Saturday, April 26, 2008

Finance: Palm Beach Mansions, Get 'Em While They're Hot

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Recently, there has been an interesting confluence of stories in my community that caught my attention and prompted me to do this cartoon for the Palm Beach Daily News. I’d been hearing rumblings that lenders were beginning to foreclose on various people after extended periods of non-payment with little or no repercussions.

Last week, the Palm Beach Post, ran a front-page story stating that the number of foreclosures in March had nearly quadrupled over the previous year. Almost on cue, I began seeing reports on CNBC of hedge funds that were buying blocks of financially distressed property at 20 or 30 cents on the dollar.

Meanwhile on the island of Palm Beach — that enclave of the rich and famous where billionaires regularly buy and sell mansions in the $40 to $ 75 million range — the real estate market has never been better. In fact, it’s booming. It’s not unusual to see several announced sales in this price range per month. Most recently, former Goldman Sachs partner John Thornton purchased an oceanfront mansion built by billionaire businessman Sidney Kimmel for a reported $81.5 million. The house had only been listed for a short time, and Kimmel got his asking price.

All this got me to thinking: Hmmmm, Fed steps in to back hedge funds and investment banks … and foreclosed properties mean write-offs galore for mortgage issuers. How low do they have to go before they can reasonably get out from under their position? And flush funds can’t wait to buy at bottom feeder prices. Could this be what’s prompting a flood of new foreclosures?

My grandfather had a Palm Beach construction company during the Great Depression. They were kept quite busy building houses on the island at the time. But wages were so low that he would cook a big pot of fish chowder on the site for his crew every day. For most of them, it was the only hot meal they got.

You know the old saying, “The rich get richer” … and we pay for it with inflation and taxes.

Wednesday, April 23, 2008

Politics: Magic Realism and Presidential Politics


How about this? Barack Obama and Hillary Clinton are both saying that the popular vote should determine the Democratic presidential nominee. How weird is that? The idea is certainly not in the rules as laid out by the DNC, or in the laws on the books in fifty states, or in the constitution of the United States.

Obviously, they have their reasons. Obama is most likely worried about the recent hue and cry that, even though he is a mathematical shoe-in for the nomination, he “can’t close the deal.” Should the superdelegates buy this argument and fall back to more familiar territory — two decades of Clinton party leadership — he’ll point to his lead in the popular vote and say they shouldn’t cheat the voters. Hillary on the other hand, really only has one chance at making a case to the superdelegates to be the nominee; if she casts the primary vote totals in the framework of a national election. Even this doesn’t supply her with a supportable position unless Florida and even Michigan's popular vote totals are included. To heck with the fact that both states' delegates were declared null and void by the DNC.

The television landscape is even more bizarre. Cable anchors periodically explain that the nomination is based on the delegate count. They'd be remiss not to mention it. But then they'll spend the next two hours interviewing dozens of talking heads about every possible scenario of which candidate is ahead of the other based on popular vote, exit polls, demographic groups, uncounted superdelegates, endorsements and whether the candidate is elite, effete, female, black, bitter, truth challenged, yada, yada, yada. CNN has actually trotted out three specious popular vote scenarios, all with different results.

Focus Pocus

The definition of Magic Realism according to Encyclopedia Britanica is “a … literary phenomenon characterized by the matter-of-fact incorporation of fantastic or mythical elements into otherwise realistic fiction.” Yep. That pretty much describes the way the Democratic primary process is being foisted on us.

Let’s see if we can get on the same page here. For the first hundred years or so of our history, the political parties in each state selected their delegates and representatives at party caucuses. Primary elections are a relatively new innovation, introduced (ironically) by Florida in 1904. As originally conceived, primary elections bind party delegates to vote along the same lines of the results. But in the last thirty years, the national Democrat and Republican parties have made significant changes in their processes to better insure control over the outcomes of the primaries. With gerrymandered districts, select early primary states, superdelegates, delegate apportionment and a host of increasingly arcane party rules, the road to the conventions are an unholy mess. Small wonder that it's blown up in the Democrat's face this year.

Jefferson's Genius

Thomas Jefferson said,“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.” As a key framer of the Constitution, he firmly believed that each state should have a sovereign and self-determining government and that the federal government should be limited in scope to matters pertaining to trade and national security. The Federal government was devised as a caucus of state congressional and senate delegates, administrated by the executive branch.

In my mind, there is no more compelling an argument for Jefferson’s rectitude than what we have witnessed over the last year. As we have watched the Democratic and Republican primaries unfold, each state has had a very distinct personality, with its own priorities and issues. What better way for these candidates for our highest national office to get a first-hand education about the people of America? Unfortunately, unless they are being disingenuous, these lessons seem to have gone over the Democratic candidates' heads. If you suplant nomination by delegate with nomination by popular vote as they are now both suggesting, the primaries become a national election and you marginalize each state’s political primary process and weaken each state's party influence on the national committees.

We are used to the Clintons saying whatever is expedient to suit their purpose. But it’s most definitely a strange assertion for Mr. “Bottom-up Change” Obama to make.

Tuesday, April 15, 2008

Politics: Obama’s Rocket In Your Pocket

If you mainly follow the primaries on TV, you probably were mystified and amazed by Barak Obama’s overnight meteoric rise to frontrunner status in February. After all, he was only duking it out with Edwards for number two in the January primaries — a position that in past elections might mean you’d be a contender in four more years but would only amount to “also ran” for the nomination. The next thing we new, he all but swept Super Tuesday and had almost delivered the “coup de grace” to Clinton’s campaign before the month was out.

The most hallowed political pundits were caught scratching their talking heads. They stammered and shuffled their papers in confusion as they tried to wrap their party-position debates around the fact that 4,000 rabid supporters were showing up for stadium-held Obama rallies while a few hundred were showing up for Hillary in a civic center — or the fact that Obama was out-fundraising Hillary ten to one — or that large chunks of the Clinton’s much vaunted political base were falling into Obama’s camp.

Even if you were Web savvy, you still might have been wondering if it all couldn't just be chalked up to Obama’s charisma and speaking ability. But if you are one of the many who have recently welcomed social networking and mobile convergence into your day-to-day life, you recognized immediately what Obama’s secret weapon was. Those huge Obama rallies were really Obama flash mobs.

Yes folks, it’s not about the black candidate or the female candidate. Nor is it looking like it’s about the most experienced candidate either. It’s about whether or not you tweet. A tweet is what users of Twitter do. Twitter is a social network for cell phone texting where members can subscribe to receive brief mass text messages from each other. And yes, Obama has a Twitter profile with lots of subscribers. Every time he tweets that he’ll be speaking somewhere, thousands of his subscribers get the message. When they tweet that they are going to attend, thousands more get it.

Twitter is only part of the huge, interconnected Web 2.0 infrastructure though. Obama’s campaign is participating in all of the large communities, many of which have their own texting applications. Plus, he also operates his own text message subscription list on his campaign Web site. also offers virtual cell phone banks where volunteers can help get the message out. For the Pennsylvania primary, you can volunteer to put in some time calling as a representative of Women for Barack Obama and Veterans for Barack Obama. A similar virtual bank was responsible for 5,000 calls in Spanish prior to the Virginia primary, where Obama got over 50 percent of the Hispanic vote — a shocker for Hillary and those pundits, again.

And, as we continue to watch the election on TV — commentary after punditry, segment after breaking news story — it’s obvious that broadcast journalism still only barely understands the implications. They still don’t get it. But Obama does.

Drue Kataoka of the Valley Zen blog caught an excellent video where Barack Obama himself was discussing some of the strategy behind it. Watch and listen …

Did he say something about social networking having implications in government? Hmmmm ... stay tuned for more astonishment.

Wednesday, April 09, 2008

Subprime programming is now our reality show

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As editor of ValueRich magazine, I did a full-page cartoon series called Managing 2 Laugh. A recurring character in the series was Jonesy the Insult Wall Street Bull, a send up of Robert Smigel’s Triumph the Insult Comic Dog from the Conan O’Brien Show (I’m a big fan). Jonsey’s job was to basically point out the myriad insulting ways Wall Street, the financial media and government typically stiff-arm small business.

The most recent Jonesy episode was illustrated in August of 2007, when most of us were just beginning to get a whiff of how serious the subprime mortgage fiasco could get. CNBC and many other financial media outlets were still shining a rose-colored light on the whole thing, with the exception of Jim Cramer who famously exploded in Erin Burnett’s face over inactivity from Fed Chairman, Ben Bernanke and comments made by St. Louis Fed president William Poole. “He has no idea how bad it is out there!”

You could see all the sides lining up to play it to the hilt. Cramer, who claims to be on the side of small investors, was spitting and screaming for an investment bank bailout. Of course, as he actually said on the air, a big reason for this is that he was “getting calls” from buddies within the big hedge funds and banks.

These are the same hedge funds and investment banks who provided a speculative market so that mortgage companies and commercial banks could easily absolve themselves of application vetting risks by reselling the loans. They were already lobbying hard in Washington to keep tax breaks on their incredible profits. All they had to do was call their lobbyists and tell them to quickly change the pitch to “save our homes.”

Poor Ben Bernanke, who had just taken over from former Fed Pope Alan Greenspan, was caught in the middle. Being new to the position and anxious to establish his own gravitas, he probably figured he’d push back against cries for action from these large special interests, but as we now know, that wouldn’t last long.

Believe me I’m no market expert. But human nature being what it is, I saw the train coming down the track … hence this cartoon.

It’s interesting to look at the cartoon now and see where we are today … The once reticent Fed has now pumped so much money into the economy that we might as well call the dollar the peso … Bear Sterns is being acquired for cents on the dollar with government backing … former Fed Pope Greenspan crying, “It wasn’t me.” The repercussions keep a poppin’ every day.

And where does this leave us middle class small investors? Who knows? If I had to bet, my wager would run counter to what they’re saying on CNBC right now, that the market is bouncing off the bottom and we’ll be making a comeback sometime within the next year. My bet would be that, right after the election is over in November, all the Fed’s unaffordable propping up is going to go away and the bottom is going to drop further than ever. Think about it. What incentive will there be to keep it going? Wall Street’s positions will certainly be covered by then. We’ll have a new regime in Washington who can’t be blamed … human nature.

What do you think?

I think it’s time to blow the C harp and sing the blues. Xcuse me while I whip this out:
We saw this train a comin,’

Comin’ down the track.

Now that it’s done got here,

It’s hard to push it back…