A Whole New Thang

It’s becoming increasingly clear that the entire game is shifting, and man, do I mean entire. The idea that unregulated free market capitalism, as we’ve experienced since Reagan, is fraudulent and evil and has had huge financial, ethical, moral and humanitarian consequences and they are completely nontrivial. Much of the US and much of the world bought into the unregulated invisible hand as wiser than mere mortals and vastly superior to the judgments of a democratically elected government.

Just how screwed we are and how long it will last and just how bad it would be are issues that are just coming onto the radar screens of the ink stained wretches, to mix the hell out of a metaphor. When we start getting down to it, it all becomes much clearer, but the unholy alliance of the Religious Right, business and the wealthy was doomed from the start, in spite of a nearly three decade run. Now that the unemployed Evangelical sees whom he was supporting at AIG, the entire structure falls of it’s own weight. The party of the angry old white guy will be a minor distraction and regional footnote to the political story of 21st century America.

To them, I say good riddance and don’t let the door hit you in the ass.

On Turning Fifty

The years mean so much less as we age. The difference between turning ten and turning twenty was profound. I was basically not the same person with a completely different set of friends and acquaintances and had moved from PA to NJ to CT to VT to CA and back to CT. Turning ten, I was a little tan kid in fourth grade in an LA suburb, mostly concerned with BB guns and minibikes. Turning twenty, I was a sophomore at an ivy covered college in Connecticut, lost in a rapturous, heart bending affair of the heart of some sort and bearing absolutely no resemblance to that LA kid.

Flash forward and I’m turning fifty on the same street where I turned forty, living in the same house and with many of the same guests showing up. Same job (none), same wife (and best friend), a little less hair and memory and both grayer at that.

The odd juxtaposition of how quickly it passes and how little things change is sort of paradoxical in an obvious yet unfathomable way. What a ride. I’m so thankful for all the people in my life who have made it a joy, and I hope I get to see them at sixty. The idea that I’m closer to being eighty than nineteen is profoundly disturbing, but I remember friends who didn’t get to grow old, and this seems the better alternative. Geoff Dimmick, Brick Fisher, John Sidgmore, Dave Boast and a host of others would surely rather age than be lost so young.

Happy Birthday to the whole world. No exceptions.

Truth in Advertising

see more pwn and owned pictures

Another Week

Monday stumbles through the dawn like a newborn calf, all legs and elbows and surprised to find itself standing. So here we go on my last week in my forties. Turning twenty one was such a shock that nothing after that really has meant much. But this seems different. Unless Danny Hillis and Ray Kurzweil are right about the Singularity, fifty is not middle aged, it’s damned well past it.

That being as it may, life is all just stuff that happens to you while you’re making other plans. So another week is just another week.

Although. The thing that makes life so much more interesting is loved ones, and a whole bunch of them are coming to visit this week for the foreboding 50th birthday party Sunday. I do love a party, and this one should be fun. We’ve got friends, nephews, nieces, great nephews and great nieces, plus a brother and a whole lot of others showing up to make the weekend a lot more interesting.

Pig roast by a genuine former political prisoner (Cuba), steel drum music by Sir Cedric, open bar and lots of delectable munchies sounds like fun to me.

Anyway, a short post, but it’s time to take the dogs to the beach.

Piling on Obama

Today’s New York Times features a host of generally left leaning pundits who usually cut the new guy in charge a lot of slack. Today was different. They’re going after him for two things mostly; underestimating how pissed off people are about bailouts and how deep the current financial catastrophe is. Well, sorry for being human, but none of these geniuses saw it coming either.

I’ll stop patting myself on the back for calling this thing half a decade ago, and point out that the conventional wisdom missed the whole damn thing and the media was complicit in telling any and all that real estate is going up forever, and buying and holding stocks is the way to gain wealth.

Whoops. Never mind.

Just how the hell to fix this stuff is beyond complicated. A primary problem is the staggering amounts of debt sloshing around in world markets. Repeat after me; there is more debt than money in the world and this can’t have a happy ending. Get it? Most of a quadrillion dollars in derivative debt just can’t be unwound. There isn’t that much money. Quadrillion, with not an M or a B or a T, but a Q. That’s US$1,000,000,000,000,000.00.

There’s no way humans are going back to using the home as ATM by refinancing, and even the credit card abusers seem to be wising up to that nastiness, so it’s not going to be back to business as usual by summer. This is the collapse of a decades long spree of deregulation, cheap credit and the insane notion that “deficits don’t matter”. (Thank you Dick Cheney for that one. Apparently Democratic deficits do?)

So really, we’re just starting to get a vague idea of just how ugly it gets, and in a fair amount of denial in the mean time. Here in Key Largo, most people are employed in the vacation business, as waiters, bartenders, maids, fishing guides, cooks and the like. With discretionary income collapsing by the day, who’s going to go on vacation to the Fabulous Florida KeysTM” and spend money?

This really gets ugly and I have no clue how the population is going to handle it. Unfortunately blaming Obama for inheriting the shitstorm is likely to become a popular pastime. Like The Onion headline states when Obama was inaugurated, “Black Man Given Nation’s Worst Job”.

Mainers in a tight spot

This morning on NPR there was a piece on a couple from Portland, Maine (God’s country) who moved to LA where he gets work and she gets preggers. Flash forward and the work dries up along with the credit cards they’ve been living on. Final plan is to move back to Maine and move in with her mother who lives in a small house in the woods. Dad has lost almost everything in the stock market, and can offer no help except access to a woodlot they can cut and sell or burn for heat. Grow a garden, can the produce, harvest deer, all of these are life skills for hardy New Englanders, but it points out how hard this will be for less handy folks.

What if there’s no mom to move in with? What if you couldn’t grow weeds to save your life? What if you didn’t know a chain saw from a chain letter or have a dad with a woodlot? What the hell will the truly unfortunate do?

Obviously this is just the beginning of a huge change in the lives of everyone on the planet. I write about the American parts of this, mostly because it’s what I know. Some other places face really terrifying futures, including China with literally hundreds of millions of unemployed migrants. Pakistan, holy crap, scares me just to type the name. The lunatics running North Korea? Mass starvation and nuclear high jinks.

Growing up, I was certain I knew how I would die; in a nuclear firestorm when the US and the USSR acted out mutually assured destruction. Maybe that’s why I don’t fear terrorists at all. The threat is so minor in comparison. Beestings kill more people than terrorists, so would someone please give me back my civil rights and get on with the police work of arresting and convicting these guys? Thank you very much.

Anyway, we live in interesting times, and it’s going to be interesting seeing how it works out. Best of luck to both my readers!

The New Stingy Chic

Just how we handle the freaking financial Apocalypse will define us for a generation. The actual detailed plan for how to pull this off has yet to be written, but I’m dumb enough to give it a try. How do we handle an America in which one out of four wannabe employees are unemployed? I’ve given it some thought and here’s my take on it, although it requires a lot more selflessness and kindness than a lot of us have been capable of these past few decades.

First off, I expect fewer occupied houses, which is not great for the real estate market, to state the obvious. What will happen is people doubling and tripling up in housing. It costs the same to heat a 4-bedroom house with 6 people living in it as it does with 2. A new occupation I think we’ll see is sort of a domestic caretaker. If 4 friends are living together and one loses his or her job, I can see that person doing the laundry, cleaning and cooking for the other three in return for lodging and food.

It makes sense with everyone worried about employment to know that unemployment doesn’t necessarily mean homelessness. The fate of the abandoned McMansions as future multi-family housing just makes a lot of sense as the absurdity of putting 3 or 4 people in a 10,000 square foot house becomes even more obvious. I think our recent immigrant families especially would adapt to this well, as culturally multigenerational households are familiar. Primarily, I’m thinking Latin Americans, but the same is true for South Asians and Chinese.

How else do we adapt? Is it just me or do there appear to be yard sales everywhere? Many times as many as in years past. And some amazing bargains. (Yes, I stop at yard sales.) I’ve given a lot of thought to the food situation and I’m not sure how it works out. My brother in Guatemala tells me that fast food restaurant have a “10Q” menu, meaning all items on it are 10 Quetzals or less, about US$1.25 or less than a Euro. I could see that happening here with McDonalds selling rice and beans and maybe a sausage for a buck. But the more widespread feeding of the population seems harder to grasp. Most churches and civic organizations (Lions, VFW, Chamber of Commerce, et al) have kitchen facilities, so maybe they’d rotate?

It’s always killed me that there are 350,000 churches in America and roughly 750,000 homeless people. The churches are used a few hours a week for a Guy that allegedly has mansions in heaven (Really! Look it up!) with the homeless hang on the curb, in the dumpster or at a shelter if they are lucky. Can somebody tell me the scriptural basis for NOT cooking for and feeding the homeless and putting them up in churches? Hello? Is this thing on?

Though I don’t agree with his religious views, you’ve got to love a guy like Larry James. You can oppose Christianity as much as I do, but man, you’ve got to give him credit. Maybe there are a lot more potential Larry Jameses out there. It would sure make this whole collapse of what we knew much easier for many, many people.

And then there’s this guy, who gives me a huge amount of hope. What a great story about some great people. There's still a lot of hope.

AIG Redux

Believe it or not, I used to be important in the world of finance and high tech. I loved showing up for a board meeting at Goldman or one of the upper crusty venture capital companies in shorts, Birkenstocks, tie dye and a pony tail. That bunch was an incredibly entitled group of people. They took their insane paychecks and plush surroundings as a birthright. To hear about the tone deafness of the folks at AIG is just a walk down memory lane.

I’ve got no problem with wealth, or big payouts. It’s just that they ought to reflect actual value created or social good or something more tangible than a credit default swap. My money came from growing a business, hiring thousands and providing internet access for millions. Hard to argue that wasn’t worth a few million bucks. But the money scramblers? No, no, no.

Anyway, I have such memories of these guys, even a few literal billionaires, and how they treated immense paychecks and actual dynastic wealth; like a right owed them. It’s not hard to imagine how the kids at Goldman, Citi, AIG and the other bailouts could be so blind to the outrage, since their peers and neighbors were the same entitled pricks. I don’t think I ever met a Democrat among them, and they sure laughed at the religious right that made their party the dominant player for most of the last few decades.

A new friend recently asked how I would describe the human race in one word. I said, “Flawed.” These people certainly show that. And since many of them were and remain friends, I can understand some of where they come from. The prep schools and Ivy League colleges they attend set them up to feel superior. The investment banks and venture capital firms feed the desire to be crazy wealthy as if it’s the normal course of things.

So now, it’s a little shocking to see them coming out of the bubble and blinking in the unaccustomed sunlight. It will take them a while to get their bearings, and oh, what an adjustment that will be. Michael Lewis in “Liar’s Poker” in the early eighties wrote what he thought would be a call to arms about the silly excesses on Wall Street, like paying an investment bank CEO an absurd $2 million a year. How crazy is that? The public will never stand for it! The amazing thing is that he was off by nearly three decades.

It’s hard to have a lot of pity for the formerly fabulously well to do. Ironically, there was a huge amount of social pressure to spend like you made even more than the insane pile you did, so between real estate values plummeting and the stock market tanking, I believe a lot of these guys will go from private jets to the Hamptons to really not great circumstances. Without 7 figure bonuses, the second house definitely goes, the private jet is gone, primary residence in doubt, later to the Porsche, the trophy wife takes a hike and hello to $50,000 a year as a junior bank manager in Hoboken. Hard to feel sorry, but what a flight path that must be to live through.

The reality of the hard struggle for most Americans to provide food, shelter and health care to their families is evident to most of us. There has been an “elite” (Republicans stole and twisted the term) living high above the fray, pulling down small fortunes while the bulk of the population struggled to hold it together. I’m sure they would be surprised at the depth and intensity of the animosity their fellow citizens have for them, but they really need to get used to the idea and fast.

Class war is an ugly thing (another stolen and twisted phrase) but you just can’t keep this shit up in broad daylight and not get fed to an angry mob.

Front page New York Times story today cites the huge increase in volunteers showing up to do charitable work while unemployed. That’s a great sign that maybe we’ll pull together as a country and make things better. For now, it seems like we’re steering the right way and not into Mad Max or fascism. I’m watching a piece from NBC as I type that shows evictions by police an hour north of here. In my younger days, we went bankrupt and the bank seized the house. It’s pretty damned devastating, but it’s great to now that rather than riot and rage, people are volunteering to help others.

They’re foreclosing 50,000 houses in Vegas this year and 12,000 in Miami. How many families and individuals does this affect? How would you like be renting a house, be current on your payments and have the police show up and literally throw all your stuff into the street? How would you like to watch your kids see this? It’s just devastating.

Anyway, I remain cautiously optimistic that the social and political outcome in this country will be positive, though extremely painful. The economy will definitely go to hell, but maybe, just maybe, as a people, we will get by.

Buddha and the Cows

One day in spring, Buddha was sitting in the grass with a group of students. They were interrupted by a frantic man who ran up to them and said, “Have you seen my cows? They escaped! They are my whole life! If you see them, let me know immediately! I live in the house over there. At least I will if I find my cows. Where can they be?”

With that, the man ran off, terrified of losing his cows. The Buddha looked at each of his students and said, “Let us take a moment to be thankful that we don’t have any cows.”

A Glimpse of the Apocalypse

Today’s New York Times has a front page story that features the concerns of the Chinese premier over the US’s ability to pay the trillion US dollars it owes Beijing. They seek assurances that the money won’t go up in smoke. As a friend of mine much smarter than me once said, “They’ll get their dollars back. Can’t promise what those dollars will be worth.” The point is (obviously to economists) that the best way for a nation (from its’ point of view) to pay off deft is to inflate the currency.

Unfortunately, this is rarely the lenders’ view. Should the Chinese stop loaning us money, the price of our bonds would have to fall so someone would want them. Uncle Sam’s crazy bond blowout! Prices so low, it’s insane!

Brief note here. As the price of a bond falls, the interest rate goes up. The dollar denomination is what you get at the maturity of the bond, either months or years from now. Here’s how it works:

I loan you $90 for your offer to pay me $100 in a year. I earn $10 for my trouble, so I get (10/90=0.11) 11% interest.

Later, I loan you $80 for your offer to pay me $100 in a year. I earn $20 for my trouble, so I get (20/90=0.22) 22% interest.

Much later I loan you $70 for your offer to pay me $100 in a year. I earn $30 for my trouble, so I get (30/90=0.33) 33% interest.

Get it? The cheaper the loan (basically a 1 year $100 bond) the higher the interest. And while the full $100 has to be paid on all three loans, until the end of the year (the maturity), the first guy is screwed if he needs his money sooner, since no one will give him the $90 he loaned, just the $70 the last guy got.

Throw in the higher inflation inevitable with falling bond prices, voila! You see why the Chinese have their knickers in a knot. They can sell (or just stop buying) and the value of their holding will fall in dollar terms immediately, or they can hold on and have the value of the dollar decline, getting back at maturity the right number of dollars, but much less value in what they can buy with these new smaller dollars.

Got it? Good.

Basically, we all know that the US Treasury isn’t like Scrooge McDuck’s basement, with piles of cash and gold lying around. To fight the Iraqi war, bail out the banks and stimulate the economy, we’ll need to borrow the money from guess who?

As noted previously, most Americans never saw this thing coming. Imagine being Chinese! They didn’t have a market economy the last time a nasty spell came around in the early 80’s. Yours truly was moving furniture for $3 an hour with an Economics degree from Trinity College. My friend who cleaned the Slurpee machine at 7/11 wasn’t a Pakistani immigrant. He was a native Californian with a Doctorate in Physical Chemistry.

I’ll be 50 this month, so I remember the hard times and have been cautious about risk, markets and debt. Any American under 50 never saw it first hand. Any Chinese of any age has never been through this. It will become very political, very contentious and very dangerous when 100 million newly middle class Chinese get sent back to the rural villages.

May you live in interesting times.

Slowly catching on…

For those of us who saw it coming, there’s a sense of scheudenfrade watching others come to terms with the financial Armageddon. There are a lot of older people who followed the rules and had a “diversified” stock portfolio that’s nearly gone. Buy and hold indeed. The alternative “safe” strategy of Treasury bills (bonds) is paying out a mighty 0.75%. So, let’s see, to live on the interest at a modest US$50,000 a year would require a nest egg of precisely $6,666,666.66.

How many retirees are sitting on that kind of wealth? Would you expect to be living on fifty thousand a year after piling up nearly seven million dollars? Most people would be thrilled to retire with a million bucks in the bank, but to keep it safely in T bills means living on US$7,500 a year. That’s like having a job that pays US$3.68 an hour, less than half the legal minimum wage. And that’s with a million bucks!

No wonder there are so many anecdotal tales of older folks going back to work. So sad after a lifetime of work and savings to have it basically stolen by a bunch of fat cat Wall Street type who got filthy rich while losing our money. The Jon Stewart/Jim Cramer face-off Thursday really managed to sum it up well, as well as just being funny. There’s something terribly wrong with the best journalist in America being a comedian, but thank Dog for Jon Stewart.

10 Things about Obama's Plan

This is worth a repost. More tomorrow.

Last week, President Obama unveiled his budget—his blueprint for America—and it's ambitious, amazing, and unapologetically progressive. I thought you should see this summary of what the plan would do from MoveOn.org. Please check it out and pass it on!

10 things you should know about Obama's plan

The plan:

Makes a $634 billion down payment on fixing health care that will go a long way toward paying for a more efficient, more affordable health care system that covers every single American.1

Reduces taxes for 95% of working Americans. And if your family makes less than $250,000, your taxes won't go up one dime.2

Invests more than $100 billion in clean energy technology, creating millions of green jobs that can never be outsourced.3

Brings our troops home from Iraq on a firm timetable, finally bringing the war to a close—and freeing up almost ten billion dollars a month for domestic priorities.4

Reverses growing income inequality. The plan lets the Bush tax cuts for the wealthiest Americans expire and focuses on strengthening the middle class.5

Closes multi-billion-dollar tax loopholes for big oil companies. 6

Increases grants to help families pay for college—the largest increase ever.7

Halves the deficit by 2013. President Obama inherited a legacy of huge deficits and an economy in shambles, but his plan brings the deficit under control as soon as the economy begins to recover.8

Dramatically increases funding for the SEC and the CFTC—the agencies that police Wall Street.9

Tells it straight. For years, budgets have used accounting tricks to hide the real costs of the wars in Iraq and Afghanistan, the Bush tax cuts, and too many other programs. Obama's budget gets rid of the smokescreens and lays out what America's priorities are, what they cost, and how we're going to pay for them.10

Pretty amazing, right? Can you pass this on to your personal network too, to make sure everyone knows how far-reaching and progressive Obama's plan is?

Thanks!

P.S. Turns out there are way more than 10 amazing things in Obama's budget and we couldn't resist sharing just a few more.

Stops unnecessary government subsidies to big banks, health insurance companies and big agribusinesses.11,12,13
Expands access to early childhood education and improves schools by investing in programs that make sure every child has a qualified, strong teacher.14
Negotiates for better prescription drug prices using Medicaid's tremendous bargaining power.15
Expands access to family planning for low-income wo men.16
Caps the pollution that causes global warming, and makes polluters pay to support clean energy innovation.17
Sources:
1. "Obama Offers Broad Plan to Revamp Health Care," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-health.html
2. "Obama Expects Fight Over $3.55 Trillion Budget Plan," Bloomberg News, February 28, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aiLyabbGqJBo&refer=home
3. "Energy Budget Is Sunlight After Eight Years of Darkness," Center for American Progress, February 26, 2009
http://www.americanprogress.org/issues/2009/02/energy_sunshine.html
4. "The Economic Cost of War in Iraq and Afghanistan," The New York Times, March 1, 2009
http://www.nytimes.com/2009/03/01/weekinreview/01glanz.html
5. "Tax Cuts," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-tax.html
6. "Energy Budget Is Sunlight After Eight Years of Darkness," Center for American Progress, February 26, 2009
http://www.americanprogress.org/issues/2009/02/energy_sunshine.html
7. "Student Loans," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-edu.html
8. "Obama unveils budget blueprint," CNN, February 26, 2009
http://www.cnn.com/2009/POLITICS/02/26/budget/
9. "Obama budget would boost SEC, CFTC, FBI," Reuters, February 26, 2009
http://www.reuters.com/article/politicsNews/idUSTRE51P5RD20090226
10. "Obama's budget," Los Angeles Times, February 27, 2009
http://www.latimes.com/news/opinion/editorials/la-ed-budget27-2009feb27,0,2535327.story
11. "Student Loans," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-edu.html
12. "Health Insurance Stocks Dive on Medicare Advantage Cuts," The Wall Street Journal, February 26, 2009
http://blogs.wsj.com/health/2009/02/26/health-insurance-stocks-dive-on-medicare-advantage-cuts/
13. "Agriculture," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-agri.html
14. "Investing Wisely in Our Children," Center for American Progress, February 26, 2009
http://www.americanprogress.org/issues/2009/02/education_budget.html
15. "Obama Offers Broad Plan to Revamp Health Care," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-health.html
16. "Obama Offers Broad Plan to Revamp Health Care," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-health.html
17. "Setting 'Green' Goals," The New York Times, Febru ary 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-energy.html

Good News?

I’ve been scanning the media for stories about the social reaction to current economic events. It seems like the traditional reactions to extreme economic downturns have been either pulling together in shared sacrifice or Fascism, at least that’s how the last one turned out. To get to Fascism would probably require a fair amount of violence and an increasingly forceful response by government to suppress it.

Today’s USAToday (useful for learning what the proles know) has two front-page stories about the better outcome; outpourings of public philanthropy and families coming together in hard times. While it’s heartening to think that Americans might just pull together in hard times, there are a few countries out there, in similar distress, about whom it’s much more difficult to be sanguine.

Let’s see who might take a less happy direction.

Russia? Check.
China? Check.
Albania? Check.
Turkey? Check.
Pakistan? Holy shit.
India? Holy shit tambien.

Anyway, the bad news is that more than a couple of the scarier candidates have nukes. Great. So how does this play out? The bizarre strengthening of the USD against other currencies is horrible news for many of the most challenged countries out there.

Anyway, the good news is that we Americans might not just kill each other off.

The bad news is how many other folks just might be up to the task.

Rush Limbaugh- My Hero

Okay, nobody loathes the dittoheads and their master as much as I do, but Oh. My. God. The Republicans are just shitting themselves over this vacuous blowhard who holds sway with the hard-core right wing base. Republican National Committee Chairman Michael Steele was forced to apologize, stating, “I respect Rush Limbaugh, he is a national conservative leader, and in no way do I want to diminish his voice."

Can we start a “Draft RushSarah2012.com” committee and get these idiots on the ticket? Nothing could better guarantee Obama’s second term. I’d write them a check in a heartbeat.

On his site, Rush is currently bloviating on how the collapse of the stock market is Obama’s fault; the fall started in September when the market realized Obama was going to win. That’s funny, as I recall, McCain went down in flames after the market did, and people realized what a dog’s breakfast Bush & Company had made of things. There will always be idiots who agree with Limbaugh, but I can’t imagine an America in which a majority would vote for him.

My personal enmity for the guy has a lot to do with my parents, who are huge fans of Limbaugh. How the hell can self-described Evangelical Christians take their moral guidance from a thrice-divorced drug addict? And why should the head of a political party have to apologize to the nitwit?

More Happy News

Well, surprise, surprise. Regular readers (both of you) of this blog knew that we were at the beginning of a financial shitstorm, rather than looking for a bottom and quick recovery to what was, and will always be an unsustainable orgy of debt and artificial affluence. AIG has somehow managed to lose over $60,000,000,000 in a mere three months. Based on a standard 40-hour workweek, that comes to over a million dollars an hour. Now that’s talent. The State of California is in crisis because of an annual budget deficit less than half of AIG’s quarterly loss. Holy crap!

The continuing destruction of the US and global economy is likely to continue apace for many years. How long we let the cowboys run their losing rodeo is anybody’s guess, but at some point, the fun and games have to stop. We’re eventually either going to nationalize (government takeover) these losers, or let them file for bankruptcy protection. Bankruptcy is labeled “protection” for a reason. Jobs are protected, but shareholders are generally screwed as share prices hit zero. Just whom we’re protecting by keeping them out of bankruptcy is a really good question.

Well, the Dow fell below 7,000 this morning, marking a fall of more than half since the peak in the fall of 2007. Ouch. How does it feel to lose half of your savings when all you did was work hard, save money and invest in a Dow index fund like the vast majority of financial advisors advised? What if you knew (and I do) that it will fall by half again? How exactly does that feel? I’m thinking “not good”.

So if we head over to the Motley Fool (how I loathe these idiots) they still contend “buy and hold” is the way to go. They suggest that patience is the strategy for now. Patience? Is patience a good strategy when you’re drowning? Anyone here ever heard of cutting your losses? Sheesh.

My favorite abuse by the financial talking heads is the assumption that ten or twenty years of history is meaningful in doing financial analysis. Financial cycles run much longer than that. It’s like making a twenty-minute study of the tides. The data will not be useful.

So where does this leave us? Hell if I know. I’ve been telling those I love, or even like, to avoid debt, stay out of real estate (my outlook since 2004), save money and be frugal. Buy used. Credit scores are an absurdity dreamed up by a marketing team. They will be meaningless in the Depression. Cash is king.

Back to School

We just found out that my nephew Josh was accepted at the Solebury School starting with 9th grade this fall. Growing up in Guatemala, we thought it might be helpful to get him a little Americanized. The admissions people were really taken with Josh, and worked to snag him including offering a nice chunk of financial aid. Maybe it’s because I turn 50 this month, but I found myself thinking back on being 14 and being in high school.

How much anguish could been prevented if on the first day of high school, a wealthy, successful, self-made alumni got up in an assembly and told the school how reviled, hated and abused he’d been in high school. Maybe he could tell the story and show a photo of the super popular football star who got shanked in prison after being gang raped by 12 of his closest friends.

Popularity in high school feels like the most important thing in the universe, whereas in my experience, popularity in high school seems to guarantee a life of underachieving and wondering where the hell the time went. The geeks run the world, but I was in school before Silicon Valley created geek chic.

After all the years, that’s kind of how it worked out at my school. But at the time I could only see what was in front of me, and the beautiful people just seemed so unapproachable and so serene and popular and funny. I got zero respect, had my ass kicked a few times and was made to feel very insignificant. That speaker at the assembly could have saved many, many of us years of angst.

High school is also when most of us get that hideous, stomach turning, hurts so bad it feels good insanity of falling in love. Unrequited, it’s agony and requited it’s all consuming. On weekends in summer, I always pause to think how many people are at that moment falling in love, getting that certain look, the first touch, the first kiss.

High school is also when many of us make friends that we’ll have for life, which is a first step in creating a world where we create our lives. We get issued a family; a life is what we make it. I hope Josh has the wisdom, the smarts and the good luck to end up with positive friends, a good attitude and the chance to grow into a kind, educated and purposeful man.

Good luck, Josh. You’ll need it.

What just happened?

This was stolen unabashedly from my pal Eric over at iTulip.com.

As Paul Volcker pointed out over the weekend, the global financial system has disintegrated and no one has any idea how to fix it. Lots of good ideas about how to fix the banking system, but as we've explained, even if any of these things are done -- and we are not holding our breath -- it's the endogenous credit system that's the real problem, the one that used to magically allow consumers to lend new money into existence by taking out a car loan or charging dinner on their Visa card, the one that depended on the now defunct securitized debt market.

Most reasonably aware North Americans have, like me, watched this mess develop for over 20 years. Credit was substituted for savings. Two incomes were substituted for one. Other people's savings were substituted for our own.

These past 20 years have been like a long bus ride into the middle of a desert without food or water, with the driver all along telling us that, no, we are not heading into a desert but traveling along a long stretch of beach that leads to an ocean with palm trees and swimming pools, we just can't see the water yet.

All along the way the skeptics look out the window and say, "We're going the wrong way," and, "Shouldn't we turn around or at least stop to pick up drinking water in case you're wrong?"

"Stop being so negative," yells the driver over his shoulder. "You don't understand neo-classical geography."

Meanwhile, the rest of the passengers in the bus sit watching Survivor on portable DVD players or reading about Britney Spears's hairstylist in The National Enquirer.

One day the bus runs out of gas. The driver gets out, looks around and says, "How about that. Here we are in the middle of the desert without food or water. Who could have known?"

He pulls out a cell phone and shortly a helicopter rescues him and his friends, leaving everyone else behind to fend for themselves.

The End

Legalize It And Tax It

My God, the new kid just keeps getting better and better. The US Attorney General, Eric Holder is signaling an end to raids on medical marijuana clinics, dispensaries and growers. He wants to give states the right to legislate their own drug laws, at least for marijuana. How does the bluenosed right wing oppose “state’s rights”? Only with a humongous dose of hypocrisy, which they seem to have in abundance. Let’s consider the upsides to legal marijuana, in let’s say California alone.

An end to drug violence on the border, at least the marijuana part.

New massive stream of tax revenues, certainly well into the billions.

If it’s not a crime, you’re not a criminal, so crime falls prima facie.

Vast reduction in prison populations, especially if past offenses are pardoned.

More police available to stop actual bad stuff.

Honestly, what’s to hate?

It might have taken a financial crisis to get us over the hump, but maybe we can over this whole prohibition thing. Here’s a simple test of whether or not legalization is a good idea. Would you rather room with a stoner or a drunk? How about as neighbors? Honest to God, there’s nothing I’d like so much as to have every crazy, wife beating drunk take up weed instead. It’s just really hard to get angry or violent with that kind of buzz on.

Go Obama, and stay tuned for the corporate opposition funded by the liquor and tobacco industries.