Monday, June 30, 2008

Category Error

As I mentioned a couple of months ago, one of the propaganda hacks from told me at a dinner party this winter that the Democrats were going to attack McCain on his war record as a "payback" for the SwiftBoat attacks on Kerry in 2004.  

A few weeks later we started to see trial balloons from George McGovern ("laser-guided bombs from 35,000 feet") and Jay Rockefeller.  Those both seemed to go nowhere and were shot down fairly quickly.  Yesterday, Wesley Clark was on "Face the Nation and he attacked McCain's wartime experience.  Clark's comments are pretty far off the reservation (especially coming from a guy who was fired by Clinton for doing such a shitty job in his post), but they do reveal a fundamental Democratic misunderstanding of the SwiftBoat controversy and what it was really about.  

[UPDATE:  Apparently Clark has a little consistency problem with his views on attacking wartime service.  Oops.]

Apparently, the Democratic thinking on this issue stopped at "Republicans attacked our candidate's war record in 2004, therefore we should attack their candidate's war record in 2008."  This is an extension of the classic Democratic explanation for their lack of success in Presidential elections for the last thirty years.  It wasn't that their policies were not popular, it was that the Republicans played dirty and were "tougher" than the Democrats.  It's the kind of self-preserving lie we all tell ourselves.  Politics is a contact sport and both sides play rough.  Get over it.

In 2004, Kerry made his military service a cornerstone of his rationale for why he should be elected.  I give Kerry a lot of credit and respect.  He volunteered for duty and went off to war, a deeply unpopular war, at a time when young Americans of his class were turning their back on military service.  

The reason that the SwiftBoat attacks came out, however, was related more to Kerry's actions after he got back from Vietnam.  He testified that American soldiers were committing all kinds of outrages "reminiscent of Genghis Khan" and, well, that didn't sit right with a lot of folks who had served honorably.  So, they went after his record, which they believed was reflective more of a self-promoting blowhard than the war hero he was making himself out to be.  And contrary to popular belief that it was all lies, Kerry could not disprove their assertions, which is really why the attacks were so devastating for him.

Kerry had every right to point out his honorable service, but his campaign put so much emphasis on it, believing it would be an effective contrast with Bush, that it was like an invitation for others to tell their side of the story.  And their story painted a picture of Kerry as more of a vain blowhard who was mostly interested in self-promotion, a picture Kerry didn't help with his historically impossible "Christmas in Cambodia" stories.  Face it, you know in your heart that picture is pretty close to the person Kerry seems to be.  I don't begrudge the guy a little inflated story telling after war service, but the people he slandered in the Winter Soldier investigation weren't as forgiving.  

McCain's experience doesn't prove that he is prepared to be President, but it does say a lot about his character.  The man was imprisoned and tortured for over 5 years, refused preferential treatment and release (offered because he was the son of a well-known military family and because of his rank) and then stayed in the Navy after rehabilitation to serve as the leader of a flight squadron.  Say what you will about his politics, the man has backbone and a deep sense of honor.  

Which is why these attacks are fated to help McCain more than hurt him.  For the skeptical voter in middle America who is thinking about Obama, such attacks on a man who served with such distinction are not going to sway you towards the guy who has been a Senator for two years.  I don't know how much longer they are going to try this strategy, but it is hard to believe somebody in the Democratic camp hasn't said, "Hey, this is a pretty stupid road to go down."

Friday, June 27, 2008

Krugman on Oil

Krugman takes on the theory that increased activity in oil trading has some relation to the spike in oil prices in today's Times.

It's a pretty good article (more snow is falling in Hell), but I am not that surprised.  Krugman is a respected economist when he is not beating his breast as a political hack for the left side of the spectrum.

He does make one strange comment, though:

"Many economists scoffed: Mr. Masters was making the bizarre claim that betting on a higher price of oil — for that is what it means to buy a futures contract — is equivalent to actually burning the stuff."

I don't think Masters' point was that betting on oil prices was equivalent to burning it.  Surely Krugman is sophisticated enough to see that Masters was pointing out that there was a large inflow of capital into the futures market and that should increase the value of the contracts themselves.  It's not the same as burning oil, but when oil is partially priced through the futures market, it is similar in effect to an increase in demand for the barrels themselves.  The Internet bubble was not caused by some underlying shortage of crappy web-based companies.  It was caused by an abundance of capital chasing their paper and bidding it up.

But Krugman does admit that there is a question whether or not all this money coming into the commodities market has created a speculative bubble.  And so (snow day in City of Dis public schools!), we seem to reach a similar conclusion:

"Regulating futures markets more tightly isn’t a bad idea, but it won’t bring back the days of cheap oil. Nothing will. Oil prices will fluctuate in the coming years — I wouldn’t be surprised if they slip for a while as consumers drive less, switch to more fuel-efficient cars, and so on — but the long-term trend is surely up."

Along the way he beats down some straw men.  Conservatives are allowed to believe in the efficiency of free-markets, but that doesn't exclude reasonable regulation.  I don't know any so-called conservatives who just think we should let markets run wild.

Still, some interesting perspective from Krugman and I agree that this is the kind of theory that politicians love because it makes it seem like there is an easy fix to today's energy problem.

Thursday, June 26, 2008

$240MM Doesn't Buy What It Used To

Gallup Daily Tracking Poll has McCain and Obama tied.

Actually, it's been pretty much a statistical dead heat since March.  

McCain still has a tough row to hoe and I can't say I think his campaign so far has been very well-run or focused.  His speech after Obama finally rammed the stake through Hillary's heart was pretty abysmal and only served to highlight the fact that he is not going to compete with Obama on speech personality.  He's given the Democrats some good ammunition with his (grossly misrepresented) comments about troops in Iraq for 100 years.  And he has yet to offer a cohesive, compelling theme for his candidacy, the kind that casual political observers latch onto in the way they do "Hope and Change."  Sometimes I wonder if his strategy before the GE is to hang back and let Obama make the kinds of rookie screw-ups he made during the primaries.

The thing is, McCain's almost non-existent campaign and almost non-existent spend (particularly compared to the massive amount of money being spent by the Obama campaign) make it even more remarkable that the race is still, essentially, a tie.  There are some goofy outliers, like the Newsweek poll that had Obama up 12 points, but looking at the long-term trends, it's hard not to see that as either an anomaly or as a result of poor methodology.

Add to this the fact that a pretty good portion of the major media are in the bag for Obama and have been pursuing an "Obama is inevitable" story line and you have to admit that maybe Obama is not the juggernaut he has been made out to be.  Interestingly, in this campaign season, the last person you want to be is the "inevitable" candidate.  Just ask Hillary.

Tuesday, June 24, 2008

The Continuing Adventures of Cancer Beagle

The echocardiagram showed that the main tumor mass was unchanged.  There was a tiny amount of progression in one small area, but nothing like the out of control growth that sarcomas usually exhibit.  For all intents and purposes, she still has stable disease.  

The vet told me that her heart is still excellent and he is quite amazed at how fit she is.  In fact, the tumor isn't actually having any noticeable effect on heart function.  It's like a bit of extra flesh on the muscle, but it's not actually doing anything.  This doesn't mean we can leave it untreated, but it does make me feel like the chemo regimen is worth the effort.  If Maggie were sluggish and in clear discomfort, it would be clear that the chemo was for me, not for her.

As Scottish Lass said last night, "Maggie doesn't know she has cancer." 

It's true.  Outside of a skin rash that drove her a little batty last week, she's perfectly normal.  At the moment, she is on the rug playing with two bones - hers and the one she stole from Wallace.

Some things never change.

Saudi Soda, Persian Perrier

StinkRock asked about oil prices.  This is not an area in which I have spent any time in professional career, so I can't speak from experience.  Like many, I had assumed that the explosive growth in China and India had led to a demand spike that was outstripping supply.  It turns out, however, that global production has grown by about 9.87% from 77MM to 84.5MM barrels per day since 2002. In the same period, demand has only grown by about 9.38 from 78MM to 85.3MM.  In 2002, oil was about $20/barrel.  

Obviously, the picture is more complicated than that, especially because oil contracts settle in US dollars and the plummeting value of our currency is related to at least some of the rise in crude oil prices.

One interesting proposition is that oil prices have become disconnected with actual usage dynamics because of the explosion in oil trading by speculators who do not plan to take delivery.  This was the subject of Congressional testimony yesterday.

Commodities futures were created in the 19th century as a way of smoothing out the seasonal prices of goods so that producers and buyers could run their businesses more efficiently.  So, cattle producers could sell forward contracts to deliver beef and be assured that they had locked in the price.  The buyer of the contract would be a slaughterhouse or food company that would take delivery of the beef as settlement for the contract.

In oil, an example of end users hedging through commodities futures would be an airline, which would buy oil futures to lock in prices now for future delivery.  

What has happened since the turn of this century, however, has been a massive allocation of capital from institutions and hedge funds into commodities trading.  Their influence and exposure to the market has been amplified by the fact that margin requirements for oil contracts (i.e., how much of the value you have to put up versus how much you can borrow) is much lower than the 50% Reg T requirement for stocks.  This is, no doubt, one of the reasons why hedge funds have started to exploit the space.  If you can leverage every dollar into $10, you can make an enormous return on equity.  

This is not to say that the funds are evil or rapacious.  They are taking advantage of the way the system is set up because there is a strong incentive to do it.  And the commodities markets do require a certain amount speculation to provide liquidity so that end-users can effectively hedge.  But it doesn't strike me as unreasonable to have more stringent requirements on margin and trading in markets where the underlying asset has such a profound impact on the economy.  Simple, common sense regulations, like preferential treatment for end-users who are trying to hedge prices, don't strike me as a bad idea at all.  This is the kind of function that regulatory agencies are put in place to perform.  I'll be interested to see if there is any action on this in the months ahead.

UPDATE:  The contra case from the Wall Street Journal.  It goes out of its way to be defensive about oil traders, which is not unreasonable, but it is quiet on the effect of massive inflows of capital into a market.  Yes, the new commodity index funds are only applying stock index fund techniques, but they are still introducing a lot of new capital into the market.  Same with the amount of money brought in by hedgies.  In some respects, oil is not unlike other areas, like merger arb, where the massive inflows from hedge funds have created inflationary pressure.

Monday, June 23, 2008

Speaking of Campaign Idiocy

McCain needs to beat down his advisor Charlie Black.   Talk about handing ammo to your opponent.

I'm tempted to say that Black was guilty of the classic political gaffe of actually telling the truth, but I am really not so sure that this is true in this campaign.  An attack could make people question whether they want an inexperienced guy like Obama at the helm, but it could just as easily make them think, "What the hell was all that craziness from Bush about if we're just going to get attacked again?"


I was at the vet today with the MagDog.  She was there for an echocardiagram to look at her heart and determine if there is any increase or reduction in the tumor mass.  Still waiting on the results.  While sitting in the waiting room, I saw on CNN that Amy Winehouse has early-stage emphysema.  This is absolutely mind-boggling.  She's 24 years old.  We're talking about a disease that is most prevalent in people 65 and older and usually doesn't present until the 50s.  

The other thing about it is that it is irreversible.  And she is already down to 70% lung capacity.  

I don't really know her music but I have heard raves all around.  I am just finding it hard to conceive how somebody so young could have done so much damage to her lungs so quickly.  It's absolutely extraordinary and very sad.

The Gift That Keeps on Giving

Since this Presidential campaign started what now seems like half a century ago, there have been many bizarre gems of bone-headed campaign moves.  Fred Thompson's "Fred '08 - I Kind of Want the Job, but Whatever" campaign style springs to mind.  Huckabee's bass playing does as well, although, to be fair, he was better than Clinton was at sax.  Hilary's "Tuzla Dash," tied in with her attempt to make 8 years of receiving the 4-H club at the White House into executive experience, was a fairly awesome display of political chutzpah.  So it's been pretty fun for a political junkie like the Misanthrope.

The latest "What were they thinking?" moment has now come and gone.  Obama has retired his political sign-cum-Presidential Seal.  After its debut last week, it has been quietly relegated to the dustbin of history.

I confess to a kind of confused wonder at the Obama campaign.  On some key things, like ground organization, the campaign has been tremendously well-run and impressive.  In fact, I think his organization on the ground was what allowed him to blind-side the Clinton campaign, which was clearly being run on the assumption that she would coast to victory early.  That's what gave him his Iowa victory, which was the moment he became a real possibility.  He's been aggressive on the attack in an effective, although frequently dishonest, way, which has kept first Clinton and now McCain on their heels.  And his fundraising is obviously extraordinary.

On the other hand, they've already burned through $240MM to win the primaries and they show no signs of slowing down the spend.  His decision to forego public financing is hard to understand given that the GE is only 8 weeks and $90MM is a lot of money to spend in that time.  

And there are the constant gaffes (e.g., Samantha Powers, Austan Goolsbee) where people affiliated with the campaign say things that directly contradict the message and are then thrown under the bus.  The awful way in which he handled the Wright situation was also remarkably bush-league, given how well the rest of the campaign is run.  And I am still trying to understand how Obama's first national ad buy is for a commercial that claims he passed legislation extending health care for when troops when Obama didn't sponsor the bill or even vote for it.  Somebody fire that ad director, because that is just handing ammo to your opponent.

It's a curious mix of tremendous competence and total sloppiness.  And that's why you get dumb shit like the seal.  No, I don't think it speaks to anything about Obama, outside of a possibly disturbing tendency to believe his own hype, but it sure makes for election fun.

StinkRock content:  Good article in today's Times about Obama's connection with the ethanol lobby.  Enjoy.

Mysteries of New York

I just went over to my favorite greasy spoon in the neighborhood, La Bonbonniere, for some lunch.  Walking down Jane Street, I spotted an Oral-B toothbrush with  small plastic cap around the brush lying right in front of a stoop.  It stuck in my head because I thought the little brush cap was a good way of packing the toothbrush in a Dopp kit without a big bulky plastic holder.

On my way back, I passed the same stoop and the toothbrush was gone...but the plastic cap was still there.

Still trying to wrap my head around that.

No, We Will Not Play "Can I Ride?"

On Saturday, StinkRock, JT and I went to see Polvo at Bowery Ballroom.  I had been into the band since about 1997, when the bassist in my old band Rubber Baby gave me a mix tape (yes, an actual cassette!) with the song "Fractured (Like Chandeliers)."  That song quickly launched itself into the top regions of my list of favorite songs of all time.  It's a crazed sonic attack that is both frightening and elevating.  

Because I discovered the band just as they were breaking up, I never got to see them live.  Their sound is so odd and sui generis that it was hard for me to conjure a mental picture of the band playing live.  So I had no real expectations for the show.  Given the band's supposed "math rock" sound, I think I envisioned a lot of slacker detachment and a low energy level.

But first, pre-show prep.  StinkRock, JT and I grabbed some dinner in Chinatown, where StinkRock insisted that we order the frog in ginger and scallion sauce (Number S537).  It was my first time eating frog and the meat really does taste like chicken.  The only thing that is a bummer is the high bone-to-meat ratio on those little fellas.  The food was good though and I haven't seen either of those guys in a while, so the dinner was most excellent.

At Bowery, we missed the opener, Art Tanker Convoy (not to be confused with Stratotanker or any other tanker-related bands).  We caught most of the Birds of Avalon set, though.  JT and I had seen them before at North Six with Black Taj (a Polvo offshoot band).  Birds of Avalon is like a lot of bands that you see in the second slot in a mid-sized venue.  They aren't bad and they play competently.  The sound is a kind of mix between Brooklyn indie and 1970s stadium rock with lots of twin-guitar harmony lines played on matching Les Pauls.  The concept could work as there is something thrilling about those guitar passages, but the songs themselves were just boring.

So, there we were.  It was time for Polvo.   And the truth is, I cannot find the words to describe the experience.  I can throw out all kinds of crazy superlatives, but it wouldn't do justice.  By the end of the show, StinkRock, JT and I were all just kind of standing there slack-jawed with every pleasure receptor in our brains firing as fast as possible.  They were impossibly tight and the drummer was just incredible.  (He's a new addition as the original drummer and his replacement have long-since left.)

Ash Bowie, one of the two guitarists, stands calmly on stage, his lanky body curved in such a way that it looks like time-space is curving around him.  He looks about as excited as a sleepy man picking lint from between his toenails.  But he is producing an unreal assortment of sounds from his guitar and they all rock.

Have I mentioned that the band was tight?  For guys who haven't toured in 10 years, it was almost impossible to believe how together they were.  And the sound was heavy and beautiful and scary and all kind of other things.

I'll stop because gushing is boring and because I'm not conveying what this experience was really like.  Maybe StinkRock will take a stab, but I think he feels like the effort is not worth it.

I'll close with two observations.  First, I would never have imagined that such a band could be so much better live.  They played two new songs, which were great, and they should put out a live show from this tour as a way of releasing them.

Second, the set list.  JT actually went to high school with Steve Popson and Dave Brylawski from the band, so we hung with them after the show.  (They are very friendly, normal guys and it was great to meet them.)  They claimed that they just played all the songs they could remember.  What was notable about their set, though, was that they didn't play their one big college rock "hit," "Can I Ride?"  It's not a bad song at all, but it's not as amazing as the things that later appeared on records like Exploded Drawing.  So it was cool that they bailed on that and just played what they wanted.  And they seemed to be having a great time on stage, which bodes well for a new record or more shows.

Easily one of the top ten shows I have ever seen.

Thursday, June 19, 2008

Such a Pleasant Day

The Misanthrope was in DC for the last three days doing work-related things.    Normally, I would take the train or the shuttle, but this time I decided to fly myself.  In the post-9/11 world, flying to Washington, DC is not a simple task.  

Reagan National (KDCA) was out of the question.  Aside from security issues, big airports like that are not very accommodating to small aircraft like the FantaPlane (yes, it's orange; see picture above, taken in Canada last year) as we make our approach to the runways so slowly that it screws up sequencing for the passenger jets.  Last year I flew into Philadelphia International a couple of times and the poor approach controller had a hell of a time getting me in between jets doing 170 knots on approach.  I do about 120 knots on approach at a huge airport.  You do the math.

With DCA out, that left three smaller airports that are within 15 miles of downtown Washington: College Park Airport (KCGS), Potomac Airfield (KVKX) and Washington Executive/Hyde Field (W32).  Because of 9/11, those airports are now in what is called the Washington Flight Restricted Zone (FRZ), which is a circle centered on Reagan National with a 15 nautical mile (1 nautical mile = 1.15 statute miles) radius.

To be able to fly into the FRZ, you have to get a special security clearance that allows you to fly into those three airports (also known as the "DC 3").  Details can be found here.  Luckily, I started the process about a month ago by (a) going to get fingerprinted by the TSA at Reagan National and (b) going to the Dulles Flight Standards District Office (FSDO) to be vetted by an FAA official.  You'd think they could have the fingerprinting and the vetting at the same airport, but you'd be wrong.  Anyway, I made the trip and completed the tasks.  The final step was a briefing on FRZ procedures and moving around the Washington Air Defense Identification Zone or ADIZ, which I would get at Washington Executive/Hyde Field when I landed.  Pilots sure seem to love acronyms (e.g., VOR, PIREP, TAF, METAR, ADF, HIWAS, EFAS and on and on), but it does make things go faster.

I decided to fly into Washington Executive/Hyde Field because Ray Isherwood, their security coordinator, had been very helpful in guiding me through the process for getting a clearance.  It turned out to be a great decision. 

First of all, don't let the name fool you.  It's 10 miles from the Capitol, but I could have been in Iowa at a small rural field.  The place was empty.  Fetter Aviation, which runs the airport, was housed in a small building near pavement with grass growing through the cracks.  I admit to being a bit concerned with my choice when I touched down.

But the service I got there was fantastic.  A gentleman named Lloyd met me at my plane, gave me a ride with my bags to the office and then completed all of the paperwork for my final security clearance.  Lloyd also made sure I saw the required video lecture on flight operations in the FRZ and ADIZ.  There's some very interesting procedures in such a tight security zone and there was certainly talk of some unpleasant scenarios.  I am not kidding when I say it is a serious matter and I am not supposed to discuss some of them.

Lloyd, along with the owner, Stan Fetter, also helped set me up with a rental car and gave me a ton of good tips on how to operate in the FRZ.  After I had left, there were powerful thunderstorms approaching, so Stan went out personally and made sure my plane was secure.

My pleasant day started yesterday when I returned to the airport on Wednesday afternoon.  Another Fetter Aviation fellow, George, helped me out with dropping off the rental car and loading the plane.  He was very friendly and he and I got to talking about his background (ex-Navy), where he was from (Texas) and how he ended up at Hyde Field (long story).  George, along with Lloyd and Stan made me feel right at home.  Super service all around.  I will definitely go back there when I visit DC again.

My return flight was just under 2 hours from liftoff to touchdown.  I had a strong tailwind, so I averaged 150 kts of ground speed (about 170 mph).  Air Traffic Control gave me my preferred route, which you can see here.  (For some reason, they had me taking off from Potomac Airfield, which is only about three miles away and is often confused with Hyde Field.)  Cruising at 7000 feet, I was poking through the bases of some cumulus mediocris clouds, keeping an eye on their vertical development for signs of building thunderstorms.  I got a fantastic view of nearly the whole Chesapeake Bay as I passed over Maryland and into Delaware.

When I got to the New York area, my route took me directly over JFK at 5000 feet.  Passing over Sandy Hook, NJ, I was startled to see a Qantas 747 flying below me at 3000 feet on approach to JFK.  I'm used to seeing big traffic when I fly in and out of my home airport, Linden, which is about 10 miles south of Newark, but I had been cruising placidly for so long that the sight of that huge white mass shooting out from beneath the left side of the FantaPlane was a shock.

The approach controllers at JFK gave me vectors off my assigned route that took me along the south shore of Long Island so that I would steer clear of some thunderstorms that were developing by LaGuardia.  It was nice to know they were watching me.  Finally, I had East Hampton airport in sight, cancelled my IFR clearance, did a normal visual approach and greased the landing at a quiet field.  Fantastic.

At the airport, I didn't have my car as the Scottish Lass had taken it to New York, so I was dreading the long wait for the utterly undependable, insanely expensive taxi service out here.  But my pleasant day had a great ending as Mike, the manager of Sound Aircraft, my local FBO, took pity on me and gave me a ride right to my front door.  Mike is a supremely nice guy.  He even bought me dinner after I passed my FAA checkride for my license years ago.  It was a great way to end the trip.

From the time I got into my car in DC to the time I walked through my front door in Sagaponack: about 3 1/2 hours.  No check-in or baggage screening.  No waiting at the gate.  And an experience made all the better by such fantastic service at both ends. 

A pleasant day indeed.

Tuesday, June 17, 2008

Hell Freezing Over

It's usually a cold day in hell when I like what Paul Krugman has to say, but this post really captures the weirdness of Obama's proposal.  As Krugman notes, love it or hate it, we are talking about 1970s level tax rates.

As he also notes, Obama's people aren't even sure what the details of the proposal are.  I made a passing reference to this in my previous post when I noted that it wasn't clear if Medicare taxes were included on the income above $250K or if it would even be the same tax rates.

If you're going to appeal to the middle class by pitching "soak the rich" policies, at least have your details in order.

Sunday, June 15, 2008

Two Minutes to Midnight

Tonight, Tony Alva, Jackson and I will be going to Madison Square Garden to see Iron Maiden. 

Yeah, I know.  It's a pure nostalgia tour and it's not the same as seeing them in the day, but I am looking forward to it nonetheless.  

Kick off prayer circle at the Molly Wee at 7PM!

Saturday, June 14, 2008

Shade of the Past

I've seen a number of articles like this one noting that foreign investors have been buying up "trophy" properties in New York City.  Reading these reports reminds me of my first job, working in the real estate investment banking group at Goldman in the early 1990s.  This was during the workout of the savings & loan debacle and I remember well the Resolution Trust Corporation selling off huge portfolios of bank-owned real estate for pennies on the dollar.

I also remember the sale of Rockefeller Center to Mitsubishi Estate, an arm of Mitsubishi Group, in 1989.  There were similar articles at the time predicting that the Japanese would soon own all of New York and America.  Flash forward to 1996 and Mitsubishi took a bath on the deal (they paid $1.4BB for the property) and eventually lost control of the buildings.  In retrospect, what the Japanese buyers had done was buy up a lot of property at the top of the market.  Indeed, one of my first assignments at Goldman was to go out to LA and report on various large assets owned by a Japanese bank.  Every quarter, we'd prepare a report for them that said the same thing - you're fucked.  But in the corporate culture of Japanese banks, I later found out, up and coming executives being groomed for the top would be rotated through different departments for one year stints.  The result was a system that rewarded managers who kept the problem from exploding on their watch.   So, they would hire Goldman to give them an appraisal of the situation and then do nothing and hope they would get to the end of their year to pass the turd onto the next guy.

I can't help but feel that history is repeating itself.  For one thing, the properties mentioned so far, the Chrysler Building and the Flatiron Building, may be iconic, but they are not Class A office space by a long shot.  The office space inside the Chrysler Building is cramped and filled with columns.  The elevator system is atrocious and not up to the requirements of a modern office building.  Like its sister building, the Empire State, it is not a prized office space.  It does well only because of its location.  The Flatiron is a wonderful building, but suffers many of the same defects and is not in the same desirable location.  If and when the New York office market goes into a downturn, these are the kinds of assets that start to hurt first.

It is also interesting to read that investors are seeing the buildings as a bargain because of the weak dollar.  No doubt this makes sense at the moment, but the weak dollar is not going to continue forever and this kind of currency exposure can whipsaw an owner who will not be able to sell these assets quickly.

Things may work out for these guys, but I can't help but fell a strong sense of deja vu all over again.

Happy Birthday

Today is the 224th birthday of the United States Army or the 233rd if you include the Continental Army, which preceded the United States itself and was created on June 14, 1775.   Included in that 1775 army were several of my ancestors, including a few who had joined the cause even before this and answered the call at Lexington and Concord in April.  It seems hokey to say it these days, but I'm pretty thankful that they signed on a for a cause that seemed hopeless at the time, even if it now seems inevitable.  The privations in those early years made for a pretty unpleasant life.

In the course of the Presidential reading program, I have been reminded that before the Civil War, the idea of a large standing army was considered a frightening threat to freedom.  Indeed, one of the reasons why Washington was considered such a great statesman was that he commanded an army to victory and then relinquished control as soon as the battle was over.  Few at the time could believe that he would have the strength of character to do such a thing.  

The notion that civilian volunteer militias, called up only when there was a threat, would be more effective fighting forces than a regular army corps was prevalent in the thinking of most Presidents right up to Franklin Pierce.  Gradually, the experience of the Mexican War and the Civil War, along with the advance of military technology, would make it clear that militias were not as effective as a regular, trained army.  But even up to the beginning of World War II, the notion of a large standing army fit uncomfortably in the American psyche.  In some sense, it still fits uncomfortably and I happen to think that is a good thing.  

Friday, June 13, 2008

Mike Wants Some Meat

Okay, Mike, here you go.

Today, Barack Obama proposed what he called the "doughnut hole" approach to "fixing" Social Security.  Under his plan, wages up to $102K annually would pay the SS payroll tax.  From $102K to $249K, no payroll tax.  Above $250K, the payroll tax kicks in.

So, what is wrong with this plan?  It seems reasonable, albeit in a populist way.  The guy making more than $250K won't miss that income, right?  And it helps keep Social Security solvent for the lower wage earners, right?

The problem is that Social Security is not supposed to be a welfare or a wealth transfer program.  It is a pay-as-you-go program that is supported by the current workforce.   It was meant to be a kind of synthetic savings program so that working Americans would not retire into poverty because they had been forced to relinqush a bit of their checks every month into a "savings" program.  Everybody pays into the program and receives benefits based on a point system, so it's not quite like putting your money away, but there is an attempt to make contributions match with disbursements.

But here's the catch.  There's a cap on benefits, which is why we have a cap on contributions.  So this new tax liability does not come with the promised benefit, which makes it, essentially, a combination welfare program and wealth transfer mechanism, which is what it is not supposed to be.

If Obama's proposal were to lift the cap, the new tax would not contribute any excess capital to the Social Security trust fund.  It would be an incredibly inefficient savings plan for me, but at least I would have the possibility of getting a government IOU in 30 years.  Unfortunately, it also would have little, if any, effect on the solvency of the Social Security program as you'd simply have massive disbursements in the out years.

But if his proposal doesn't lift the cap, it is essentially a brand new tax on my earnings for which I receive nothing.  Zip.  Nada.  That's a pure wealth transfer program and that is not what Social Security is supposed to be.  Given the taxes I am already paying for inept government services, I am not inclined pay more.

There are other problems.  Employers foot a portion of the payroll taxes, so there would be a new burden on them.  I can tell you from experience that if companies are paying a new payroll tax on their high earners, they are going to find that extra money by letting a lower earner go or not hiring for an open position.  If this new tax funds an increase in benefits for lower wage earners, you can bet that management will reduce retirement programs to balance out the new benefit.

This kind of proposal is what I find objectionable about the whole Obama campaign.  It is a populist, soak-the-rich policy program hidden behind a lot of posing about hope and change and this aura of faux "reasonableness."  

But we've seen what happens to economies when soak-the-rich programs are put in place.  Look at the UK in the 1970s, where the top marginal income tax rate was, effectively, 100% at one point.  The country was nearly killed.  Look at the 1970s in this country, when high marginal rates were the order of the day along with stagnant growth and high unemployment.  Look at the cities, with their high tax burdens, where people fled in droves to avoid paying. Look at New York State, which was nearly destroyed by its insanely high corporate taxes in the 1980s.

It's unclear if Obama is also proposing to include Medicare taxes as well in this proposal.  If he is, we are talking about a scenario where I would be paying a top marginal federal rate, inclusive of payroll taxes, over 50%.  That's before New York State and, in my case, New York City taxes, which would drive it over 60%.  These are the kinds of tax burdens where people begin to go out of their way to avoid paying taxes by any means possible.  In the case of one of my investors, he is literally renouncing his U.S. citizenship because the tax burdens are so high (he also holds a passport from an EU country).

This is why I feel a dizzy flashback to 1976 when I hear Obama talk.

Thursday, June 12, 2008

Once Again, Misanthrope Leads and the MSM Follows

Misanthrope on June 11:  The three stages of working for Obama.

Wall Street Journal on June 12:  The three stages of working for Obama

I Guess Those 18 Months Made the Difference

Jimmy Carter in November 2006 arguing that Obama doesn't have the experience to be the President yet.

Wednesday, June 11, 2008

Worst Jobs In The Current Environment

Working for Barack Obama.

Stage one: Deny there is a problem

Stage two: Claim that the person doesn't really work for you.

Staqe three:  Throw them under the bus and claim they were not the (insert name of departing person) you thought you knew.

Anybody see a disturbing pattern here?

A Serious Threat

The Times has an article today on the ridiculous kangaroo court proceedings going on in British Columbia against the Canadian magazine Macleans.  Macleans published an article critical of Islam and offended Muslims brought an action against the publication in the terrifyingly extra-legal British Columbia Human Rights Tribunal.  They note that free speech has been curtailed in several Western countries by laws that prohibit speech that offends.

It's times like this that I am reminded of the genius of the Constitution and the Bill of Rights.  Imagine being hauled in front of a tribunal here in the U.S. where the normal rules of evidence that apply in real courts are not relevant.  Where, as the defense counsel for Macleans argued:

“Innocent intent is not a defense....Nor is truth. Nor is fair comment on true facts. Publication in the public interest and for the public benefit is not a defense. Opinion expressed in good faith is not a defense. Responsible journalism is not a defense.”

In other words, there is no defense.  It's all about feelings.

Let's not go down this path, as so many other countries seem to be.

Tuesday, June 10, 2008

FedEx Are Lying Scumbags

Today I gave up on a package that FedEx was supposed to be delivering for the past 2 weeks.  I just told them to send that shit back if they couldn't be adults and figure some way for me to get it other than my going out to Brooklyn.  What's the point of paying for FedEx if I have to go to Brooklyn to get my package?

The package was 2 replacement batteries for my laptop (don't even get me started on the "MacBook Pro Shitty Battery" issue).  The issue was that Apple requires a signature to deliver the package.  Usually, this problem is solved by signing the little door tag they leave when you aren't home.  When the delivery man sees it the next day, he can leave your package.

Except, as I learned today from an idiotic supervisor at FedEx, Apple asks them not to allow that because they don't want packages left outside the door.  Which is why there was no package after I signed it and left it on my door for two days.  It would have been nice of them to tell me that earlier.

Then there was last week, where the tracking page said that the delivery man had made two attempts to deliver - on a day when I was in the apartment all day long.  So, lying scumbag #1 right there.  Also, let's add on the FedEx call center woman who told me the package would be on the truck, so I should be sure to be at home that day.  Lying scumbag #2

Then there was the nice operator on Friday who told me that she would have it left at the FedEx facility on Leroy Street, which is pretty close to me.  Except that, as I learned today, you can't do that because it was a "Home Delivery" package, not a "Business Package."  So, lying scumbag #3.

What's the point of this rant?  For one, I am actually really fucking pissed off.  It's a little ridiculous to use FedEx and then not get the package for 13 days.  I am also really annoyed that they claimed to make delivery attempts when I was there and knew they didn't actually try.  And it's also annoying that operators for FedEx would suggest solutions for the package that were not possible.

So, if you are ordering something from Apple on line and you might not be around for a signature, be sure to request that it be delivered USPS, because FedEx is a bunch of lying morons.

Thursday, June 05, 2008

Olympic Rescue Dogs!

When I say, "Jump," you're gonna say, "HOW HIGH!!???"


Why are the guys who scale New York skyscrapers always French?  

A History Lesson for Obama

A nice dissection of the nonsense that spews from his mouth on foreign affairs.