Last Anecdote and Observations

This evening I spoke with the owner of a wine store. He said that my sales are actually up compared to the last three months of last year. I’m getting a lot more customers buying by the glass, as opposed to people coming in to buy bottles and take them home. I get a better profit on the per-glass sales.

Sure, this isn’t anything as scientific as something Angelo Angelou could put together in Central Texas. Or what the big marketing firms could query and sort on. But it is, I think, a fair snapshot of life in this new economy. People are spending about the same, but smarter, or in different ways, or more tactically. That bottle at home is better spent as three glasses at the bar, with friends. Topping off the gas tank feels less like a fill-up, even if the cost is the same (or greater, factoring the time to drive to the station).

The next hit will come when the retail credit dries up, and that, I think is part of why the government today focused its energy on unfreezing the credit markets. Because 80% of retail sales happen between October 15 and January 15, and what happens in the next three months will permanently impact who is in business, and how they will sell, in nine months. And without ready credit for retailers to purchase goods to sell, or factors to handle the accounts receivable from credit card sales, this will probably be the first true “Black” holiday period in a very long time.

Instant Feedback on Bush Speech

Everything listed by the President may happen even with a massive bailout. Given the amount at risk, I suggest the following alternative plan:

  1. Wait until after the elections to do anything other than take the time to analyze the models and consequences of economic programs
  2. Ignore the bad loans: let the institutions that took the risk take the consequences
  3. Take the $700B and invest it in new loans to small- to medium-sized businesses, and to ensure the continued operation of student loans
  4. Have the SEC, FBI and any other federal agency investigate every decision-maker in companies responsible for getting us into this debacle. Engage in a ‘De-Baathification’ process, keeping the guilty from ever working in the financial industry again.

One last comment.The President called our capitalism the best economic ever devised. For once, I agree with him. But that means that the profits of capitalistic endeavours must be matched by taking responsibilities for losses incurred when engaging in free market activities.

The Money Shot

A quick post: expect follow-ups on this. I’ve been watching the (selective) bailouts by the government, with my money, to “save” investment companies that have knowingly thrown themselves over the cliff. They’ve created the same derivative monster that shook the market back in 2001-2002, only this time with real dollars at risk. Taxpayer dollars. Now the current administration, knowing full well that whatever they come up with will fall to the next administration to execute, is preparing a gazillion-dollar bailout package, details, implications and oversight all to be determined. Some simple questions (which I’ll drill down on in the coming days):

  1. So… what if we let the chips fall where they may? Will I still be able to buy a loaf of bread?
  2. If they’re using taxpayer funds to purchase taxpayer assets, can’t the government just issue us stock certificates in the corporation that will have to own those securities?
  3. If I rip someone off, I get prosecuted. Wall Street execs, money managers, hedge fund gurus and their ilk in many cases knowingly ‘sold short,’ or packaged and hid bad debt in complex, multi-corporate moves (anyone remember Enron?). Where are the indictments? Where’s the FBI? I wanna see handcuffs! Lots of them!
  4. Even fiscal conservatives and free market freaks are talking regulation. Let’s start by doing what Bush did (badly) in Iraq: de-Baathification trials for all involved. Every executive with fiduciary responsibility for cleaning up this mess has to first prove that she or he was not part of making the mess. And furthermore, that they will not profit, other than salary, in cleaning things up. And not own stock in any company (except through double-blind trusts) during their work and for five years after completing helping with the bailout.

That would be a good start.

2B, or not 2B: Work permits are the question

H-1B visas, which permit foreign professionals of various ilks to work legally in the US, were all issued by late winter. H-2B visas, essentially created for migrant farm laborers, were sunset when Congress let a key provision lapse.

Let’s consider the implications:

  • We have national shortages of doctors, nurses and all manner of technical professionals. For example, HMOs have squashed the profitability out of these careers. $60,000 is a lot of money, but for the work a nurse must do for years to reach that lofty number, it’s almost better to get into sales, or something equally less messy and regimented. $60k for someone from the Philipines or Pakistan is a huge boon: for people with a work ethic, this means they can support entire extended families back home. That’s not a slam: even accounting for the weak dollar, the standard of living in these countries is much lower than for the United States.
  • Picking grapes or tomatoes is back-breaking work. For the extremely low pay proffered, only people who can’t flip burgers, greet people at Wal*Mart, or wrangle carts at the grocery story would apply. To say nothing of the gas bill they’d incur just getting to and from the farms.

Americans are supposed to have choices, and our alleged free market system currently gives more choices to people in hedge funds, finance and arcane niche careers. For the millions worried about their chances of enjoying their old age, the current economic climate does not, to say the least, bode well.