California Dreaming

There is a simple reality that we as a society are having a tough time grasping. It doesn't matter, Federal, State, County or Municipal: our collective governments are all spending far more money than they have available and even if they don't want to acknowledge it, are all essentially bankrupt.

It's with that background that the following stories out of California this week have me incredulous. We have students at UCLA protesting upcoming tuition hikes ( I wonder how a 32% increase gets figured in the CPI) but at the same time the state of California is trying to get a handle on a $21 billion budget deficit. It doesn't get any better on a municipal level as San Francisco is staring square at a budgetary disaster or so says Steve Kawa, Mayor Gavin Newsom's chief of staff.

" I don't even know if I have words to describe how bad this is,".......

Next year's budget deficit is likely to top $400 million, Kawa said. That forecast could get even worse with federal stimulus money coming to an end next year and the state likely to help balance its own budget woes by cutting money sent to cities and counties.
"It may be the perfect financial storm," Kawa said. "It's going to be incredibly difficult to find a way to balance next year's budget without some severe impacts."

It gets even better. Check out this story in today's NYTIMES, With F.H.A. Help, Easy Loans in Expensive Areas :

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.
A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

Great. It doesn't take a genius to figure out how this will end. Speculators praying for a real-state uptick on the back of the taxpayer. I think more pain in on the way.

Trade Shows in the Second City

When I started this blog one of my intents was to focus on the B2B world. As time has gone by my posts have tended towards economics/politics. Here's a brief return to original intent.

As an amateur student of business and markets a daily read of Mike Shedlock’s blog (Mish) has not only helped keep me out of investment problems in this tough environment but his writing has also generated money making ideas for me as well. In one of his posts over the weekend he addressed a situation that is dear to all of our hearts---some of the outrageous costs associated with Trade Shows. Worth a read by everyone who has to deal with this kind of stuff.

http://globaleconomicanalysis.blogspot.com/2009/11/conventions-say-good-riddance-to.html

http://www.wbbm780.com/High-costs-drive-major-trade-show-out-of-Chicago/5660124

It was a painful decision for the Chicago-based trade association, whose first trip here for its annual convention impressed its members, until they got the electricians' bills."Our costs were about $200,000 more," said Lieber. "So it went from $40,000 to $240,000 for the electrical work alone…….

The city got the word Wednesday that the huge medical convention wouldn't return. They're also sweating out a decision by an even bigger show.The International Plastics Showcase has been in Chicago since 1971, but now a spokesman says: "We are looking at other options."

Seventh Inning Stretch

This past World Series battle between the Yankees and Phillies was an entertaining match up as far as baseball goes. Because I just don't have the patience to sit and watch a complete baseball game I'm a couple years removed from the pomp that accompanies a Major League baseball game.

What is the deal with the 7th inning stretch? I remember going to Memorial Stadium in Baltimore back in the '80's and being serenaded to "Thank God I'm a Country Boy" by John Denver as the game moved into the bottom of the seventh inning. It was fun and light-hearted.

What a different scenario now. As the Yankees left the field at the end of the top of the seventh inning the PA announcer asked all"to rise, take off your hat, and join in the singing of God Bless America." It was presented as a spiritual event. I guess there is nothing inherently wrong, but it reminds me of an experience I had while visiting the Soviet Union during the summer of '81. One evening our group attended a performance by the Moscow Circus and smack in the middle of the program was a PA announcement followed by a group of soldiers goose-stepping into the circus ring carrying various flags and banners to commemorate the heroes of the Great War ( which had been fought 35 years before). We as a group of Americans were struck with how out of place and strange the demonstration seemed. I got the same feeling last week as I watched this quasi-religious ceremony between innings. God Bless America was a song the Flyers used to dust off before must win playoff games as a good luck charm. If they really needed the game they would bring Kate Smith in to sing the song live. We've gone from that to an almost Leni Riefenstahl moment.

Very strange.

No Fever LIke Gold Fever!!!!

So, the yellow metal hit a new all-time nominal high in $US terms--over $1040 an ounce. All in all there really wasn't much hoopla in the MSM and for a long-term gold bull like myself, that is good news. I don't know whether this breakout is the result of future inflation fears, the alleged secret meetings of the Gulf States to create an alternative reserve currency to the dollar or just a further decline in confidence in "paper", but what I do know is that this action does not bode well for our economy and I would go so far as to say our society. Jim Sinclair, Mr Gold offers his assessment,
"The reason why I suggest that today’s market should scare you, and not be a cause for high five because of the implication of the event.

Hyper-inflation has always been a currency event, not an economic event. The currency event has always been, for whatever reason it occurred, a loss of confidence phenomenon. Clearly confidence in the US dollar and its management is slipping. Historically when this currency event comes about the transition is extremely fast.

We have been doing a countdown to the beginning of the end, or that process acceleration. The are 33 days to go.

Gold is then off to $1224, $1650 and then on to Alf’s numbers."


I have heard a few commercials on various radio stations advertising gold coins, but for the most part I'm hearing more stories about people selling their gold for cash now instead of actually going long. I know it's not scientific but it's enough to keep me long for the time being. I believe the yellow metal has a long way to go on the upside.

Not Change--More of the same

I was an early and vocal supporter of Barrack Obama's Presidential run ( to be exact I had two candidates, one in each Party--Obama on the Dem side and Ron Paul on the Repub side). I have also been a vocal critic of many of George W Bush's policies. One particular practice I find particularly odious is the so-called Signing Statement, whereby the President essentially says that he doesn't plan on adhering to the very law he is in the process of signing.

I found this recent article in the NYTimes disturbing.

President Obama has issued signing statements claiming the authority to bypass dozens of provisions of bills enacted into law since he took office, provoking mounting criticism by lawmakers from both parties.

President George W. Bush, citing expansive theories about his constitutional powers, set off a national debate in 2006 over the propriety of signing statements — instructions to executive officials about how to interpret and put in place new laws — after he used them to assert that he could authorize officials to bypass laws like a torture ban and oversight provisions of the USA Patriot Act.

I believe these Signing Statements were wrong when Bush did them and I believe they are equally wrong now that Obama does them. What has happened to the US Constitution?

GE -The Emporor Has No Clothes

The alleged magic of jack Welch looks now to be a lot of smoke and mirrors with the news out today that the company settled for $50 million with the SEC over accounting fraud in 2002 and 2003. The stories of quarter end shenanigans to "make a number" at Welch's GE are legendary. Typical of the way things work, now Jack's on the golf course and at big dollar corporate events while others are left to deal with the problems and soiled reputation that remains. This paragraph from the Financial Times report tells it all:

But the settlement reinforces the notion that GE’s focus on “making the numbers” every quarter – and investors’ penchant for rewarding the company for doing so – was a bull market phenomenon that was unsustainable over the long term

In my business world, I still see way too much emphasis on "making numbers" in the short-run rather than focusing on building long-term sustainability -- I hope this GE experience is a lesson to corporate America. It doesn't work in the long-run. The" make the numbers" mentality is another example of the delusional world we find ourselves circa 2009 America. Fast buck, no money down, bailout nation short cuts aren't going to get the job done and are likely to end in disappointment and disgrace.

Cultural Icons?

It's been tough not to notice the non-stop media barrage of all things Michael Jackson. Back on June 27, the day both Jackson and Farrah Fawcett passed, George Ure over at Urban Survival penned a thoughtful paragraph or two on the meaning of cultural icons. He used the Wikipedia definition of the term Cultural Icon and then followed with this gem:

Not many folks turn off the infostream long enough ponder a bit about the important role of the archetypes and icons, how they form and frame us, let alone study how they work down at the preconscious and subconscious levels forming and co creating the physical world we share in 'waking' hours perhaps better described as social sleep.
Still, if you've forgotten Socrates "Allegory of the Cave" the Wiki entry on archetypes of this sort (here) is about the best short-form description of how those little buggers work.

I hadn't revisited the Cave Allegory since my freshman year at Colgate when Plato's Republic was in the syllabus for one of our Core requirements -- Philosophy and Religion. It's amazing what you don't see and perceive as an 18 year-old college student. It's funny how I can sat that 30+ years later. The Cave Allegory and The Republic are worth revisiting.

The Jacko circus is just another example of how we've lost it as a society. Reality is a tough foe. We need to wake up soon .Bob Herbert said pretty much the same thing in his NYTimes column yesterday. I think it's one of his best efforts I've read. See what you think:

Meeting Michael Jackson in the mid-1980s was one of the creepier experiences of my life. I was an editor at The Daily News and had to present him with an award in a large room with just a handful of onlookers and a photographer at Madison Square Garden.

I wasn’t put off by the fact that Jackson, then in his mid-20s, couldn’t make small talk. Lots of people have trouble with that. There was something about his overall behavior that weirded me out. He seemed, even then, to be a person who was trying with all of his being to step outside of reality and leave it behind.

Emmanuel Lewis, the child star of the hit TV series “Webster,” was with Jackson that evening. The undersized Lewis was probably 13 at the time, but he looked much younger, maybe 7 or 8.

Jackson seemed to relate only to Lewis. He made faces at the tiny boy and giggled as Lewis hopped around and climbed over furniture, much to Jackson’s delight. I remember thinking as I left the Garden that Jackson had treated Lewis almost as a pet.

I’ve never heard any suggestion of anything improper about the relationship between Jackson and Lewis. But what I wish I had thought more about in those long-ago days of Michael-mania was the era of extreme immaturity and grotesque irresponsibility that was already well under way in America. The craziness played out on a shockingly broad front and Jackson’s life, among many others, would prove to be a shining and ultimately tragic example.

Ronald Reagan was president, making promises he couldn't keep about taxes and deficits and allowing the readings of a West Coast astrologer to shape his public schedule. The movie “Wall Street” would soon appear, accurately reflecting the nation’s wholesale acceptance of unrestrained greed and other excesses of the rich and powerful.

In neighborhoods through much of black America, crack was taking a fearful toll. Young criminals were arming themselves with ever more powerful weapons, and prison garb was used to set fashion trends.

Motown was the label that gave us the Jackson 5. But when Michael and his brothers released their first album in 1969, the label had already reached its creative peak and most of the best work — the stunning originality of the Miracles, the Marvelettes, Mary Wells, Martha and the Vandellas, the Supremes, the Temptations, and others — had been done. Hip-hop would soon appear, and then the violence and misogyny of gangsta rap.

All kinds of restraints were coming off. It was almost as if the adults had gone into hiding. The deregulation that we were told would be great for the economy was being applied to the culture as a whole. Women could be treated as sex objects again as misogyny, hardly limited to hip-hop, went mainstream. (Have you looked at network television lately, or listened to the radio?) Astonishing numbers of men abandoned their children with impunity. Most of the nation seemed fine with the idea of going to war without a draft and without raising taxes.

In many ways we descended as a society into a fantasyland, trying to leave the limits and consequences and obligations of the real world behind. Politicians stopped talking about the poor. We built up staggering amounts of debt and called it an economic boom. We shipped jobs overseas by the millions without ever thinking seriously about how to replace them. We let New Orleans drown.

Jackson was the perfect star for the era, the embodiment of fantasy gone wild. He tried to carve himself up into another person, but, of course, there was the same Michael Jackson underneath — talented but psychologically disabled to the point where he was a danger to himself and others.

Reality is unforgiving. There is no escape. Behind the Jackson facade was the horror of child abuse. Court records and reams of well-documented media accounts contain a stream of serious allegations of child sex abuse and other inappropriate behavior with very young boys. Jackson, a multimillionaire megastar, was excused as an eccentric. Small children were delivered into his company, to spend the night in his bed, often by their parents.

One case of alleged pedophilia against Jackson, the details of which would make your hair stand on end, was settled for a reported $25 million. He beat another case in court.

The Michael-mania that has erupted since Jackson’s death — not just an appreciation of his music, but a giddy celebration of his life — is yet another spasm of the culture opting for fantasy over reality. We don’t want to look under the rock that was Jackson’s real life.

As with so many other things, we don’t want to know.