lack of leadership

One thing was very apparent yesterday: there is a total lack of leadership in Washington. The president is a lame duck, the speaker of the house preferred to engage in partisan politics at the worst possible time, and neither one of the presidential candidates lifted a finger to avert the crisis. One was hiding for fear of being blamed, while the other went on lecturing about the excesses of the past.

As a result $1.2 trillion in equity disappeared over a span of six hours. That is a lot more money than the proposed $700 billion bail-out plan so hotly debated.

What is happening you may ask? 

First, the country is angry. People, who once gladly participated in spending money they did not have, are now faced with foreclosure, job losses, high food and gas prices, and endless bills. In many cases, the situation is entirely of their own doing, but they want someone else to blame. And what better candidates than the rich bankers and CEO's on Wall Street?

Second, the country does not understand. Their anger blinds them. They have an aversion towards taxes, preferring to get things for free and not have to pay the bill. Their representatives are too busy blaming the other party to explain to their constituents what is really happening and the news media are making things worse by proclaiming the crisis too complex to understand. It is not.

Third, everyone in Washington is too busy trying to figure out how they will benefit from this mess. How they can most efficiently blame it on the other guy. For many that means, how they can get back at the White House for all the pain and frustration it has dealt them over the past eight years. Bipartisanship disappeared under Bush and now that it is needed it is nowhere to be found.

Lastly, those very same politicians are afraid of their own seats. The more unsure they are about re-election, the more likely they were to vote no on the rescue package. Rather than doing the hard thing and trying to explain to their constituents what is wrong, they prefer the easy way of "teaching those greedy bankers a lesson."

The solution is extremely simple folks. The $700 billion is, as one journalist called it, the most expensive psychotherapy ever. It is all about confidence. People need to trust one another and they need to feel confident that the US will stand behind its financial system. If that confidence fails, nobody will be willing to lend money and the economy will come to a standstill -which will be good for the environment by the way, so why complain?-.

Once people lose confidence and trust, things can quickly unravel. Very quickly and very profoundly. A Great Depression II is not out of the question. I don't buy the WSJ argument that the wealth of doomsayers will prevent another GD scenario. While it is true that most disasters happen when people least expect it, some disasters do happen even when they stare you in the face.

and miles to go before i sleep

If you think the crisis is over, think again. The worst is yet to come. I don't want to sound like an alarmist, but it should be obvious to everyone now that this is true. There is simply no other way. Even if the Fed can restore normal lending in the weeks to come, the fallout from what went before, and what is underway is still to hit. The lag could be as long as six months to one year.

Banks have failed while others were taken over for peanuts. What that means is that many are out of work and soon many more will be. Of those who survived, the mergers are likely going to be followed by massive rounds of layoffs. People out of work will result in more foreclosures, and more losses. To say nothing about reduced spending. Remember, 2/3's of our economy is based on consumer spending. And much of that spending is on credit. Up to half of it comes during the holiday season. A season that is now upon us.

If the holiday spending is much reduced, and it will be significantly reduced, many retailers will go under. That too won't happen for another six to nine months. Apart from hitting pocket books, it will hit commercial real-estate. Other highly-leveraged businesses will fail soon too. Many in California got a bit of extra "help" here from the delayed budget. That budget has also pushed some cities over the brink. Vallejo went bankrupt, Oakland is considering 120 layoffs, San Francisco has problems.

Even in the mortgage arena there is more to come. The majority of the so-called option-ARMs have yet to reset. Sixty percent of these ultra-toxic loans are in California. Many have been negatively amortized for their entire life-span. So not only will people now have to pay the full price, which they were never able to, their loan balance is now higher than it was before they started.

Unfortunately, that is not the only problem. A key problem is that the recession will be world-wide. What that means is that exports will get hit and exports are -for now-the only bright spot left.

It has been said that we are a long ways from Great Depression II. As of today, there is no doubt. However, experts have been surprised before about how quickly and how profoundly things can unravel. The wizards from the Treasury, the Fed, and the Administration have all gone on record months before the current crisis, stating how solid the economy was, and how resilient the markets were.

I think it is time to buy some gold.

infrastructure

We often neglect to see how infrastructure plays a key role in environmental protection. If you live in a low-density suburb you are going to pollute a lot more than people living in a city. A lot more. And there is very little you can do about it. Your whole life-style is a polluting nightmare.

First off, you have to drive everywhere. Because there is nothing to do in your suburb but sleep and watch TV, you need to drive all the time. You drive to work, to school, to the gym, to the stores. Because your house is stand-alone, and likely way too big -as that is the main attraction of suburbia- you need to buy more goodies to fill it up. (People always fill their houses to capacity no matter what the size).

You also need to heat your mansion more in winter and cool it more in summer. Because your neighborhood home-owners association enforces it, you likely need to keep a useless green lawn and waste tons of water on it. Furthermore, you need to mow it regularly spewing out inordinate amounts of greenhouse gases.

Second, you cannot easily change this pattern. It is built-into your life-style. You cannot really walk to the store even if you wanted to, because there is no store, and because it probably isn't safe to walk outside of your development. There are no side-walks, only wide streets with people driving SUV's at very high speeds.

Believe it or not, but infrastructure is foiling elegant solutions like re-usable shopping bags. Today's WSJ has a long article entitled "An Inconvenient Bag." They discuss the failure of the reusable shopping bag. They highlight how stores like Walmart and Home Depot have given out millions of free bags. Bags that cost a lot more to produce, generate more pollution, and take up more space than the ubiquitous evil plastic "t-shirt" bag we all use. 

The problem, we are told is that people do not reuse the bag. And it is easy to see why. Such bags do not mesh with suburban shopping habits, where people drive to the store a few times a week and load up. A reusable shopping bag works best for an urban user who walks to the store everyday to pick up necessities for just that day.

When you get to your regular supermarket, you need a cart. You will haul so much heavy stuff that you do need the cart. Instead of shopping with your bag as city dwellers would, you need to put your bags in the cart. It is easy to forget. It is also inconvenient as you don't know how many bags you will need.

Then when you get the bags home and unload them you need to remember to put them back in the car for your next trip. Even with your bag, items come with so much wrapping that your gains are rather minimal. Unless you can put your veggies straight in your re-usable bag -which does not work easily and which some shops won't let you do- you will need tear-off plastic bags in any case.

I am afraid these partial "solutions" do more harm than good. What Walmart and Home Depot and others should do, is sell bags. Make people pay. The more people pay the less they consume and the less waste there is. That unfortunately goes against the whole supermarket philosophy. But then again, as yesterday's WSJ hinted at, shopping at supermarkets does not really save you money. It just makes you consume and waste more. The excess far exceeds your meager savings, and you would be better off buying less, better quality, items at your local grocer.

You would spend the same amount, but be leaner, healthier, and less wasteful. You would also support a sustainable and sensible infrastructure.

a primer on insurance

We are told insurance works to protect people against unforeseeable and unexpected tragedy. The concept is fairly simple: a number of people facing risk pool money together so it can be paid in times of need out to the few who become actual victims. There is no cheating, everyone knows they may not become a beneficiary unless something bad happens, and most would choose not to ever "have to benefit" from this arrangement.

Occasionally, a participant will try to cheat and issue a false claim. That is a bad idea, and the industry has the full backing of the government and law enforcement to make sure these bad apples are punished in a highly publicized and visible fashion. This type of cheating does not pay. Besides there is a far easier way to reap benefits. One where the government will give you a helping hand.

First, add a little capitalist twist to the story and you get the insurance company. In return for orchestrating all the logistics the company is allowed to make a profit. That is easy since the company can invest the money people provide and get a return hopefully before it will have to pay the few unlucky souls. Nobody objects to the company charging a bit extra either. People don't even object to companies rejecting those who are considered high risk. Or charging more to those who are high risk but nevertheless "acceptable." After all, companies have to make money.

In short, this arrangement seems rather straightforward and easy.

Experience has taught us to beware of such easy and straightforward schemes. There is ample room to cheat here. People pay upfront and if you can somehow avoid paying them back later, you can pocket all the money. The easy way to do that is to refuse coverage to those who need it, when they need it. You can start by refusing claims, or making it hard for people to file claims. That will turn a lot of them away, while others may die before they can benefit. 

It is now so common for health insurers to deny claims that patients expect to have to argue with their carrier at one point or another. Today's WSJ had some tips on how to argue with your insurer in case a claim is denied. But it doesn't stop there. Insurance companies also try to ditch you when you file claims for more than a few pennies. They will go to great lengths to uncover technicalities in your record that will allow them to break the contract.

It is one of those tactics insurance companies find acceptable or evidence of good business practices. You know, protecting shareholders? How else would you explain their stance on California's bill AB1945?

The bill prevents insurance companies from retroactively rescinding coverage. Mind you, it still permits insurance companies to drop customers who intentionally submitted fraudulent applications. But that requires proof and meaning extra work and smaller profit margins. Better to avoid it when we can.

AB1945 is a straightforward honest bill. Yet the insurance companies are fighting it tooth and nail. A spokesperson for the industry said -with a straight face- that they are trying to protect consumers. Not the shareholders, folks, you. You, the insured. They are trying to protect you from those fraudulent cheaters that are causing all our problems.

It turns out insurance companies like to rescind policies retro-actively. They like to dump patients with expensive medical conditions that were diagnosed years after they were approved for coverage. Recently, Blue Cross was fined for dumping 1,770 members, while Blue Shield dumped 450. Kaiser Permanente, Health Net, and PacifiCare were also fined for dumping patients. Dumping it seems is part of the way insurers do business.

Governor Schwarzenegger personally knew someone who was diagnosed with cancer and had his coverage rescinded. According to the insurance company, the patient had a pre-existing condition and should not have had coverage. What was that pre-existing condition, you ask? A knee injury sustained years earlier. The governator was so shaken by this incident, he decided to do something about it. Only so far it hasn't happened. And if the insurance industry gets their way, it won't happen. Because all the money they save goes into their shareholder's pockets. That my friends is their true mission: to collect people's money and stuff it into shareholder's pockets.

In case you doubt if insurance is profitable, look no further than Warren Buffett. And if you wonder what happens when insurance companies do dumb stuff and end up losing money, look no further than AIG. As you can see, the insurance business is a very good business with very little downside risk.

why the rich get richer

Capitalism is a funny system. Suppose you all start out at the same time with the same resources. As soon as someone gains a small advantage, their position improves. It becomes easier for them to amass even more resources. At the same time the others struggle more to stay in place. Suddenly, the ones with an advantage are the favored party to amass more.

It is like the little rivulets in the park. I was hiking the other day in an South Bay park and noticed how erosion had changed the trail from my previous visit. There was a section of trail in a wide swooping turn that was angled downward. Throughout little rivulets carried water across the trail into the canyon below. At one point, all rivulets were of nearly the same size and all must have carried about an equal amount of water.  But in my absence something happened. Suddenly one or two of the rivulets became bigger and they "grabbed" the water from the adjacent ones. Now the trail was largely flat with two or three big gullies instead of an undulating surface with 20-30 little streams.

Today it was announced that the Oracle of Omaha, aka Warren Buffett had made an investment of $5 billion into Goldman Sachs. First, we note that Warren has connections to the firm, granting him wide access to executives and information. Second, we note that he got a sweet deal with 10% extra interest and options to buy more shares on the cheap. 

Goldman did not have much choice, they need the money. Also, Buffett knows his way around at Goldman. Thirdly, giving it to Buffett almost guarantees the value will go up. In times of crisis people look for heroes and saviors. And if there was ever a savior of capitalism, Buffett is the man. It is almost a self-fulfilling prophecy. 

The name Buffett makes it so the investment will attract other money and hence go up in value. And with the government poised to follow, Buffett is sure to become a major beneficiary of tax payer money. And nobody will feel he didn't deserve it. I.e. we are going to pay Warren well and rather quickly too. That should ensure him a 40%+ annualized return.

No such luck for the ones who are left behind. They will pay the bill instead. Like the tiny rivulets supplying water to the growing gullies, while drying out themselves, we will make Warren even richer than he already is. That is how capitalism "creates" wealth. It shift resources from the masses to the few. The few who will then put the others to work to create even more wealth -mostly for themselves, mind you.

This system has no internal checks and balances. It keeps flowing until a few rivers are left. Rivers so wide that the trail will ultimately collapse. Unless us smart people intervene to save the day.

catch-22

You probably heard about the bail-out package. The $700 billion that is needed to "stabilize" the market. The $700 billion that will buy worthless debt "instruments" and straddle tax payers with excess pain for decades to come. But what you may not know, or may not have thought off is that this package will do nothing for struggling home-owners. It will do exactly nothing about the source the mess, the mortgage crisis.

What it will do, is allow banks to write-off or remove from their balance sheet, worthless paper. Toxic debt is the technical term. That will make the bank look better, and up its credit rating. That will make it so the bank can get more money and won't have to raise funding to shore up its collateral.

However, the plan can only work when two things happen. Things that nobody really wants to happen. Or at the very least, things that nobody should want to happen.

The first is the CEO's and other C-executives will walk away with millions in bonuses, severance, and other platinum or diamond-studded gold parachutes. All rewards for "a job well done." And there is nothing you or I or anyone else for that matter can do about it. Because those greedy executives will not sign on to a plan that forfeits their "packages." 

Guess what will happen to bank X if its CEO has to sign on to a plan that wipes out his/her package in order to rescue the company? If you said, he/she will let it go under, you win! Because that is exactly what will happen. No CEO will voluntarily give up their "benefits" in order to do his/her fiduciary duty or protect the shareholders. CEO's are eager to fire workers to protect the shareholders and boost margins, but don't touch their money!

The second is that the Fed will have to pay way too much for all that debt. If the Fed values the debt for what it is worth (nothing), then the cure won't work. Even if the Fed pays a more reasonable rate, the rescue won't work. The cure can only work if the Fed buys worthless paper for its over-inflated and unrealistic face value.

So here you have it. A package that buys useless paper at enormous cost with your money and rewards incompetent executives for their greedy misbehavior over the past five to eight years.

And what will this marvelous package do? It will restore confidence. It will make it so banks don't fail and so credit does not dry up. It will save the financial sector. It will do nothing, absolutely nothing for housing, mortgages, home-owners or anyone else. They will be left to pick up for themselves. It will do nothing about the next wave of upcoming foreclosures. It will do nothing about crashing housing prices, or lost jobs.

The banks sold everyone mortgages that they could not afford and then they packaged these mortgages with plenty of excess fat into investment "vehicles," that are now worthless because the collateral is not there (i.e. the house). So the bank has a problem, and guess what, we will bail them out.

crisis

Postponing recessions just makes matters worse. That is the lesson we learn from the current crisis. Instead of letting the economy suffer a bit after the 2000 stock market bubble, the Fed decided to give it a lift with plenty of free credit. A government subsidy that went on for too long. And what happened? People felt good... for a while. 

They felt so good they started to think how to spend their money. Suddenly, their house was worth a fortune. It had run up during the boom and now with cheap credit there was a way to cash in. Never mind those paper losses on the stock market. Here was real money and and it was easy to get it. Just refinance. Real estate never goes down now does it?

What people did not realize is that real estate does not appreciate at 40% or more year over year. Those crazy numbers were based on paper gains made in an "irrationally exuberant market." Everyone felt rich and when you are rich you pay richly. Especially those who have never been rich before (the so-called nouveau riche). They have money so they want to pay. All those stock market gains drove housing through the roof.

So here we are, after the big bubble, lots of tears about our paper losses, but hey the house is worth a fortune. And interest rates are low. Let's refinance and take some money out. Let's do some shopping. It is our patriotic duty (remember the 9/11 mantra? go out and shop).

And for those of us with gains, let's invest in the real estate market. It is safe, remember, real estate never goes down. Let's buy a few properties and flip them in a few years. After they've appreciated 50-100%. Those are normal returns, aren't they ? Real estate always goes up that way, doesn't it? Plus it is tax-deductible. Free money from Uncle Sam.

Every time interest rates moved down a notch, more calls to refinance. Sure, the Fed enabled the crisis. But mass delusions and greed made it happen. Good news all around. Lots of money to spend on credit, lots of jobs in the financial industry, lots of joy to be had.

The more people you attract the more creative they get. And the financial institutions sure attracted lots of people. It did not take long before these geniuses figured out a way to package all these loans and sell them to investors. With nice added bonuses and commissions. More air in the bubble. Soon enough the insurance guys got in the game too. Insuring debt? Why not, after all the more contracts we write the more commissions we get.

Let's not forget that all of it is safe. No risk! Who has ever heard of no risk and lots of reward? Well, in real estate of course. Real estate never goes down. Look at the last five years. See those double digit returns? That's normal, my friend. Real estate always does that. You didn't know? Better get in now that the going is good.

More air in the bubble.

Let's not worry that nobody can pay their real mortgage. Let's give them five years of low monthly payments. Negative amortization? Never heard of it. What does it mean? Well, never mind, we'll flip it before the bill comes due. Or we'll refinance again and take out some more. This party will never end.

There is an endless supply of money. Just like there is an endless supply of oil. Kool-aid someone?

real people, real pain

With Wall Street grabbing all the headlines we often forget how the turmoil in the financial markets hurts real life people. Take Annette Pucci, a New York retail manager, for example. We read in the WSJ today that Mrs. Pucci had planned a $15,000 face lift for her 50th birthday. She had to settle for a $1,200 botox treatment instead. "It was a very big disappointment," Mrs. Pucci is quoted as saying.

Or take Mr. Provost, 53, who lost his job and will have to foreclose on his $2.5 million villa with its own boat dock in Sarasota, FL. "A foreclosure would be devastating," he says. "My wife and I would have to start from scratch."

Our heart goes out to these unfortunate victims of tragedy. To those who will have to forgo caviar, face lifts, nose jobs, servants, expensive vacations, hummers, and suffer endless unimaginable hardships. These innocent victims of a crisis deserve our sympathy. And they are not alone. Their pain will spread to hard working retailers selling luxury yachts, SUVs, Rolexes, Prada shoes, and other vital necessities of life.

I guess the world is just too unfair.

main street blues

Wall Street's crisis may be contained--for now, but main street's problems are only just beginning. Thousands of layoffs from financial institutions are likely to hit main street pretty hard. Here is a group of well-to-do individuals who tend to splurge on housing and cars, that will suddenly find itself out of work. Since a fair number have already splurged in a rather excessive manner, expect another round of foreclosures to hit the market pretty soon.

Going forward, the reduced spending will ripple through the economy. It is the famous trickle-down effect, Republicans are so keen on. Only this time it works as a gusher, and in reverse too!

Job losses, high food prices, high gas prices, and a credit crunch will all add up to a perfect storm. Not to mention all the tax increases we are likely to see to pay for all the bail-outs in the financial industry.

The main street effects of this crisis will not be felt for another four to six months. Furthermore, it is by no means certain that the financial crisis is over. I would give it at best a 5-10% chance. I am not even sure it is fully contained yet, let alone solved.

I am starting to think that a bank-run a la 1930 is no longer a far fetched scenario. Washington Mutual (WaMu pour les intimes) experienced a mini bank-run of sorts yesterday, despite the FDIC insurance. The trouble with such herd-like panic behavior is that it can cause even a well-run and well-capitalized institution to go under (I am not sure if WaMu is or not, but that is another matter). If all depositors claimed their deposits banks would effectively have to shut their doors.

I assume there are many analogous situations out there. Situations where a sudden panic could lead to the demise of otherwise sound businesses.

Cash flow is what matters here as many California businesses are starting to realize. Having no state budget for months can do you in, even if you run a sound enterprise that isn't leveraged the way Lehman Brothers was.

depression

Most recently, on August 4th, I reminded everyone of the long slowdown that was yet to come. It now appears even I may have been too optimistic. At the time, my estimate was about 12-18 months of downturn. Now I would say it looks more like 3-5 years. Yes, years. You are not reading that wrong. And even that estimate could be way off. Because we haven't seen the end of the credit crisis yet. Not to mention that some people may actually be exacerbating it right now by short selling and other devious tricks.

One thing Mr. McCain said is very true. It was driven by greed. Greed all across the board. From the top to the bottom. And that is one thing Mr. Obama has a hard time admitting. It is easy to point to the rich, but this time everyone played along. The "regular" people had a very active role in all this. Of course, the damage they did was limited by their limited resources, but given that there are so many of them, their contribution cannot be ignored.

Before we give these candidates too much credit though, it behooves us to point out that stating the obvious is easy, however painful it may be to admit to it. Doing something about it is a different matter. And here is a crisis that was decades in the making. How to undo that is not trivial. It all started with Ronald Reagan's de-regulation mantra. Yes, it does go that far back. The anti-government stance that killed regulatory oversight is the root of it all.

Remember in the late 80's when books started appearing warning us of the great slowdown of the 90's? The new great depression. By the mid 90's you may even have joined in with the chorus of nay sayers who welcomed another doomsday prediction gone bad. But chances are you forgot all about it. Or it got lost in the fake scare of Y2K. Remember that one? That was an obvious hoax.

But the coming depression was not. It was merely postponed by a series of bubbles. Things like that happen. Money and paper gains just moved around from one bubble to the next, until they ended up in housing units that are emptily bleaching in the desert sun. Or nearly-paid-off units that were refinanced so their owners could upgrade their kitchens, bathrooms, pools, and SUVs. Now all these gadgets are sitting pretty in foreclosed properties.

During those bubble years we did nothing to make matters better. Quite to the contrary, we exacerbated the problems by venturing into Iraq. By giving tax cuts to the very rich. By further de-regulating and privatizing organizations.

Our war games have made matters much worse. It doesn't so much matter whether we win or lose, whether we leave with honor or not. What matters is that we have sunk inordinate amounts of money we don't have into a hopeless endeavor, whose only "saving grace" is that it made some people incredibly rich.

The money is gone and we have little to show for it. Sure we can pat ourselves on the back and say:"we turned a corner," but in doing so we left our hard-earned cash behind.

As for de-regulation and privatization, has it occurred to you that our government is now taking over the bulk of the financial and insurance industries? Freddie and Fanny, AIG, the list will get longer, rest assured. We are "nationalizing" industries. Hopefully we will be smart enough to regulate them as well. It would be foolish just to pay the bills without reprimanding the offenders. But then again, foolish things seem to be the rule these days.

save the environment, write to congress

Here is one thing you can do for the environment. Write to your representatives and senators demanding that they keep gas prices high. High gas prices are the only known remedy to our key problems. Only high gas prices can fix our dependence on foreign oil. Only high gas prices can make Detroit look into alternative energy. Only high gas prices can cure global warming.

In case you wonder take a look at these numbers:

Since 1981, the number of cars and trucks on the road has increased 75% to 249 million.

Since 1981, the number of miles driven by Americans has doubled (no the country did not expand)

Since 1981, gasoline consumption has increased by 40%.

Since 1981, fuel efficiency has gone up by a whopping 60%, but clearly that has had no effect on conservation, quite to the contrary.

Pushing fuel economy to 35 mph will NOT achieve anything except lower out-of-pocket costs and more driving as a result. IT IS THE WRONG THING TO DO.

Abundant cheap oil in the 90s has fueled the popularity of the gas guzzlers and SUVs. It has enabled long haul commutes. It is responsible for the housing boom in far-out regions.

Do something good for America, write your representatives. Urge them to keep gas prices HIGH.

how to become a (real) environmentalist

I pointed out in my latest post that anyone can call themselves "an environmentalist." It is a feel-good label, like saying I am a "moral" person. I care about the environment we all live in. But what does it really take to become an environmentalist? Do you need to recycle? Do you have to buy a new fuel-efficient car? Do you throw out those old-fashioned incandescent lights? Do you bring your own bags to the grocery store?

Unfortunately my friends it takes a lot more than that to really help save the environment. And many of the things people view as environmentally responsible are not. For example, you are not an environmentalist when you consume like the average American does. Buying new anything is a big no-no. Buying new stuff to replace old stuff that is in good working condition is the number one capital sin against the environment. Never throw out something that works well, ever.

You see there is a good reason why business types hate the environmental movement. They, unlike many idealistic promoters, realize that it will cost them revenues. It will shrink the economy. Actually, the very best we could do for the environment would be to shrink our economy. By about 85-90% or so.

Business people are very smart though. They understand that you cannot contradict the public's wishes. They also understand that it is much easier and much better to pervert the public's wishes. That is what the green movement is all about. If consumers want green items, sell them green items. Always give the consumer what they want, even when they want something that cannot exist. Always sell new items, even if doing so is the most un-green thing to do. We all have to survive don't we?

You can't call yourself an environmentalist if you live in a big house in suburbia. No matter how clean your neighborhood is, and how much recycling, composting, and other "good" things you do, living large is not a sound thing to do. Driving, the inevitable suburban activity is not green. Not even in a hybrid or electric car. Lighting up your house at night is not green. Using 100 gallons of water per person per day is not green. Having a clothes dryer and using it is not green. Maintaining a lawn or a pool is not green. 

I think you get the picture. The only cure for being destructive to the environment is to change your life-style. Fat chance you say. I don't want to give up my wonderful life-style. My happiness that comes from shopping and consuming. Never mind that depression is rampant across the country. We are happy even if it takes Prozac to prove it.

And speaking of fat, fat is the right word. Because obesity, the inevitable by-product of our environment-unfriendly way of life, will ultimately take its toll. So will asthma and COPD triggered by air pollution, and other ills. And if those things don't help to set us on the right path, then the inevitable collision with an uninhabitable planet will. Sooner or later we will all become environmentally responsible, whether we like it or not. 

Just take a look at what is happening to the high-flyers on Wall Street today. Those guys who told you greed is good. That the party would never end. That things would only get better. Today is a day of reckoning. Unfortunately there are many more to come.

global warming wsj style

There is nothing the guys at the Wall Street Journal like better than to discredit the New York Times. Now that Rupert has taken the lead, this tendency has turned into a necessity for all Dow Jones affiliates. If Rupert had his way, the NYT would disappear from the face of the earth. That would be a shame because the NYT is without a doubt the best newspaper on the planet. 

Having said that I do not always agree with the NYT, nor do I always disagree with the WSJ. But it is clear that the latter is more obviously biased than the former. The WSJ is also more deviously biased, advocating a position that materially benefits the rich and powerful. I.e. the NYT editorials may stress a liberal point of view, but that point of view does not necessarily serve to make someone really rich. The same cannot be said about the WSJ. Here opinion is clearly in service of making money.

One area where the NYT and the WSJ like to do battle is global warming. It is a problem that is real and should concern us greatly. It appears all the writers and columnists at the Times grasp that, although not all think it is a real emergency. There is a range of opinions from, "We need to take action now," to, "Well maybe it won't be so bad if we contain it."

The WSJ has no such distinctions. Their stance is clear. Global warming is not a problem. Like mayor Larry Vaughn on Amity Island, the WSJ maintains there is nothing to worry about. The situation is under control. Not because they know or because someone says so, but because of business. If there was something to worry about, it would affect business and that would be bad. Ergo, there is nothing to worry about, period.

The latest salvo in this battle is Thomas Friedman's book "Hot, Flat, and Crowded." It apparently tries to warn us of impending doom. Mr. Friedman thinks global warming is a key issue. Against that, the WSJ puts reviewer Bjorn Lomborg, author of "Cool It: The Skeptical Environmentalist's Guide to Global Warming."

I need to point out that "environmentalist" is not an official title and everyone from Mr. Lomborg to drill baby Guiliani can call themselves an environmentalist. Chances are that those who feel the need to do so have something to hide, but that is another matter.

In trying to make fun of Mr. Friedman, Mr. Lomborg uses the following line. "By 2030, will the evening news feature weather, other news and sports?" The WSJ was so taken in by this "absurdity" that they decided to highlight it by printing it in large letters as an excerpt in the middle of the page. Surely, nobody in their right mind would think this could happen?

Guess what, my friends, take a look at the evening news! The evening news in 2008 IS weather, other news, and sports. The evening news, especially on local stations such as KTVU Fox and others has been that way for years. More than five years ago, a "liberal" Bay Area weekly added up all the time spent on various stories on the local evening news. It found that more time was spend on weather -and obvious weather for that part- than any other story. Not only that but weather is often the first and key story on the news.

Obvious weather, such as KTVU reporters standing in the midst of Sierra snowstorm and saying, "Yes Julie, it is snowing here in Truckee." And that is in the Bay Area, a part of the country that has -according to Rand McNally- the best weather in America. One can only wonder what happens in places where there is weather.

Yes, folks, that is what is happening to America. A constant barrage of non-events interspersed with commercials to dumb us down. Take a look Mr. Lomborg. The future is here! You don't have to wait until 2030. 

Enjoy!

culture war

The WSJ has a piece today on what it calls "Culture War" in the 2008 presidential campaigns. Similar pieces have appeared in the Journal and other media throughout the week. The Journal has had more, given its solidly pro-Republican stance, but even so-called liberal media have dealt with this issue. The issue is Sarah Palin and what she represents and why she exposes Obama's weak spot. A weakness so great, it may cost him the election. 

As soon as the McCain camp announced Palin as their running mate and I was able to see her picture and read a bit about her background, I knew there was trouble. BIG TIME trouble for the Democratic ticket. I said so to many of my friends but they shrugged it off. They pointed out she had no experience, she was a redneck, she was against abortion and gay rights, etc. etc. An endless list, that like much of the official Obama response entirely misses the point. Not only is it irrelevant but every time a critic points out one of Sarah's perceived flaws, it only strengthens the McCain-Palin ticket. Sarah's weaknesses are her strength! 

Putting Sarah in the hot seat and making her sweat can only turn thousands of voters to her rescue. The analogy to Hillary shedding tears in the primaries is stunning. Only -as I pointed out before- Sarah is much better at this than Hillary. It comes natural to her.

In Thursday's editorial Lynn Forester de Rothschild, who admitted being a Democrat, said Democrats need to shake their "elitist" tag. And for those who do not understand what that means and point out how Barack grew up in a poor family, she goes on to explain that "elitism is a state of mind, a view of the world that cannot be simply measured by one's net worth." That same day, he-who-cannot-be named in Democratic circles also made similar points in his editorial "Obama Can't Win Against Palin."

If Obama wants to win he will need to do all the following (and maybe more):

-Stop attacking Sarah Palin. Many have pointed out that he is running for President while she is not. Stepping down to her level or elevating her to his level is asking for defeat.

-Have his party stop attacking Palin. This is less obvious and many believe Obama should focus on McCain and let the others attack Palin. However attacking Palin, esp. the way it is done now, only makes her and the McCain ticket stronger.

If the Democrats want to attack Palin they should change their strategy. But I recommend they lay off. Palin is weakest when ignored.

-Obama must give answers and not just point out what is wrong with the country. He must stand for something, something other than "Change." I am sorry to say, Mr. Obama, but change is now associated with Palin. She represents change in way that no words can undo.

-Obama needs to explain what he wants to do in simple terms. Not just tie McCain to Bush, because it is obvious now that he will be different. Provide solutions, simple solutions, like cut taxes. Not cut taxes for so and so and raise them for someone else. That just doesn't fly as a slogan. If he wants to raise taxes on the rich, he should do so later when he is in office. 

-Obama and the Democrats need to understand that an election is like a sale. You don't need to expose your weaknesses and not everything you say has to be complete and true. It doesn't matter if the media "exposes" you. Just do what W. did and keep repeating the same mantra, even if everyone says it is false. Repeating a simple and appealing message with direct connection to the voter is key.

You need to highlight important points in a SIMPLE manner and coin phrases that stick in people's minds and evoke favorable images. You need to promise people what they want even if it cannot be done, or is physically impossible to do so. Remember the calorie-free energy drinks?

-Make sure the solutions are simple and do not contain three-syllable words. Make sure they do not have a number of alternatives or exceptions and special cases, and other confusing stuff.

-Stick to speeches in large venues, where Obama is great and refrain from doing too many interviews. When doing interviews, make short statements in sound bites, that use simple words instead of droning on an on like he usually does.

-Understand the difference between a speech and a conversation. Don't talk down to people. Don't be the smart-ass senator who has all the answers and will tell you what is good for you.

-Mingle with the common folk and be seen, filmed and photographed in that capacity.

-Change his dress from smart-Harvard lawyer, to a more Palin-like can-do, roll up your sleeves style.

My 2c.

obama's change

I wonder if the democrats realize what kind of change Americans are looking for. After having swept the country with his "change" campaign, Barack Obama is now suddenly finding it hard to believe that McCain and especially Palin have successfully hijacked his campaign slogan. What is even more hard to believe is that he does not seem to understand why that is, and his arguments "I don't understand" and "this is just more of the same" just show how he misses the point. (More cynical persons might say, how his elitist stance is disconnected from the real America)

Americans it appears want not so much change to something new, but a change back to the past. They want to turn the clock back. They want to change things back to where they were. Back to the good old times, when gas was less than a $1 a gallon, when they could fly and drive all over the place and when they did not have to worry about greenhouse gases, endangered species, and all those other "nasty" items that interfere with their daily consumerist happy-go-lucky attitude.

Sarah Palin is the perfect embodiment of the kind of change Americans are looking for. The more we hear about her so-called shortcomings -or what the opponents perceive as shortcomings- the more she becomes the ideal candidate of change. Her small town, no-nonsense, hard core religious, hockey-mom, all-american image is exactly the kind of change Americans are so desperately yearning for. Everything about Sarah Palin, from her hairdo to her glasses cries out change.

Furthermore, the Obama camp now seems puzzled and the very fact that they are illustrates why they are so vulnerable. In essence they are disconnected from the middle America that they need to win the election. 

And yet it is so obvious what their problem is because they faced it before. When Hillary sat down with the blue-collar folk to shoot the breeze, she won and she won with great margins. And even though Hillary is very good at this, she is no match for Sarah here. 

But Hillary's move came too late. By then, the game was already lost. Maybe that is why the Obama folks were able to brush it aside or did not pay attention.

Well, my friends, it is back. But this time bigger and better than ever before. And if Obama could afford to ignore the lessons of Hillary drinking beer and pressing the flesh, he cannot afford to ignore the Palin magic. Better scramble and do something quick.

Let's face it America, what sounds better to you. Going moose hunting with John and Sarah or having lengthy discussions about the finer points of the law with Barack and Joe?

And therein, my friends lies the outcome of this election.

housing crisis

Recent events, among them the take-over of Fannie Mae and Freddie Mac, clearly show that the housing crisis isn't over yet. As a matter of fact, I predict it will get (much) worse before it gets better. That is because many mortgages still have to reset to their "real" rates, while housing prices keep on dropping. The drop is likely to accelerate into a free fall soon as banks become increasingly aggressive dumping properties that they want off their books.

Many people, including many prime borrowers cannot -and could not ever- afford- their real mortgage rate. Many had no doubt hoped to "flip" the property or refinance before the reset happened. That is now all but impossible to do. To make matters worse, ever larger numbers are effectively "going underwater" with their mortgage balance higher than their home value. For those who do and who don't have a lot of equity in the house, the best strategy then becomes to walk away from it.

Large swats of homes in foreclosure or empty pose a real threat to local communities. Not only do the abandoned swimming pools breed mosquitos, and the unkept lawns breed weeds, there is also the increasing temptation of crime. Easy targets can tempt even upright citizens who would never dream of stealing things.

All these events leave the government with another massive burden that will need to be passed on to tax payers. But it doesn't end there. Lots of foreigners and foreign governments are invested in entities such as Freddie and Fanny, and when a take-over happens and their equity gets wiped out, they become very cautious and very aversive towards more US lending and investment. Given how much national debt we have and how much we keep piling on with our little diversions in Iraq and Afghanistan, that could mean more trouble to come. If foreigners stopped buying debt we would have to raise interest rates to make it more attractive. That would mean even more foreclosures. Not to mention the damper it puts on business.

Meanwhile jobs are disappearing fast too. With an economy that depends on consumer spending, and no growth in consumer spending, jobs will continue to disappear. Small businesses will go under. Not just in the housing sector, which is already badly damaged, but throughout retail, the cornerstone of our economy. 

Bring in a few additional temporary setbacks, such a no California budget for 67+ days, and more businesses will bite the dust for lack of credit. More people who can no longer afford their mortgage. The only "happy" place we have left is exports. But a US downturn is likely to spread around the globe and that means our one remaining happy place is also under fire.

Don't forget the underlying trend, a population that is aging fast, in need of more medical help, and largely uninsured. Do you see a perfect storm brewing? 

drill baby drill

Such was the utterance filled with joy of one Republican conventioneer interviewed by Channel 7 news the other day. The thing he really liked about McCain apparently was offshore drilling. And he is not alone. As I pointed out earlier, even die-hard environmentalists, driving their Volvo's around Berkeley, think it is time to give drilling a second look. "If it can be done without harming the environment," of course!

What drives this enthusiasm is high gas prices. Or should we say, relatively high gas prices, because these prices are only as high as European prices were before the recent run-up in oil. It says a lot that Americans are hurting at levels that Europeans found quite comfortable for many decades.

The call for offshore drilling has met with all kinds of well-meaning but irrelevant responses. Barack Obama rightly points out it won't matter to prices paid at the pump. Others worry about beach pollution and oil spills. Yet others think we may be able to reduce "our dependence on foreign oil" this way.

As an aside it always strikes me as funny that we Americans are so afraid of the world. Politicians make a point of protecting America, as if we are in danger somehow. The theme was everywhere at the political conventions. It must be high on people's minds. But why?

The only danger to our well being my friends, is us. We are driving this civilization into the ground with our endless unsustainable consumption. Nobody, just nobody in the whole wide world can threaten us in a meaningful way. Sure 9/11 was extremely painful, but in the big scheme of things, quite irrelevant.

Back to the drill bits though. I am afraid to say, that whether we drill or don't drill won't make one bit of difference to the environment. The thing that destroys the environment is our wasteful misuse of energy. In this case, "our" includes not just America, but increasingly other countries as well. The only thing that can save us from such destruction is high gas prices. Unless you support high gas prices (and I mean $10 per gallon and up), don't call yourself an environmentalist. Don't protest the war in Iraq. Don't bother pretending you care. All you care about is your own comfort.

The only thing that is proven to work against this madness is high prices. Sustained sky-high energy prices. That is what it takes. If you are ready to support it, stand up and raise your hand. Because that is the price to pay for saving "the planet" and ensuring a future for our kids.

who's in charge?

It seems the democrats do not understand -or pretend they don't understand- what the role of president is all about. And role is the right word. The presidency is an acting job. It is a job where you pretend you are in charge, while others more powerful than you make the real decisions. It is a job where you communicate those decisions and get people to accept policies that may not be in their best interest. If that is not apparent to everyone, it is because people like to be fooled.

The republicans do understand, and that is why they favor professional actors for key executive positions. People like Ronald Reagan, Arnold Schwarzenegger, Fred Thompson, etc. Democrats on the other hand think they can solve problems and so they prefer brainiacs like Al Gore, John Kerry, and now Barack Obama. People who are smart, educated, and "qualified." Unfortunately those people also have a hard time connecting to the average voter. They are not very electable. And when elected, they are often not very effective, like Jimmy Carter.

The president may be hailed as "commander-in-chief," and "leader of the free world," or the man in charge of the most powerful country on the planet, but that is all hogwash really. For one, presidents are politicians and the best politicians have very few strong feelings or ideas on how to lead the world. They are people who go with the flow and ride the wave of the voters. They also like to make sure their contributors get what they pay for.

Government is a layered structure. 90% of it is run by non-elected career people, called bureaucrats. They change very little from one administration to another. While presidents may hire chiefs to run the bureaucrats, these chiefs are only as effective as their bureaucracy-skill sets allow.

Powerful interest groups know how to get to the bureaucrats. The bureaucrats in turn know how to get things done, and you need to be on their good side to get things done. That is where the Washington-insider comes in. Washington-insiders can get things done. And if they are in high office, such as VP, then they can really get things done. (VP's do not get elected so they need not be so popular).

Then there are the various special interests. Car companies that want people to drive big cars. Oil companies that want to drill. Pharma companies that don't want you to buy drugs in Canada, farmers who want to get free water, gun-owners who are paranoid about losing their toys. The list is endless. All these people try to collect money and influence voters and politicians alike.

On top of it all some presidents add a little icing on the cake. They have some pet projects. Kennedy liked to mess with foreign politics in Asia and that is why he got us in Vietnam. Johnson wanted a civil rights legacy.  Nixon was just plain greedy. Carter wanted to change people for the better. Ronnie just wanted to be loved and admired. W is still trying to figure out who he really is.

So much for qualified. How about likable and charming? Now, who do you like best? McCain-Palin or Obama-Biden? It is your choice, America.

what's in a name

Well, John McCain couldn't have done better even if he wanted to. He chose the perfect running mate to express his feelings. That is, if we look at it from a linguistic perspective. The word palin derives from Greek and means "again" or "backwards." As in palindrome, or running back again. How about that? Four more years. I am surprised the Democrats haven't figured this out yet.

Or maybe they have and they figured it isn't nice to play tricks with someone' s name. After all, it isn't Sarah's fault that her name means again. It isn't even her real name. Just something she picked up from her oil executive husband. She can't help it. It is just a fortunate or unfortunate coincidence. Here is Sarah Again.

Sarah, abortion again, drilling in the wildlife refuge again, offshore drilling again, George W again. Nil nove sub sole, the Romans used to say. And it seems maverick McCain agrees. 

Still, we have to congratulate him on a very smart move. One that may well win him the election by siphoning off the Hillary crowd. My vote (that is to say my prediction) is with McCain, odd as it may seem. I just don't think Barack can win.