Baseball91's Weblog

August 11, 2010

After Dayton’s Became Marshall Fields

Marshall Fields.

Brand names. Remember those green shopping bags from Marshall Fields? After all the leveraged buyouts. Minnesota got those green shopping bags, after the merger and acquisition. Even though Dayton’s had acquired Marshall Fields. All those mergers and acquisitions in the age of divorce. In the New Millennium. When the age was over, the DFL Party had been infiltrated by the rich. It has been 24 years years since the Democrat-Farmer-Labor candidate won the office of the governor.

Brand names, after the power struggle. In the New Millennium. Spending millions, to change your identity. After leveraged buy-outs. As the young ponder exactly what inheritance would be left. Those Marshall Fields’ shoppers had tried to come to grips with these same kind of changes twenty years ago.

Believing that the primary election was a more democratic method of choosing a candidate that the endorsement process, Matt Entenza and former Senator Mark Dayton competed against the Democratic-Farmer-Labor Party endorsed candidate Margaret Anderson Kelliher, and Dayton appears to have won the primary election. Through July 27, 2010, Dayton had used only $2.76 million of his own money to finance the gubernatorial bid, where candidate Matt Entenza had spent $5 million of family personal spending that allegedly had come from his wife’s career at United Health. Together the three DFL candidates have spent more than $9 million to win position on the November ballot.

Through most of last night with the votes counted in metropolitan Minneapolis-St. Paul counties, DFL-endorsed Margaret Anderson Kelliher held a “strong” lead over “enigmatic department store heir” Mark Dayton, according to the Star Tribune description. Even though Dayton’s Department Store no longer exists. Dayton’s margin of victory reportedly grew early this morning when his totals from northern areas of the state helped overtake hers. With 99 percent of the vote counted, Dayton led Kelliher by more than 5,000 votes, though the Minnesota House Speaker had not yet conceded.

The great divide. In the New Millennium. Male versus female. Old versus young. Rich versus the rest. The ethics of it all. After the sexual revolution. All of the issues of gay marriage, abortion, medical marijuana. For now, the unity rally has been postponed.

Millions for your campaign, and then the millions from your tax base, without limits. Without controls. As the federal government had quit regulating the corporations funding the system. Those grass root movement, with the heirs of the pot smoking generation. When grass root movements seemed forever dead. When the system, the manufacturing part, had seemed to move to China. And all that was left of the Machine was the budget deficits.

The superficial, all of the superficial, with their superficial bleeding. And then having to live in such a superficial world, with the bleeding. No wonder a candidate suffered depression.

The great divide. The great divide. Yale University. The goalie on Yale’s varsity hockey team. Was he a fraternity brother there at the time of George W. Bush when he joined Delta Kappa Epsilon? Married to the fourth child of John D. Rockefeller the 3rd. It sounded like a story of The Great Gatsby.

Long since divorced from Alida Rockefeller, the sister of Senator Jay Rockefeller. More recently, after six years of the bubbling Bush Administration when a liberal coherent voice was needed in the U S Senate, (when he opposed the War in Iraq) he was named in April 2006 “the blunderer” by Time magazine. At the time he was rated as one of America’s “Five Worst Senators,” Dayton himself gave himself along with the entire Senate an F for progress. Having lost in the 1998 gubernatorial primary, Dayton was elected to the U. S. Senate, after spending nearly $12 million of his own money in 2000 to win this job. In that 2000 campaign, he stated in financing future campaigns, he would not “do the same.” Retiring from the Senate, he had cited his dislike of fundraising for political campaigns. Not unlike shoppers trying to come to grips with the change twenty years before, Dayton elected to retire rather than adapt to the change of the modern political world of change, in the always need for money.

Described this morning by Rachel Stassen-Berger, as an enigmatic department store heir, with a spotlight on his people skills, in current times of budget deficits which left an acrimony between Republicans and Democrats like that seen between Palestinians and Israelis. Not that Republican candidate Tom Emmer is any better. He seems worse.

The DFL Party had been infiltrated by the rich, since not many farmers, not many laborers, have ever been rich enough to spend a  fortune to hold political office.  With the ultimate Republican principle of spending your own money, when you could not or would not attempt to raise campaign funding from others. Was that the ultimate arrogance of it all?

Dayton had been a one-time legislative assistant to U S Senator Walter Mondale. Former Vice-President Walter Mondale was campaigning this week for DFL-endorsed Margaret Anderson Kelliher who had played by the rules. Did the one-timeformer State Attorney General have a similar experience in his life in 1962?

Union member Michael Lefkowitz of St. Louis Park was quoted today as believing Dayton, “stands for the little guy.” Maybe Michael believed the lead in the Star Tribune, or just all of the commercials. The lead of the story was “Kelliher’s DFL endorsement was ‘no match’ for Dayton’s experience and name recognition.” With more than 600,000 votes cast, Dayton had won by little more than 5,000 votes,

After the mergers and acquisitions in the age of divorce. City versus rural, north versus south, the State of the Union in these once United States. In the New Millennium. The unity rally scheduled for 11 am was, for the time being, postponed.

POST SCRIPT: In following any talk of future ballparks in Minnesota, with the inauguration of the new governor, where new stadiums seem to take shape with a gestation period of a new born, it is worth noting the son of Gwendolen May Brandt and Bruce Bliss Dayton was related to Andy MacPhail, in a step relationships. The governor’s mother (who did pass away in November 2002) had married Leland MacPhail, the former president of the American League and the father of Andy MacPhail. So speaking about being born on third base, like his step-brother, Andy, Mark Dayton is somewhat acquainted with the ins and outs of stadium talk. And as a sidelight, the philanthropy of Bruce Dayton is a profound story of philanthropy.

#Julie Ann Oelfke # Julie Ann Lee

The mob. Protecting property, from the mob. Why is there the mob?

Why are there all these stadiums? In the reason why we live here, there is need for revenue. Why publicly-financed stadiums? In the unity rally scheduled for professional athletes. Our heroes. Our system. In in a step relationships, to our heroes, not from here, like Andy, who left for Chicago.

For The Home team. Why is government building all of these stadiums? Granting such Privilege?


June 10, 2010

Obama Interview with Matt Lauer

Comedian Jon Stewart lampooned on Tuesday night President Barack Obama interview with Matt Lauer, in which Obama said he was talking to experts to find out “whose ass to kick” for the the Gulf Coast oil disaster. President Barack Obama did back Bud Selig on not overturning Jim Joyce’s blown call, but said on the issue of expanded instant replay: “I think that baseball is going to have to take a look at what football and basketball have already decided, which is replay may, in some cases, be appropriate,”

Andrew Malcolm of the Los Angeles Times wrote on June 7th that British Petroleum “and its folks were significant contributors to the record $750-million war chest of Barack Obama’s 2007-08 campaign.”

Andrew Malcolm wrote:“In case you were tempted to buy the faux Washington outrage at BP and its gulf oil spill in recent days, here’s a story that reveals a little-known corporate political connection and the quiet way the inner political circles intersect, protect and care for one another in the nation’s capital. And Chicago.”

“Follow these standard Washington links if you can: Shortly after Obama’s happy inaugural, eyebrows rose slightly upon word that, as a House member, Rahm Emanuel had lived the last five years rent-free in a D.C. apartment of Democratic colleague Rep. Rosa DeLauro of Connecticut and husband, Stanley Greenberg,” whose consulting firm “was a prime architect of BP’s recent rebranding drive as a green petroleum company, down to green signs and the slogan ‘Beyond Petroleum.’”

Stanley Greenberg’s consulting firm is closely tied to GCS — whose name is based upon the last initials of Stanley Greenberg, Clinton advisor James Carville, and John Kerry’s 2004 campaign manager, Bob Shrum — a sister Democratic outfit which “according to published reports, GCS received hundreds of thousands of dollars in political polling contracts in recent years from the Democratic Congressional Campaign Committee.”

“Now, we learn the details of a connection of Rahm Emanuel, the Chicago mayoral wannabe, current Obama chief of staff, ex-representative, ex-Clinton money man and ex-Windy City political machine go-fer,” Andrew Malcolm wrote, “…. you’ll never guess who was the chairman of that Democratic Congressional Campaign Committee dispensing those huge polling contracts to his kindly rent-free landlord.

“For an ordinary American, that (five years rent-free in a D.C. apartment) would likely raise some obvious tax liability questions. But like Emanuel, the guy overseeing the Internal Revenue Service now is another Obama insider, Tim Geithner, who had his own outstanding tax problems but skated through confirmation anyway by the Democratic-controlled Congress.”

“Remember this was all before the letters BP stood for Huge Mess. Even before the Obama administration gave BP a safety award,”Andrew Malcolm of the Los Angeles Times wrote. While comedian Jon Stewart Stewart lampooned on Tuesday night President Barack Obama interview with Matt Lauer, in which Obama said he was talking to experts to find out “whose ass to kick” for the the Gulf Coast oil disaster, and he did back Bud Selig on not overturning Jim Joyce’s blown call.

April 9, 2010

Another Reason for Making Whoopi

Filed under: chicago,Chicago Cubs,Minneapolis,Minnesota,Minnesota Vikings,MN,St. Paul — baseball91 @ 7:48 PM

Those love nests called home.

The Minnesota Vikings expected a state so deeply in debt to finance their stadium. When decade after decade one owner replaced the other, reaping unbelievable return on their investment. In baseball, the franchise was owned by people who have lived here since 1961. In the case of the NFL, that no longer was true. Now our NFL franchise owner was from out east. A real estate tycoon. And his lease was up after 2011. But he was not making threats. About the Minnesota part of his franchise name.

Professional sports franchises. Their lobbyists had become the media that covered them, because the networks sold commercial time. Because consumers bought their products. But the athletes, whether locally grown or not, will pay taxes on the income. And people will travel here to see them play. That is the argument, without discussion of a user tax.

But with tax payers money, we are learning that the Minnesota franchises can play the same game with the redistribution of the wealth as in other localities. Where even the Saint Paul Saints wanted me to build them a stadium. A franchise that was making more profits in the 1990s than the big league club across the river.

It was not just the big leaguers. It was now what was going on in the amateur draft. Jeff Samardzija got $10 million when he was drafted in 2006 by the Chicago Cubs, which was paid for by the fans. Who? A “former Notre Dame wide receiver” who is now 25-years-old. You really did not give young men of college age this kind of money until they proved themselves in a profession, like baseball. Or except in baseball? At this point in his life, Jeff Samardzija is 91 victories behind where Bert Blyleven was at the age of 25. But in the Scot Boras age, the public perception is played on by spin doctors, where the value of the player is tied to how much he is paid.

When you did not have to pay for your own stadiums, you could afford to shell out bonuses to an elite. Even the unproven. Paid for by teams in the league, not so unlike government money which built the 19 other stadiums since Camden Yards opened. In he new system of Bud Selig baseball, your mistakes overcompensating could be overlooked. A lot like the mistakes of Carlos Zambrano with his $91.5 million over 5 years. Or Alfonso Soriano and the team investment of $136 million, over 8 years. Or Kosuke Fukudome making $12 million per year. Didn’t we just leave that hellhole of a ballpark? Fukudome. Hey! A new stadium will last longer than these .258 hitters like Fukudome, whose name your mother wanted the eldest child’s mouth washed out with soap, if she ever came over. So the expenditure were worth it? For 30 year leases?

These had become public policy issues. And now there was the stadium issue with the Minnesota Vikings.

Another bride
Another groom
Another sunny
Another season,
Another reason
For makin’ whoopee.

A quiet service,
A lot of rice,
The groom is nervous
He answers twice.
It’s really killing
That he’s so willing
To make whoopee.

Picture a little lovenest
Down where the roses cling
Picture that same sweet lovenest
Think what a year can bring.

He’s washing dishes
And baby clothes
He’s so ambitious
He even sews;
But don’t forget, boys
That’s what you get, boys
For makin’ whoopee. -by Gus Kahn

Sports Blogs

May 22, 2009

A Nation’s Capital



Deflation overseas continued to be in the news. The news from the UK was that in the 4th quarter of 2008, the economy had contracted 1.6%. Office for National Statistics yesterday announced that GDP in the UK fell 1.9% in the 1st quarter when compared with the prior quarter. This was the largest decline since the 3rd quarter of 1979. MarketWatch reported that year-on-year, GDP was down 4.1%, much larger than the 2% decline seen in the fourth quarter.

There then was a downgrade from Standard & Poor’s Corporation in the UK ratings outlook. Yet today MarketWatch is reporting that the dollar fell to the lowest level versus the Euro since December on Friday, as traders looked for alternatives to the U.S. dollar. It additionally was stated that fears about the global economy were abating. Whose analysis was that?

At the same time, the central bank of Japan upwardly had revised its economic view for the first time since July 2006, leaving the key interest rate unchanged at 0.1% and expanding the range of eligible collateral to ensure financial market stability.

Who trusted the Bank of Japan, based on their reported of real estate valuations in their portfolio over the last 10 to 15 years of their own crisis?

With worry that the debt level in the UK may result in its credit rating being cut, there was new concern about the massive U.S. deficit, with the falling US dollar notching fresh multi-month lows against the Euro, pound, and yen.

The battle was waging between forces of deflation in many countries on the continent overseas, with government in the United States and the United Kingdon promoting hyper-inflation. This was the same battle reflected in LIBOR rates on October 1, 2008.

No ratings agency has issued any new comments on the credit rating of the U.S.

How to protect capital in times of crisis? Is there a real alternative to the dollar?

The Euro reached a high against the dollar at $1.4008, its highest level since Jan. 2, 2009.

The pound recovered from the turbulence it suffered in the wake of the S&P announcement Thursday and set a new high for 2009 at $1.5937. Why?

Pension funds, insurers, and institutional investors, are pouring back currency flow into Great Britain, supporting the British pound and exchange traded fund (ETF). According to Boston-based State Street Global Markets LLC, in the 60 days to May 13, the money flows were 99% higher than any comparable period since 1997.
The depressed pound is actually a way to play distressed assets with potential for the upside, says Joe Weisenthal. The pound gathered strength today after the Bank of England voted to hold the key interest rate at a record low of 0.5%, says RTT News.

April 19, 2009

Mark to Market Accounting

Monetary policy. And frozen food.

Each American household seemed to have an ability to freeze time. With cameras and camcorders. And in a sense there has been a loss of spontaneity, a loss of freshness.

Each American household seemed to have an ability to freeze food. There was an affect of frozen food on people.

Freezed time. In a sense freezed time was what newspapers did each day. It was explaining what was in a piece of art.

Banks. In a sense banks helped freeze money and surplus income. Saved surplus, not “invested” in companies. But money set aside without any appreciation that one day a power outage would come. Frozen assets. But food in the freezer goes bad at times of power outages. And maybe too much had been stored there in the first place. Stored out of fear of the day of famine? Stored out of convenience? Stored as a way to manipulate destiny, but with a bit of humility discarded.

Control. Monetary policy. Mine, the government’s, was about control. Human control had replaced natural law with a loss of humility as a result?

This power outage was worldwide. The commercial real estate crisis was here. General Growth Properties, the Chicago-based company, which is owner of regional malls all over the country, amassed $27 billion in debt by buying malls and shopping centers.

I was fearful of the duration of this power outage. And how far reaching. And I was fearful of people without power trying to wrestle with life to resolve their problems.

The news from overseas was that almost all British banks had no liquidity. The people of Latvia, already without power, saw little chance of rescue soon.

The commercial real estate crisis was here which, along with deflation over the next 6 months, will determine the extent of spoilage. Those earnings reports from Citibank, Wells Fargo, this week had been missing a large amount of transparency.

And in China. The head of the China Banking Regulatory Commission issued a statement published on its website Thursday that banks need to guard against making risky loans and instead focus more on sustainable lending practices. Banks must be “on high alert for the accumulation of hidden risks as loans surge,” Liu Mingkang said. According to published reports today, in remarks made at the Boao Forum for Asia, Chinese Premier Wen Jiabao called for more surveillance of countries that issue major reserve currencies. That would be the United States. This statement comes on the heels of discussion at the G20 meeting of a new world currency. There is growing distrust of America and the politics involved in our currency. Last month in an essay published on the central bank’s web site, the head of the People’s Bank of China, Zhou Xiaochuan, proposed the creation a new international reserve currency. Seeking to expand currency swap agreements that are seen as a step toward eventually making the yuan more of a global reserve asset, Wen said, “We should give full play to bilateral currency swap agreements and will study expanding currency swaps in scale and to more countries.”

It was monetary policy and the currency reserve that allowed imports from around the world to be sold so cheaply in the United States. And I was fearful of people without power trying to wrestle with life to resolve their problems.

Monetary policy. And frozen food.

April 18, 2009



I live in a country that seems indifferent for the most part to the difficulty in different parts of the world. All politics was local. No one wonders what is going on in Mexico or Canada, much less the Baltic nations. One day you wake up to discover that those gangs and drugs in the inner city that you moved to the suburbs to escape…..well that there is no real escape.

By this time next year, the three Baltic nations of Latvia, Estonia, Lithuania as well as Russia, Hungary, Ukraine, Kazakhstan, Romania, Serbia and Georgia, all with negative outlooks, risk being downgraded by Fitch Ratings. “That is a clear signal how we see the direction of creditworthiness in the region,” with their reliance on exports and a consumption-fueled credit boom, Fitch Ratings reported. They seem to be the Moody’s of Europe.

The worldwide credit drought has left Eastern Europe among the most vulnerable in the global economic slump. The worldwide credit drought has left banks with more than $2 trillion in losses and write-downs. Fitch estimates economic contraction of Latvia’s economy by 12 percent this year, with 10 percent contraction in Estonia and Lithuania.

Edward Parker of Fitch Ratings said: “Real economic activity is still falling quite rapidly. This year will be by far the deepest recession since the early years of transition” to free market economies from Communism in 1989. With the return to growth in 2010, Fitch is forecasting a 1.4 percent rate of growth which will be “a very weak recovery. It’s not going to feel like much of a recovery,” Parker said. “We’re still going to see rising unemployment, pressure on bank balance sheets and public finances and some political pressures stemming from that.”


Emerging Europe will see its recession deepen before improvement that may lead to credit rating downgrades in about half the countries which will be determined by the ability of countries to keep with the condition imposed by the International Monetary Fund in the way of spending cuts after they have received bailout money. Fitch Ratings is assessing balance of payment trends, the ability of countries to refinance external debt, economic policy responses to the hardships and success in attracting international aid when deciding on rating cuts.


Among the poorest countries in the region with the weakest credits are Moldova at B-, Ukraine at B, and Georgia at B+. These poorest countries are with weaker governmental institutions, more vulnerable to sharp declines in capital inflows. The strongest countries credit-wise in the region are the Slovakia and the Czech Republic at A+, and Poland at A-. Slovakia’s Euro-region membership makes it a “safe harbor.”



Better placed than other East European countries, because of lower deficits, credible exchange rates, and a lack of previous fast credit expansion, both Poland and the Czech Republic are to withstand “global shocks” in the assessment of Fitch Ratings.


Some political pressures stemming from that? In Moldova, the recent scene following a recent parliamentary election was of demonstrators gathering in front of the country’s Parliament, calling for an end to communism, claiming the election result was fraudulent. According to the Prague Post, “The demonstration morphed into a riot when a portion of the crowd dodged police barricades and infiltrated the government complex, ransacking and setting fire to the premises. In what Stela Brailean, 23, called an overblown response, Moldavian communist authorities then reportedly commenced mass arrests, communication blackouts, and various intimidation techniques to repossess their grip on power, drawing the attention of European democracies. ‘The communist party is introducing restrictions, persecuting people, installing a totalitarian regime,” Radio Free Europe/Radio Liberty Moldova bureau chief Vasile Botnaru said in a telephone interview from Chisinau. “If it escalates, it’s absolutely a danger for democracy.’”


“The worsening economic situation in the country – the poorest in Europe – has widened the ideological gap between the pro-Western youth in the capital and left-leaning older generations nostalgic for the communist promise of economic security. Another gap, said Alina, exists between the country’s ethnic Romanian majority and Russian minority, a clash further fueled by an ongoing dispute over Moldova’s secessionist Trans-Dniester region, a frozen conflict zone jointly administered by a regional government, Russia and Moldova since a 1992 ceasefire.”

April 8, 2009

Last Train to Clarksville

When I was in seventh grade, I liked “The Monkees.” It was a television show. Maybe that was why I was drawn to that economist Brian Jones.

As for the economy, “we’ve gotten to a point of the dry heaves. We’ve got nothing left,” said economist Brian Jones.

This was a kind of economic global warming that had gone on. It was a slow process, this economic global warming.

I was gonna start to read more about Iceland. I wonder how it was when economies melted. Iceland was leading the fall.

This ain’t over. The economic turmoil. Until people started to accept that everything was 30% over valued. The values in my neighborhood have barely budged.

Stimulus packages promoted the illusion of old valuations. Stimulus packages were false, and as false as most of the politicians who promoted them. Those home value in my neighborhood had not fallen much and taxes had not dropped.

Radical change. Accepting that we are not worth what we had thought.

When cash became king, where were we gonna put it? Because more than half the banks in the world really are illiquid. Especially the big ones.

And with the new tax policies, would government try to survive by confiscating what wealth was left? Would those home-owner deductions soon go the way of the limitations on deductions for charitable contributions?

Governments, the G20, had a huge fear of deflation. That was what the meeting was about this week. When no one really had a clue how to unite to tackle the matter. With a new international currency? When Germany and France did not want to follow the spending method evangelized by President Obama.

I wonder how it was when economies melted.

February 7, 2009

Abitrary and Capricious


There is nothing like having a front office who tries to get along with the players.  But what does it say about fan relation?  Player salaries are one factor in escalating ticket price. 


There is a seriousness associated with sport.  In hockey.  In baseball.  There are a lot of irreverent scribes.  They don’t mix well with the competitor. 


With George Sherrill’s signing, a $2.75 million deal for the 2009 season, the Orioles will not have any arbitration hearings this year. 

The Orioles have avoided this situation since winning their case against starter Rodrigo Lopez prior to the 2006 season.  Andy MacPhail joined the Orioles in June 2007.  Andy has a perfect record avoiding arbitration since he joined the Cubs.  Sherrill had asked for $3.4 mllion.  The Orioles offered $2.2 million. The hearing had been scheduled for Feb. 19th.  


I am sure all of the agents know of his record.  There was not much competing going on in the off season.  A lot of sports fans have been led to believe that the value of a franchise was based on total payroll and not the standings, and players were to be recruited.    

Those ticket prices in Baltimore would not be frozen for a while. 

January 16, 2009

Star Tribune Files for Bankrupcy


You can try to have someone do the translating.  What it means.  From Minneapolis-St.Paul to Denver to Seattle.  The Minneapolis Star Tribune filed for chapter 11 in a New York court late yesterday while the local media covered the story of the lives saved on the Hudson River. 


The news.  What story to go after?  Today?  Why today?  The manufactured news versus the stories that had to be worked at….with sources.  With interviews.  Notice how there are fewer stories these days.  Everywhere.  The year 2009 was now all about economic news.  It did not cost as much to cover statistics. 

by Mark Fitzgerald is editor-at-large at


January 16, 2009 ….. It wasn’t the economy, but Avista’s own business decisions that brought the Minneapolis Star Tribune to bankruptcy, Picard argues. In his blog “The Media Business,” Robert Picard writes that newspapers’ traditional influence in communities was based on a perception of financial probity.  A well-known academic expert on media economics who is editor of the Journal of Media Business Studies, Picard said “traditional” newspaper companies will continue to try to avoid bankruptcy.  Longtime newspaper companies also are in better shape than Tribune and the Star-Tribune, even those that have substantial debt such as McClatchy, Picard said. “Private equity is the most expensive debt,” he said.  The Avista Capital Management partners private equity investors and real estate businessman Sam Zell of the Chicago Tribune are operated by chief executives new to the newspaper business.  “For any of the traditional newspaper companies, (bankruptcy) would be the absolute last resort,” he said. “But, you know, once the dam breaks, sometimes it’s easy to just kind of wash your hands and go along with it. A lot of the old rules are out, but I hope the old rule of reputation stands.”

“They’re blaming the changes in the industry, they’re blaming the economy, they’re blaming the unions — when clearly the blame belongs in
New York with the managers of Avista,” Picard told E&P today.


World GDP                        $47 trillion

World stock valuation     $121 trillion

Bond market                      $85 trillion

Credit derivatives             $473 trillion


Stock and bonds.  Herds.  Speed.  Information.  Changing direction.  Panics.


China-America.  American consumption had started to build a new China.  22 times richer…we need a loan…cheap Chinese labor. American consumption of Chinese goods.


Plentiful Chinese saving.  Lower interest rates due to Chinese savings.    50% of all global growth, and 33% of the world economy.   When the Chinese lose money on us.  Will there be Chinese anger at us?  Or when will they turn on the loans?  Escalating political risk.


(MarketWatch) by John Friedman


“December 22, 2008

….Print journalist of the year — Allan Sloan, senior editor at large of Time Warner’s Fortune magazine.  Sloan, the premier business journalist of his generation, doesn’t write on a 24/7 basis. He may seem woefully out of step in the age of the blogosphere, where spewing ill-informed opinions often count for more than old-fashioned reporting.


But Sloan stands out because his pieces always include all of the finest qualities of journalism — in any age — analysis, clarity, curiosity, depth, empathy and a point of view.


The financial meltdown has been the story of the year because it has had an impact on so many people.   The story has been ongoing, beginning with the subprime disaster, and extending to the woes of Bear Stearns, Merrill Lynch, AIG, Lehman Brothers and other once-glittering kings of finance. All the while, the stock market has crumbled.


The crisis has brought out the best in Sloan and his The Deal musings in the magazine.Main Street more than Wall Street in his simple, straight-forward imagery:


One of Sloan’s best pieces was published back in March and entitled “Don’t expect another bull market.”


Journalists everywhere should note that Sloan doesn’t get his points across with fancy writing. If anything, he reflects:


“Hello? Eight years of dead money in the broad stock market? How can that be, given that Ibbotson Associates says the S&P has returned an average of 10.3% a year, compounded, since 1926? Think of it as a six-foot man drowning in a pond with an average water level of six inches — if you step in at the wrong place, the water can be eight feet deep.”


Sloan reminds me of a veteran baseball pitcher who gets the batters out by drawing on his ample knowledge and experience, not because he has the best fastball in the league.”


More and more we will become a society that reads about the importance of statistics, instead of following the game.  Just as more and more the computer has made us all geeks.  A lot of old rules are out, but I hope the old rule of reputation stands.  If it doesn’t, there will be no place to discover who of your friends had died.  There will be no obituary page.  The obituary writer at the Star Tribune just took a buyout last week.  

December 27, 2008

Trillion Dollar Meltdown


“Credit is the air that financial markets breathe, and when the air is poisoned, there’s no place to hide.” – Charles R. Morris


With the help of the Fed, the hissing from the big bubble is not done.  There are no Black Mondays with housing prices, when prices fall 23 percent in a day.  They occur much more slowly than stock prices.  But not subtley.  So wrote Paul Krugman on August 8, 20005.  His book published earlier this year deals with economic times in the Great Depression, and how they relate today.  No wonder he won the Nobel Prize in Economics this year.


On December 22, 2008, Paul Krugman wrote in the New York Times that whatever the new administration does, “we are in for months, perhaps even a year, of economic hell. After that, things should get better, as President Obama’s stimulus plan ― O.K., I’m told that the politically correct term is now “economic recovery plan” ― begins to gain traction. Late next year the economy should begin to stabilize, and I’m fairly optimistic about 2010.” 


When he was asked his thoughts on the prospect that gasoline could go over $4 a gallon this summer, George W. Bush, Jr., responded, “I hadn’t heard that!”   At the White House press conference, on Feb. 28, 2008, he also denied the country was headed into a recession.  Economists now say that recession began in December 2007. 


Looking for wisdom.  It was always out there.  In Charles Kindleberger’s book, Manias, Panics, and Crashes.  I am reading it now. 


One of the New York Times 100 notable books of 2008 is the book, The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash, by Charles R. Morris. 


Morris is author, attorney, former banker, and software company executive.  He puts the readers through the factors which created “the greatest credit bubble in history.”  His book had been published before St. Patrick’s Day, long before talk of activating the Large Hadron Collider machine on September 10, 2008.  I was suspicious about the LHC and its affect on Wall Street.  I lived next door to Calvin Coolidge’s secretary in 1969.  Miss Braddock felt that landing someone on the moon was gonna set off the ocean tides. 


From the Bloomberg News last week.  “You’re up to $1 trillion now and this is still going to run for some time,” said Charles R. Morris, whose book “The Trillion Dollar Meltdown” was published in March. In September 2007, “the first back-of-the-envelope calculation I did came up with $1.1 trillion and this was using really low-default estimates.”


Mr. Morris writes in his book: “The sad truth…is that [the] subprime [mortgage market] is just the ‘first big boulder’ in an avalanche of asset write-downs that will rattle on through much of 2008.  An overhaul of subprime-like assets, at least as large, is sitting in corporate debt, commercial mortgages, credit cards, and other portfolios.  Even municipal bonds may be at risk.  Loss estimates of $400 billion to $500 billion barely get your halfway there…When large wobbly objects tumble, they go very fast…I lay out…the likely course of write-downs and defaults on the whole asset gamut–residential mortgages, commercial mortgages, high-yield bonds, leverage loans, credit cards, and the complete bond structure that sits atop them.  It comes out to about $1 trillion.” 


I do not think that the financial meltdown of 2008 was a temporary dislocation.  William Hughes wrote a book review of “The Trillion Dollar Meltdown” in March 2008.  He included in his review the coming conflict in fiscal policy in a recession, involving lower wages to keep US Government bonds more attractive than stocks, the ugliest of ugly conflicts of interest by the US Fed.  He predicted the bailout put together by Ben Bernanke and Henry Paulson 6 months before it was raised.  “We will see money overflowing everywhere. We will see more money directed towards speculation again. We will see more price inflation. The only big question in my mind is whether higher wages will be tolerated. They call them ‘Secondary Inflation Effects’ which are halted, thus enforcing the destruction of the Middle Class. Lower wages permit the long-term interest rate to stay suppressed.”


If there is something fundamentally wrong with the US economy, then spending more will not fix it.  A physician listens to subjective complaints and then goes in search of objective data.  What do the findings show?  Because getting the right diagnosis means finding the right treatment plan.  These symptoms include massive debt and overspending, both individually and collectively.  By people.  By companies.  By municipalities.  Drinking, smoking, carrying on.  All the excess.  Of high income concentration.  The contagion of too much debt in the neighborhood.  The subprime collapse was just another symptom of little regulation over time, with a loss of transparency.  Too much reliance on money from overseas.  China was booming based upon the appetities of the American consumer.  So foreigners have joined the feast because of all of the US debt. The United States continues importing more than it exports.  The “customer” was lost amidst all of this.  That customer who was always right.  Customers once got attention, whereas consumers got no real attention.  Many feel there was not  enough tax revenue to maintain what we had, in the way of roads.  Despite the reckless government spending.   


Writes Harvard University vice provost for international affairs and a professor of Mexican and Latin American Politics and Economics, Jorge Dominguez, and Juan Enriquez, author of “The Untied States of America: Polarization, Fracturing, and Our Future”: 


“Austerity. Because we have been spending 5 to 7 percent more each year than we earn, a forced restructuring, triggered by a currency collapse, would have the same effect on wages and purchasing power that the housing collapse had on housing prices. All talk is of payments, supports, subsidies, incurring more debt, stimulus packages. The thesis seems to be: If only we spend more the party can go on. The thesis seems to true only if the financial meltdown is a temporary dislocation in housing and credit markets, a temporary mismatch. 


“Middle Easterners and Asians who save and invest bought dollars for decades, but some of this money is now fleeing. The dollar has dropped sharply. Gold has skyrocketed. In financial crises, huge pools of capital cross borders very quickly; a few can make a great deal of money shorting the country’s currency. The solution requires the country to begin to spend what it earns, reduce its mountainous debt, and address massive liabilities, restructure Social Security, pension deficits, military, and Medicare. No wonder politicians would rather spend more of your money now rather than address these problems.


William Hughes did a book review of Morris’ book.  “The massive financial chicanery, shady corporate insiders’ dealings, really stupid government policies, predatory lending practices, stockholders’ conning schemes, and the outright fantasies.  This is scary stuff!  What makes it even scarier is that one of the most culpable parties to this ongoing crash, President Bush, is in total denial.  And he’s going to be in office for another nine months!   Author Morris warns that to continue ‘to downplay and to conceal the current crisis will lead the country on a path to disaster.’”


Writes William Hughes, “Like a whirlwind, the crisis triggered by the housing crisis and mortgage debacle has extended to almost every phase of the landscape in US economic and financial life. And the rookies running the US Federal Reserve initially said the problem would be contained.  My claim made in late June 2007 was that it involved absolute contagion to the system, which is what we see vividly now.  Let’s review some high level stresses in several arenas, examine the response potentials, and check on the gold and US Dollar impact.  One should note, the gold and silver prices will soon demonstrate strong independence from the US dollar.  Just like in 2005, gold can rise even with some bounce in the buck.  Unlike 2005 though, the buck is likely not to make much in the way of advances.”


The story of 2009 will be foreign currencies.  Hughes predicted the weakness in foreign currency.  In the early part of 2008 as problems with banking, bonds, and now economies went global.  In reaction to policy changes, primarily monetary and now fiscal, gold will react to an acceleration in monetary inflation after a long period of heavy money growth over 10% annually in many leading industrial nations.”


In March 2008, Hughes wrote, “The US Fed has been playing a dangerous secretive game. They denied the depth and power of the bond debacle in order to wait for Europe to feel the same problems.  The US Fed wanted to wait until Europe saw banking problems, economic slowdown, and bond losses.  Some degree of arrogance might have crept into their thinking that the US system was more resilient, more robust, and had stronger markets with greater safeguards installed.  All were untrue.  The US Fed figured they could cut interest rates faster later, only after Europe started to show signs of similar problems, joining them in the easing cycle.  Well, Europe took a few months more time to detect damaging signals, and their problems on the continent are much less imposing in their degree of destruction than what is seen in the Untied States.”


In March Hughes wrote, “The bigger reasons for the US Fed to fiddle and diddle, delaying and postponing, are more profound to the problems faced. They are two-fold.  Primarily, the US Fed is a private firm, with primary loyalty not to America but to owners who reside in London and Old Europe, with no desire to eat a trillion dollars or more in losses.  So their initial repurchase loans to member banks and other banks have been for high quality US Treasuries, not mortgage bonds, and certainly not collateralized debt obligations.  Up to the time when the Term Auction Facility opened shop last month, the US Fed only took US T-Bonds of various maturities. Since the Term Auction Facility began to lend against broader assets, they began to accept Fannie Mae & Freddie Mac bonds. Think their corporate bonds and mortgage backed (in)securities. Why would the US Fed take Fannie Mae & Freddie Mac bonds?  Because they eventually will be bailed out by the US Government.  Though they might not really be fully guaranteed, they will be at crunch time.


“The other reason the US Fed delayed in prescribing and delivering the needed monetary medicine again points to their private firm status. They wanted to have the US Government take the $1 trillion tab for bailouts, to put the kibosh on the US Dollar, not the private US Fed owners. They are no more a public benefactor than Wall Street. Both the US Fed and Wall Street firms are the quintessential parasites in the modern financial era.


“Finally, the US Government has proposed a measly $150 billion bailout proposal, the first of several.  My forecast has been firm, that the rescue packages will be numerous, greater in scope in succession, and each inadequate until a master Resolution Trust Platform is instituted. The price tag on the full blown rescue will be at least $2 trillion and possibly as much as $4 trillion. The US Government fiscal packages will include tax cuts for households, permanent installation of lower taxes for the wealthy and corporations, greater tax incentives for business investments and job hiring, items directed to the poor, and more.


“When the monetary stimulus takes root from lower interest rates and easier repurchases to assist the mortgage process, while at the same time the government fiscal stimulus packages spread out more broadly, we will see money overflowing everywhere. We will see more money directed towards speculation again. We will see more price inflation. The only big question in my mind is whether higher wages will be tolerated. They call them ‘Secondary Inflation Effects’ which are halted, thus enforcing the destruction of the middle class. Lower wages permit the long-term interest rate to stay suppressed. Lower wages ensure the recession necessary to keep US Government bonds more attractive than stocks, the ugliest of ugly conflicts of interest by the US Fed. The US Dollar takes heavy blows when the US Government stimulus package takes form as less an unknown. The gold price has risen since January, in part because of the foreseen combination of heavy US Fed monetary medicine and heavy US Government fiscal medicine working. It smells more inflation in all forms.  


“When prescription moves to application, gold will vault past $1000 per ounce easily. Also, silver will vault past $20 easily.  The major rub will be the effect on long-term US Treasury bond yields.  The solution requires more price inflation, asset inflation, wage inflation, and spillover, all of which contribute to rising long-term interest rates. Already, we see the rub in higher mortgage fixed rates, higher jumbo mortgage rates, higher corporate bond yield spreads, higher junk bond yield spreads, higher fixed rate swaps. My gut feeling is that Rookie Chairman Bernanke harbors quietly his biggest fear, that enacting a full blown rescue of the banking & bond & economic system will trigger a bear market in US Treasury Bonds. That would ensure a credit derivative meltdown an order of magnitude worse than just from Credit Default Swaps off mortgage bonds, and an order of magnitude more swift.”


So wrote William Hughes in March 2008.  

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