A Look Back, and Forward

I have, and will send you a copy if you ask nicely, an article I wrote for a client's newsletter dated November 2008 just as Congress finally caved in and passed the bill bailing out Wall Street while the rest of the country went to hell in a handbasket.

Back then I wrote:

“There are three camps when it comes to where we go from here. The first group says the current crisis has already outstripped our available social resources to deal with it and that any political attempt to solve it will just make things worse. This camp believes that a prolonged period of discipline and austerity is inevitable.  

The second camp – including the Bush administration – argues that the financial markets are the problem and that the state must mobilize its resources to impose a solution, inject liquidity into the system as a preface to any further solution. They believe the problem can be contained.

The third group believes the state solution is an attempt to save the very financial institutions that caused the problems in the first place and that letting them off the hook easily will not rectify the problem in the long run. Some members of this group also believe that this crisis is overblown and that a relatively simple change to the accounting rules would resolve it in short order…

If you are bullish on America in the long run, there is reason to hope that the tab will be less than $700 billion. After the Treasury buys up those troubled mortgages, it will try to resell them to investors. The Treasury’s involvement in the crisis and the speed with which Congress is responding could generate long-range optimism and raise the value of those mortgages, although it is impossible to say by how much. Make no mistake, the rebound will come eventually, but no matter what direction this country takes to resolve the problem, it will take time and will probably be painful.” 

So where are we today? Well, I think some of this has played out as it was foreseen. These were not original predictions. I just found this in my research for the article. And it looks like the only vision that DIDN’T come to pass was that Bush’s Bailout would save us. Probably because rather than buying up the mortgages and making new loans they were supposed to, the big banks put the money in their vaults to shore up their bottom lines and pay executives their inflated salaries while the rest of us lost our jobs and our homes.

Under normal circumstances, it takes time to reestablish trust in the credit markets, create new jobs and sell off the bad debt in an orderly manner. Moody’s Economy.com estimated that U.S. banks made 15 million questionable mortgage loans from 2004 to 2007. Many loans were adjustable-rate, interest-only for the first five to seven years, so their defaults will only start being felt next year. It is estimated that 10 million – or two-thirds – will default. And it will take more than just another year for the housing market to recover.

The good news: Americans are waking up from the bubble dreams. The bad news is that America’s image as the world’s greatest economy has been damaged and regardless of what anyone says, nobody, ABSOLUTELY NOBODY, knows how to fix it. If you ask me it’s time we stopped worrying about solutions to the big wound and just treat with the best medicine we have. Love.

Love of country, love of your fellow men. If you want to throw in love Jesus, you can do that too, but understand the other two are equally important now. I don’t know what’s going to happen. That's another thing no one knows. How bad does it have to get for people to come out of their homes and march in the streets? Well, we've had that already. And if they can’t fix it before next year, then maybe the next folks to Occupy Wall Street won't be as peaceful. Next year – election year – is shaping up to be a watershed.

Stay tuned...

Remembering 9/11

I was alone in the elevator when the first plane struck and did not hear the explosion. It wasn’t until, as I stood on line waiting to pay the cashier, I saw a young woman huddling against the wall sobbing and shaking. I asked the cashier what was wrong with her.

The cashier replied nonchalantly. “I guess some plane crashed into the Trade Center just now and she saw it.”

I paid for my coffee and left. In my mind, I excused it with a mental image of a single engine prop crashing into the side of the tower, and dismissed it with the thought I would hear about it that evening on the eleven o’clock news.

But the guard at the gate wouldn’t let me return to my office. “There’s been some sort of incident next door,” he said. “They’ve shut down the elevators.”

From the lobby of Seven World Trade Center, I could see through a wall of glass across a causeway into the heart of Tobin Plaza, the fountain in the center of the Trade Center. On a day bright, clear like today, by noon there would be crowds would gather in that plaza to eat their lunches and perhaps enjoy a little music, part of a whole summer of lunch time programs. Looking over now, I saw pieces of paper drifting down and what appeared to be thin white wisps of smoke.

I was irritated that my breakfast routine was being affected by some looser out to make the evening news, but there was nothing I could do, and my coffee was getting cold, so I went across the lobby to the conference center where there was a bank of pay phones. I had left my cell phone (a cumbersome analog) in my office and I wanted to call my wife and find out what was going on. I thought she would be amused.

The recorded message I got didn’t make sense. After several tries, I gave up and found a comfortable seat in a lounge where I was soon joined by a few people from another company. We were all sitting there when we heard a tremendous explosion. No one said anything but instead we all looked at each other. Then someone stuck his head in the door.

“Another plane just hit the other tower,” he said solemnly. The impossibility of that statement hadn’t quite sunk in when he added, “It’s a 757. They’re evacuating the building.”

We were under attack. My coffee mates were quick to comply with the evacuation order. I, on the other hand, stayed right there and leisurely finished my coffee and Danish. When I finally returned to the lobby, it was nearly empty. Now looking across to Tobin Plaza I could see what appeared to be the wreckage of a jet engine belching flames and thick black smoke in a place where the huge bronze statue had stood. The two security guards at the desk directed me to get out of the building through the loading dock. On my way out I passed the front glass doors of the building, the very heavy green glass doors I always used to enter the building every morning, and where I’d come through about an hour earlier. All the glass was shatter and broken. Out on the street, smoke hovered over parked cars.

I was guided down to the basement of 7 World Trade and out the loading dock. As I came into the morning air, I looked up and saw, directly overhead, a black yawning chasm near the top of the north tower; flames and thick black smoke poured from the wound. At that moment, I understood the seriousness of it, realized many people had died. I moved on quickly, walking north a few blocks. The sidewalks were filled with people standing quite still and looking up into the bright morning sun trying to comprehend what they were seeing. I did not look back. I knew now that I would be seeing this on television for weeks to come.

I found a pay phone within a few blocks and waited in a short line for my turn to call. I could not see the buildings, but I heard when the crowd collectively gasp in horror. “They’re jumping,” someone said. I couldn’t understand why anyone would want to stand there looking. Some women turned and covered their eyes.

When it was my turn, I called my wife. She was already awake, having received many phone calls from friends wanting to know if she’d heard from me. I told her I was alright and that I wasn’t sure what to do next. I hadn’t been able to get back up to my office. My briefcase, my keys, all my personal papers and stuff were up there. I told her I thought I might stick around awhile to see if later I might have the opportunity to get back in and get things from my office. Then I told her I loved her and I had to get off because the line behind me was getting longer by the minute. I promised to call her later.

I walked back to Greenwich Street and took one more look. The crowd gasped again in unison as more bodies fell from the gaping hole. I thought I saw two people holding hands as they fell. That was enough. I turned north again and walked. As I did, I passed an army of people walking and running the other way and I marveled at man’s insatiable appetite for disaster, pain and carnage.

My idea was to go up Greenwich about eleven blocks to the Allstate building. I knew people who worked there and thought I might be able to use a phone. I was ten blocks along when I ran into a guy from my office. Marc was standing in the middle of the street trying to make his cell phone work. He told me the Allstate building was closed. I asked if I could use his cell phone. I dialed the number and listened but there was no ring. I hung up and tried again. As I waited for a ring, the south tower, tower number 2, began to crumble and implode. My back was to it. Marc, who was facing it was saying look, look, the tower’s falling. “The tower’s falling,” he kept telling me. I could not turn to look. I had worked in that tower for many years before taking this new job a year earlier and the first thought that ran through my head was the faces of those co-workers. I thought right then “This changes everything. Everything.”

He looked at me incredulously. “You didn’t see it!” he said.

“Come on," I said, "let’s find a bar that’s open. I think we both need a drink.”

We walked several blocks before we found a restaurant with a lounge. Above the bar, the television was showing rerun after rerun of the collapsing tower. At first they told us the bar was closed. I pointed to the television. “We just walked out of that,” I said. A few minutes later, a young man appeared at the bar and ask what we would like to drink. I ordered a whiskey.

Marc and I were sitting at a table watching the television and sipping our drinks when the second tower collapsed. I finally got up and went to a pay phone by the restrooms and called my wife.

She was hysterical. “You told me you were going back in!” she screamed. “I thought you were dead.”

We had a friend who lived in an apartment in the 90's on West End Avenue and we agreed I would go there to wait until the commuter trains began running again. Because the subways had also stopped running I had to walk, a long walk that took me several hours. On every block there were people standing around listening to radios from stores or cars. The first time I got scared was walking through Times Square. There were several huge digital screens that always projected news and they were showing the planes hitting the towers over and over. I looked up into that clear blue sky wondering if there was still something up there aimed at midtown.

When I got to our friend's apartment I watched the television coverage for awhile but the walk had tired me out so I took a nap. When I woke up it was almost 4:00 pm. The trains were reportedly going to start running within the hour so I decided to wait that hour and then take a cab to the Harlem station. Just before I left, Seven World Trade Center, which had been on fire most of the day, finally collapsed. All the things I had in my office - my briefcase, my cell phone, a one-of-a-kind artist's rendition of the New York Stock Exchange and several mementos that sat on my desk all disappeared. I found myself even years later looking for something only to realize it had been in my office that day.

When I got home an hour or so later Barbara and I held each other a long time. And later went to a supermarket to get some food. I don't remember what it was that brought it on, but as we walked the aisles something got us laughing, and I remember the absolute quiet and the angry looks that met our laughter. How could we explain that we could laugh because I had survived.

Turning 65

It's been a few months since I posted to this blog and now it's September, always an auspicious month for me - the beginning of Fall and the stretch leading up to the biggest holidays of the year. I thought I should write about what it's like to be full retirement age, but in fact - according to Social Security - I'm not. That won't happen until next September when I turn 66. And who knows, with the government looking for new ways to save money and balance the budget (without raising taxes?) maybe next year it will be moved to 68 or even 70.

Anyway, for those of you youngsters who want to know what it feels like, I can tell you that aside from a few more aches it's pretty much like it was when I was 64.

I urge everyone to read this. Please!

Archive for the ‘Barton Biggs’ Category

Paul Farrell On The 10 "Doomsday Trends" Set To Destroy America

Tuesday, April 19th, 2011

Feeling like the daily dose of objective "truth" from Tim Geithner's latest media circuit has got you down? Fear not: here is MarketWatch's Paul Farrell summarizing the 10 ways in which the very system is destroying America, to lift your spirits up. To wit: "Doomsday Capitalism? Capitalism is killing America? Yes, that’s the message in my tenth book. “Doomsday Capitalism, 10 Self-Destructive Trends.” But you’ll never see it in print. No one, even book publishers want to read this truth: Capitalism is destroying America. Why? Super-Rich Capitalists get rich off these macro trends. They want happy talk. Back in 2007 Vanguard founder Jack Bogle called my warnings “prescient.” But that didn’t stop the meltdown. Next time financial historians warn of a bigger meltdown; a total collapse has been the destiny of every nation for eight centuries. This time, capitalism is the saboteur." Cheerful stuff.
10 Doomsday trends America can’t survive
Capitalism has become a religion for the Super Rich, with many such “saviors.” Heresies must be denied, such as this one: Doomsday Capitalism is destroying America from within. Here are highlights, with links to a few of the earlier hundred columns on topic. Ten macro trends building to a perfect storm, a critical mass, a flash point:

1. Doomsday Capitalism: Death of the American dream, spirit, soul

After our bankrupt Wall Street was resurrected in 2008 — thanks to their Trojan Horse, an ex-Goldman CEO inside the Treasury conning trillions from a clueless Congress — it became obvious that capitalism is killing America’s soul. Nobody trusts government. And no matter who’s elected, wealth, Wall Street and the Super Rich rule America; total collapse is coming.
Why? Sen. Bernie Sanders, the independent from Vermont, said it best: “There is a war going on in this country … the war waged by the wealthiest people in America on the disappearing and shrinking middle class of our country. The nation’s billionaires are on the warpath. They want more, more, more. Their greed has no end and they are apparently unconcerned for the future of this country if it gets in the way of their accumulation of power and wealth.”

2. Doomsday Democracy: ‘Mutant Capitalism’ killing ‘We the People’

Stop kidding yourself, democracy is dead: “All men are created equal” is a quaint political fiction. The public has no real say in a nation where wealth buys votes, a naive public is easily manipulated and elected officials have a price.
In “The Battle for Soul of Capitalism,” Bogle warned us the “Invisible Hand” no longer serves “We the People” nor the public welfare. Today, Wall Street and the insatiable Super Rich 1% rule America. And they are obsessed with restoring the same unregulated free-market Reaganomics that loves gambling in the same speculative $580 trillion derivatives casino that triggered the 2008 meltdown.

3. Doomsday Conspiracy: Wall Street takeover, the new ‘Invisible Hand’

The Super Rich have always had some hand in America’s destiny, operating from the shadows. Today, this conspiracy of Wall Street, Corporate CEOs, politicians and Forbes 400 billionaires operates openly, with absolute power and an arrogance that is corrupting the nation’s soul, their souls, your soul. This conspiracy has no moral compass , yet ironically, is legal.
Why? Wealth can easily buy favorable laws, making even the most unethical, selfish, corrupt behavior legal by fiat. And their high-priced lobbyists all over Washington, Congress, government regulatory agencies and the Fed all have the power to grab the rewards of capitalism for the Super Rich, while transferring the liabilities to the other, clueless 99% of America’s taxpayers

4. Doomsday Politics: Monopoly of Super-Rich Anarchists rules America

Forget buzzwords like oligopoly, plutocracy, socialism. Today Washington is a pure anarchy, a game played by tens of thousands of high-priced lobbyists squeezing the best deals out of America’s budget, solely for their clients’ interests, never the general public. Our economy is a monopoly of Super-Rich Anarchists. They know the only votes that count are in Congress. And they’re for sale.
Lobbyists are “brokers.” Today there are 261,000 lobbyists brokering special interests, all fighting for the maximum possible slice of a $1.5 trillion federal budget pie — special regulations, exemptions, loans, tax loopholes, earmarks, access, agency appointments, defense contracts, you name it — endless gambits that further consolidate the power and wealth at the top for Super-Rich Donors

5. Doomsday Economics: Growth is a numbers game for politicians

The principle of grow or die, once a given in economics and politics, is being challenged by new “growth and die” research, while a bizarre numbers racket is used by economists as propaganda to hide the truth, manipulating investors, consumers, voters, the public.
All economists tend to be biased, work for banks, politicians, corporate CEOs, think tanks and the Fed, all with political agendas. They’re more speech writers, supporting partisan slogans like “drill baby drill,” ignoring long-term consequences. For example, global population will increase 50% by 2050, yet old-school economists keep pretending natural resources are infinite.

6. Doomsday Psychology: The broken promises of behavioral science

Back in 2002 behavioral science offered investors hope: Psychologist Daniel Kahneman won the 2002 Nobel Prize in Economics, exposing Wall Street’s myth of the “rational investor.” Their promise: We’ll help you understand your brain, make better decisions. You’ll be “less irrational,” control your brain, be a successful investor.
Wrong. That will never happen. Why? Because your brain will always be irrational. Worse, Wall Street quants are always light-years ahead of our home-school brain rewiring; they know you’re vulnerable, easy to manipulate. They also hire the top neuroscientists for their casinos. No wonder the house always wins.

7. Doomsday Technology: Innovation, derivative casinos, the singularity

Sophisticated new technologies, mathematical algorithms and neuroscience all guarantee Wall Street insiders huge margins gambling in their derivative casinos, leveraging deposits from Main Street’s “dumb money.” Today Wall Street is even more obsessed, grabbing for high-risk profits in a tough “new normal” of high volatility, increasing risks, lower returns.
Average investors are no match for Wall Street’s high-frequency traders who easily win by huge margins on this rigged playing field. Still, naive Main Street investors keep betting despite warnings that the more you trade the less you earn.

8. Doomsday Warfare: Pentagon math: population + commodities = wars

The Pentagon predicts that by 2020 “warfare will define human life” as global population explodes 50% to 10 billion in 2050. Powerful commercial, political and ideological forces drive globalization. Emerging nations compete for scarce resources. This is “the mother of all national security issues,” warns the Pentagon.
“Unrest would then create massive droughts, turning farmland into dust bowls and forests to ashes. Rather than causing gradual, centuries-spanning change, they may be pushing the climate to a tipping point. By 2020 there is little doubt that something drastic is happening. As the planet’s carrying capacity shrinks an ancient pattern reemerges: the eruption of desperate, all-out wars over food, water and energy supplies and warfare defining human life.”

9. Doomsday History: This time really is different — the final meltdown

Bubble/bust cycles have been well documented for eight centuries. But the lessons of history are never learned. Euphoria blinds us in boom times. We deny risk. Bubbles blow. Meltdowns happen. We will always recover.
Wrong. Many now challenge that naive assumption. Financial historian Niall Ferguson comments in his “Rise and Fall of the American Empire:” “Collapse may come much more suddenly than many historians imagine. Fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice. Many nations in history, at the very peak of their power, affluence and glory, see leaders arise, run amok with imperial visions and sabotage themselves, their people and their nation.”

10. Doomsday Investing: Survival strategies in the post-capitalism era

Former Morgan Stanley guru and hedge fund manager Barton Biggs, offers his Super-Rich Investors a doomsday strategy in his “Wealth, War and Wisdom.” He warns of “the possibility of a breakdown of the civilized infrastructure.” No hippie radical, he says “think Swiss Family Robinson, your safe haven must be self-sufficient, capable of growing food, well-stocked with seed, fertilizer, canned food, wine, medicine, clothes. And be ready to fire a few rounds over the approaching brigands’ heads, to persuade them there are easier farms to pillage.”
But will that work for Main Street investors in the next meltdown/depression? Read our 12 tips and six worst-case scenario rules for average investors preparing for the doomsday scenario.
Farrell's conclusion: eat the rich... more or less

Has America passed the point of no return?

Can’t we deflect the trajectory? Yes, but America would need a fundamental shift in how our leaders think, says Jared Diamond in “Collapse: How Societies Choose to Fail or Succeed.” We need leaders with “the courage to practice long-term thinking and make bold, courageous, anticipatory decisions at a time when problems have become perceptible [like in 2011] but before they reach crisis proportions.”
Bottom line: Underneath America’s endless political drama lie deep wounds that are widening the gap between the Super Rich and the other 99% of America, wider today than before the 1929 Crash. And now as then, we know the Super Rich don’t really care about the needs of the rest of America — witness their agenda in states like Wisconsin and Michigan, and the GOP’s new “Path to Prosperity” budget, a rush to restore failed Reaganomics policies.

About a day

I haven't had one of these in awhile - a day to remember. Certainly not one having to do with education. Truth be told I tried to ignore my high school graduation. When my graduation from Indiana University was taking place, I was in another town. And while I wasn't too keen on doing this either, I had coaxing and more importantly I felt like I had something to stand up for, an accomplishment. So my friend Chris came and took pictures and Drew Neiporent (of Tribeca Grill and Nobu fame) supplied the champagne for the pre-party. And then we all walked from the castle across the lawn and into the big tent to the accompaniment of the graduation march and the cheers of all those family and friends and I have to admit it was heady stuff.

For this day, I would be remiss if I didn't thank Sister Ruth Dowd and Ms. Karen Sirabian
   (Heart and Soul)
for the opportunity to walk this path.

Relief

As I listen to the day of reporting about the death of Osama bin Laden, I feel relief, a release of an almost invisible layer of fear I barely knew I felt. It was good to admit it and bid it goodbye. Not that anyone should be letting their guard down in the wake of this, but it seems like a closing of an ugly book, a page turned in a bigger history, an unusual opportunity to begin again. How to fix the wounds and continue this migration from fear to hope, that is the natural state of human beings.

The Profit Motive

"For the well-off, this could be the best tax day since the early 1930s: Top tax rates on ordinary income, dividends, estates, and gifts will remain at or near historically low levels for at least the next two years. That's thanks in part to legislation passed in December 2010 by the 111th Congress and signed by President Barack Obama."

from How the Rich Pay No Taxes by Jesse Drucker, posted yesterday on MSN Money Partner.


I'm going to begin this year's posts by discussing something that's been on my mind for some time. Americans are feeling hopeless right now. Why? A lot of people are out of work and those that do have jobs are struggling to make ends meet. Health insurance doesn't cover the most important problems facing an ageing population many of whom have just had their life savings either seriously dented or entirely wiped out due to losses in the market and unemployment. Does Washington give a shit? You sure couldn't tell it by the vote this week. They're cutting education, social programs and throwing public employees to the wolves. They're more worried about how much public money (read public scrutiny) goes to candidates for federal offices. The more they cut that, the more advantage a wealthy candidate has over the other guy. The tax cuts they've been talking about for weeks now didn't go to the poor or the unemployed. Everywhere you turn, money is being funnelled not to people who need it but to people who are simply GREEDY!

And therein lies the problem. In this country, we believe everyman has the right to make as much money as he can. Now I know I'm gonna be visited by Republican ninjas in the middle of the night, so if this is my last post you'll know who's responsible. But here's my point. There's a deficit? Fine! Let's tax the shit out out the rich!

Another quote from Mr. Drucker's article:

"For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate -- what they actually pay -- fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so."

Let me say that again. LET'S TAX THE SHIT OUT OF THE RICH!!!

Why not? Oh, don't tell me I'm a bleeding heart liberal. What right have so few got to control so much while the majority of people in this country are quite understandably unhappy with the way things are? Instead of taxing the shit out of them, the goddamn congress is giving them goddamn tax cuts. WHY??? DOES THE GODDAMN POODLE NEED A HAIRCUT?

We need health insurance for everyone in this country. And I'm not talking about this patchwork system that's in place now that's gonna spring a leak at any time. We need a serious look at jobs for the middle class in this country. In case you hadn't noticed THERE AREN'T ANY!! If you're not a stock broker, or supporting the financial system in this country, you're slinging hamburgers or working at Walmart. That's because all the manufacturing jobs have been sent overseas. Why? BECAUSE RICH PEOPLE WEREN'T MAKING ENOUGH GODDAMN MONEY! So screw the unions, screw the sick, screw the poor fucker out there just trying to make it from one day to the next.

My friends, this has got to stop. Eventually there's gonna be too many people out there who are hungry and sick of voting for liars who say they'll fix the problem only to become part of it after they've been elected. WE NEED A CAP ON WEALTH IN THIS COUNTRY. TAXING THE SHIT OUT OF CORPORATIONS AND WEALTHY INDIVIDUALS IS NOT WRONG. IT'S WHAT HAPPENS WHEN THINGS ARE SO OUT OF BALANCE THE SYSTEM HAS STOPPED FUNCTIONING.

This is the beginning of a series of blogs on this subject. Americans need a real change, and we need to start by changing ourselves and our attitudes toward wealth.

Spring is coming!!!

Today is chilly - you have to wear a coat to stay out for any length of time, but the sun is bright and the breeze is fresh and brisk. Main Street Tarrytown is in fine form. I saw this painter sitting by her window diligently painting away at something, so I took her picture. If I ever find out who she is I'll revise this to include her name. Happy Spring everyone!