Crooks,Clowns, Cronies and Con Men--A Portrait of our Federal, State, and Local Political Leadership

I had some time this past weekend to catch up on my current events reading. It might appear from the title of this post that I am being unfair to those in the political class. I am sure we all know some hard working, decent people who have given their professional lives to politics and government, but on balance I think we are stuck with a bunch of sad sacks, political party be damned. I would even go a step further and add business leaders to the 4-C moniker. Over the past several years I have witnessed some pathetic examples of business leadership. It sure is sad, but we truly are reaping what has been sown.The articles highlighted below are just things that popped over the past couple days. A potpourri of craziness.

Exhibit 1-- Denver School System raped by bankers: Superintendent gains promotion to the US Senate.

There are multiple issues in this story. How did the Denver School System get in a situation whereby they were staring at a $400 million unfunded liability. The School Board's solution was to enter into a derivative "swaps" agreement with JP Morgan. The end results of their financial efforts: they still face a $400 million shortfall and still owe another $400 million because of the Morgan deal blew up in their face. The best part though is the guy that orchestrated the deal, the Superintendent of Schools at the time, Michael Bennet was eventually appointed to fill a vacant US Senate seat. He has the full support of the Obama Administration as he faces his constituents in a Democratic primary today. His explanation for the fiasco, "Nobody could have seen the financial crisis coming". Right

Exhibit 2--Matt Tiabbi skewers the players and pawns of both parties in the fiasco that is FinReg. I think it might have been Karl Denniger who pointed out that the Glass-Steagall Act was 40 pages and we would have been better off just reenacting it rather than wasting time with the new 2000 or so page piece of garbage that we are now stuck with.As Taibbi so skillfully points out, you would have to be worse than naive to believe that the cast of characters in DC are working for "we the people". The plutocracy is getting taken care of across the board. I knew Mitch McConnell was in the tank, but shame on Chris Dodd, Barney Frank, Blanche Lincoln and a host of others.

Exhibit 3 -- This story boggles the mind. How about an August surprise where the Obama Administration orders Freddie and Fannie to forgive the mortgage debt on "underwater mortgages"--loans where more is owed than the home is worth. I don't even have a comment to offer on this one.

I'll leave the issue of massive unfunded pension liabilities out of this rant. That's for another day. Something to ponder, given all the problems we face at the municipal, state,and federal level plus $3 trillion ( yes TRILLION) of unfunded liabilities staring us in the face, why would anyone put their neck on the line and seek an elected position in government. I hate to be cynical, but even those who flat out suck seem to do well financially once they do their government "service". It's the new fast track to wealth in our economic system.

The Sad State of Our Political Affairs

There is not much to say. I fired up my computer and was confronted with this story about Charlie Rangel's Ethics Committee problems. ( my home page is the NyTimes) There isn't any commentary necessary. It's another sad example of a "Public Servant" who really isn't a public servant--- shame on me, I always respected Charlie.

I thought I'd take a quick peak at Mish's site to see what I missed in the economic world. It was Opening Day at Saratoga after all. Right after reading about Rangel I come across this about the political operatives in Bell, Ca. and all I can offer is that it is almost impossible to have any faith in our current structure. I am open to any suggestions. Maybe it's possible to label these two stories as "bad apple outliers" but I fear that that is wishful thinking.I quoted the Psalms last post, why not Ecclesiastes this time:

For with much wisdom comes much sorrow; the more knowledge, the more grief."

I might not put Hemingway in the same category as Scripture, but this line sums it up just as well:

"Was there ever a people whose leaders were as truly their enemies as this one?" - Ernest Hemingway, For Whom the BELL Tolls, Ch. 13

Paul Krugman's Latest-- A Misplaced Faith in the System?

Paul Krugman has a Nobel Prize for Economics and I don't. The argument could be made that he knows a hell of a lot more about economic issues than I do but after his Op-ED piece today lambasting the FED and Ben Bernanke I am wondering whether Professor Krugman and his economist brethren have an overblown faith in the economic system and in the powers of Central Bankers and policy makers to effect the economic system.

Krugman's article criticized Bernanke and the FED for not going the extra mile in combating the problems in the economy. Krugman believes and he points out that Bernanke also clings to this belief that the FED does have extra tools at its' disposal to fight the deflationary spiral the economy is facing. For example.

" It can buy longer-term government debt. It can buy private-sector
debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.
Nobody knows how well any one of these actions would work. The
point, however, is that there are things the Fed could and should be doing, but isn’t. Why not? "

I stopped "officially" studying Econ after my sophomore year at Colgate. A semester of Macro and trying to get my head around the Edgeword Box Diagram drove me over the edge. Economics is called the "dismal science" but labeling it a science is inaccurate and an attempt by those who practice it to elevate the intellectual importance of their craft.

It really isn't rocket science. Our economy went through a multi-year process whereby all we did was stimulate it. We went from .com boom to post 9-11 zero % financing to house flipping, to house as ATM consumption. We stimulated ourselves to "pull-forward" demand for probably the next decade. I don't know what these prize winning economists don't get about that. We are in a spot where there is nothing left to stimulate. A substantial % of US homeowners owe more on their home than it is worth. We have a debt hang-over on a personal level, a local government level, a state government level and the Federal government level yet somehow good Professor Krugman is looking to convince us that borrowing more is the answer to our problems.

Krugman and his crew worship at the altar of a false god. For whatever reason they have "faith" in the wisdom of policy and policy-makers. As he stated in today's column:

Like other economists, myself included, Mr. Bernanke was deeply disturbed by
Japan’s stubborn, seemingly incurable deflation, which in turn was “associated
with years of painfully slow growth, rising joblessness, and apparently
intractable financial problems.” This sort of thing wasn’t supposed to
happen to an advanced nation with sophisticated policy makers.

King David had something to say about this many years ago. Krugman's misplaced faith reminded me of it--Psalm 146:3-4. We might all be better off keeping the giant slayers' words in mind as we continue to listen to prescriptions offered by our monetary princes.

Put not your trust in
princes,

nor in the son
of man,
in whom there is no help.
4
His breath goeth
forth,

he returneth to his
earth;
in that very day his thoughts perish.

Tom Friedman is Freakin Annoying

Tom Friedman gets paid big bucks to pontificate to us on the pages of the NYTimes. I'll never forget how James Howard Kunstler described a Friedman piece on alternative energy--something to the effect of "he's blowing green smoke out his ass", well as far as I'm concerned he's doing it again. In his Sunday column, Freidman takes the opportunity to opine on the BP oil spill and how this is our opportunity to change as really we are all responsible for the predicament we find ourselves in. ( Just a digression on the BP spill but what's up with the live cam shots on the CNN, CNBC etc. of oil seeping out in real-time? What's the point?)


At face value maybe Friedman has a point but his recipe is laughable. I'll let him spell it out:

"We have to use this window of opportunity to insulate ourselves as much as possible against all the bad things we cannot control and get serious about fixing the problems that we can control. We need to make our whole country more sustainable. So let’s pass an energy-climate bill that really reduces our dependence on Middle East oil. Let’s pass a financial regulatory reform bill that really reduces the odds of another banking crisis. Let’s get our fiscal house in order, as the economy recovers. And let’s pass an immigration bill that will enable us to attract the world’s top talent and remain the world’s leader in innovation. "

Friedman is a creature of the establishment. In his world some kind of legislation is going to get us moving to solve our problems. He doesn't get it, we are so far beyond that at this point that his cries ring hollow. Day after day hard working Americans have less and less reason to believe that the professional politicians who sit in various legislatures have any answers for the multitude of problems we as a society face. Think of kidding, take a look at what my own state legislature is proposing. They are going to borrow from the state pension fund to lend to that same pension fund. Yeah Tom, legislation is the answer to our problems.

Top 5 Social Media Tips for C-Suite Execs

As I read this educational post on Mashable this morning I couldn't help but think back to a dinner conversation I had with my client and friend Walter a couple weeks ago when we were both in NYC for a Trade Show. Walter is in the pump business, double diaphragm pumps to be specific. He brought along a colleague from his office, Eric, who handles the social media responsibilities for the organization. It was fascinating listening to these two 30 somethings talk about where they saw things going on the social media front and how important it was going to be for their business. Now keep in mind .Walter is not in the most glamorous of businesses --in fact his business is rather old school when it comes to embracing digital marketing, let alone Twitter, Facebook, blogs etc. One of the things Walter said really stuck with me as he talked about how ubiquitous social media will be in our sales and marketing lives over the next couple years. He said, "Remember 15 years ago, almost nobody used e-mail. When e-mail first came out, all I heard was why do we need it."

No question the younger crowd is totally engrossed in the digital world. As the Mashable post points out, for upper level management in today's business world social media is an unpracticed art. That is going to change, I think pretty quickly. The business environment is changing in dramatic fashion and these changes are coming at us warp speed. Those in the executive suite who don't adapt to this changing world will find themselves ex-management in the not too distant future.

Top 5 Social Media Tips by Jennifer Van Grove

• Go where the people are
• Invest in people
• Be a subject matter expert
• Make it personal
• Don't neglect internal social media

Where Are We In The Housing Correction?

If you believe what T2 Partners has to say in this recent report the sane approach might be to continue to rent for the time being ---if you have that option. I realize it is human nature to always look for the silver lining and that we have suffered through almost two years of housing price devastation, but a study of the chart at the top of this post surely indicates more pain coming as ALT-A Option ARMS are re-set later this year and into next.

A couple amazing stats for the above mentioned T2-- Whitney Tilson research piece:

• 14%+ of all mortgages on 1-4 family homes were delinquent or in foreclosure in Q4 2009


• Of homeowners who haven't made a payment in a FULL YEAR- 23% haven't been foreclosed upon


• If home prices were to drop another 10%, the percentage of underwater homeowners would increase by 50%+


• HELOC delinquencies are soaring

I still believe a double-dip recession is in the works. Be careful out there.

Tough Times At My Old Kentucky Home

This Saturday is Derby Day. No question the Kentucky Derby is a cornerstone in the pantheon of American sports events. Even though I am a big horse racing fan, I haven’t been paying attention to the economics of the sport and as a result this Joe Drape article in the Times surprised me. It shouldn't have. When the financial history of this era is written it will rival any of the classic mania’s of yesteryear. Take your pick of asset, art, dot-com, vacation house ---the Drape story talks about 6 figure breeding rights that are now worth something in the order of 10k. What were we thinking I guess we weren’t and that was the problem. When it’s all said and done we are not any different than the Dutch in the 1600’s willing to bid up tulip bulbs to astronomical price levels.