This nice review of how much the US Government has pledged thus far to "bail out" the US (global) financial system.
I am at a loss for words. Nice round up. As I have said before, we are looking at needing a wheel barrel full of dollars to buy groceries in the near future. Any idiot who buys US Government Debt will understand how much debt the Fed and other agencies referenced in this article have taken on and they will stop buying any more and begin dumping what they have.
This will happen just when you think the "crises" is over. In reality, the "crises" will look over because the US Gov will have taken all the risk and for a Short while one will think the party is back on. Then all hell will break loose.
If you know anything about how to protect yourself from a dollar that is worth 10% of what it is now, do it today.
Let me know also cause I have no idea.
Monday, November 24, 2008
Saturday, November 15, 2008
Bail out Auto Industry?
I was inspired to write a commentary on the Auto Industry after reading this post by John Dvorak on Marketwatch.com. In his article he makes a couple arguements that are dead wrong and likely assumptions that will contribute to Congress bailing these worthless institutions out. Below is my letter to Mr. Dvorak. Please feel free to read his article first.
Dear Mr. Dvorak,
I read your article entitled “Could Steve Jobs Save GM?” and was struck by one of your arguments that Mr. Jobs comes from an industry accustomed to constantly declining prices. You state:
You also imply the auto industry business model is not manageable the way the tech industry is. You say
I would like to argue both of your points are dead wrong. In fact I am absolutely sure the auto industry faced and still faces the same dynamics of the tech industry and has for a couple of decades now and this is in fact a key reason for Detroit’s demise. They never reconfigured their business model to this reality. Instead they looked for a way to sustain their worn out mid 20th century business model even after investing in the 1980’s to re-tool themselves to better compete with what then was a virtual onslaught of automobiles from Japan that Americans were confounded by. American consumers were astounded by the idea you could buy an automobile and own it for 5 years only needing to change tires, oil and gas. Detroit had never made such an automobile and had no intention of doing so until they had no choice.
Well part of the reality of a well-made automobile that was fuel efficient to boot, was the manufacturing process and technology used to make such a car a reality. Yes, Technology, robotics, automation, precision and ultimately declining prices of microprocessors to the extent where all things are controlled electronically from a central processor / circuit board is a reality now. All of these things became less and less expensive. Outside of the cost of raw aluminum, steal and plastics (which admittedly have risen in recent years to artificially high levels, although this is not sited as a primary reason for the collapse of the US auto makers), every factor of input used in manufacturing automobiles and every part of making the actual automobile got more technically advanced and cheaper to produce.
In addition to these realities, it became measurably easier to create a product to enter the market. Look at the Hyundai example. I was a consumer in college of a 1988 Hyundai automobile. I was amazed by the fact that the engine, transmission, parts; chassis were all a kind of stew of parts by different suppliers. I don’t have an exact breakdown but through my ownership experience I learned the engine was Japanese and when I had to replace engine parts (parts obviously originally outsourced to inferior Korean parts suppliers at the time) the new ones came also from Japan. Hyundai, a large industrial company at the time of its foray into automating initially went to Ford, UK to requisite technology for cars and light trucks. Later they moved from foreign licensing agreements to the development of their own passenger cars. They outsourced styling to Italy, manufacturing and know how from Japan and the UK and introduced their first car, the Pony with an eye on ultimately exporting automobiles. They did not have their own in house designed engine installed in an automobile until 1992. To this day, Hyundai continues to reinvent itself by partnering with makers of various technologies for fuel cell technology, hybrid technology, truck building and manufacturing.
What is the purpose of this expose on Hyundai? I would argue that any team of engineers could create an automobile right now, outsource the major components and assemble them somewhere in the US and be in business not unlike Microsoft entered the gaming business with it’s X-box a few years back.
What you were right about in your article was your suggestion that having a “big 3” industry has been a real detriment to innovation and a real hindrance to destroying the legacy infrastructure that has ensued. The “big 3” are like the “big Soviet 3” where not only are they bound to themselves and their ideology but they are programmed to dominate and destroy any dissention from within their boarders. They have obviously not been successful in this strategy globally (the US never has been) and foreign auto companies with healthy competition have been able to innovate and reinvent as you rightfully suggest.
So what did Detroit do in the 1990’s when confronted with the obvious reality that it was becoming cheaper and cheaper to build automobiles, international competition was eating their lunch and their industry was beginning to look like the PC industry? (Side note, I have been making this argument to friends and relatives for years as they glazed over in complete befuddlement about the state of the American Auto Industry) They went right back to the 1970’s with huge gas guzzling vehicles (trucks this time conveniently re-branded Sport Utility so the consumer could have a soft and fuzzy feeling about them) they could sell for 2-3 times the price of a “passenger vehicle” and make as much per vehicle in the process as they sold cars for. Now that is a Detroit CEO’s wet dream. Yes, no restructuring needed, no retooling for the future, no innovation, shelf the hybrid technology, the fuel cell technology the regenerative hydraulic technology (Ford) and just about everything else because the future was in TRUCKS.
(Interesting fact, GM with the EPA developed Hybrid technology then GM walked and EPA published the research some time around the mid 90’s and Toyota picked it up and announced a short time after that within 10 years they would have a fleet of hybrid vehicles on the road globally. Now they own so much of the technology you practically cannot go hybrid with out a licensing agreement from Toyota if not buying the technology outright and just installing it in your vehicle)
In fact the only innovation that came from this move to trucks as passenger vehicles came directly form the typical 19th century mindsets of the people who run Detroit’s big three, a creative way to skirt all of the regulations tied to passenger vehicles in the United States and Congress gave them the tacit approval to do just this. Trucks were not bound by fuel efficiency standards of cars, they did not have the stringent side impact rules, bumper safety rules, roll over rules, emissions rules, passenger safety rules, you name it. Detroit figured out how to completely spit in the face of all car regulations and at the same time did something that any skeptic of TV advertising would be loath to admit, convinced ½ the auto buying public that they needed a vehicle that got the fuel efficiency marks of a 1978 gas guzzler, would cause them to be out of pocket something on the order of $1,000 for a tire replacement and would have annual operating cost of over $9,000 (back when we had $1.50 gas mind you) including depreciation. In addition the mass use of trucks as personal use vehicles would cause measurably more destruction of the roads (impacting their tax dollar), the environment, on drastically increased emissions and for the first time since 1978 would be the single most direct cause of the renewed increase in per-capita energy consumption in the US. These realities do not touch on the ecological destruction caused by moving to Trucks as a primary means of transportation or the overall environmental damage, stress on the global supply chain for fossil fuels, damage to the economy of the United States when fuel prices spiked to $4.00 per gallon, and damage to the image of the United States as just one massive reckless consumption nation bent on war and debt to feed their un-stainable desire to consume.
Yes I am forever reminded when moving some things from a friends apartment in early 2007 of the unprecedented success of Detroit’s marketing efforts when after seeing one of these trucks “SUV’s” parked at the loading dock asking a young lady of about 22 if that was her “truck” parked outside. “No” she said. Then I rephrased my question, “Is that your SUV parked outside”. “Oh, yes that is mine.” She replied. My my, what a job Detroit did to convince Americans of their need for a truck as their primary means of transportation, sunset rides up mountains, adventurous rides through back roads somewhere, visions of mom’s with their children happily strapped in the spacious back seat, pictures of families arriving at the beach with pounds of Chinese made plastic garbage piled in the rear storage area. The images abound. The advertising companies did their job.
In a land of more paved roads per capita than most others in the world, where the “nuclear” family has shrunk to about 1.5 children per family, where commutes have grown to nearly an hour in most large urban areas, where household costs had begun to skyrocket with the second major reason American per-capita energy consumption resumed it’s rise, massive 3,500-5,000 square ft “homes” with huge annual maintenance and depreciation costs, Americans were solidly sold on buying trucks to get to and back from work each day. Sad story at best. Meanwhile during this very time the rest of the world, Europe, especially France, Japan, Korea, China, India, you name it, the fastest growing segment of the auto industry was in vehicles with UNDER 600 cc capacity engines.
Now Detroit is reeling. They bought themselves about 15 years of life with their reckless shortsighted policies and their flight from the obvious, automobiles are now being made and sold around the world at less than $3,500 a pop. They knew this was coming. It scared the hell out of them and they yielded to the rest of the world to meet the challenge. There is no turning back.
I say we let GM, Ford and Chrysler implode. When all these smart people are jobless, perhaps they will have enough money between them to go out and start new automobile companies, ones with smart design, energy efficiency, consumer friendly, programmable interfaces, customizable on order, door to door delivery, mail order catalog business models, prices manageable with a credit card, recyclable components, flexible manufacturing technologies, safety and efficiency built in. I mean when the Cold War “ended” and we had a president who’s first responsibility was NOT to go looking for another imaginary enemy to build up the Defense Department Corporate Welfare machine, the defense industry actually shrank. Suddenly America had a bunch of smart people without a job and the next thing you know another completely new industry popped up surrounding technology these unemployed people could apply their talents to and exploit. I am writing you using that technology today and your owe your current job to it. The economy is already in the pits, what is there to loose.
Perhaps Steve Jobs and a few other smart technology people who have had to operate in an industry of advancing technology and declining prices could actually create a new automobile industry based on a set of assumptions known and operated under by the global auto industry for years. Innovate, outsource, produce, sell, repeat.
Dear Mr. Dvorak,
I read your article entitled “Could Steve Jobs Save GM?” and was struck by one of your arguments that Mr. Jobs comes from an industry accustomed to constantly declining prices. You state:
There is no such effect or urgency in the any other industry. The closest you come is with auto depreciation, whereby a new car, once driven off the lot, becomes used and worth significantly less.
You also imply the auto industry business model is not manageable the way the tech industry is. You say
And the irony is that I think it may have been possible in the past, before the companies were vertically integrated, but not in the present, where the manufacturing, inventory, subassemblies, delivery and other systems that are in place are too delicately balanced and complicated for a newbie to deal with.
I would like to argue both of your points are dead wrong. In fact I am absolutely sure the auto industry faced and still faces the same dynamics of the tech industry and has for a couple of decades now and this is in fact a key reason for Detroit’s demise. They never reconfigured their business model to this reality. Instead they looked for a way to sustain their worn out mid 20th century business model even after investing in the 1980’s to re-tool themselves to better compete with what then was a virtual onslaught of automobiles from Japan that Americans were confounded by. American consumers were astounded by the idea you could buy an automobile and own it for 5 years only needing to change tires, oil and gas. Detroit had never made such an automobile and had no intention of doing so until they had no choice.
Well part of the reality of a well-made automobile that was fuel efficient to boot, was the manufacturing process and technology used to make such a car a reality. Yes, Technology, robotics, automation, precision and ultimately declining prices of microprocessors to the extent where all things are controlled electronically from a central processor / circuit board is a reality now. All of these things became less and less expensive. Outside of the cost of raw aluminum, steal and plastics (which admittedly have risen in recent years to artificially high levels, although this is not sited as a primary reason for the collapse of the US auto makers), every factor of input used in manufacturing automobiles and every part of making the actual automobile got more technically advanced and cheaper to produce.
In addition to these realities, it became measurably easier to create a product to enter the market. Look at the Hyundai example. I was a consumer in college of a 1988 Hyundai automobile. I was amazed by the fact that the engine, transmission, parts; chassis were all a kind of stew of parts by different suppliers. I don’t have an exact breakdown but through my ownership experience I learned the engine was Japanese and when I had to replace engine parts (parts obviously originally outsourced to inferior Korean parts suppliers at the time) the new ones came also from Japan. Hyundai, a large industrial company at the time of its foray into automating initially went to Ford, UK to requisite technology for cars and light trucks. Later they moved from foreign licensing agreements to the development of their own passenger cars. They outsourced styling to Italy, manufacturing and know how from Japan and the UK and introduced their first car, the Pony with an eye on ultimately exporting automobiles. They did not have their own in house designed engine installed in an automobile until 1992. To this day, Hyundai continues to reinvent itself by partnering with makers of various technologies for fuel cell technology, hybrid technology, truck building and manufacturing.
What is the purpose of this expose on Hyundai? I would argue that any team of engineers could create an automobile right now, outsource the major components and assemble them somewhere in the US and be in business not unlike Microsoft entered the gaming business with it’s X-box a few years back.
What you were right about in your article was your suggestion that having a “big 3” industry has been a real detriment to innovation and a real hindrance to destroying the legacy infrastructure that has ensued. The “big 3” are like the “big Soviet 3” where not only are they bound to themselves and their ideology but they are programmed to dominate and destroy any dissention from within their boarders. They have obviously not been successful in this strategy globally (the US never has been) and foreign auto companies with healthy competition have been able to innovate and reinvent as you rightfully suggest.
So what did Detroit do in the 1990’s when confronted with the obvious reality that it was becoming cheaper and cheaper to build automobiles, international competition was eating their lunch and their industry was beginning to look like the PC industry? (Side note, I have been making this argument to friends and relatives for years as they glazed over in complete befuddlement about the state of the American Auto Industry) They went right back to the 1970’s with huge gas guzzling vehicles (trucks this time conveniently re-branded Sport Utility so the consumer could have a soft and fuzzy feeling about them) they could sell for 2-3 times the price of a “passenger vehicle” and make as much per vehicle in the process as they sold cars for. Now that is a Detroit CEO’s wet dream. Yes, no restructuring needed, no retooling for the future, no innovation, shelf the hybrid technology, the fuel cell technology the regenerative hydraulic technology (Ford) and just about everything else because the future was in TRUCKS.
(Interesting fact, GM with the EPA developed Hybrid technology then GM walked and EPA published the research some time around the mid 90’s and Toyota picked it up and announced a short time after that within 10 years they would have a fleet of hybrid vehicles on the road globally. Now they own so much of the technology you practically cannot go hybrid with out a licensing agreement from Toyota if not buying the technology outright and just installing it in your vehicle)
In fact the only innovation that came from this move to trucks as passenger vehicles came directly form the typical 19th century mindsets of the people who run Detroit’s big three, a creative way to skirt all of the regulations tied to passenger vehicles in the United States and Congress gave them the tacit approval to do just this. Trucks were not bound by fuel efficiency standards of cars, they did not have the stringent side impact rules, bumper safety rules, roll over rules, emissions rules, passenger safety rules, you name it. Detroit figured out how to completely spit in the face of all car regulations and at the same time did something that any skeptic of TV advertising would be loath to admit, convinced ½ the auto buying public that they needed a vehicle that got the fuel efficiency marks of a 1978 gas guzzler, would cause them to be out of pocket something on the order of $1,000 for a tire replacement and would have annual operating cost of over $9,000 (back when we had $1.50 gas mind you) including depreciation. In addition the mass use of trucks as personal use vehicles would cause measurably more destruction of the roads (impacting their tax dollar), the environment, on drastically increased emissions and for the first time since 1978 would be the single most direct cause of the renewed increase in per-capita energy consumption in the US. These realities do not touch on the ecological destruction caused by moving to Trucks as a primary means of transportation or the overall environmental damage, stress on the global supply chain for fossil fuels, damage to the economy of the United States when fuel prices spiked to $4.00 per gallon, and damage to the image of the United States as just one massive reckless consumption nation bent on war and debt to feed their un-stainable desire to consume.
Yes I am forever reminded when moving some things from a friends apartment in early 2007 of the unprecedented success of Detroit’s marketing efforts when after seeing one of these trucks “SUV’s” parked at the loading dock asking a young lady of about 22 if that was her “truck” parked outside. “No” she said. Then I rephrased my question, “Is that your SUV parked outside”. “Oh, yes that is mine.” She replied. My my, what a job Detroit did to convince Americans of their need for a truck as their primary means of transportation, sunset rides up mountains, adventurous rides through back roads somewhere, visions of mom’s with their children happily strapped in the spacious back seat, pictures of families arriving at the beach with pounds of Chinese made plastic garbage piled in the rear storage area. The images abound. The advertising companies did their job.
In a land of more paved roads per capita than most others in the world, where the “nuclear” family has shrunk to about 1.5 children per family, where commutes have grown to nearly an hour in most large urban areas, where household costs had begun to skyrocket with the second major reason American per-capita energy consumption resumed it’s rise, massive 3,500-5,000 square ft “homes” with huge annual maintenance and depreciation costs, Americans were solidly sold on buying trucks to get to and back from work each day. Sad story at best. Meanwhile during this very time the rest of the world, Europe, especially France, Japan, Korea, China, India, you name it, the fastest growing segment of the auto industry was in vehicles with UNDER 600 cc capacity engines.
Now Detroit is reeling. They bought themselves about 15 years of life with their reckless shortsighted policies and their flight from the obvious, automobiles are now being made and sold around the world at less than $3,500 a pop. They knew this was coming. It scared the hell out of them and they yielded to the rest of the world to meet the challenge. There is no turning back.
I say we let GM, Ford and Chrysler implode. When all these smart people are jobless, perhaps they will have enough money between them to go out and start new automobile companies, ones with smart design, energy efficiency, consumer friendly, programmable interfaces, customizable on order, door to door delivery, mail order catalog business models, prices manageable with a credit card, recyclable components, flexible manufacturing technologies, safety and efficiency built in. I mean when the Cold War “ended” and we had a president who’s first responsibility was NOT to go looking for another imaginary enemy to build up the Defense Department Corporate Welfare machine, the defense industry actually shrank. Suddenly America had a bunch of smart people without a job and the next thing you know another completely new industry popped up surrounding technology these unemployed people could apply their talents to and exploit. I am writing you using that technology today and your owe your current job to it. The economy is already in the pits, what is there to loose.
Perhaps Steve Jobs and a few other smart technology people who have had to operate in an industry of advancing technology and declining prices could actually create a new automobile industry based on a set of assumptions known and operated under by the global auto industry for years. Innovate, outsource, produce, sell, repeat.
Thursday, November 13, 2008
Now Something Really Scarry
I read yesterday again on Bloomberg that a firm in Dubai had agreed to borrow on terms determined by the cost of insurance (CDS, Credit Default Swap Contracts) on the debt.
I don't know if you as a reader here realize what a mind f*** this is. I mean the exact unregulated product that is out there covering some $60 trillion in debt and has been at the core of the financial collapse world wide is going to be used as a bench mark to price debt to an institution.
Forget official interest rates or Libor rates or any government issued or regulated market benchmark of the cost of borrowing money. Forget the business model or the validity of the business to make money or anything else. Base it on a derivative product that as we all know has the ability to value the likelihood of debt being paid at a rate of about ZERO.
This quote is from the article:
OK, so I have said many times since the genius Greenspan then Bernanke and Paulson all suggested banks somehow should manage their own risk profiles and not have capital requirements set by regulation entities or the Fed, that banks are horrible at determining risk for anything and have been in the middle of every boom and bust and have nearly bankrupt the government regulated insurance entities that are supposed to protect Joe the citizen's money more than once and have business models that are completely out of touch with reality.
Now they are admitting their business model is broken, they don't know how to price risk, they don't know how much to charge to lend to institutions and they are all completely in the dark about the exposure they have on their books to the shit they purchased and sold over the past 10 years because of this broken model. So they are going to price debt based on a unregulated product traded on a non-transparent platform that has a bunch of hedge funds and other profiteers manipulating the prices of the products for their benefit?
What the hell is going on here? I am beginning to think the idea in the Muslim world that interest is forbidden and all "lending" must be done with equity participation and repayment is a share of profits is one that the western banks need to seriously start to look at. Maybe then they will hire staff that have finance degrees and understand business and can make determinations on "lending" based on the business model and likely profitability of the entities they are "lending" to so they can get back to making loans that they have a stake in and making money the old fashioned way, earning it through smart decisions in lending.
I don't know if you as a reader here realize what a mind f*** this is. I mean the exact unregulated product that is out there covering some $60 trillion in debt and has been at the core of the financial collapse world wide is going to be used as a bench mark to price debt to an institution.
Forget official interest rates or Libor rates or any government issued or regulated market benchmark of the cost of borrowing money. Forget the business model or the validity of the business to make money or anything else. Base it on a derivative product that as we all know has the ability to value the likelihood of debt being paid at a rate of about ZERO.
This quote is from the article:
Banks are toughening terms for all borrowers following $919.1 billion in write downs and losses worldwide by tying loan rates to credit-default swaps rather than Libor to better reflect the risk they won't get repaid. Nestle SA, the biggest food producer, and Nokia Oyj, the largest mobile-phone maker, are among companies bowing to banks' demands to link loan rates to the derivatives contracts.
OK, so I have said many times since the genius Greenspan then Bernanke and Paulson all suggested banks somehow should manage their own risk profiles and not have capital requirements set by regulation entities or the Fed, that banks are horrible at determining risk for anything and have been in the middle of every boom and bust and have nearly bankrupt the government regulated insurance entities that are supposed to protect Joe the citizen's money more than once and have business models that are completely out of touch with reality.
Now they are admitting their business model is broken, they don't know how to price risk, they don't know how much to charge to lend to institutions and they are all completely in the dark about the exposure they have on their books to the shit they purchased and sold over the past 10 years because of this broken model. So they are going to price debt based on a unregulated product traded on a non-transparent platform that has a bunch of hedge funds and other profiteers manipulating the prices of the products for their benefit?
What the hell is going on here? I am beginning to think the idea in the Muslim world that interest is forbidden and all "lending" must be done with equity participation and repayment is a share of profits is one that the western banks need to seriously start to look at. Maybe then they will hire staff that have finance degrees and understand business and can make determinations on "lending" based on the business model and likely profitability of the entities they are "lending" to so they can get back to making loans that they have a stake in and making money the old fashioned way, earning it through smart decisions in lending.
Vindication
I have found an article that totally vindicates everything I have been saying about the desperate need to reign in the unregulated derivative markets, esp. the CDO’s and CDS’s that have caused the crash in our financial system today.
This article by Bloomberg today sites the work done 10 years ago by a woman named Brooksley Born. She was head of the CFTC in 1998 during the collapse of Long Term Capital Management and cried out for several years to regulate these products. Her stubborn refusal to back down on the issue was not just ignored by people like Greenspan, Rubin and Authur Levitt but her statements were outright discounted publicly by them. Obviously they had too much push from the industry that was making money hand over fist creating and selling them.
This quote from the article about how they played down Ms. Born:
Here is a statement of how the industry was making so much money they would do anything to stop oversight:
I have said many times any time you have a completely non-transparent market where the products are designed by mathematicians and sold by an army of Ivy League “idiots” with no idea of what the hell they are selling and don’t care as long as they make a lot of money doing it is a formula for disaster. This entire crises is the result of government actions going back to the late 1990’s with deregulation of banking and investment institutions followed by Greenspan's tacit approval of anything Wall Street wanted to do followed by the influx of every one and any one starting an unregulated hedge fund to buy and sell at extreme leverage all of these exotic products.
This quote shows and example of lax oversight Ms. Born tried to tighten”
Need I say more?
Thank you Bloomberg for a concise article. I love when the many things I have been writing about which many people find extreme or don’t know where I get them from come together in one well-written short article…
This article by Bloomberg today sites the work done 10 years ago by a woman named Brooksley Born. She was head of the CFTC in 1998 during the collapse of Long Term Capital Management and cried out for several years to regulate these products. Her stubborn refusal to back down on the issue was not just ignored by people like Greenspan, Rubin and Authur Levitt but her statements were outright discounted publicly by them. Obviously they had too much push from the industry that was making money hand over fist creating and selling them.
This quote from the article about how they played down Ms. Born:
She roiled colleagues when her agency said on May 7, 1998, that it would consider whether the over-the-counter instruments should remain exempt from oversight. That same day, Greenspan, Rubin and Levitt issued a rebuke of Born's plan, saying in a joint statement, ``we seriously question the scope of the CFTC's jurisdiction in this area.''
… The near-collapse of Long-Term Capital Management, a hedge fund that had more than $1 trillion in derivative contracts, in September 1998 should have been a ``wake-up call,'' as Born once put it. The argument failed to sway other regulators.
Here is a statement of how the industry was making so much money they would do anything to stop oversight:
Investment banks fought regulation for more than a decade because derivatives, whose value is derived from bonds, currencies or other assets, were a cash cow. As much as 40 percent of the profit for dealers, including Goldman Sachs Group Inc. and Morgan Stanley, was from the private transactions, according to fixed-income research firm CreditSights Inc.
I have said many times any time you have a completely non-transparent market where the products are designed by mathematicians and sold by an army of Ivy League “idiots” with no idea of what the hell they are selling and don’t care as long as they make a lot of money doing it is a formula for disaster. This entire crises is the result of government actions going back to the late 1990’s with deregulation of banking and investment institutions followed by Greenspan's tacit approval of anything Wall Street wanted to do followed by the influx of every one and any one starting an unregulated hedge fund to buy and sell at extreme leverage all of these exotic products.
This quote shows and example of lax oversight Ms. Born tried to tighten”
While leading the CFTC in 1998, Born declared that the unregulated contracts could ``pose grave dangers to our economy.'' Born, a lawyer who according to futures attorney Dan Roth battled fellow regulators with the ferocity of a courtroom litigator, lost a turf fight with Alan Greenspan and Robert Rubin over policing the deals.
After Congress exempted the contracts from U.S. oversight in 2000, the market swelled from about $100 trillion to $684 trillion by June 30. The growth included credit-default swaps and collateralized debt obligations, custom-made products barely in use under Born's reign. They played a part in almost $1 trillion of global bank losses and are prompting lawmakers to seek controls on the complex deals.
``Brooksley has been vindicated,'' said John Tull, a CFTC commissioner from 1993 to 1999. ``Had they listened to her, I think this catastrophe could have been averted.''
Need I say more?
Thank you Bloomberg for a concise article. I love when the many things I have been writing about which many people find extreme or don’t know where I get them from come together in one well-written short article…
Monday, November 10, 2008
Irresponsible Hedge Positions “Illegal”
This is a new twist on the exceptional risk "investment" banks have taken in the recent past with respect to irresponsible lending and leverage. From the Dow Jones Newswire release today regarding Sweden's investment bank D. Carnegie & Co. AB this quote:
Yes they use the word "illegal" when citing the reason to "revoke" the banking business license of D. Carnegie.
If only the US regulators had the ability (or lets say willingness since they do have the ability to revoke) to revoke business licenses for companies that are repeat offenders in the investment banking and securities businesses.
STOCKHOLM (Dow Jones)--Sweden's financial regulator Monday revoked the banking license for D. Carnegie & Co. AB (CAR.SK) due to illegal trading activities and said the National Debt Office was taking over the bank's operations.
Yes they use the word "illegal" when citing the reason to "revoke" the banking business license of D. Carnegie.
If only the US regulators had the ability (or lets say willingness since they do have the ability to revoke) to revoke business licenses for companies that are repeat offenders in the investment banking and securities businesses.
Sunday, November 09, 2008
AIG, "I'll have a double please." US Spineless Treasury, "OK"
Un-believable? I don't think so. AIG has gone from an $80 billion government bailout to a $150 billion government bail out in less than 45 days.
I have said it a million times and I will say it again. The government CANNOT BAIL OUT THE MESS WALL STREET HAS CREATED. THEY DO NOT HAVE THE RESOURCES AND SHOULD NOT TRY.
The AIG scenario was to be expected. Where is this money going? This is what is quoted in the Bloomberg article today.
Well big F***ing deal. There is nothing in these black market insurance products that says the company that sold them to you has not been run by a bunch of complete idiots and may go bankrupt one day. If you bought "debt insurance" from an insurance company (or any fool that sold this stuff on worthless debt for a quick buck) that goes bankrupt and cannot "pay out" in case of a default on the debt you purchased thinking it was OK to purchase the shit as long as you could buy "protection" against default, tough luck. Your insurance company just went out of business so you can do one of two things, keep your debt and hope it all does not default (since there is no market for it), or find some other sucker stupid enough to sell you insurance on your worthless debt.
I just don't get it. We are giving money to AIG so they can give money to their "customers" to meet their request for additional collateral on an unregulated product sold to unregulated market participants. We the TAXPAYERS who have no reason to bail out anyone in this mess. Let the damn thing implode. Force the "parties" who bought and sold this stuff to work out deals to close out the paper and move on.
This is absolutely pissing me off. First Fannie and Freddie were bought so the government could "narrow the spread on the cost of borrowing and thus the mortgage rates to home buyers" by a whopping 3/8 to .5%. Well what happened? The rate dropped about .40 percent about 2 weeks after the deal and now sits about 5/8% HIGHER than rates were BEFORE the stupid bailout. That is a swing of over 1% to the upside in mortgage rates from their short lived drop after the bailout.
What is the verdict? FAILURE, failure, FAILURE.
Paulson, you are a complete fool and Bernanke should go back to whatever university he taught at and crunch numbers some more because he has no decent knowledge of the markets and no street sense.
Read more about this here...
I have said it a million times and I will say it again. The government CANNOT BAIL OUT THE MESS WALL STREET HAS CREATED. THEY DO NOT HAVE THE RESOURCES AND SHOULD NOT TRY.
The AIG scenario was to be expected. Where is this money going? This is what is quoted in the Bloomberg article today.
...The expanded aid to AIG may help stabilize companies that depend on AIG to protect them against debt-market losses....
Well big F***ing deal. There is nothing in these black market insurance products that says the company that sold them to you has not been run by a bunch of complete idiots and may go bankrupt one day. If you bought "debt insurance" from an insurance company (or any fool that sold this stuff on worthless debt for a quick buck) that goes bankrupt and cannot "pay out" in case of a default on the debt you purchased thinking it was OK to purchase the shit as long as you could buy "protection" against default, tough luck. Your insurance company just went out of business so you can do one of two things, keep your debt and hope it all does not default (since there is no market for it), or find some other sucker stupid enough to sell you insurance on your worthless debt.
I just don't get it. We are giving money to AIG so they can give money to their "customers" to meet their request for additional collateral on an unregulated product sold to unregulated market participants. We the TAXPAYERS who have no reason to bail out anyone in this mess. Let the damn thing implode. Force the "parties" who bought and sold this stuff to work out deals to close out the paper and move on.
This is absolutely pissing me off. First Fannie and Freddie were bought so the government could "narrow the spread on the cost of borrowing and thus the mortgage rates to home buyers" by a whopping 3/8 to .5%. Well what happened? The rate dropped about .40 percent about 2 weeks after the deal and now sits about 5/8% HIGHER than rates were BEFORE the stupid bailout. That is a swing of over 1% to the upside in mortgage rates from their short lived drop after the bailout.
What is the verdict? FAILURE, failure, FAILURE.
Paulson, you are a complete fool and Bernanke should go back to whatever university he taught at and crunch numbers some more because he has no decent knowledge of the markets and no street sense.
Read more about this here...
Friday, November 07, 2008
Hedge Fund Collapse [Major]
I read an article today on Marketwatch.
This was a follow up article from 24 October also on Marketwatch.
Why do I present this information? Simple. I have read so many of these types of articles from companies that within 6 months are dead, gone, penny stocks or bailed out, it is not funny. Citidel is massive in the hedge fund world.
I predict and have been saying for some months now that we will experience a major hedge fund collapse soon. This will be larger than the collapse last year of the of $9 billion hedge fund Amaranth Advisors.
Back in 1998 Mr. Greenspan orchestrated a the bail out of Long Term Capital Management. He did this without government money. Instead he had a dozen or so banks pony up to $250 million each to re-capitalize the fund and allow its holdings to be sold off in an "orderly" fashion.
The interesting connection between LTCM failure and the statements by Citidel in the article from 24 October is this quote:
This was exactly the cause of the collapse of LTCM. LTCM lost huge money primarily due to bets related to the Rubble. The Rubble collapsed in 1998 and Russia defaulted on debts. The key is these funds use sophisticated methods to "hedge" their investments (bets) for or against a security, currency, commodity or your grandmother's likelihood to die tomorrow or whatever else BS they can thrash around billions of dollars at to try and make a buck irrespective of the laws, lives or losses by any party willing to do business with these vultures.
Anyway, this "dislocation" Mr. Griffin talks about is exactly what number crunching mathematicians are completely unable to deal with. These guys leverage themselves to the hilt to rake out a few percentage points gain in their bets. They risk so much capital and borrowed money by use of hedging strategies that allow them to minimize risk while making high returns. However when their risk protection strategies break down they are screwed, literally. They can suddenly loose billions and often have no way to protect themselves other than to liquidate.
Well, as I have said before many times, when one is dealing with an "esoteric" market of highly complicated, unregulated "derivative products" and all hell breaks loose, whom in the hell are you going to "liquidate" to? Everyone else is playing the same game. There are no regulators, there are no authorities since these guys play in unregulated markets, there are no laws, rules, allegiances to nations, people, humanity... anything. There is no oversight or "police" looking into what these guys do. They are secretive and play with "products" most people do not understand and have terms that only work in normal functioning markets. The products are created and traded on proprietary systems by over paid number crunchers who have the street smarts of a doorknob.
OK, off the stump. Well, I will add that one of the early "brilliant" ideas of Mr. Bernanke was to open the treasury up the regulated banks followed by the unregulated Wall Street "investment" banks with the explicit idea that they would provide liquidity to their "clients" duh, hedge funds, they acted as prime brokers to, lent to and often took positions in their "investments" (raids on other companies).
It is really fascinating to see the treasury open up to the completely unregulated market through regulated entities. Oh, and when the unregulated entities begin to go broke because leverage at 30 to 1 has failed as a "business model", the fed says "OK now you just become regulated and we will open up the spigots for you." I mean this is just F***ing crazy. Period.
Also it is fascinating to see how desperately this entire process is failing. There are so many "dislocations" in the market right now nobody knows which way is up. All I know is the stock market is now a playground for hedge funds to trade and manipulate and play "who is left standing at the end of today" games to try and make a buck. They account for 40+% of the volume and for anyone in 2008 to even THINK that the stock market is a place to "invest" they are kidding themselves.
The valuation of the stock market has become such that the model of how it used to work is no longer valid when you have hundreds of billions of dollars (trillions really when you count leverage)playing it like a schoolyard game. All of the "value" funds, mutual funds, retirement accounts, endowments, pension funds and the like that still have "ownership" of stocks are simply going to hand all of their money over to whoever manages to rake the most out of it before it collapses entirely. This will be soon.
We are looking into the abyss right now and as long as the government continues to pump billions of soon to be worthless dollars into the institutions that function in this market, this money is going to simply be sucked back out by those who understand what is going on. If you want to see an example look back to that 1998 collapse of the Rubble. I will not forget the billions pumped into Russia at the time by I believe it was the World Bank. The money went into Russia as hard currency, got converted by anybody and everybody with access to the right people and promptly went right back out of the country into Swiss bank accounts and the like.
This is what is happening with the money the Fed is pumping into a dying system right now. That is why there is no market. The cash pumped in goes right back out and is being held by anyone and everyone with access to it. The "market" continues to get sucked like a vacuum.
Meanwhile, I am convinced the dollar is going to loose it's international value as the world's reserve currency and as I have said many times before, if the nations with this currency don't start spending it on I don't care what, (buy anything and everything TANGABLE you can now with the dollars you have) they will be burning them for fuel in the winter, maybe not this winter but definitely by next winter.
This takes me to Ceberus Capital Management, the fund stupid enough to buy some 80% of Chrysler and 51% of GMAC Financial Services including their desperately worthless mortgage arm ResCap. GM announced this week they don't have any money and thus have no resources to bail out Chrysler. I believe this spells b-i-g p-r-o-b-l-e-m for Ceberus. They were trying to orchestrate some kind of quick deal to get Chrysler on GM's books so the government could bail the auto company out. Not even the idiots making decisions to bail out industries in Washington right now have the stomach to hand over the money to the likes of Cerebus. They would go to jail for something like that.
What if Chrysler / GMAC / Cerebus all go down the tubes? What a party that would be.
Don't be stupid. Shake all preconceived notions about the US stock market being a place to put your money for your future. The world is being reshaped as we speak and until the idiots running our government have the "balls" (for lack of a better word) to shut down the massive unregulated markets that trash the global financial system for a living and admit all of the norms that have defined the functioning of the capital markets have been completely destroyed by this massive unregulated market and their creation of "products" to place their highly leveraged bets, normal people must stay as far from this circus as possible.
If you are saving for your future, get out of the sucker's stock market before it becomes an empty dustbin.
All the best.
This was a follow up article from 24 October also on Marketwatch.
Why do I present this information? Simple. I have read so many of these types of articles from companies that within 6 months are dead, gone, penny stocks or bailed out, it is not funny. Citidel is massive in the hedge fund world.
I predict and have been saying for some months now that we will experience a major hedge fund collapse soon. This will be larger than the collapse last year of the of $9 billion hedge fund Amaranth Advisors.
Back in 1998 Mr. Greenspan orchestrated a the bail out of Long Term Capital Management. He did this without government money. Instead he had a dozen or so banks pony up to $250 million each to re-capitalize the fund and allow its holdings to be sold off in an "orderly" fashion.
The interesting connection between LTCM failure and the statements by Citidel in the article from 24 October is this quote:
He (Ken Griffin) blamed most of the fund's losses on huge dislocations between cash securities like corporate bonds and related derivatives that Citadel and other firms use to hedge those positions.
This was exactly the cause of the collapse of LTCM. LTCM lost huge money primarily due to bets related to the Rubble. The Rubble collapsed in 1998 and Russia defaulted on debts. The key is these funds use sophisticated methods to "hedge" their investments (bets) for or against a security, currency, commodity or your grandmother's likelihood to die tomorrow or whatever else BS they can thrash around billions of dollars at to try and make a buck irrespective of the laws, lives or losses by any party willing to do business with these vultures.
Anyway, this "dislocation" Mr. Griffin talks about is exactly what number crunching mathematicians are completely unable to deal with. These guys leverage themselves to the hilt to rake out a few percentage points gain in their bets. They risk so much capital and borrowed money by use of hedging strategies that allow them to minimize risk while making high returns. However when their risk protection strategies break down they are screwed, literally. They can suddenly loose billions and often have no way to protect themselves other than to liquidate.
Well, as I have said before many times, when one is dealing with an "esoteric" market of highly complicated, unregulated "derivative products" and all hell breaks loose, whom in the hell are you going to "liquidate" to? Everyone else is playing the same game. There are no regulators, there are no authorities since these guys play in unregulated markets, there are no laws, rules, allegiances to nations, people, humanity... anything. There is no oversight or "police" looking into what these guys do. They are secretive and play with "products" most people do not understand and have terms that only work in normal functioning markets. The products are created and traded on proprietary systems by over paid number crunchers who have the street smarts of a doorknob.
OK, off the stump. Well, I will add that one of the early "brilliant" ideas of Mr. Bernanke was to open the treasury up the regulated banks followed by the unregulated Wall Street "investment" banks with the explicit idea that they would provide liquidity to their "clients" duh, hedge funds, they acted as prime brokers to, lent to and often took positions in their "investments" (raids on other companies).
It is really fascinating to see the treasury open up to the completely unregulated market through regulated entities. Oh, and when the unregulated entities begin to go broke because leverage at 30 to 1 has failed as a "business model", the fed says "OK now you just become regulated and we will open up the spigots for you." I mean this is just F***ing crazy. Period.
Also it is fascinating to see how desperately this entire process is failing. There are so many "dislocations" in the market right now nobody knows which way is up. All I know is the stock market is now a playground for hedge funds to trade and manipulate and play "who is left standing at the end of today" games to try and make a buck. They account for 40+% of the volume and for anyone in 2008 to even THINK that the stock market is a place to "invest" they are kidding themselves.
The valuation of the stock market has become such that the model of how it used to work is no longer valid when you have hundreds of billions of dollars (trillions really when you count leverage)playing it like a schoolyard game. All of the "value" funds, mutual funds, retirement accounts, endowments, pension funds and the like that still have "ownership" of stocks are simply going to hand all of their money over to whoever manages to rake the most out of it before it collapses entirely. This will be soon.
We are looking into the abyss right now and as long as the government continues to pump billions of soon to be worthless dollars into the institutions that function in this market, this money is going to simply be sucked back out by those who understand what is going on. If you want to see an example look back to that 1998 collapse of the Rubble. I will not forget the billions pumped into Russia at the time by I believe it was the World Bank. The money went into Russia as hard currency, got converted by anybody and everybody with access to the right people and promptly went right back out of the country into Swiss bank accounts and the like.
This is what is happening with the money the Fed is pumping into a dying system right now. That is why there is no market. The cash pumped in goes right back out and is being held by anyone and everyone with access to it. The "market" continues to get sucked like a vacuum.
Meanwhile, I am convinced the dollar is going to loose it's international value as the world's reserve currency and as I have said many times before, if the nations with this currency don't start spending it on I don't care what, (buy anything and everything TANGABLE you can now with the dollars you have) they will be burning them for fuel in the winter, maybe not this winter but definitely by next winter.
This takes me to Ceberus Capital Management, the fund stupid enough to buy some 80% of Chrysler and 51% of GMAC Financial Services including their desperately worthless mortgage arm ResCap. GM announced this week they don't have any money and thus have no resources to bail out Chrysler. I believe this spells b-i-g p-r-o-b-l-e-m for Ceberus. They were trying to orchestrate some kind of quick deal to get Chrysler on GM's books so the government could bail the auto company out. Not even the idiots making decisions to bail out industries in Washington right now have the stomach to hand over the money to the likes of Cerebus. They would go to jail for something like that.
What if Chrysler / GMAC / Cerebus all go down the tubes? What a party that would be.
Don't be stupid. Shake all preconceived notions about the US stock market being a place to put your money for your future. The world is being reshaped as we speak and until the idiots running our government have the "balls" (for lack of a better word) to shut down the massive unregulated markets that trash the global financial system for a living and admit all of the norms that have defined the functioning of the capital markets have been completely destroyed by this massive unregulated market and their creation of "products" to place their highly leveraged bets, normal people must stay as far from this circus as possible.
If you are saving for your future, get out of the sucker's stock market before it becomes an empty dustbin.
All the best.
Saturday, November 01, 2008
Rants on another topic...
I got a phone call from my mother the other day. She has been staying in her Jacksonville, FL house for the past 3 months. The call was some routine question about her house here in Maryland then ended. Shortly thereafter she called again. This time it was to vent about something or everything. I am not sure which but the conversation started with something like, “I am really upset about these markets.” Then some spouting about “This $700 billion bail out is ridiculous. Using taxpayer money like this really pisses me off. I am really pissed off about these markets. I mean I worked very hard for my money and now it is nearly gone. That xyz mutual fund I have is down to nothing (she was gleaming when it was going up during the unwarranted record reached in the Dow about a year ago). And what about this damn election… I don’t understand why all these black people are voting for Obama. I mean they are all excited to vote just because he is black. That really makes me mad. They are even registering “homeless” people here. Some guy was given an address like “pillar #4 under freeway…”
OK, this is when I have to just cut off the conversation and hang up (with a few short words expressing my extreme displeasure of her “TV induced Talking Head view of the world”, most likely from the antithesis of intelligent reporting, FOX news).
So what is it about Florida that once my mother has been there for more than 60 days she becomes some kind of extreme right wing racist? After she had been there 5 months or so she usually gets fed up with Florida herself and can’t wait to get back to Maryland. That is when I breath a sigh of relief and realize she is only truly 30 percent right of center and not 70 percent as she becomes after a couple of months in that dreadful state.
Occasionally I get questioned about when I am going to come down and visit. Mind you, my mother’s snowbird home is in Jacksonville. She might as well be in Alabama or Georgia cause everything north of Orlando is not worth a wintertime visit. It gets cold there. The beaches are lacking, the economy non-existent, culture does not exist and it is not perpetually warm. What in the hell would I want to go to Jacksonville Florida for? Anything north of Orlando is just not worth the trip.
My impression of the northern ½ of Florida is that it’s heavily settled by blue-collar northerners who just wanted to be in Florida when they retired and found the cheap real estate enticing. The economy there is like that of a Central American nation where all the “currency” that supports the local economy comes from the pension funds and 401k’s built up while people worked in states with productive economies. Go south of Orlando and you get the better off northerners who can afford the more pristine locations and 365-day warm weather offered by the tropical southern part of the state. Here, for example, is where you get the New Jersey and New York Jews who buy up “nice” condos on the beach in Miami and elsewhere they can use to bribe their reluctant children down for a visit. I mean even their kids cannot resist a free condo on the beach in Southern Florida. In fact, I might even visit my mom if she were down there. But no, she had to be where her siblings settled in the northern part of the state.
Initially there was hope. My mom first purchased a condo on a golf course just outside of St. Augustine, still not far enough south but it was a start. I figured maybe she would find it to cold and move closer to her ½ Jewish cousin who lives just west of Miami. I actually went to her condo for about 4 days in November 2007. It was cold. There was some kind of costal storm that had wiped out the beaches. Everything was deserted. I was told the “season” did not start till December. Huge multi story condo buildings rested on the deserted beaches south of St. Augustine. There were no restaurants, no grocery stores, bars, nothing, just rows of condos on the beach nearly deserted. It was surreal to say the least.
One day the little bridge we drove over from my mother’s misplaced “condo on golf course development” was closed and I had to take a detour to get to town where I would go the 5 Star St. Augustine hotel and borrow their network for a few hours for about $10. I was amazed at what I saw. On this detour only minutes from downtown and my mothers condo was a road bordered by double wide trailers on cinderblocks, tiny bungalows and houses that looked like servant quarters from some long lost Georgia plantation that were dragged down to Florida and had survived for 100 years only because of the hardiness of their tin roofs. I mean, the place was downright poor, Alabama, Mississippi and Louisiana poor. Yep, we were in Florida, home of stolen elections, inbred politicians and God fearing racists.
My trip to downtown St. Augustine with friends from the Netherlands and Germany who happened to be in Florida at the same time, hence my reason for trekking down there, were to find places to hang out and enjoy some bourgeois time in town. Unfortunately since we were there in November (once again before the prime season) the place was perpetually deserted except for an occasional day tripper bus tour, a few off season tourists and some students from the tiny collage in town. What was worse than the desertedness of the place was the lack of places where I would want to spend more than 10 minutes hanging out in. I mean poor towns are quite depressing to hang out in. We found one lively bar at the end of a pretty extensive strip of mostly deserted and closed bars (due to the off season time I presume) where they had live music and some people actually in the place. I met a few locals and one nice girl explained how the majority of the strip of bars I asked her about had migrated into the hands of one or two owners over the years. Yep, this is a reality in many towns in America that have seen they’re past glory come and go. The stately houses become 8 one or two bedroom tenement style housing units owned by one or two old school families and the commercial district follows suit, often by the same clan. That is when the rest of society drags down along with the town. If you have an outspoken attitude you are run out of town and if you are black or lacking in education you get exploited to the n’th degree and if you speak out, your destined for the food stamp line for life.
This is an area where the right wing politicians push for school vouchers (an idea pushed by the right wing that a family can obtain a “voucher” they can take to a school that is “achieving” positive test scores and get out of the cycle of sending their children to failed schools in their home district). The reason they push for the vouchers is these pieces of paper allow the families with the means (i.e.; transportation, income/job, freedom of movement and connections) to get a government issued pay out where they can “self bus” their kids to the one school in the entire county that may be able to have test scores that pass the national standardized tests. What the right wing does not bother to say is that in most school districts in poor states (and even in entire districts in most American cities) there is not one public school that is capable of passing national standardized tests. Thus the damn voucher is a worthless piece of paper unless you have the means to trek your kid to some other far school or district or ability to get them into a “limited access” charter school. The people with these means are going to benefit and they of course are the last people who need it. Hence, the voucher program is nothing but another subsidy for the wealthy conservatives who rake the most “rents” from poorer parts of the nation and want some kind of government handout to get their kids to better schools on the broader taxpayer’s dime. Yea, you got it, Banana Republic, I mean America, well the US anyway.
Let’s not mistake my attitude here. I had only been to Florida once, when I was 15 years old and my mother took us down to visit my right wing religious aunt and her family and to see Disney world (or land or whatever they call it there). I think that trip was also to Jacksonville where my aunt and uncle and cousins had recently moved from Tampa. My uncle was from a big farm family in Georgia and all I remember from the trip were new churches with lots of people, a different way of talking and trying to water ski (Disney whatever is a kind of blur). That trip left no lasting impression. I always made an effort to see my aunt and uncle when they came up north to visit the family though. My cousins were great when we were kids and as an adult I always enjoyed the cultural experience of talking at length with my aunt and uncle about everything. I may trash macro cultural realities but I love communicating with individual people of all stripes.
I don’t however like Florida.
I suppose if I were a CEO of a Fortune 500 company and could use the corporate jet to fly down to my waterside house in Palm Beach or Boca Raton for the weekends like about 60% of them do there might be some reason to visit the place. But even then I wince at the idea of finding any kind of cultural entertainment or other stimulating leisure experience to recharge before heading back to the office in some productive economy state. (Well other than having a rolodex of other Fortune 500 company CEO’s and good social calendar where I could always find the hottest place to hang out and flirt with hordes of beautiful borderline professional women who haunt the place looking to land their sugar daddy CEO. Needless to say, this is not happening any time soon.)
So to my loving mother I politely asked again in a follow up email full of apologies and other niceties both ways about the short heated conversation on everything that is wrong with our lovely country simply to avoid political issues in our conversations. We are days from an election and even though many of her siblings up north that moved right of center during the waning years of the Clinton administration have, after being completely disenfranchised by the doorknob running our country for the last few years, decided also to vote for Obama (even though they are not black) my loving mom who has spent the last 90 days surrounded by the many God fearing racist in the poor state of Florida, has not had the opportunity to change her mind.
OK, this is when I have to just cut off the conversation and hang up (with a few short words expressing my extreme displeasure of her “TV induced Talking Head view of the world”, most likely from the antithesis of intelligent reporting, FOX news).
So what is it about Florida that once my mother has been there for more than 60 days she becomes some kind of extreme right wing racist? After she had been there 5 months or so she usually gets fed up with Florida herself and can’t wait to get back to Maryland. That is when I breath a sigh of relief and realize she is only truly 30 percent right of center and not 70 percent as she becomes after a couple of months in that dreadful state.
Occasionally I get questioned about when I am going to come down and visit. Mind you, my mother’s snowbird home is in Jacksonville. She might as well be in Alabama or Georgia cause everything north of Orlando is not worth a wintertime visit. It gets cold there. The beaches are lacking, the economy non-existent, culture does not exist and it is not perpetually warm. What in the hell would I want to go to Jacksonville Florida for? Anything north of Orlando is just not worth the trip.
My impression of the northern ½ of Florida is that it’s heavily settled by blue-collar northerners who just wanted to be in Florida when they retired and found the cheap real estate enticing. The economy there is like that of a Central American nation where all the “currency” that supports the local economy comes from the pension funds and 401k’s built up while people worked in states with productive economies. Go south of Orlando and you get the better off northerners who can afford the more pristine locations and 365-day warm weather offered by the tropical southern part of the state. Here, for example, is where you get the New Jersey and New York Jews who buy up “nice” condos on the beach in Miami and elsewhere they can use to bribe their reluctant children down for a visit. I mean even their kids cannot resist a free condo on the beach in Southern Florida. In fact, I might even visit my mom if she were down there. But no, she had to be where her siblings settled in the northern part of the state.
Initially there was hope. My mom first purchased a condo on a golf course just outside of St. Augustine, still not far enough south but it was a start. I figured maybe she would find it to cold and move closer to her ½ Jewish cousin who lives just west of Miami. I actually went to her condo for about 4 days in November 2007. It was cold. There was some kind of costal storm that had wiped out the beaches. Everything was deserted. I was told the “season” did not start till December. Huge multi story condo buildings rested on the deserted beaches south of St. Augustine. There were no restaurants, no grocery stores, bars, nothing, just rows of condos on the beach nearly deserted. It was surreal to say the least.
One day the little bridge we drove over from my mother’s misplaced “condo on golf course development” was closed and I had to take a detour to get to town where I would go the 5 Star St. Augustine hotel and borrow their network for a few hours for about $10. I was amazed at what I saw. On this detour only minutes from downtown and my mothers condo was a road bordered by double wide trailers on cinderblocks, tiny bungalows and houses that looked like servant quarters from some long lost Georgia plantation that were dragged down to Florida and had survived for 100 years only because of the hardiness of their tin roofs. I mean, the place was downright poor, Alabama, Mississippi and Louisiana poor. Yep, we were in Florida, home of stolen elections, inbred politicians and God fearing racists.
My trip to downtown St. Augustine with friends from the Netherlands and Germany who happened to be in Florida at the same time, hence my reason for trekking down there, were to find places to hang out and enjoy some bourgeois time in town. Unfortunately since we were there in November (once again before the prime season) the place was perpetually deserted except for an occasional day tripper bus tour, a few off season tourists and some students from the tiny collage in town. What was worse than the desertedness of the place was the lack of places where I would want to spend more than 10 minutes hanging out in. I mean poor towns are quite depressing to hang out in. We found one lively bar at the end of a pretty extensive strip of mostly deserted and closed bars (due to the off season time I presume) where they had live music and some people actually in the place. I met a few locals and one nice girl explained how the majority of the strip of bars I asked her about had migrated into the hands of one or two owners over the years. Yep, this is a reality in many towns in America that have seen they’re past glory come and go. The stately houses become 8 one or two bedroom tenement style housing units owned by one or two old school families and the commercial district follows suit, often by the same clan. That is when the rest of society drags down along with the town. If you have an outspoken attitude you are run out of town and if you are black or lacking in education you get exploited to the n’th degree and if you speak out, your destined for the food stamp line for life.
This is an area where the right wing politicians push for school vouchers (an idea pushed by the right wing that a family can obtain a “voucher” they can take to a school that is “achieving” positive test scores and get out of the cycle of sending their children to failed schools in their home district). The reason they push for the vouchers is these pieces of paper allow the families with the means (i.e.; transportation, income/job, freedom of movement and connections) to get a government issued pay out where they can “self bus” their kids to the one school in the entire county that may be able to have test scores that pass the national standardized tests. What the right wing does not bother to say is that in most school districts in poor states (and even in entire districts in most American cities) there is not one public school that is capable of passing national standardized tests. Thus the damn voucher is a worthless piece of paper unless you have the means to trek your kid to some other far school or district or ability to get them into a “limited access” charter school. The people with these means are going to benefit and they of course are the last people who need it. Hence, the voucher program is nothing but another subsidy for the wealthy conservatives who rake the most “rents” from poorer parts of the nation and want some kind of government handout to get their kids to better schools on the broader taxpayer’s dime. Yea, you got it, Banana Republic, I mean America, well the US anyway.
Let’s not mistake my attitude here. I had only been to Florida once, when I was 15 years old and my mother took us down to visit my right wing religious aunt and her family and to see Disney world (or land or whatever they call it there). I think that trip was also to Jacksonville where my aunt and uncle and cousins had recently moved from Tampa. My uncle was from a big farm family in Georgia and all I remember from the trip were new churches with lots of people, a different way of talking and trying to water ski (Disney whatever is a kind of blur). That trip left no lasting impression. I always made an effort to see my aunt and uncle when they came up north to visit the family though. My cousins were great when we were kids and as an adult I always enjoyed the cultural experience of talking at length with my aunt and uncle about everything. I may trash macro cultural realities but I love communicating with individual people of all stripes.
I don’t however like Florida.
I suppose if I were a CEO of a Fortune 500 company and could use the corporate jet to fly down to my waterside house in Palm Beach or Boca Raton for the weekends like about 60% of them do there might be some reason to visit the place. But even then I wince at the idea of finding any kind of cultural entertainment or other stimulating leisure experience to recharge before heading back to the office in some productive economy state. (Well other than having a rolodex of other Fortune 500 company CEO’s and good social calendar where I could always find the hottest place to hang out and flirt with hordes of beautiful borderline professional women who haunt the place looking to land their sugar daddy CEO. Needless to say, this is not happening any time soon.)
So to my loving mother I politely asked again in a follow up email full of apologies and other niceties both ways about the short heated conversation on everything that is wrong with our lovely country simply to avoid political issues in our conversations. We are days from an election and even though many of her siblings up north that moved right of center during the waning years of the Clinton administration have, after being completely disenfranchised by the doorknob running our country for the last few years, decided also to vote for Obama (even though they are not black) my loving mom who has spent the last 90 days surrounded by the many God fearing racist in the poor state of Florida, has not had the opportunity to change her mind.
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