in line with the REAL assets of the world, the bottom will never be reached. The problem though, is being prolonged by the fact that Wall Street, the Business Media, and all their minions have yet to accept these facts, and keep buying (or supporting) the paper assets as best they can. Because they have yet to come to grips with the fact that they were all wrong, and were all willing sycophants in the construction and maintenance of a financial house of cards. So, for all of you in the "Business Media" that are among the multiple millions of the followers of this blog, please hear me...

YOU WERE WRONG. DEAL WITH IT!!!

Now, accept the fact that you are also pretty smart, and have the ability, once you have "handled the truth" to be a part of the recovery - a good recovery built on sound numbers. Have at it, and help where you can, and get wealthy if you can. But don't try to bulls**t us anymore. We won't buy it.

Doomed to Fail

HOW COMMON SENSE AND PERSONAL EXPERIENCE TEACH THAT THE STIMULUS PACKAGE IS DESTINED TO FAIL

Many things (admittedly not all) that we experience in our personal lives can be extrapolated to the world at large and government in particular. This goes especially for economic things. Personally, or macroeconomically, one can NEVER borrow their way to prosperity. Any apparent prosperity is just that apparent, with no more connection to reality than a computer generated visual effect in a movie or television show.

Case in Point: A person (mea maxima culpa) is given credit cards which he then uses to "enhance" his living standards. He (or she) eats at better restaurants more often, goes on nicer vacations to nicer places, has nicer appliances and computers and televisions, etc. Now all of this happens s-l-o-w-l-y, over many years. Then suddenly, the credit cards are maxed-out, and he can't "afford to live". Worse yet, the bills are due! But just in time, an exciting offer comes through the mail, giving him an opportunity to move his balances to a NEW card, and have more available credit to live off of. The cycle repeats several times and eventually you have a person who cannot POSSIBLY afford to pay the money back. What follows is bankruptcy, and years of living much much lower "on the hog" and hopefully a long, slow recovery from the addiction.

WELL.... what we have seen in the past 30-odd years is that whole situation writ-large. Our government, through sdeficit spending, has been pumping BILLIONS of borrowed money every year into our economy, making us all appear more prosperous. Whether it was easy money for constuction loans, or mortgages, or money for the military, or for social programs - whatever they spent money on. It all served to "pump up" the economy, like a sugar rush pumps up a child - or speed pumps up a user. But now - RIGHT NOW - is the point where we are used up. Tapped out.

The bottom line is, this "stimulus" is doomed to fail, or at least doomed to ultimately fail, one that bit of fake money is used up. So my economic advice to anyone reading this is... GET READY! Because as soon as this plays out (however long it lasts) it's gonna be really really ugly.

2 months later....

Well, two months (roughly) have gone by since I last posted...

Personally, it has been an interesting ride. In the sense that is of the ancient Chinese curse of "may you live in interesting times". But in the end, thanks to God in heaven, and working through some dear friends here, I am now gainfully employed. And not JUST gainfully employed, but in a job which suits me perfectly. It was just the process of getting here which was "interesting".

Psychological stress is a fascinating thing. Sometimes when you are not really even consciously aware of it, it can get inside you and wear you down and manifest itself outwardly and physically in ways you don't ever expect. Once again in my life, I have re-learned that, while working is sometimes stressful - NOT working is worse. Or at least when you have a family who depends on you. Now each day I even more strongly thank God for the blessing of my job, and pray that he help all those fathers (and others) who are out there still searching - and worrying.

To all those friends who were praying for and trying to help me in my employment search - Thanks.

It's the economy, stupid....

That famous line from the 1992 presidential campaign is what made Bill Clinton the 42nd President of the United States. The line consitutes a more modern and sophisticated version of Nixon's old line that "elections are determined by the price of pork bellies in Chicago". The economy is the foundation of every aspect of our power and identity as a nation - and our ability to continue to exist as one. If the economy is good, most everything else will fall into place. If it isn't - nothing else matters.

Today, as I have for the last few weeks (thanks to the weakness in said economy) I had the opportunity to watch as the Dow Jones plummeted even as Treasury Secretary Paulson was offering his rote assurancees that everything was under control and it would all be fine. I believe that it is worthy of note that the markets tank nearly every time he, or any other government official speaks. Perhaps it's because the very fact that they are speaking about the subject means that it is still a problem which is out of control.

There is an old saying that goes "when your only took is a hammer, pretty soon all your problems start to look like nails". Seeing Paulson, Bernanke, et al speak now is a sad and loud and garish real-world expression of that old proverb. They have cut interest rates and pumped billions of dollars into the oconomy, and each time it has had essentially zero affect. So, the answer - to them - is to cut more and pump more. And they will continue to do so until they can pump no more.

That is because the fundamental problem in the market - mark-to-market valuation - is was, and always shall be a lie. For years Wall Street has been operating under the assumption that any asset's value is determined solely on what one can theoretically sell it for. A good principle, but one with limitations. It only works if the buyers are well informed and make good decisions. There really is such a thing as intrinsic value. Just because some idiot somewhere pays $50,000 for a Toyota Corolla DOES NOT MEAN THAT EVERY OTHER COROLLA IS INSTANTLY WORTH $50,000. And now, sadly, the United States Government is in the position of having to pay (figuratively) $50,000 for a lot of Corollas while simultaneously trying to convince everyone else in the market that every other Corolla is a $50,000 car - and people are not that stupid. Not any more. And sooner or later they are going to hit the wall and lose their abnility to buy any more Corollas. People know that, and no amout of bluster on the part of Hank Paulson, Ben Bernanke, or anyone else is going to change that.

It is sad and frustrating and heartbreaking to watch this happen. To watch a great nation essentialy come unraveled because of the greed and hubris of a handful of elite business and government leaders.

Mass, Vacation, Etc...

I had the RARE pleasure of going on "vacation" last month. Vacation being 4 days at the beach, but it was (literally) the nicest four days of my life. The weather was perfect, the place was perfect, the kids were perfect... Absolutely amazing that it all worked out. Made all the sweeter by the fact that we had not had a break AT ALL in about four years. Every waking moment of every day since August of 2004 was either at work or taking care of the kids/house. My wife and I hired a babysitter once to go to the MEF Mass at Our Lady of Grace (3 hours), and once for dinner (3 hours).

From Friday morning until the following Wednesday morning, I didn't read the paper, or see or hear the news at all. A self-imposed news blackout which made for a blessedly peaceful weekend. Call it blissful ignorance if you'd like, but it worked.
In spite of all of the stress and economic doomsaying that has happened since, it hasn't gotten me down like it did before. I watch with interest and fascination, but with no personal anxiety whatsoever. Amazing what the human brain can cope with once you give it a chance to recover !!!

Mass was fascinating, though! As you see, I don't travel much and rarely if ever get to see mass outside of my home church and the aforementioned OLG. So Saturday evening, my wife, mother-in-law, myself, and the powerpuff girls attended a "bi-lingual" mass, at Holy Trinity Catholic Chapel. Needless to say "bi-lingual" meant it was nearly all in Spanish, but with an obviously non-spanish speaking priest, there were some oddities. The opening prayer was in English, but virtually everything else was in Spanish save for a few words here and there. The Gospel was read in Spanish, by a nun. Something I had never seen before. The homlily was in English, but interpreted real-time. The eucharistic prayer was English, but everything else from that point on was spanish, and led either by the same nun or another lay person.

All that said, the mass was WONDERFUL. There were altar boys, reverent and precise. And even all of the lay participants were reverent, precise and well practiced. The congregation was so young, so passionate and reverent and there were kids EVERYWHERE. I was more comfortable there than at my home church. The ushers gave out a very detailed spanish-english handout of all of the prayers and hymns, in order, which was very easy to follow. Allowing me to sing and pray along in spanish* with no trouble at all, though I know little spanish beyond what one hears on Dora the Explorer.

I want to go back....

* At the risk of sounding conceited, I have a gift of being able, with very little practice, to pronounce a foreign language for the most part as a native speaker. Naturally, "sight reading" in a foreign language has its limitations, but for the purpose of participating in mass, it works great.

Coming Soon.....

No one likes to be the bearer of bad news, but the truth sometimes hurts. I am not trying to be a doomsayer, just trying to warn the readers of this blog to get ready, or rather get as ready as you can. Not eveyone is in as volatile and vulnerable an industry as I am, but in the long run, that won't matter a whit. It may take a while until it gets to you, but it will get you eventually.

AND NOW, I ask my faithful audience to pray fervently that I am absolutely and completely wrong....

Meltdown.... procrastinated

Well, we have been watching intently the last six days (or more) as the house of smoke, mirrors, and paper that is the world of Wall Street unravels and collapses before our eyes. Comparisons to the 1930's, to the Resolution Trust Corporation, to the 1970's, etc., etc., etc. abound. They are all fundamentally flawed and fundamentally inadequate to describe the mess in which we find ourselves.

Fundamentally flawed because the crash of confidence that was behind all of the aforementioned crises was a crash in the confidence of the value of REAL THINGS. To be sure, there was speculation, and prices collapsed, and the financial system froze up as a result, but still, behind all the speculation, there were real things, of real value. So, no matter how bad things got, everyone in the system knew that they would be holding a real asset with some non-zero value - or paper backed by the same. The promise of value did not constitute value in and of itself. And even when there were not real assets to back up a promise of future value (bonds, paper, etc.), the lender of funds was compelled by self interest to insure that the expectation of future value was realistic and believable. This "crisis" is a crisis of confidence in the value of paper assets that have, essentially, no value at all. Zero. SO... Like musical chairs, whoever winds upholding them at the end loses EVERYTHING.

Of course there was also a time, not long ago, when real value was thought to be an integral component of value itself. And real businesses, which produced real products, were considered honorable and desirable and respectable. Now, the "Captains of Industry" (Carnegie, Ford, DuPont, etc) i.e., those who actually MADE things, have been replaced by the "Masters of the Universe", a comic-book sounding term used to describe the current batch of disgraceful bastards on Wall Street who bring to the table not any real productivity, but rather the self-inflated ability to pass worthless assets back and forth, inflating their value with each transaction, all to line their own pockets and scam the poor dumb bastards down below who operate under the pathetic belief that the price you pay for something has some connection to it's real value.

Think of it this way.... Say, for instance, I were to go into the woods to answer natures call, and find an expired (and losing) lottery ticket. An absolutely worthless piece of paper. BUT.... being unscrupulous and enterprising person, I find a gullible looking man o the street, and tell him that the ticket is a five-dollar winner, but if he will give me two-fifty for it, he can cash it in later for five. He, being gullible, believes me, and give me the two-fifty in cash. Then, he decides to "improve his position" and finds another person, tells him that the ticket is a $25 winner, but sells it to him for $12.50 cash, thus more than doubling his money, This happens two more times, and someone will be holding what they think is a $200 ticket, which is essentially and truly worthless. But then, the word gets out.... the lottery ticket that's being pedaled on "the street" is worthless, and all of a sudden, the holder of the ticket can't find a buyer. He's out $100, but he claims to be out $200! Because the ticket is "on his books" as a $200 asset. That is where we are today in the financial markets, except, of course that, instead of gullible street people, we have the "masters of the universe" and instead of two hundred bucks, we are dealing with trillions of them.

That is where we are until last week, that is. Last week, the United States Government agreed to come in and essentially buy the worthless ticket for some price, say.... $50. Which means that we, the taxpayers, just essentially gave away $50 - plain and simple. It also means that "traders" (we used to call them dumbasses) made a hundred bucks ($2.50+$10.00+$12.50+$25.00+50.00) trading worthless paper. And all the while the $100-paying dumbass is squealing about losing fifty bucks. Gotta Love that. He was stupid enough to pay $100 for a worthless piece of paper, knowing full well it was worthless, because he thought he could find another sucker. And now, that hubris, that moral bankruptcy, is supposed to be my fault, and I AM SUPPOSED TO BAIL HIM OUT!!!! Making certain, of course, that his billion-dollar personal wealth remains intact.


The comparisons are inadequate because nothing in the history of the modern financial system comes anywhere near the scale of this crisis. The numbers are unimaginable. So much money that, if all of the governments in all the world poured cash into the system, there would still be more worthless paper than there would be cash.

It is for these reasons that, no matter what the consequences, the inpending "bail-out" is a disaster in progress. NOT a disaster waiting to happen, but a REAL disaster unfolding before our eyes. It made a big splash two days ago, but it is doomed to fail. There is simply no way to make it big enough to make a real difference. Sooner or later - more likely sooner - within weeks, that is, the whole thing will crash. The numbers say it has to. The emperor has no clothes, and everybody knows it now. The fact that the government is trying to convince us otherwise doesn't change that de-facto nakedness. That is why they should have done nothing.... Nothing for Bear Stearns, nothing for Fannie or Freddie, nothing for AIG, nothing for all of them. If the Dow falls to 6000, then so be it. That is where it belonged the whole time. Let it fall, let it crash, let it bottom, and then, once things have assumed their REAL value, start to build it back. Build it back based on reality, not on pure bullshit paper. It will be rough, yes, but sounder in the long run.

BUT NOW the government (or central banks) has "shot their load", when it DOES crash, not only will it be worse, but the only refuge, the last resort of government assistance will be gone. So we will have the 1930's without "relief". People will be broke, and broken, and hungry, and there will literally be nowhere to turn.

And when THAT happens, it is going to get ugly. Very ugly, very fast. So get ready. It's going to be a long, cold winter....

May God help us...

Life and Times

Anybody who has read or heard the news in the last few months knows about the problems in the mortgage and housing industries. Those of us involved in the industry have been watching and listening warily - fearfully - to each new bit of news. It was one of those situations where you knew something bad was going to happen, but there's not a damn thing you can do about it. Amazingly (at least to me) the industry kept plugging along like there was no tomorrow. We were swamped with work, subdivisions going up, houses going up, development everywhere.

Until this month.

Now, in a span of a few weeks, most of our big clients called and put a hold on all of their projects "until at least next spring". Now there is little work in-house, and very few prospects for more. I personally have no work to do to speak of. Yesterday we laid off half of my field staff, and then we had a company meeting wherein it was explained just how dire the situation is, and how we think we can all hang on until January, but after that, unless something changes, we will have to cut virtually everyone else. This is all set in the background knowledge that there are several firms in this business, both big and small, who have or are getting ready to go out of business entirely. Needless to say, it gives me pause.

Of course, I am prone to overreaction, so maybe it'll all work out and happy days will be here again in a few months! In the meantime, I can't get this song out of my head...



It has been said that those who don't know history are doomed to repeat it. But that ignores the fact that those who do remember history are doomed to worry about repeating it!!!!