To Catch a Trader And My Mixed Feelings

I have mixed feelings about this. On the one hand, these guys are a pack of assholes. They are masters of the universe, wealthy, mostly white, and almost all male. They have undoubtedly been part of the global economic crisis as we now know it and would, given a position of power, exploit and abuse that power. I would hate these people if I knew them. (Watch the full documentary here.)

On the other hand, what they did is one of the smallest problems in the stock market, and yet it is the only problem we ever seem to prosecute. The intro of the documentary quotes Preet Bhahara saying "It doesn't matter who you are, the rules are the rules and the law is the law."

Well... that's wrong. It does matter who you are and everyone knows that. There is far shiftier behavior transpiring on Wall Street and those criminals never go to jail. These people wrecked a good hunk of the global economy, and very few of them have even been investigated. Look at how long it took them to investigate Madoff!



I'm speaking about this as an ex-day trader. That's one of the reasons I'm angry. I've seen the inside of the machine. I've seen the gears turning. There are genuine changes that can, and should, be made, but focusing on some insider traders ignores those prospects. It is similar to the year or so after the crash, and how so many people were obsessed with vilifying short traders, all the while completely ignoring the actual problems.

And yet here we are, the problems aren't fixed, and we're going after the same people instead of the real criminals. How's that windmill, guys?

Save The U.S. Post Office

I, a priest, a rabbi, and a shit-load of asshat Congresspeople who are trying to force the USPS out of business, all walk into the Post Office... all of them. I'm not kidding. I was in the Post Office about two hours ago and it was like a sardine can.

The fact that it was packed to literally overflowing was not what angered me. If anything, I felt sympathy for the man behind the counter, who was obviously frantic in his attempts to clear the line all by his lonesome. He complained loudly that back-up was supposed to be arriving, but "who knows?"

What infuriated me was the fact that this line -- this annoyance -- was business. Business was booming! If the UPS Store or Fedex Store had lines like this, they would be doing twice their current business. And yet, the USPS is losing money? How is that possible?

Oh right. It's not actually losing money. It's earning money. It's earning about a $1 billion annually. The reason why it is still technically losing money is those aforementioned asshat congresspeople who are literally forcing it to lose money.

To me, the USPS represents the corpus of America. It's on life support. It's being clogged up with idiotic hyper-conservative wingnuts. And it's on the verge of a collapse brought on by those wingnuts.

I do not think it exaggeration to say that as goes the Post Office, so goes America. And if we are stupid enough to, completely intentionally, drive this entire thing to collapse, then we deserve the bed we have made. We deserve every, single, fucking moment that we are forced to sleep in it.

Save the post office.

Detroit And America's Intransigence

I'm watching Dan Rather Reports special two-hour investigation of Detroit's public schools. Long story short: they're screwed and they are emblematic of our nation's educational system on the whole.



Rather early on, they showed some videos from Detroit's past in the 1950's and 60's, when the city was rumbling with vibrant industry and manufacturing, and the ridiculously effusive language being used to describe the city and, indeed, all of America just stuck in my craw.

My craw got all stuck full of it because it reminded me of the same garbage in that innane "Halftime in America" ad for Chrysler that aired during the Super Bowl. It's the same shit, different generation, and it is absolutely infuriating.



We have problems. Detroit is hosed. Wanna' fix Detroit? Spend lots of money, build a lot of stuff, and let the child run. We are not doing that, though. We are not doing any of that. Instead, we dumped trillions of dollars into the banks — thus saving the all-important rich people — and the public debate is between those who want to fix things, and borderline-crazy nincompoops like Ron Paul who think that the world will magically fix itself.

No, what videos like the Chrysler ad show is that we don't need to actually fix problems, we just need to feel great about being American! Fix problems? Pah! We're American! Poor people can't afford food? Pah! We're American! Middle class collapsing? Pah! We're American! Unemployment at double-digits? Pah! WE ARE FUCKING AMERICAN!

This feel-good garbage, so strongly rooted in American exceptionalism, makes me want to puke. We are not "Americans". We are a group of people, nothing more, and our system is broken. We need to fix it. Not doing anything and feeling proud about that hasn't worked up to this point, so why should we expect it to magically start?

Dan Rather Reports: "They Took Our Jerbs" Not Entirely Crazy

More Economic Ideas: The Hub

Continuing my thoughts from The Population Vacuum, here is my idea of The Hub.

The Hub is a large-scale construction designed, from the ground up, to be a catalyst of human activity. Human activity means a healthy society. Stagnancy equals Rome.

It is designed with facilities for science, art, retail, food, relaxation, and entertainment. It is designed to foment as much exchange of ideas, money, goods, and services as possible in as small an area as possible.

The Hub will have strong ties to the surrounding area. It will invest heavily in ventures near and far, and will invite in the local economy, let it incubate, and then release it back into the economy. The Hub will not be an economic vacuum, like a super-plaza anchored by major chains. The Hub’s very existence is to prevent the deterioration of the nearby economy and culture. The Hub integrates and does not dominate.

The Hub receives as much of its resources for functioning from the surrounding area as possible. Raw materials for manufacture, food, and retail products are drawn from the locals. This provides fuel to the local economic fire as opposed to squelching it. It also provides a local flavor to The Hub, meaning each and every Hub is unique and desirable. The lack of cookie-cutter operations keeps each Hub out of competition with other Hubs.

The Hub can be smaller scale operations as well. It must not be pure retail. It must include manufacturing, art, entertainment, and as much free production and facilities as is economically possible. Malls could easily be hubs. With a vibrant schedule of activities designed to draw in the local economy, malls could become stronger attractions, raise property values of nearby areas, attract new residents, and foment ideas and economy.

The Hub can be instituted on a micro-scale. Small plazas can build parks, schedule events, and utilize the parking area for tents, stands, and presentations.

One of the primary elements of The Hub is a large variety of non-retail offerings that bring people in every day. People only shop now-and-then, but people always want entertainment, food, and stimulation.

Manufacturing must be included. Objects for sale made on site are necessary for a continued connection to the local economy. Furniture, toys, fabrics, clothing, art, board games. Everything except heavy industry.

Large chains compliment the environment and the smaller stores in The Hub. Starbucks draws in people and causes increases in traffic at local cafes. GAP isn’t necessarily in competition with local boutiques. Large chains are good.

Ding!

That is the sound of an idea. A recent issue, the March 24th, of Time Magazine was dedicated to them. They mention the term paradigm shift, referring to a fundamental change in perception, such as when people started to realize the Earth was not the center of the universe. Not only did I find the ten ideas listed to come nowhere near that benchmark for the term, most of them are already old-hat.

1: The Common Wealth- Yes. Wouldn't the world be nice if we were all rich and happy. Well drop this stupid, hippy idea and wake up to reality. This concept has been floating around for decades. There will always be amazingly rich people and amazingly poor people. It's the end result of an economic spectrum. Going global with this just means we'll have rich and poor countries. And, sorry to say, the world economy is far ahead of any humanitarians in thinking globally. Business is very worried about the environment, world peace, and all these other great ideals because problems in any area mean lost money. This article is almost superfluous because people already know these things.

Oh, and 100mpg cars in 2030? Try 2010. We'll have those running around in very short order with $10 gas.

2: The End of Customer Service- Apparently, those self-checkouts at Wal*Mart are a paradigm shift. "...the need to interact with human beings is quickly disappearing." Anyone who has interacted with those HAL-like nightmares knows that there is still a very big place for human interaction. Especially after waiting at a kiosk behind a 4,000 year-old woman as she tries to figure out which way to swipe this new-fangled credit card.

3: The Post-Movie-Star Era- The death of modern Hollywood has been predicted before. People have known that big name stars do not correlate well with move success for some times. They should have talked about the emergence of the 15-Minutes-of-Fame era, compliments of the internet and YouTube. Big name stars will continue to be a thing because their names mean little, only that a big name is attached, thus indicating a big movie. They mention Ratatouille, Alvin & The Chipmunks, and Transformers as bucking the system. No, idiots. The big names in those movies were the brands, themselves. You didn't need big stars to advertise that it was a big movie.

4: Reverse Radicalism- What? Ok, fine, studying terrorists. I'll support that. But a paradigm shift?

5: Kitchen Chemistry- Again, a paradigm shift? I think not. They set up a straw man in the opening paragraph by saying "you've been cooking like an idiot. You press on meat... to guess how rare it is; you trow spagetti at the wall to see if it's done; you add an amount of salt that looks pretty... If people made medicine this way, we'd all be dead." We are not changing the way we cook forever. Many people are very precise, analytical, and scientific about their food. We've been this way for centuries. Hell, 300 years ago, food was more scientific than it is now. This not new. People have been precise, anal, and analytical about food for a long time. Oh, and molecular gastronomy has been around for decades. It has not caught on because it's a niche product.

6: Geoengineering- This is a good idea, but certainly not a paradigm shift. These ideas have all been around for some time. In the early days in an effort to manipulate the weather for farming.

7: Synthetic Authenticity- Basically a business model. It's been around since at least the 60's and pretty much defines modern marketing. And seriously, there is not such thing as a paradigm shift in advertising.

8: The New Austerity- Yet another credit doomsayer. He lists all the previous doomsayers who were wrong in the first paragraph as though that gives this doomsaying credibility. The fact that I kind of agree with him notwithstanding, this isn't a paradigm shift.

9: Mandatory Health- Paradigm shift? New idea? Really? Go ask Milton Hershey who created Hershey, PA as a healthful haven for all employees. They could live there on the cheap... as long as they exercised, didn't do anything naughty, and were early to bed, early to rise, and all that rot.

10: Re-Judaising Jesus- There are so many fucking splinter groups of Christianity, they've given up the ability to have a paradigm shift. Every idea, EVER, has been posited and discussed. Nowadays, you have a paradigm shift by switching religion, which for many people, according to a recent study, happens once every few days.

Well Sir, That Will be $55,535. Enjoy Your Mini Cooper!

Jalopnik.com, a favorite read of mine, has an interesting short on how expensive one can get a car on a company's "Build Your Own" section of their website. A few standouts include a V6 Porsche Cayenne at nearly $165,000, a Porsche Boxter clocks in at $118,000, and a Smart FourTwo, one of the crappiest cars I have ever driven, at a hair under $29,000.

The rationale of these cars and whether they're worth it aside, it made me think about the disconnect between cars prices, inflation, our parents' generation, and the credit economy... I read into things.

It made me think about how car prices have increased so exorbitantly. Yes, I can see where much of the money goes, cars today are vastly superior to cars of thirty years ago, but I find it interesting and telling that car prices have increased so out of line with inflation. For example, a base Mustang in 1965 cost $2,368, which works out to about $15,000 grand in today's dollars. A base Mustang today costs $20,000. A five-thousand dollar difference is not insignificant. In fact, it's bloody huge.

I was also thinking as I looked at the listing for a BMW 1-Series costing nearly $60,000, or a Honda Accord at $38,000, that the disconnect between advertised prices and what the cars actually cost betrays the sort of financial gymnastics that accountants must play to get their cars advertised at the prices they need. It reminds me of an experience I had with my parents years ago. They wanted to buy a Hyundai Sonata. They saw a flier from a local Hyundai dealer advertising a price of, I think, $14,000 for new example of last year's model. After some talking, and revealing the flier, the man looked at us and said, flatly, "we can't sell you a car for that price. No one can."

After my mother stormed out, and ran, she had to use the bathroom, we were about to leave when the salesman chased after us and, well, we made the purchase. So happy ending. But the guy we were dealing with said that the advertisement was a lie, and frankly, so are all the other advertisements for every other dealer. They all lie. It's the only way they can sell cars. Dealers lie. Manufacturers lie. And can you imagine what dire straits the auto industry would be in if they hadn't invented leases? Thirty years ago, leases (almost) didn't exit. Now, a huge chunk of the American population rely on leases to just get around.

It's not that cars have outstripped inflation, it's that inflation numbers do not represent actual inflation. Inflation, much like car prices, is also a lie. It's a lie that has, as the economy has evolved over years, required ever-more complex bouts of gymnastics from economists to keep the economy on the perceived golden path of 2-3% inflation. Unfortunately, income has NOT kept up with inflation. Your parents earned more than you, on average, than you are earning. Which means the cheaper cars thirty years ago were more easily affordable on sheer income than the more expensive cars of today.

Basically, what this means is that people can't afford cars. Well, I should say that people can't afford the cars they want. They can afford the cars they don't want, like, say, the Honda Fit or Hyundai Elantra. Most people with average incomes can afford these cars. But what cars were selling like hotcakes over the last fifteen years? SUVs! Granted, as gas goes up they go down, but I'm talking about the last decade or so, not just the last three years. And of course, how could they buy all these expensive cars that no one can actually afford? Credit! Yes, credit.

The American economy is as insane as it is because of credit. Good, bad, we'll see what the ramifications of it are in a few years, but it cannot be argued that most of what we see are because of the credit economy. Starbucks, Audi, McMansions, and Coach Bags all exist on the credit economy. It's a strange thought, but much more than cars, we haven't been able to afford life for decades, and it's only getting worse.

I mentioned that inflation lies. Well, I seriously doubt there's an economics professor out there who would disagree with that (I say professor because professional economists also lie. Remember, they make money from your perceptions). Places like Wal*Mart have sent the prices of packaged food and televisions down. In the case of things that can be outsourced to China, the prices have plummeted. Just sit back and think about the immense processing capacity in your cell phone. It's all because of China.

But things we can't outsource have done nothing but go up. Cable service, for example, has increased immensely. Take a look at these diagrams lovingly stolen from The Mess That Greenspan Made.



Man does not live on clothing alone. That apparel category is nothing but clothing and jewelry. Nothing else. But "Other Goods and Services" is loaded to the gills with service and not goods. You can see these subcategories in detail below, at the Consumer Expenditure link. And, lookie lookie! That category is through the roof. Transportation follows the ups and downs of gasoline. Recreation goes up steadily. And housing... housing is a laughable number. It doesn't actually include house prices, instead it includes a statistic called "equivalent rent."

Equivalent rent is, roughly, the amount of money that it would cost to rent a place of similar amenities to a place you want to buy. For example, I want house A, and a mortgage would cost me $1,000 per month. Equivalent rent seems like it would say what kind of house could I rent for $1,000 per month, but it actually means that I could rent a house similar to house A for some amount of money. It is almost always lower than the cost of owning since ownership provides many bonuses not apparent in the numbers, and is thus worth it. But, as recently happened, if a housing market explodes, housing costs go way up, and since equivalent rents are lower than mortgage costs, and houses that were once available for rent instead go up for sale, the equivalent rent statistic becomes corrupted.

This happens because the equivalent rent statistic is heavily weighted towards other rental properties, and if those are all now for sale, and other houses that are being rented are being lived in by people terrified to give up their comparably low rate, there is NO WAY to determine an equivalent rent. House A would now cost $2,000 per month to own, but still appears as $1,000 per month comparable rent and inflation is unaffected. Equivalent rent can also be massaged based on who is doing the analyzing. Two financial firms can go into an area and run their "algorithms," and come up with wild divergent data. These data are almost always skewed towards some agenda. So on that chart, where the line says 'housing,'considering that housing costs nearly doubled in some areas of the country, increasing over 30% in good ol' RI, imagine it far and away on the top of the list.


To further illustrate the disconnect between reality and the easily digestible numbers we see on TV, look at the spending for recreation in 2005. Toys and televisions are plummeting thanks to those helpful, slanty-eyed slave workers over in the land of Pandas and rice, but most everything else is going way up. Data gathering for movie tickets didn't even begin and even that is a skewed number. Average movie ticket prices include everything down to 45th-run theaters. I instead go on data from my local megaplex. In 1998, I paid $5.25 to see Godzilla. And that had been a brand new $0.25 price increase. It now costs $10.25, with another $0.25 increase planned for the summer. That means from 1998 to now, a prime-time, megaplex ticket has seen a 100% increase. That's a shit-load of inflation and data that aren't included in the publicly available charts.

These data do not show the economy as progressing in a healthy way. They show two totally different sets of data that exist on the extremes of a spectrum. If anything, they show the economy as deteriorating. The public, joyfully encouraged to do this by the government and financial institutions, only pays attention to the happy average and is consequently oblivious to our sorry state. And how the hell did all of this happen? The credit economy and the desperate need for that $55,000 Mini Cooper.

Once you factor in the again-exploding credit card debt, it gets worse.

The average American household is carrying somewhere between $8000 and $10,000 in credit card debt alone. That doesn't even include other forms of debt like small loans and cars. Just plastic. $8,000. The only reason, the only reason your neighbors have that Mercedes is because of credit. If it wasn't for credit, you wouldn't even know what a BMW is. A BMW? A motorcycle? You want a motorcycle? Ohhh, they make cars, too?! We now live on credit. Nearly 50% of all households are spending more than they earn in a year.

I, for one, think we're crusin' for a bruisin'. The fact that are unable to afford life itself anymore means that the economy must suffer a correction. I don't know how bad it would be, but I suspect it would be bad. That's not to say we can't afford life, but we can't afford the life of an American. A Honda Civic, a TV, a computer, a night out once a week are all well within the means of most Americans. Too bad our economy is based on us spending far more than those seemingly simple things.

The credit economy is something our parents didn't have. They dreamed of owning a house. They dreamed of no debt and savings. Hell, that wasn't even our parents, that was our grandparents. The dreams of an ideal age, fresh out of winning the greatest war the world had seen, everyone could own a slice of paradise with some hard work. Where the hell did those dreams go? Washed away, I guess, by a torrent of easy credit, and $55,000 Minis.

Data and junk:
Consumer Expenditure Data (Bureau of Labor & Statistics)
Equivalent Rent Nonsense (The Mess That Greenspan Made)
Benign Inflation (The Mess That Greenspan Made)
The Truth About Credit Card Debt (Ms. Weston makes good points here, and I thought it important to include, but the problem is that the "most" she cites is only 55%, and the economy is heavily based on the remaining 45%. And, of course, credit card debt is the smallest part of the problem.)
Money 101: Controlling Debt