A tad askew from the traditional view

Thursday, January 19, 2006


Just when you thought Bush's ratings were going into the dumpster, who should come along to bail him out but good old Osama. The new tape came out and Bush has been prancing around all day long, proud as punch under the cloak that Rove wove (see blog of 12/23/05). Now for those who don't think things like this ever just go down by accident, well hold that thought. This happens to fit very neatly into the theory that communications have been passed back and forth between Bush and Osama through the Bin Laden family for some time now (see blog of 8/19/05). If so, this latest "favor" on the part of Osama suggests that we will continue not to be able to track him down, and, in return, we will also continue not to have any terrorist acts committed on U.S. soil.

If it is true that a deal such as this has been put together, it is possibly the smartest thing and maybe the only real smart thing that Bush has done. Of course Osama is a monster who deserves the cruelest of punishments, but just consider the alternatives. Consider the impact on this nation if terrorist acts were to paralyze our transportations systems and our communications, taint our food, blow up our malls, and possibly infect us with biological hazards. Recall, for a moment the panic that occured on 9/11 and the false rumors that had everyone in the country looking toward the sky and living in fear. And, let's face it, 9/11 was only a small operation. Imagine how bad it would be if the terrorists, after years of planning and positioning, actually launched a multi-pronged attack of monumental proportions. To say that the economy would collapse would be a major understatement. Further, does anyone really believe that the Department of Homeland Security can protect us....protect our borders.....protect our ports....protect our nuclear plants....and protect the hundreds of other major potential terrorist targets? From what's been reported, it's clear that our government itself doesn't believe it.

No, if there's been a deal done, then hooray for the President........ But then, what happens after he leaves?...............

Wednesday, January 18, 2006


....CPI was negative for second month in a row and the core rate was at 2%, exactly where it's been for the last two years....This strongly suggests that inflationary pressures are not building....Interestingly, every stock market in the world has been off from 1% to 6% over the past five days....Energy costs are down today....Precious metals are down....Commodoties are down....The only recipient of some money appears to be the bond market...There may be some nervousness world wide as possibly evidenced by the small panic in the Japanese market yesterday which caused it to close down early...........The Iran situation is also interesting due to the leverage the country has....It is estimated that if Iran stops selling oil, the price of crude could rise to the $80 level....The Iraq problem is not going away...There's not much to get excited about, except that the news seems to be describing conditions that may favor the real estate market, or at least delay the onset of an eventual real estate collapse....Bush says he will do everything to gain the release of the American woman journalist who is a hostage in Iraq....I'm sure he'll ignore and hopefully fire any advisors who tell him that his stock may go up if she is killed....a horrible thought, but there is no doubt that we have entered an era of unspeakable acts....

Tuesday, December 27, 2005


One thing is clear....some people are getting very nervous..... and it seems to be stemming from a combination of factors.....First, the yield inversion thing appears to be on the verge of happening and this is spooking a lot of investors....Second, new home sales have dropped 11% according to the Commerce Department.....So now, those that are nervous about a recession (that may be fordoomed by the Fed's yield inversion) are also concerned with the possibility of the worst of all scenarios - a recession coupled with a real estate collapse.

The nervousness apparently prompted a huge jump in option action on Monday....ROBERTINRIO'S site reported that 95,000 deep-in-the-money Walmart puts were sold yesterday. "That's ten million shares," according to ROBERTINRIO, and he goes on to point out that the open interest before yesterday was 5,000. He says the same was true yesterday for a lot of other stocks, too.

The bottom line here is that a large amount of money was waged on the possibility that there will be a crash in January. This should be of grave concern, but if there is any good news here it may lie in the old saw that says the more that investors anticipate something and the more that they invest accordingly, the less likely it is to happen. Another possible silver lining is that a recession might be kinder to the real estate market than a strong economic cycle that would include inflationary pressures. Interest rates would be lower in a recession, and lets not forget that much of the trillions of dollars of recent mortgages involved variable rate provisions.

Having said that, however, it is a fact that there are multiple areas of the economy that could trigger and be a major part of a financial panic. The stock market and the real estate market are perhaps just the most obvious. My personal favorite, as the most likely sector to cause all-around mayhem, is the short term money market. Think about it for a moment. All those huge corporations with hundreds of billions or more in combined short term debt, relying totally on the confidence of investors to roll their debt over, and over, and over - every day - over and over. Any interruption in confidence could have the potential to trigger immediate defaults and the aggregate amount of financing involved is way too large for the banks to be able to cover.

Think it's unlikely? Well, guess what. It's already happened once before, and that was at a time when the total short term debt was much smaller than it is today.

It might be appropriate to relate a little story here, because I happen to have had a ringside seat to this near disaster that few, in fact, know about. The events that are described below were not publicized at the time and, as far as I know, have since only been mentioned in a couple of books. It was in the early '70's, and the interruption in confidence in that case was triggered by the bankruptcy of the Penn Central Railroad, which had the effect of wiping out some short term investors. An ensuing panic began to chug forward erratically. Then, a baseless rumor started on Wall Street that Chrysler Financial would be next, and that company immediately found that it was unable to roll over its short term debt. The company president, together with a man named McGillicuddy from Manufacturers Hanover Bank, appealed to every major financial institution in the country for commitments of money. I was working at one of those institutions and sitting in on the meeting they had with us, and I can tell you that those two gentlemen were extremely nervous, and so were the officers of my company. I'll never forget one thing they said. They pointed out that, if this had happened to the much larger General Motors Acceptance Corporation, the maximum financing that could have been legally raised from every bank and every insurance company in the country would have been insufficient to cover that company's short term debt.

My company fell into line, as did many other lenders that the traveling roadshow visited, and we provided a substantial commitment. A day later, we were aware that the roadshow was at its last institution, Prudential Insurance, and we knew that everything depended on the Pru approving a $50 million commitment. At this point it would be accurate to say that the nervousness among my company's senior officers had turned to fear. The panic in the short term market was spreading and it was beginning to spawn false rumors involving other companies as well, such as Household Finance. If Chrysler Financial was to be unsuccessful in obtaining commitments for the total amount of money they needed, we all knew that they would immediately go into default, and that this would set off a chain reaction that would produce a major financial crisis. It was indeed a scary situation.

Well, as it turned out, Prudential approved the $50 million commitment to Chrysler Financial, and, as a result, there were enough commitments to cover the company's short term debt. In no time flat, the investors returned and Chrysler Financial was able to roll over its debt. Just like that. Not one penny of all those commitments was actually ever needed. As in most other areas of our economy, it was all just a matter of confidence. Once the debt was covered, everything returned to normal. The rumors went away, and everyone breathed easy.

For some reason, however, I couldn't help remembering that situation yesterday.........

Friday, December 23, 2005


George W. Bush is a Superhero, and very likely the first to actually be a real live person. His super powers come directly from his Cloak of Patriotism, which was created especially for him a little over four years ago.

On September 11, 2001, to be exact, while the President was being frantically flown from one part of the country to another, and after the Vice President had high-tailed it to an "undisclosed location," Karl Rove (remember him?) was busy in the basement sewing room of the White House putting the final touches on this brand new and magical Cloak. At exactly 8:30 PM on that day, with the President back in the White House, Rove threw the finished Cloak over George W. Bush and put him before a national audience for a five minute speech. The results exceeded Karl's fondest hopes. The President's numbers were rising by the minute. The Cloak of Patriotism had passed its initial test with flying colors.

Three days later, anxious to try out the Cloak on the road, Rove threw it over the President once again and took him to Ground Zero in New York. There, he gave him a bullhorn in front of a bevy of construction workers, and sat back and glowed with pride. As the President ended a brief speech with a hearty "God Bless America," and the workers chanted "USA USA USA," the poll numbers soared to their highest level ever - the absolute zenith of his presidency. The Cloak was suddenly on the verge of becoming an instant legend.

At first, as with most awesome things, it was used sparingly, but soon it became apparent that under the Cloak of Patriotism the President could do almost anything he wanted, without the usual need for justification or even a rational explanation. He could even do preposterous things. His inner circle said to him..."Hey, let's just wind down that Afghanistan thing...There's nothing worth while there ...No oil at all...Let's go kick ass in Iraq...You know Sadam was going to knock off your daddy?.....And, while we're at it, screw civil rights.".....They threw the Cloak over Bush and - presto - it was done. And it was exactly at this point that they discovered that the Cloak not only enabled the President to do anything he wanted, but that it also had the power to reflect any criticism directly back to it's source with a withering burst of energy.

Anti-war critics were soon being cooked to a crisp by the destructive capabilities of the Cloak and it eventually became apparent that its powers went beyond anything that had been imagined. Indeed, whole countries were decimated at will. France, and all of its 61,000,000 citizens, were denigrated to the lowest conceivable level - possibly below contemptuous - after Bush donned the Cloak and repelled the anti-war criticisms of its leader.

John Kerry's greatest misjudgment in the 2004 Presidential campaign may perhaps have been his inability to grasp the huge significance of the Cloak that Rove had woven. Naively, perhaps, thinking that anyone could wear one, he actually got hold of a lesser cloak and tried it on, using his credentials as a legitimately decorated war hero, against the President's record as a war-dodging, allegedly absentee member of the National Guard. What a mistake. Rove's Cloak, tested in battle, and refined under a variety of situations, easily prevailed. The swift boat gang from Texas threw it over the President and proceeded to turn Kerry's record into a "fraudulent" pile of ashes. Kerry conceded defeat in a telephone call to Bush at around 11:00 AM EST on the morning of November 3, 2004.

While there is evidence that its powers may be waning, the Cloak still seems to have some life. Just this week, Democratic Representative John Conyers, Jr. of Michigan - serving his 19th term in the House - made public a proposed resolution to censure the President and Vice President for allegedly lying to the Congress in order to justify invading Iraq. Within minutes, a presidential spokesperson responded by throwing the Cloak of Patriotism over President Bush and announcing that if Conyers spent as much time fighting terrorism as he did attacking the President the country would be better off for it. To what extent Conyers will soon be reduced to a simpering, whimpering turncoat of a terrorist-loving traitor by the Cloak-wearing, Patriotic, Superhero President, remains to be seen.

Meanwhile, for those who may have wondered what Rove is doing these days - besides praying that he stays out of prison and making sure that the pharmaceuticals won't have to pay for any part of the proposed budget cuts - it's a pretty fair bet that he's holed up in the basement sewing room of the White House at this very minute, toiling over the creation of a new super power for the President, possibly called the Cloak of Religious Righteousness.

A Happy Holiday to all who happen past this site. Please join me in a serious wish that the year 2006 will somehow bring an improvement in the conduct of America's affairs, both at home and abroad.........Dave McGill

Wednesday, December 21, 2005


First some good news......Good news?.........How long has it been?....Anyway, we have a valid candidate for Bush's Supreme Court. A church-going, conservative by the name of John E. Jones III ruled in a Pennsylvania federal court that "Intelligent Design" is really a relabeling of "Creationism" and is not a science. Wow, someone who actually puts his responsibilities ahead of his personal feelings. Let's hope it's contagious.

On the economic front, following a five year, 70% surge in mortgage debt to nearly $8 trillion, federal regulators now want to toughen the guidelines on adjustable rate loans, which have previously been reported to account for as much as 60% of the new financing. They think that lenders should actually underwrite an applicant's ability to pay the debt service AFTER the initial low-rate period (DAH!). Is this the mother of all barn-door-closings-after-the-horse-got-out situations or what. Well, at least you can't say the government isn't aware of the ticking time bomb that every day brings us closer to the major crisis that will eventually and inevitably erupt under this segment of the economy.

In the political/ethics area, you may not have read that a bill was introduced in the House yesterday to censure the President and Vice President for lying to the Congress about the reasons for invading Iraq. You may not have read about it because most papers evidently didn't find this to be newsworthy, at least not for today. Now lets think about this for a moment. A few years ago, the opposition party - the Republicans - impeached a Democrat for lying about a harmless affair, and today, the Democratic Party is threatening to censure two Republicans for alleged lies that have so far cost nearly 2,200 American military lives and an estimated 30,000 Iraqi lives. Impeachment vs. Censure. This is nothing more than additional evidence that the Democratic party in this country has become the Party of the Timid. As an opposition party, it is a miserable failure with respect to its ability to take advantage of the glaring weaknesses in the management of our national affairs. Imagine, for a moment, the aggressive clamor we would be hearing from the Republican party if the tables were reversed. It's a sad commentary on the current weakness in our two-party system.

Next, it is reported that the Senate is trying to pass a bill to cut the deficit and that the vote is taking place today, right now. The significance here is not whether the bill passes, because it is a trivial, virtually meaningless measure, but rather what it also tells us about our, so-called two-party system. The deficit, of course in enormous. We know that. It has been caused by a combination of factors, all of which having had the common result of directing a major portion of the government's red ink into the pockets of the wealthiest 1% of our population. So, is the Senate looking to the wealthy to help reduce the deficit? Absolutely not!! If the bill is passed, the spending cuts will be applied to Medicaid, welfare and - the largest target - student loans. There is no alternative bill asking the wealthy to give back any of the trillions of dollars they have pocketed through tax cuts, windfall profits and fat government contracts. Of course, the reason for this is that the democrats are being paid off just as are the republicans and, if you don't think that this is another time bomb ticking under the future security of this nation then you are sadly mistaken.

And finally - and undoubtedly the worst news today - Johnny Damon, the heart and soul of the Boston Red Sox, is apparently defecting to the New York Yankees. Sadly, the great rivalry between these two clubs, that has been so enjoyable to watch over the past few years, is now history. The Sox have now lost their entire infield and two-thirds of their outfield since the end of last season. Mismanagement of this magnitude certainly qualifies the Sox ownership for high government office......

Monday, December 19, 2005


It's far from certain that history necessarily repeats itself, but it may be of some interest to recall what happened in Iraq in the 1920's. In May of 1920, Britain accepted the invitation of the League of Nations to serve as the mandatory for the transformation of what had long been known as Mesopotamia to an independent state under the modern name of Iraq. It was Britain's objective to maintain troops in the country, assist in organizing a new form of government and then withdraw. Sound familiar?

In comparison with the situation today, however, there were some big differences. First, conditions were considerably less chaotic. Internal strife was not a problem. The main threat came from outside the country in the form of hostile neighbors and boundary disputes. And second, the type of government that was chosen for Iraq was a monarchy, a form that was relatively easy to create and maintain, and one that was accepted by the populace.

Yet, under these conditions, it was six years before Iraq was in a position to adequately defend itself, and Britain was able to withdraw its forces. Six years!

Today, we not only have to be concerned with Iraq's ability to ward off an obvious aggressor such as Iran, but there is the very real threat of civil war to be dealt with as well. In addition, the creation of a democratic form of government in a country composed of such highly volatile religious and ethnic factions is sure to consume a considerable amount of time before it is able to operate adequately, and - let's face it - a government so created under these conditions may never be able to run smoothly.

To talk of withdrawing from Iraq within a year or two or even six is pie-in-the-sky baloney, because when it comes right down to it, the "wise ones" will always say: "If we leave Iraq now, we'll be leaving it to the wolves," - and they'll be right. And don't forget, we're talking about a lot of oil here, and a lot of powerful western interests involved in that oil.

No, the truth is - and the government should level with us on this matter - we are stuck in Bush's mess for a very long haul, and there is NO WAY OUT!

Monday, December 12, 2005


Well, it's another shameful day in the neighborhood. As the number of dead American military personnel moves toward 2,150 (and we have no idea of the number of limbs that have been blown off), evidence continues to mount that the Congress and the American people were intentionally misled and lied to with respect to the reasons for invading Iraq. The essence of the latest revelation, which sounds uncomfortably familiar, is shown below, in a quote from the beginning of an article in Sunday's LA Times.

"French Told CIA of Bogus Intelligence

"The foreign spy service warned the U.S. various times before the war that there was no proof Iraq sought uranium from Niger, ex-officials say.By Tom Hamburger, Peter Wallsten and Bob Drogin, Times Staff Writers

"PARIS — More than a year before President Bush declared in his 2003 State of the Union speech that Iraq had tried to buy nuclear weapons material in Africa, the French spy service began repeatedly warning the CIA in secret communications that there was no evidence to support the allegation.The previously undisclosed exchanges between the U.S. and the French, described in interviews last week by the retired chief of the French counterintelligence service and a former CIA official, came on separate occasions in 2001 and 2002.........."

The question is, how much more of this will it take to get Washington off its duff to do something about it. After all, we're not talking about a harmless dalliance in a corridor off the oval office here. We're talking about the possibility of lies that have cost thousands of lives and crippled countless others.

Sometimes, it seems that the continuing stream of news stories relating to the casualties has numbed our minds to the cumulative horror of the situation. The reality is perhaps best placed in perspective by asking ourselves, is anything more precious to us than our own lives? If the answer is "nothing," then we might ask, is anything more precious than their lives? And only after that should we read the obituaries.

Friday, December 02, 2005


It's really not much of a stretch to imagine members of the Bush Administration planning and preparing a set of amendments to the amendments of the constitution so I wasn't too surprised when a copy of one of their drafts made its way into my possession. They're evidently calling it AMENDMENT XXVIII, and it reads as follows:

"PREAMBLE TO THE AMENDMENTS OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: The basis for these amendments is the relatively new legal concept described as "(the) President (can sure as hell) Opt (for) Omnipotent Powers," or POOP. In practice, the term POOP may also be used as a verb, as in the statement "the President POOPs," meaning, of course, that he is opting for omnipotent powers in a particular situation. The concept shall apply only to the executive branch of the government. Congress cannot POOP, although the Speaker of the House might POOP under some circumstances, but only when appearing before a joint session of congress, and the Vice President may only POOP at the pleasure of the President.

"THE FIRST AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: Congress shall make no law respecting an establishment of religion. However, upon the Vice President personally delivering a presidential POOP to the Speaker of the House, Congress shall ordain that the word "God" cannot be considered to have any religious connotation, and further that any schoolhouse persons who teach creationism cannot be considered to be religiously inspired but shall be known simply as storytellers exercising their right of free speech, and finally that any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment.

"THE SECOND AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: Congress shall make no law abridging the freedom of speech. However, when the president POOPs he may destroy the offices of a foreign news agency or newspaper and he may plant false articles in the press anytime he wishes. Domestically the president may aim his POOP at the Washington press corps so that he may withhold leaked information from unfriendly reporters. Under his right of free speech, the president may interpret intelligence information for public dissemination in any way he sees fit, and he may "out" any undercover operative that he chooses, provided that he is POOPing at such times. And any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment.

"THE THIRD AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: No soldier shall, in time of peace be quartered in any house without the consent of the owner, nor in time of war, except in a manner prescribed only by a POOPing President who may send soldiers into any house in any country of the world for any reason or for no reason at all. And any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment.

"THE FOURTH AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial by an impartial jury and cruel and unusual punishment shall not be inflicted. However, the President may send any defendant he wishes to a foreign country for interrogation purposes, provided said defendant is accompanied by the President's POOP, in which case the foregoing rights will not apply. And any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment.

"THE FIFTH AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: The Congress shall have the power to lay and collect taxes on incomes. However, if the Secretary of the Treasury should appear before Congress with the President's POOP, then the Congress shall provide a major tax cut for the wealthy. Furthermore, if the President personally POOPS before the Federal Reserve Board, then that body shall be obligated to give its blessing to a program of massive deficits in lieu of raising taxes. And any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment.

"THE SIXTH AMENDMENT OF THE AMENDMENTS AS LAID OUT IN AMENDMENT XXVIII: Under unusual circumstances, the President and Vice President may be elected by popular vote, but if the President POOPs before the Supreme Court, then that body shall meet and vote by ballot for President and Vice President and these results shall be transmitted, sealed to the President of the Senate. All certificates shall then be opened and counted only by the Vice President, while POOPing under executive order, in the presence of the Senate and House. The tabulation shall be performed using a machine manufactured by Diebold, Inc., leaving no record of the results. And any persons who are intimate with others of the same sex shall be neutered and abortions shall be added to the criteria for capital punishment."

Well, that's the whole document. I don't know about you, but it sounds okay to me......

Sunday, November 27, 2005


When I was a youngster, we studied the science of evolution in public school, and the Bible story of creation, now called Intelligent Design, in Sunday school. There was no pressure to select one over the other, although, even at that very tender age, we easily came to the conclusion that the Bible story was anything but "intelligent."

Today, parents are beginning to turn the tables on this small facet of growing up and the implications are enormous. Let's look, for a moment, at the world's most irksome trouble spots - the specific areas where problems and conflicts never seem to go away, where other countries inevitably have to get involved to keep the situation from boiling over, and where incredible amounts of time and money are repeatedly wasted in failed attempts to arrive at solutions - in other words, lets look at Northern Ireland and the Middle East. The one common element that these hotspots have in common is that the nations involved have intermingled their religions with their politics. In the case of Northern Ireland, it was the British that sowed the seeds of continuing chaos over 100 years ago by providing financial and military support to the protestant minority, thus enabling them to hold power over the catholic majority. And in the Middle East, the heat of religious fervor continuously inflames the political process. In fact, across the wide belt of Islam, stretching from Algeria to the Philippines, which, by its very nature, merges religion with politics, chaos is fast becoming a greater part of daily life. Ironically, the one country in that area that did have a secular system was Iraq, but our military campaign has made it likely that the religious majority there will ultimately take over that government as well.

Religion certainly has a proper place in society, but it is a cancer in the healthy functioning of the political process. Our forefathers, with memories of religious persecution in England, saw this and carefully provided for the separation of church and state in our constitution. Yet today, in what is supposedly the most advanced country on earth, the religious fundamentalists in America - who, surprisingly, may account for as much as 38% of the population (according to a Pew Forum survey, which I personally and hopefully doubt) - want to force all youngsters to learn about Intelligent Design in the public schools, a huge erosion in the concept of separation, and a clear violation of the rights of those families who do not wish to be exposed to or pay for the teaching of someone else's religious beliefs. And any progress made by these fundamentalists will undoubtedly only whet their appetites for more political power.

The matter will be resolved in various courts, and where there are conservative judges involved, we should be concerned about the outcome. These conservative judges like to tell us that they are strict interpreters of the constitution, and that they are guided by the "intent" of the framers, but we hear no complaints from them about the fact that the American voter has been disenfranchised by the monied interests. And more to the point,it has become increasingly apparent that many of these conservative judges share the same views as the fundamentalists, which poses the threat that their beliefs may come to influence their decisions, in clear conflict with the constitution.

As our courts become increasingly more conservative under various Republican administrations, we should be concerned - very concerned.

Thursday, November 24, 2005


Those that have the most to be thankful for today are undoubtedly the members of America's upper class. By fashioning a system under which they can "invest" tens of millions of dollars in our nation's politicians and reap benefits in the hundreds of billions of dollars, they have become the mother of all money vacuums. And they deserve additional credit for being able to accomplish this without letting more than a pittance trickle down to the middle and lower classes. In fact, there is more than a little evidence that the middle class is actually losing ground. The general situation is reminiscent of conditions that existed in Japan during the nineties, just prior to that country's descent into what has so far become a six-year spiral of deflation.

Coincidentally, on this day of thanks giving, the LA Times - perhaps unintentionally - reveals some of the economic consequences of the current situation in the United States. In a front page article on Las Vegas, the paper outlines the exorbitant demand for luxury items in that city, very likely a concentrated version of a national trend. The Times calls it the "Vegas Effect," and reports that "the city's relentless demand for luxury has contributed to a rise in prices for Kobe beef and palm trees, wiped out exclusive wine stock....," etc. etc. The Times goes on to say that the glittering shopping concourses of Vegas now contain so many exclusive boutiques that they are rivaling the appeal of the Rodeo Drive area of Beverly Hills; the Japanese style Kobe beef, considered a delicacy, is in short supply all over the United States; the price of date palms has escalated 50% in the past two years; and the demand for fine wines has "literally wiped out the finest Burgundy and Bordeaux, the finest of California, the finest of Italy, the finest of Australia and Spain..."

Also, in today's Business Section, the Times has a front page report on how the family members of the late Mexican artist, Frida Kahlo, have ventured into the business of making expensive tequila aimed primarily at wealthy American consumers. The article reveals that the overall demand for super-premium tequilas is up nearly 22%, as opposed to an 8% decline for the inexpensive brands. Steve Wallace, owner of Wally's wine and spirits store in the Westwood section of Los Angeles is quoted as saying "I have sold 200 cases of Don Julio 1942 anejo at $129.99 a bottle and I can't keep it in stock." The paper says "Wallace plans to stock the Kahlo alongside the Don Julio and another offering: the $336-a-bottle Herradura Suprema."

And how is your Thanksgiving?

Monday, November 21, 2005



BERLIN, Nov. 20 (UPI) -- German intelligence officials say the Bush administration ignored warnings about the intelligence given by the Iraqi defector codenamed Curveball.

The Los Angeles Times interviewed five senior German officials with the Federal Intelligence Service, who described Curveball's information as vague and the defector as unbalanced. The officials say the Bush administration and the CIA were warned about his unreliability and exaggerated his claims.

"This was not substantial evidence," one official said. "We made clear we could not verify the things he said."

President George W. Bush used Curveball's intelligence to say that Saddam Hussein had seven mobile poison gas factories. Then-Secretary of State Colin Powell's speech to the United Nations in February 2003 also depended heavily on Curveball.

One of the officials described Curveball as "not a stable, psychologically stable guy."

Copyright 2005 by United Press International. All Rights Reserved.


Wednesday, November 16, 2005


Greenspan's perspective: if he changes direction, he embarrassingly advertises his mistaken strategy on the brink of his retirement....On the other hand, if he
maintains his ill advised course of raising short term rates, then the negative results (i.e. major recession) would be likely to occur sufficiently down the road, he has to hope, so that his successor would be blamed..............................

Successor's perspective: a no-win situation if you believe,as he might, that the economy is already on a collision course with disaster. But if he maintains current strategy he has to hope it would continue to be known as Greenspan's plan, not his. By continuing to tighten credit the Fed would also be creating the illusion that the it believes the economy is improving, and that has to be part of its game plan.

Likely result: no change in the Fed strategy of barreling forward into the hazardous land of the inverted yield curve......(and any euphoria associated with the usual year-end stock rally should be savored, because - rally or not - the flawed policies of the government at all levels have probably already created the makings of an unavoidable economic crisis down the road)........Dave McGill

Tuesday, November 15, 2005


.........well, I just read that the average home in kokomo, indiana is worth $94,000, which reminded me of an article in last sunday's LA Times reporting that the median value of homes in all of LA County had hit the $500,000 range........And what do you get for $500,000?...Try a cottage of less than 800 square feet in a not so hot area....Actually, some in that price range were as large as 1,200 square feet...I've seen many in my travels throughout LA, and I can tell you these $500,000 houses have two things in common - tinyness and ugliness!!!....It would be totally depressing to live in them.....The market here and in many places is insane....A crash is coming that will dwarf anything seen before....and the only question is - not "if" - but "when".....

.......and by the way, the spread between the 2-year T-note and the 10-year T-bond was only 11 basis points on Thursday and it was lower mainly because the long rates made a big move downward, meaning that while the Fed was busy jacking up the short term rates to prevent inflation, the bond investors (the shrewdest bunch in investorland) were continuing to bet on a recession................and it could be a lollapalooza if coupled with a real estate collapse.......good time to get defensive......Dave McGill

Saturday, October 15, 2005

The Big Game aka The Hijacking of America

Just about everyone is aware of the new bankruptcy law that has gone into effect. If you've read the fine print in the new pamphlets that the banks and credit card companies are sending out you'll see that, in addition to the legislated bankruptcy restrictions, these lenders are now piling on significant additional terms that are beneficial to themselves, and potentially harmful to us. These changes include removing the interest rate ceiling on variable rate accounts, increasing the penalty interest, and requiring that - once penalty rates are charged for, say, one late payment - they will continue to be charged until those balances are paid in full. Clearly, the credit card user, who is about to be shackled to the wall by the new bankruptcy law, will soon be taken full advantage of by the lending industry.

But the problem is much bigger than credit cards, or the plight of those who might happen on hard times, or of those who might mistakenly or otherwise make one single late payment.

The problem is that we, the voters in the United States, continue to be sucked in by political advertising that deceptively causes us to vote against our own best interests, such as electing those politicians who enacted the new bankruptcy law - the same politicians who stage ineffective hearings or turn a blind eye to the gouging we are getting from the drug companies and from the fat cats in the oil patch - the same politicians who want to take away our right to seek legal redress under the guise of "eliminating frivolous law suits" - the same politicians who have allowed the Alternative Minimum Tax to remain unindexed so that each year it drills deeper into the middle class, a domain for which it was never intended - the same politicians who are now "seriously considering" a significant reduction in the maximum amount of mortgage interest we can deduct on our taxes - and the same politicians who drove the nation's finances into the ground to provide a large tax cut aimed primarily at the very, very rich. In short, these are the politicians who are overseeing - right under our noses - a massive transfer of wealth from the middle class to the upper class.........and yet we continue to give them our support.

Make no mistake about it, the Big Game in this country is not the Super Bowl or the seventh game of the World Series. The Big Game is the struggle between Big Business, which is controlled by the Upper Class, and the rest of us, and Big Business is winning big. In other words, maybe one percent of the population is having its way with the other 99%. The Big Game's game plan is all about money - money that flows first to the politicians and then, after a little laundering, back to the upper class together with a great deal of additional funds provided by tax revenues generated primarily from the middle class.

The front line in the Big Game goes beyond the issues of credit cards, drugs or oil. Right now, the major concern of Big Business is organized labor, a movement that certainly includes far less than a majority of all workers, but a movement which vitally affects 99% of us. What Big Business realizes is that labor unions represent the only organized resistance that it might ever reasonably expect to encounter and it knows that, in history, the unions have occasionally held the upper hand. It's out to muzzle that potential threat so that it can then have its way with not only union members but - more importantly - with the rest of us as well. (Please refer, if you wish, to a previous article in this blog entitled "99% of Us are Beneficiaries of the Labor Movement.")

I've been called a gloom and doomer on occasion, but I believe I'm basically an optimist. Optimistically, I believe that, as the Big Game continues, the Upper Class will greedily overplay its hand and the electorate will eventually become disenchanted and immune to the brainwashing provided through political advertising. Optimistically, I believe that this will set the stage for the creation of a third political party, fully committed to knocking the Big Game on its ear, a challenge that the Republican and Democratic Parties are obviously not up to. Optimistically, I believe this will lead to a radical dismantling of the campaign finance system as we know it. And optimistically, I believe that day will bring a new dawn and, with it, a movement that will ultimately give control of this country back to its people........

Thursday, September 22, 2005

Look Ma, Georgie's the Only One in Step

It's strange how separate events sometimes come together to reveal a trend, troubling or otherwise. Recently, I was reading about something called Pan-Islamism, a religious-political movement of the late nineteenth and early twentieth centuries which was an attempt to revive the religious principle of the unity of all Moslims in opposition to the expansion of Western imperialism. In the end, Pan-Islamism failed to realize its objective. It did not bring about any permanent unity of the followers of Mohamed, and conflicting nationalisms continued to divide the Islamic world. However, as I read the article, I couldn't help but think that the policies of the administration in Washington, in just four years - especially the invasion of Iraq - have probably done more to further the unification of the Islamic world, then the decades of previous historical efforts by the Moslims themselves.

Then I read in the paper that Russia and China have signed a declaration demanding respect for the rights of all countries to pursue their development free of outside interference, a thinly veiled attack on what they perceive to be a U.S. effort to dominate the world. I was reminded of President Nixon's brilliant strategy, over three decades ago, to drive a wedge between Russia and China which successfully caused those two countries to become long term rivals, and which provided significant economic, political and military benefits to the United States. Now, with the signing of what the Russians and Chinese call their Declaration on World Order in the 21st Century, it seems that the previous rivalry is suddenly becoming uncomfortably friendly. For the first time, the two countries are planning to hold joint military maneuvers and - perhaps most significantly - they are entering into economic agreements. Trade between Russia and China jumped by one third last year and has continued to expand rapidly this year, according to Vladimir Putin.

Now in the wake of hurricane Katrina and the prospect of further damage from other extreme weather-related phenomena, many in the European community are directing additional anger toward the Bush Administration for its unilateral move in abandoning America's participation in the Kyoto Accord, a treaty originally entered into by President Clinton, and one that involves most all the other major countries, including England and Russia. The purpose of the Kyoto Accord is to reduce the emission of so-called greenhouse gasses that are contributing to global warming which in turn may be causing the severe climate changes that have been noted around the world. In connection with our recent storms, the LA Times reported that "hurricanes cannot form unless the ocean is at least 80 degrees Fahrenheit for at least 150 feet below the surface. Otherwise, water does not evaporate from the surface rapidly enough to sustain the huge energy required for a hurricane. The higher the temperature, the more water vapor and heat energy are released into the air, fueling the storm." This strongly suggests that our recent violent weather patterns are related to higher than normal water temperatures in and around the Gulf of Mexico, consistent with the effects of global warming. Meanwhile, the position of the Bush Administration is that our participation in the Kyoto Accord would be bad for big business.

And finally, to the south, many eyes in Central and South America are closely following the brouhaha now taking place between the United States and Venezuela. What they are seeing is that with every misguided criticism issued by the Bush Administration, the Venezuelan leader's popularity soars ever higher on the wings of Anti-American sentiment.

There have been times in the past when we have felt proud to be Americans, especially when travelling to other historically friendly countries. The Kennedy and Reagan years come to mind, in particular. Clearly, however, this in not one of those times.............

Site Meter

Sunday, August 28, 2005


The winter wind swirled around the capitol dome and skipped off toward Foggy Bottom. Inside, the assembled senators listened attentively as Alan Greenspan proudly told them that conditions in the United States might soon be "entering an economic mode that would be the functional equivalent of the Promised Land." This was February, 1995, and the economic mode he referred to was, in fact, the Fed Chairman's long held desire for a world without inflation.

In the intervening years, history has shown that, by his own definition, Mr. Greenspan has been very successful. Inflation has never been lower during the post war period. The main beneficiary of this policy has been the business community. The resulting extended period of low interest rates has enhanced net earnings by reducing this particular operating cost to its lowest level in decades. Unfortunately, top management and major stockholders constructed a dam across the trickle-down theory, and the benefits of the Fed's policy have not been shared by the American worker. Furthermore, the abnormally low interest rates have created an unnatural real estate boom and an orgy of real estate borrowing that has fueled the economy with false expectations.

However, this is not about the lack of job security in the workplace, nor is it about "The Bubble." This article is about the coming recession which is likely to roll in like Desert Storm, a number of months after the Fed Chairman's retirement in January.

Looking back at Greenspan's tenure, it is of some current significance to recall that within weeks of his taking office in August of 1987, it had become clear that the Fed Chairman was going to tighten the money supply to the point of creating an inverted yield curve, a somewhat unusual occurrence in which short term rates actually exceed the levels of long term rates. At that time, I found myself looking at the post war history of such situations, and saw that in each of the nine times that an inverted yield curve had been achieved since 1960, a recession followed on an average of about two years later. Incidentally, this is further evidence of the well known fact that the Fed's policies take time to work their way through the economy and produce results. Anyway, there was also an episode in which the yields became inverted back in the fifties, and in that one situation, there was no subsequent recession. This is understandable, however, because the economy had generated a tremendous momentum at that time, following, first the depression, and second, World War II. The resulting pent up demand for goods, services and real estate could not even be dampened by the extreme measures of the Federal Reserve Board in that instance.

After looking at the history, I take no credit for the fact that, in November of 1987, I pointed out to my clients the fairly obvious conclusion that the economy was on track to experience an inverted yield curve, starting around February of 1988, and that, based on past experience, a recession would develop by 1990. My clients were commercial real estate developers and operators, and I was simply recommending that they pursue adjustable-rate financing at that time, in anticipation of a general lowering of long term rates during the course of the anticipated recession. In point of fact, the inverted yield scenario did begin in February of 1988 and a severe recession did commence in 1990. Some may recall Donald Trump stating that his goal at that time was just to "stay alive, 'til '95" (and he did). The actual data that confirms the existence of a recession is always subject to a delay before it becomes known. It was of interest to me at that time that the Fed was still denying that there would be any recession as late as two months after it turned out that it had already started. So it's fair to say that the Fed's pronouncements are not always gospel and, like everyone else, they make mistakes - only their mistakes affect everyone.

It is becoming increasingly clear at this time, in the last week of August, 2005, that the Fed is hell bent on taking us into another period of inverted yields. However, it's possible that what has happened here is that Greenspan initially misjudged his ability to indirectly force up the long term rates, an objective he undoubtedly wanted to achieve so as to slow down the housing market. And, indeed, it is unusual that the Fed's tightening in the short term market has had no effect on the long term market. The Fed Chairman refers to this anomaly as a "conundrum," and by using that term, he is essentially admitting that he misjudged the situation. And vexing this must be, for once the Fed realized that its policy wasn't working, it was faced with a dilemma - to continue tightening or not. But the fact is that once the Fed establishes a course of action and announces its intent, any drastic change is interpreted with a degree of panic in the always nervous financial community, so the Fed has little choice, in the face of its admitted miscalculation, but to proceed boldly onward into what I would characterize as unknown territory.

Early last week, the spread between the yields on the 10-year government bond and the two year note slipped below 20 basis points for the first time in this economic cycle, and by week end, the spread was down to 12 basis points. Based on current trends and historical precedent, a full blown inverted yield episode could commence around the year end and a recession could then begin in late '07 or early '08. Another piece of evidence that might suggest that the Fed is stumbling a bit right now, is the above timing. I don't believe the Fed would consciously want to engineer a recession starting in a presidential election year.

However, history does not always precisely repeat itself, so it becomes of interest to examine the details of the current situation as it compares with historical precedent. In this respect, the striking difference - the major departure from all previous money tightening cycles - is that this will be the first time ever that a listless economy has been subjected to the effects of an inverted yield curve. In every other instance, the economy has been superheated, with higher rates of inflation and higher long term interest rates. You might say that this situation is the exact opposite of the circumstances that existed in the fifties. If there is any variance in the current outlook, therefore, it would appear that the Fed's restrictive policy may have a greater than normal impact. The odds would seem to favor a recession beginning earlier, becoming deeper, and lasting longer than its predecessors, with the very real possibility of a general drop in prices, otherwise referred to as deflation.

Mr. Greenspan may really, really, really be looking forward to packing his bags and heading for the beach in January.............

Site Meter

Friday, August 19, 2005




A WILD IDEA, TO BE SURE, BUT THEN....................

Site Meter

Monday, August 15, 2005

99% of Us are Beneficiaries of the Labor Movement

One thing about getting along in years is you can always talk about the old days. And no matter how many eye-rolls you get, or how many sighs you hear, you can keep right on talking, because it's your inalienable right.

Fifty years ago, I was with a large company as a white collar worker. I was completely convinced that my employer cared very much about the level of my morale. We all were. Everything they did led us to that conclusion. Occasionally, someone might be fired for cause, but never was anyone laid off. The company had a Twenty-Five Year Club that encompassed at least half of all the employees. The members were proud to belong to it and the company seemed to be proud of them, and showed it in many ways. We all aspired to be members some day.

The feedback we would get as it came down the food chain only reinforced our feelings of comfort and security. I remember hearing that another large company in the area had hired an efficiency expert to come in and make changes. We were told that it had a negative impact on morale, however and that it had backfired on management and caused a drop in productivity. It was discussed with interest at every water cooler and we were told that such a thing would never happen where we worked.

Today, I read or hear stories related to working conditions and shake my head. What could have happened to cause such a drastic change? There are announcements of major layoffs involving thousands of employees on a regular basis. Sometimes, the layoffs are staged over a period of years, thus leaving the workers to worry from paycheck to paycheck, month to month, and year to year. In some instances the eliminated positions are transferred to outside contractors who hire the laid off workers and put them back to work doing the same job in the same space - space now sublet to the outside contractor - at approximately half the salary they made previously. Further, it is not uncommon for long term employees, whose jobs have been outsourced, to lose their pensions and health insurance benefits entirely.

The other day I was thinking about this general situation and fixating on how it was back in the fifties when I remembered that the company that literally turned itself inside out to make us happy did have one other very definite area of concern - unionization. The labor movement was riding high in those days. The unions aggressively exploited every opportunity to expand into new areas of opportunity, be they blue collar or white collar. Non-union companies, such as mine, were paranoid of the union movement and employees at unionized companies were doing well. The names of the union leaders were well known to everyone because of the power they wielded for good or evil - John L. Lewis, Walter Reuther and Jimmy Hoffa, to name a few.

Then, I thought about how the power of the labor movement has diminished. How the AFL-CIO is threatening to break up, and how little we even read about the unions these days. The facts seemed to be suggesting the possible existance of a fundamental law in economics - namely, that the well being of all workers in America is directly related to and proportionate to the well being of the labor movement. And history tells us that the term "workers" in this case means everyone below top management. The junior officers in financial institutions, the mid level managers, the engineers, the scientists in drug companies – many of these workers, who very likely consider themselves to be disassociated from the labor movement, are, in fact, suffering from a high degree of work related anxiety these days, and the reality of the situation is that their job security has evaporated in lock step with the deterioration of the unions' power.

Unfortunately, our government has played a major role in this trend. President Reagan, himself a product of and beneficiary of the actor's union, unintentionally perhaps drove the largest nail into labor's coffin when he fired the striking air traffic controllers back in the eighties. This event more than any other precipitated the downward momentum of the labor movement. In addition, the large amounts of moneys "donated" by management to our politicians have resulted in legislation that has further weakened the unions. The term "management," as used here, means those who own and control the vast pools of corporate funds. Furthermore, a number of states are likely to be targeted by business groups and others associated with the Republican Party for the purpose of imposing legislative constraints on organized labor, such as requiring unions to obtain permission from their members before making political donations. Such a law has already eroded the political power of unions in the state of Utah.

It is a sad commentary on our money-based political system that it ends up benefiting the few and ignoring the interests of the many, and this is perhaps best illustrated by the recent history of the labor movement. Our forefathers' concept of democracy - a concept that is claimed to be embraced by the conservative members of our high court - has been totally corrupted by the ability of our politicians to lay their hands on unlimited funds.

Fifty years ago, my father told me that he believed strongly in the Pendulum Theory. He incorrectly thought of himself as management because he wasn't a member of a union, and he predicted that the momentum enjoyed by the labor movement at that time would come to be reversed. He was right on that point, of course, and if he was still alive and working today, he would most certainly be surprised to find that his job security had come to be reversed as well. We can only hope that the Pendulum Theory will hold true once again. In order for that to happen, however, it would seem that drastic changes would have to occur relative to campaign financing, and that is like asking those who are raking in the money to give up their rakes. Not a likely event - unless the electorate becomes sufficiently fed up, or the country experiences an economic catastrophy that forces it to change its direction.

Seventy plus years ago, the Great Depression ended managements' last great heyday and ushered in the era of labor. Will this be the silver lining if that dark cloud should once again cross our economic horizon?.......

12:16 AM

Site Meter

Permalink Comments (0) Trackbacks (0) Blog it News and politics

Sunday, August 07, 2005


Probably nothing has been written about lately as much as the real estate bubbles that have developed in many of our metropolitan areas. And while I haven't thought about it much for several months now, a couple of points bear mentioning at this time.

First, it has been my opinion for quite awhile, along with many others, that one of the best bets in the financial world is that the real estate boom will eventually come to an end with extremely unpleasant consequences. With the excesses that have been encouraged by buyers, lenders , builders, and Alan Greenspan & company alike, it seems to me that a soft landing is out of the question. The real estate market will either be the victim of: (a) massive foreclosures resulting from escalating interest rates associated with a strengthening economy, or (b) massive foreclosures resulting from a new recession. And, perhaps the most likely scenario might be (a) followed by (b). In any event, Greenspan's efforts to continue to extend our current period of "stagflation," while representing one of the great tight wire acts in the history of the Fed, is ultimately doomed to failure. And when it fails, the economy will lose what has become a major part of its foundation. The contribution of real estate activity to our nation's health over the past few years cannot be overstated. The purchases of hard goods, as well as the use of loan funds to finance personal acquisitions, such as boats, autos and even second homes have made an enormous impact on our economy, and yet these are only some of the peripheral advantages of the red hot market that has been experienced in many metropolitan areas - Southern California, New York, Miami and Boston to name a few.

It's perhaps easier to grasp the concept that a recession would impact negatively on the real estate market, than that an upswing in business activity would have the same effect, but it would. Over the last several years, as rates declined to their lowest levels in four or five decades, more and more people became suddenly qualified to be home owners, and then as home prices began to rise, the industry increased the number of interest-only loans in its continuing attempt to make the ability to own homes available to as many people as possible. And as noble an effort as this appeared to be, the flip side is that if and when the rates do go back up - as in the case of a business upswing - the people who would normally have become qualified over the next few years will, in fact, already be homeowners. Under these conditions, the industry will essentially be looking into a vacuum.

Now, none of the above is particularly new, but there are a couple of recent trends that may be causing some people to raise their eyebrows a little. Bubble watchers have been somewhat comforted lately by the fact that the unsold inventory of homes has remained fairly low. Today, however, in the hottest of the hot markets, the San Diego real estate market, we hear that the unsold inventory of homes and condos has doubled over the past year. This is a development that bears watching.

Nearly fifty years ago, when I was working for a major home mortgage lender, we were constantly drilled on the lessons to be learned from the Great Depression of the 1930's, a nightmare that was fresh in the minds of many of my co-workers. And of these lessons, none was given more importance in our field than the theory that interest-only loans granted in the galloping years leading up to the depression contributed mightily to the country's near financial collapse. Never again, we were told, would the country be foolish enough to let loans be granted with little or no amortization. This leads me to my second point. It was also announced today that over the past two years in Southern California, more than 50% of all real estate purchase loans have involved interest-only features, and it is well known that many of the remaining loans have been based on 30-year amortization tables, with little write down in the early years, or have been adjustable-rate mortgages, perhaps the most evil of the foregoing triplets. Presumably the other hot markets share these trends. The countless numbers of purchasers sitting on these three types of loans are basically sitting on time bombs that may well go off - not only under them - but also under the economy as well.

I can foresee no greater economic event, short of a "bank holiday," than the stampede of home sellers that will ensue after this real estate market turns down. ........

Site Meter

Monday, August 01, 2005

For those Americans who tend to be disturbed by the actions of the "drunken sailors" who manage the finances of our country, this must have been nothing less than a very bad week.

First, the space shuttle, DISCOVERY. And frankly, the principal discovery here has to be that some $1,400,000,000.00 of taxpayer dollars evidently went down the drain. The feedback that I've gotten is that people are finding the situation to be just plain incredible. I know I'm not telling you anything you don't know. What I'm telling you is that there are a lot of other people out there - and I mean a lot - who are just as disgusted as you are. Where did the money go? What tests were done? What improvements were made? How could this team of supposedly brilliant people invest all this time and money only to come right back to square one? Has NASA become just another beurocratic entity, unable to exercise sound judgement, like many of our federal and state agencies? Time may answer some of these questions, but in the meantime, we can only hope that not only are the shuttle flights grounded, but also NASA's budget.

Second, Congress is getting ready to pass the new ENERGY BILL, which has been a key priority of the Bush Administration since day one. The party line here is that the corporations involved with the terms of this bill - lets call them the oil companies - need inducements to motivate them to explore for new sources of oil and energy. Think about that for a moment. The value of oil is at an all time high, and companies need additional inducements to find more of it? It boggles the mind. If this country was in the hands of its citizens, rather than special interest groups, we would be hearing about a windfall profits tax being imposed on the oil companies, not a gigantic pork barrel of additional benefits promoted by a president who happens to hail squarely from the oil patch.

A bad week indeed, but - personally - I believe the worst is yet to come.........