Tuesday, August 31, 2010

Small cap stocks suffer

Small cap stocks in general have had a miserable summer. While a low volume of trading hits all sectors, small caps become the most vulnerable. In this fragile market, investors are on hold in large caps and on strike in small caps.

From a market dynamic perspective, retail investors, often a mainstay of small cap companies, are retreating from the market. They're scared. Every tick down in a favorite regional or local stock finds some that press the panic button. If one thinks that institutional investors will step in and rationally price a beaten down small cap, they're wrong. With such low volumes in already thinly traded names, limited liquidity stops big investors from making a move. Any purchase of consequence will send the small cap stock flying and ruin the price opportunity.

So publicly traded small companies are paying up for their credit lines, uncertain about their banks' long term commitments, concerned about a new regulatory and tax environment that is far from clear, and watching their equity opportunities diminish by the day.

Is this a big opportunity that only small investors can buy into? Or is this a repricing of companies that have little power over bigger economic forces?

Saturday, August 28, 2010

Anticipating "Freedom"

Jonathan Franzen's "Freedom" will be released to the public next week. Reviewers with their advance copies have been busy, for the most part cranking out the standard review format --- first paragraph that shows off the reviewer's literary credibility, second paragraph putting the book's writer into some perpective, next six or seven paragraphs giving an outline of what's in the book and the reviewer's interpretative insights, and final paragraphs in which the reviewer goes for the catchy remark that will end up being quoted in the book's marketing materials or become part of some literary set's vernacular.

Me, I'm just sitting here waiting for the book. Franzen's last major novel,"Corrections", was an involving family story that was representative of a familiar set piece. The observations and insights along the way were often real, as in the kind of reality that doesn't show up in a run-of-the-mill novel. At times the description of settings and the delving into characters minds became a bit tedious but more often than not the book flowed beautifully.

If the two portions of "Freedom" that have been excerpted as short stories in "The New Yorker" are indicative, this new Franzen is much more cleanly written and less caught up in its own importance. It takes family dynamics and history into the 21st century. I am eager for Amazon's delivery this Wednesday.

Of course I did read some reviews, carefully skimming and in some cases avoiding the middle six or seven paragraphs mentioned above. It's amazing how some reviewers seem to think that detailing the entire book is not a "spoiler" because they don't reveal the ending(as if they're reviewing a mystery or crime novel). Here are some representative examples of the reviews, from useless to helpful.

The worst review by far was in the Wall Street Journal. A reviewer named Sam Sachs talked about "Paradise Lost" in the first paragraph, in the second he completely misrepresents Franzen's core readership as if he's Nelson Demille or James Patterson or Janet Evanovich or other writers that overwhelm my public library's shelves. His middle paragraphs are a straightforward detailed summary of the entire book with little picky asides from his perspective, and in the closing paragraph he more or less apologizes for being so petty and goes for the big positive quote.

Middle ground review was in "The Economist". First paragraph mentions The Great American Novel and somehow gets the names of eight famous writers jammed in. Second paragraph get into "laurels" and the possible competitive reception, middle paragraphs are a well-done review, using examples and commenting on structure and content. The final paragraph goes clumsily for the big summary idea and, my God, mentions "Paradise Lost".

The class act was in the New York Times book review section and written by the editor of said publication. It skips completely the reviewer cred requirement, a so welcome move, and gets directly into Franzen's work. "Corrections" is interwoven into the commentary and while the middle section does give parts of the linear story there is a purpose. The review is thought provoking and does not need to wear on its sleeve an understanding of literature, or a love of it. It could be said that this NYT review is on the long side and excessively enthusiastic. That's not a problem, not now.

That will only be known once the book is read by those of us who wait our turn. The change of setting from St. Louis and Manhattan in "The Corrections" to St. Paul and Washington, D.C. in "Freedom" may have Franzen's own life once again written all over it, and that's an interesting starting point from this perspective. Good writing is a stand alone virtue. I have high hopes.

Friday, August 27, 2010

"Once", wonderful film finally seen here

Somehow the advertisements for this Irish indie did not attract my attention and word of mouth didn't reach my suburb. So several years after it was well known in film circles and won a best song Oscar, Netflix finally delivered Once to my small screen.

Eating leftover family birthday cake and swilling lemonade I settled into my father's recliner to see what was up. It didn't take long before my napkin was needed to soak up a little moisture around my eyes --- music can surprise me in this way, about the only thing that does.

Being stylishly late in seeing this film had no penalty. I loved it.

Wednesday, August 25, 2010

Dreary stock market --- what we know

Today was not much to get excited about but the afternoon recovery was still welcome. The equity markets are in the doldrums. It's a global warming of equities raising the fears of a global meltdown. Here's what we know, or think we know.

Equity volumes in August have the lowest that they have been since 1999 and are less than half of August 2007 numbers. Out of the office, out of the market, on the beach, head in sand, it doesn't matter. Volumes are low. Low volumes and declining prices suggest either apathy or fear. They also mean that things could get much better or much worse when activity picks up, and the change could be fast. We're getting accustomed to that type of volatility.

Recent economic data has been awful. This week's home sales, new and used, business spending, and manufacturing output stats have been poor. Nothing is suggesting any material improvement in unemployment numbers later in the week. A growing number of market participants, still a minority, are now expecting the feared double dip. They say that with housing prices and unemployment levels on the cusp of getting worse, any more negative news and the whole economy goes down again, and with that the equity markets. Pundits who barely read People are pointing out parallels to the Great Depression and its fits and starts. That's the thought trend of the week, tune in next.

Now we can wonder and argue about whether the Fed's move two weeks ago to reinforce low low interest rates and maintain their balance sheet infusion either contributed to this lack of confidence and the market swoon or was prescient in setting up liquidity assurances in advance of the data we are now seeing. One could ask the question, "What do you do when stimulus measures and cash for clunkers and tax benefits for home buyers and extended unemployment benefits, all actions meant to help the economy through a rough patch until cyclical growth kicked back in, finally expire and the revival has hardly begun." What you do is sit back and watch economic data disappoint and say "of course, should have seen that coming. Now what?"

Maybe it's time to have lunch with Kizziah.

Sunday, August 22, 2010

"Memory Wall", short stories from Anthony Doerr

What are memories when you're the only one that has them. What are you when memory fades. "Memory Wall" is a book of stories, each interesting on its own, that are tied together into a cohesive whole, bound by a familiar and universal theme.

The settings are diffuse: South Africa, China, Lithuania, wartime Germany, wartime Korea, Ohio, Wyoming, and Idaho. The portraits of human struggle, cruelty, charity, and frailty are written with the care of a poet. That's my take based on what my fingers just did on the keyboard and no special knowledge.

Forms of memory are explored related to:

Seeds, "What is a seed if not the purest form of memory, a link to every generation that has gone before it.";

Places, "Every stone, every stair, is a key to a memory.";

Possessions, "Everything, all of it, our junk, our dregs, our memories.";

Fossils, "Nothing lasts, for a fossil to happen is a miracle... It's the rarest thing that does not get erased, broken down, tranformed.";

Personal history, "Memory builds itself without any clean or objective logic: a dot here, another dot here, and plenty of dark spaces in between. What we know is always evolving, always subdividing.";

Aging, "with the lamp extinguished beside her, streams of unbidden memories rise---decades old, deeply buried.";

Dying, "First we die," the woman says, "Then our bodies are buried. So we die two deaths. Then, in another world, folded inside the living world we wait. We wait until everyone who knew us when we were children has died. And when the last of them has died, we finally die our third death."

These topics and quotes are examples of what flows through each unique tale and, standing alone, they in no way begin to capture the beauty of this book that may be, just maybe, found in the eyes of a reader. "Memory Wall" is pleasantly mesmerizing. Some introspection is required. It comes naturally.

The payoff is personal, I would guess, as it conjures up thoughts and ideas. For me it was a determination to make lists, do those crosswords, organize old photos, and buy some gingko.

From Dr. John

"One day you're on top of the world, and the next day the world's on top of you. That's life."

This comment is from a short interview in today's "Out With" column in the NYT style section. The facing page is the "Evening Hours" photo display of socialites partying at self-indulgent charity events, this week in the Hamptons.

I wonder what the Night Tripper thinks of that.

"Walk on gilded splinters."

Saturday, August 21, 2010

Full Service Brokers --- Cash cows, or pigs, for how long

That full service brokers with a large customer base are sources of significant annuity-like income is well known. I recently have learned that the prices they charge are astounding. This not only speaks to the current income value of the franchise but also to the questionable viability of their business model for the long term.

Why do I say this. This year I have been managing two modest accounts, an IRA and a general account primarily full of illiquid mortgage backed securities(another story recounted here previously), that are going through probate. The accounts are domiciled at one of the three largest full service brokers. The current account rep(forget the prior one) is pleasant and helpful but never calls with ideas or suggestions. All interaction is related to my calls to him. These have involved liquidating some assets to satisfy the will, and both administrative screw-ups by them and what is perhaps an illegal change of a trade, in their favor, a week after execution. Working with this account has been no picnic. This is seen through the lens of working with the excellent service and admin of Fidelity, Schwab, and E-Trade for many years.

Last week I decided to make some conservative investments in the accounts as money was building up in the broker's "Bank Deposit Program" core account that pays .01% interest. I called but my broker was out for the week. I was told that another broker there could execute my trades. Between the two accounts I asked for five trades. I bought 120 shares of SHV for each account, a short term U.S. treasury ETF that actually has a yield, 150 shares of Johnson and Johnson for the IRA, and 250 shares of AT&T and 250 shares of Lilly for the general account. The combined commission for these five simple client initiated trades was $1650. At my usual brokers, listed above, the total commission would have been approximately $40. That's material.

I was charged the broker's standard charges. Individual customers have built-in concessions but, it turns out, with my individual broker out of the office there is no system that gives anyone else information about customer status or pricing, or so they say. What century are we in. When my broker returns on Monday a large part of these charges should be reversed, but if my experience with the "illegal" trade revision is indicative(promised but still hasn't happened), it takes a second to do something wrong and months to remedy it. Maybe the customer will forget, since so many of their long time customers are elderly.

That gets to the overall thought. These firms, or this one, provide inconsistent service but always with a big smile. They charge commissions that have no economic justification if they can get away with it. They are vestiges of the past. The customer base of these firms is aging and will over time not be replaced. At these types of commissions brokers are not only willing to stick it out but also incented to churn accounts. The combination of bad systems, mediocre service, administrative errors, and huge commissions is a tough formula to beat. Just be sure and have a nice day.

Thursday, August 19, 2010

Digging up memories

Last week, as mentioned here, the Daily Yonder published an article on hometown Danville with Rob Friedman's photographs and some supporting text written here. Subsequently I e-mailed the story to numerous friends and acquaintances with a Danville connection. Responses received have been poignant, with memories ranging from a nostalgic longing, to an appreciation for what once was, to an attitude of benign good riddance. Danville's plight today elicited marginally hopeful support or a degree of despair when it comes to the city's prospects.

Today I was talking to a business acquaintance and Danville area resident in her mid-thirties who is doing some accounting work related to my father's estate. She had received the DY post and as an aside mentioned that it was interesting. In a short exchange it was clear that she did not relate at all to the feelings that some in my age group had expressed. She had come of age in the late 1980's and early 90's and I realized that the Danville of today was much much closer to the one she had always known than to the "ancient" history of the relatively active city that manifested itself from the late 1800's until perhaps the early 1970's. Her timeline of memories and sense of historical context were different from that of the photographer and the writer.

This evening I came across the following in an exceptional new book, "Memory Wall" by Anthony Doerr.

"We return to the places we're from; we trample faded corners and pencil in new lines...You bury your childhood here and there. It waits for you, all your life, to come back and dig it up."

A recurring theme in this book is that one's final death is when all those who knew you as a child, those once alive or preserved in memory, have passed on. Does this apply, with longer timelines, to cities as well.

Tuesday, August 17, 2010

Fannie and Freddie and Congress

This is just a guess, but a good guess I think. The mortgage companies run by Congress will cost taxpayers 10 times more than all of the "bailouts" of other financial firms when a final audit is done five years from now. That's if there is ultimately any aggregate cost at all to taxpayers from other financial bailouts in which case the F's losses would need to be called "infinitely higher". Heck, throw in GM and Chrysler as well and Fannie and Freddie may dwarf all of it. Nonetheless Congress keeps a tight hold on the rope that would open the curtain on the F couple's black hole.

The two F's were run by Congress with multiple goals that superceded running a sound and economically viable business. It was always viewed by the market and by huge financial and foreign investors in its debt as goverment sponsored aka government guaranteed if ever a crisis led to that need.

The F's main function was as a processor, packager, short term domicile, and servicer for mortgages. Average employee expenses should have been restrained given its business model as a processing plant and its implicit guaranteed access to low cost funds. To the contrary Congress let the company be run as a stand alone entity with the goal of ramping up its share price. The F's CEO's, especially at Fannie beginning with the 1990's hiring of the superficial image man Larry Small, were given salary, bonus, and options packages that exceeded those of any commercial banker and rivaled all but the most elite investment bankers. The derivatives trading areas were paid with Wall Street style profit sharing schemes to a department whose role was, or should have been, to hedge the pipeline from acquisition to securitization, a six to 12 month window at most. It's obvious that the CEO's and the trading department were incentivised to do much more than hedge. As an example, in the most recent quarter the smaller Freddie had $5 billion in credit losses(choke on that taxpayer) and $3.8 billion of derivatives trading losses(uhgg, what's this, why this icing on the cake).

These second tier CEO's, generally coming to D.C. after being passed over for bigger jobs elsewhere, and these traders who set themselves up outside of the derivatives power nexus of New York and London, were like grifters coming in for the big haul. They got it, and still are in some cases, and they are now acting put upon as in the recent comments by Franklin Raines whose tenure was a disaster. This comment may be too strong. They were backed by their Congressional oversight panel, Democrats and Republicans, every step of the way.

Why was that? The generally given answer to this question points at the significant contributions that the F's made to the politicians, year end year out, to fund their re-election campaigns. That's part of it but maybe a small part. Speaking in generalities that don't apply uniformly, to the Democrats the F's were seen to be a pain free way to fund housing goals and expand home ownership to those who otherwise would not be able to afford it(essentially disguised transfer payments) and to the Republicans the F's were boons to corporations engaged in construction, real estate development, and every aspect of building or refurbishing and furnishing new and used buildings. Social goals and business stimulus goals were achieved with no cost to anyone, so it must have seemed in the 90's and the first seven years of this century. Everyone was happy until...

As major players from House power Barney Frank to Pimco man Bill Gross make clear, we now need Fannie and Freddie more than ever as they are the mortgage market. We're stuck with 'em. They need to be seriously managed by Congress and it's far from clear that that's happening. Until Congress gives a thorough accounting and honest explanation of the F's disaster, hiding the truth prevents any effective management process overhaul.

The double standard by Congress is galling and transparently dishonest. After spending much of the last year and a half self-righteously castigating major investment banks, AIG, and others for their actions, Congress can cast no light on itself and the most costly fiasco of all to the taxpayers. The searing personal attacks on so many individuals by many members of Congress makes their refusal to take their own inventory that much more reprehensible.

Everyone knows Congress is somehow both dysfunctional and arrogant. This is just one more example, and it will without question turn out to be one of the most costly events of our Great Recession.

Monday, August 16, 2010

"Walking Through Heaven's Gate"

What music this is! For those who have been to the Gospel Tent at Jazzfest it's a trip back. Haven't been there, this is a reason to go. Recorded in a Treme church, Glen David Andrews, with a joyous choir and a band that can be both raucous and sublime, lights up the sanctuary and fires up the crowd. If this is religion, I'm there.

Picking a favorite among the traditional hymns and songs here is not easy but I'll go with "We Shall Walk Through the Streets of the City". There is such a rush of enthusiasm and spontaneity in this performance. Trombone Shorty, Glen's cousin, plays a trumpet that sends chills through my body. The effect is beyond understanding, perfect for a building that preaches faith.

This seems to be a limited CD print financed by true believers in New Orleans and its music. It's available on Amazon with a few day delay and a price that is higher than most. Buy one while they're still available, and there will be no regrets.

Sunday, August 15, 2010

"Super Sad True Love Story", Gary Shteyngart

Dear Diary,
It's time to turn off my äppärät and get back to you. Just finished Super Sad True Love Story. I really seriously enjoyed this book, much much more than I expected. I say better than expected because Gary's last book, Absurdistan, had me laughing until it didn't. After reading three quarters of that one I just felt like I was with some super smart friend of mine who can't stop talking and parrying every comment with one more clever quip. I even got tired of the characters so, unlike the problem of disengaging with the super smart friend, I just closed that highly acclaimed book. That was easy, and the first three quarters were worth reading.

At first, Super Sad worried me as I said to myself, here I go again, laughing now, but heading for another disappointment. It didn't happen. This tale of Lenny and Euni in a not so futuristic world of politics and faddism gone mad and engaging in a story of needy obsessive love intertwined with lovely dysfunctional families and crazily coping friends works. JBF with that long sentence dear diary and, if you could talk, don't ask me about JBF. It's part of the language, reminding me of the new language of Clockwork Orange. I was with this book until the last page, and would probably buy a "Super Sad True Love Story, The Final Years - From the Rupture to the Rapture" if such a book were published tomorrow.

The print media reviews that I've seen of Super Sad are generally positive, some over the top but mostly the reviewers try to say something that suggests a hip appreciation of Gary's story. The problem is that these reviews are all so literal. They say things about how it's almost like science fiction or make comments like no matter how absurd the book seems the author may have some good points about the direction our society is heading. Give me a break, and not JBF on that comment. This book is one big metaphor for now. Get it dear diary, NOW.

Super Sad is serious, comic, penetrating, and soulfully cool literature for today. Where it stands in the tradition of literature I have no idea and, Dear Diary, I do not care. In our post-industrial soon to be post-literate America, Super Sad is at the pinnacle of our calamity. I say this only to you.

Saturday, August 14, 2010

Rob Friedman's Danville - a photographer and his hometown

"Rob Friedman's Danville: Strangely Familiar" is an article at www.dailyyonder.com. Below the headline is the broad introduction, "A photographer returns to his hometown in southern Virginia. The textile mill and tobacco company have closed, but plenty of local spirits and shades remain."

Working with Rob's gorgeous photographs, the text emerged from my experience and with his suggestions and the editing of DY's Julie Ardery. Take a look at the Daily Yonder website, or more precisely at http://www.dailyyonder.com/rob-friedmans-danville-familiar-and-strange/2010/08/12/2886. Easier, just Google "Rob Friedman's Danville".

It's worth a look.

Wednesday, August 11, 2010

Infrastructure rehab that leads to recovery

Today's market reaction to yesterday's Fed action was emphatic. Yesterday's post was not nearly as contrarian as was intended. Here's an idea. Why don't we try investing in future productivity rather than investing in the status quo. Fed Chairman Bernanke and the Fed Governors may not have seen the need to take yesterday's stance if the Administration and Congress were confronting and investing in infrastructure needs.

Bill Gross, PIMCO's bond master, favors a sizeable government backed infrastructure development program that would create jobs, stimulate business investment, and address necessities for future business growth. No one would ever mistake Gross for a big government solution liberal. He espouses free markets, limited government intervention, and taxation policies that support private investment, not government regulation. Yet today, he has stepped out of character to promote a plan that brings to mind FDR's WPA.

We can see all around us roads and bridges that need an upgrade. We can envision a rail system that is energy efficient, high speed, and linked to major distribution and transportation hubs. We can imagine airports revamped and runways rebuilt and expanded. We can't see the crumbling water and sewer systems in many of our cities, but every hundred years or so major investment is required. Our big dams may look formidable from afar, not so when seen close up say experts.

These infrastructure needs must eventually be addressed and there is no better time than now. Stopgap measures like the Fed's liquidity exercise, or propping up uneconomic and unsustainable government employee contracts, or repeated extensions of unemployment benefits, yes these may be necessary short term measures but they do nothing to develop structural changes that are required to maintain our standard of living(why not go for it and say enhance our quality of life), and build global competitiveness.

The $787 billion Recovery Act of February 2009 was promoted in a way that suggested infrastructure development as a major component. In fact no more than 15% of the money focused on that need, the effort has been diffuse, and its implementation has been so caught up in bureacratic requirements that pointing to any substantive accomplishment is hardly possible.

Today, a singular focus on rebuilding the basics will address both near term and long term needs. The last comprehensive investment was Eisenhower's interstate road system in the 1950's. Now is the time to get serious again.

Tuesday, August 10, 2010

The Benefit of Low Low Interest Rates --- what am I missing?

The first thing that I'm missing is any income of consequence on safe savings. That's not really important. What does the economy gain from this Fed commitment to negligible interest rates. That's the question.

There are three big issues for the economy right now - unemployment, credit availability, and business investment. Today the Fed announced that interest rates would remain low for an extended period of time and that it would be in the market to buy Treasuries rather than allow any run off from its mortgage securities portfoliio to reduce the Fed balance sheet. Will this action help create new jobs and reduce unemployment? NO. Will it make credit more widely available? NO. Will it lead to more business investment? NO. What it does is maintain excess liquidity in the banking system and demonstrate the Fed's willingness to act aggressively to address any systemic liquidity freeze-ups.

Chronically low interest rates penalize those who save or those who are living off of assets saved over a lifetime of work.

These low interest rates encourage risk taking as savers who need some yield move out the risk spectrum. That could lead to bubbles over time - bonds, munis, emerging markets debt, high yield debt, hybrid mutual funds that supposedly offer a balance of high yield securities and U.S. government securities, there's more that could bubble up and ...

This interest rate policy provides a free lunch for banks who pay almost nothing for their deposits and can lend at historically low rates but still have wide spreads. Even easier, banks can simply sit on the money as well, arbitraging short term almost free money into government and interbank lending programs that guarantee an almost risk free spread that pays the bills. This can discourage banks from doing the work to move beyond the safest credits in order to gain business or market share. Already large corporates with cash who have no great need for loans have ready access to the banks while entrepreneurs and small businesses need to offer up their first born to get in the door.

Business investment is on hold as economic uncertainty and the still fresh memory of the last two years of trauma linger. New regulations being digested and no firm guidance on tax protocols for even 2011 create more hesitancy. These issues cannot be addressed by low interest rates.

While this writer is no economist or policy expert, far from it, from this perspective it looks like the Fed's policy does nothing to help anything get better. Its purpose is to prevent the economy from getting worse. It's like the results of the stimulus money that purportedly saved X number of jobs even though unemployment numbers continued to climb.

While markets enjoy short term solutions, in the short term, the case could be made that the Feds interest rate policy is locking in the current negatives in a trade-off for stability at this lousy level. If the inflation that is almost inevitable begins to pick up before the policy gurus are prepared, we could have the worst of two worlds - recession and price increases for necessities.

Maybe policy folks should stop worrying about a Japan of the 90's deflation. The U.S.A. is not a homogenous society that moves in lockstep and breathes acceptance. The bet here is that we'll inflate, and it could get messy.

Monday, August 09, 2010

New Orleans at Lincoln Center - Part 2

Following up on yesterday's post that focused on Glen David Andrews at last night's Lincoln Center event, here's a little more.

Arriving at the Lincoln Center area about 40 minutes before the 7:30pm showtime, I found myself walking with a second line up the 9th Avenue sidewalk. A lady gyrating beside me said, "We don't do sidewalks in New Orleans, we do streets - first time on a sidewalk for me." The second liners circled around the Lincoln center plaza and then went on to the Damrosch Park bandshell, the site of the show.

First up was the Glen David Andrews band, revving up the crowd. The Wild Magnolias were next with standard Mardi Gras songs. Two fully dressed "Indians" danced onstage. I can't imagine how hot they must have been. New Orleans in February is not New York City in August when it comes to heat. The band was, sad to say, so so, but the lead singers were strong. A young guy with lots of energy carried the load but the star was the Big Chief in his white suit and with his one gold earring and his gold chains, frail and feeble he had one of those unmistakable gravelly New Orleans voices that do shouts, skats, and staccato so well. They said that he had been the Big Chief for fifty years. No way he wanted off that stage and as his handlers kept coming out to escort him off he shooed them away, making some of us in the crowd a bit anxious. Big Chief was big time old time.

The Soul Rebels Brass Band closed out the evening with a charged performance. It was a 45 minute non-stop ramble that segued from traditional to funk to pop and then chants in an unpredictable and amazing way. Four horns in front, two tubas, and two drummers in back, the horn players taking turns with the vocals or all joining in. The Saints(as in came marching in) kept showing up, Who Dat Gonna Beat Dem Saints came up out of nowhere at any time, there were so many transitions that it's impossible to recall what was going on. Anytime, see the Soul Rebels. No regrets possible.

They closed with a chaotic second line around and through the audience, and then hung out on stage with all of the night's performers doing riffs and random shouts, Glen David Andrews at the center of it all.

Sunday, August 08, 2010

It is THAT Glen David Andrews

Several days ago I heard that there would be a free outdoor concert of New Orleans bands, featuring the Wild Magnolias, at Lincoln Center. That's for me. That was tonight. Yes, the Wild Mangolias were there, the Soul Rebels Brass Band was on the bill, and leading off was Glen David Andrews with his band. Was it that Glen David Andrews, the one I met in 2008. Could it be? Was that possible?

This evening Glen David Andrews had a trombone but he mainly just carried it around, putting it down on the stage and then picking it up once or twice for a few notes. Tonight he was a singer, the singer and showman leading his band, as supremely confident as the young Cassius Clay, and as crazy and charismatic as he was talented. What was this? He climbed on top of those of us standing and jammed into the area in front of the stage to body surf the crowd, wireless microphone in hand, still skat singing and exhorting refrains. He and his band did synchronized dancing in a way that had the crowd laughing and dancing at the same time, or at least this person and everyone around him. He did as much messing around with the mike stand as James Brown or Mick Jagger. Did I once meet a Glen David Andrews impersonator or was this the same person. It looked like him with a few added pounds but...

After his performance I found him signing CD's and any piece of clothing that someone wanted marked up. We talked. It was him.

In the spring of 2008 I met Glen David Andrews as he was playing the street for quarters and dollars at Jackson Square in front of St. Louis Cathedral on one hot hot afternoon. He was dressed in a plain white t-shirt, worn black trousers, and black shoes that had seen better days. His trombone looked worn as well with some noticeable dents and no shine. He was accompanied by an old man on a big acoustic bass held together by duct tape and by a gaunt young guy on a snare drum who nodded off between songs while Glen passed the hat. I hung around for as long as they played. That Glen David Andrews was good, entertaining, had a big smile, and plenty of time to talk to this guy who dropped a few dollars between songs. When the guys had enough money to get some food or something else, that was it.

The same night I was wandering in and out of the great clubs on Frenchmen Street and saw Glen again. Same clothes and the trombone on his shoulder, he was striding up and down the street, looking into clubs and stopping on corners to play a song or two. We talked again and I bought a poorly or barely produced CD from him for 10 bucks. Later I was in some club seeing a set by Walter "Wolfman" Washington, the well known veteran performer and bandleader in the world of New Orleans music. Glen strode into the club and walked right up on stage and joined in with the Wolfman's band as if there was nothing more natural. He more or less stole the audience's attention for a few minutes, the audacity and the exuberance did it. As the song ended a member of Wolfman's entourage whispered something to Glen and he smiled, walked off the stage and headed out of the club with as confident a walk as when he came in.

Two years and three months later, that's now, he's dressed in a suit, has big white rimmed sunglasses, a hot band, and is on stage at Lincoln Center. Is this an amazing New Orleans story or not? Tonight he joined the Soul Rebels for the final part of their set and pretty much took control of the stage as all of the evening's musicians joined in.

Tonight I learned that Glen grew up in the Treme neighborhood, that he has a role in the HBO series by the same name, and that he is the cousin of Trombone Shorty who at 24 is an established star of the younger traditionalists of the New Orleans music scene and who is the grandson of Jessie Hill, the legendary singer and songwriter(as in Ooh Poo Pah Doo Part 2). Obviously music runs in the family. This afternoon Glen and his band visited the Louis Armstrong House Museum in Corona, Queens and did a second line around the area - wish I had known.

Part 2 of this coverage of the concert will follow tomorrow.

Friday, August 06, 2010

"Get Low"

This film has the makings of a cult classic from day one.

Duvall plays Duvall, Murray plays Murray, Spacek plays Spacek. It works.

Early on, when old man Bush, the Duvall character, is asked what it had been like to be a hermit for over 40 years, his response is "the first 38 were the hardest". That more or less sets the tone.

Watching this movie, there seemed to be many memorable lines. I jotted them down on a small note pad in my in the dark theater scrawl. Looking at them now - "no gettin' over some things", "entertaining to watch but way too much trouble", "people don't mean what they say", "alive or dead, worst place is in between 'em" - they don't mean much of anything. It's the context and the delivery that makes these small observations come alive.

This is not a long film or a fast paced film or a hugely eventful film. It pulls the viewer into the atmosphere of another era and lets this southern folk tale based loosely on facts simply entertain and enchant. It got me.

The sound track is superb. Lucas Black, Gerald McRaney, and especially Bill Cobb are strong in supporting roles. Then there's one amazing baby.

Wednesday, August 04, 2010

Low volume, slow rise continues

U.S. equities continued their rise today. Volumes have been low and data points have been mixed. Not to question good news, but why are stocks showing such resilience after the April to early July slide. Here are some possible reasons:
---Congress is not in session; less despair, fewer loose lips.
---The Gulf leak is plugged, surface oil is dispersing and no longer makes for good photo ops. The damage is likely still considerable and the extent of it is unknown, but the daily reminder of our helplessness is gone. It's almost as if God said "fire Tony Hayward and I'll let it stop".
---European financial news has calmed down, the Euro has come out of its dive, and bank lending spreads have come back in. Since most of Europe is now on vacation we don't know what this means.
---Based on the aggregate of second quarter earnings reports, U.S. productivity rates continue to improve. Since this is the result of getting by with hiring as few people as possible and running inventories at the leanest levels possible due to fear imbedded by the financial crisis of '08/'09, we can't say whether these productivity gains are sustainable. They don't necessarily translate into a growing economy but they do make individual stocks look good on a stand alone basis as long as an investor has his macro blinders on.
---With no yield of consequence to be found in bond land, and perhaps heightened risk as well, and with liquid, safe securities paying nothing, stocks with dividends and with growth potential look attractive.
---One could guess that some hedge funds and mutual fund complexes are buying into and building up favored stocks slowly and discreetly in preparation for the retail investor finally jumping back into stocks this fall out of both boredom and desperation.

With the volatility that we have seen in recent weeks, it is a reasonable expectation there are more zigs down and zags up in our near term future. I'm rooting for the zags.

Tuesday, August 03, 2010


"Departures" won the 2009 Oscar for Best Foreign Language Film. Netflix alerted me to this film that I had overlooked. It's a gem.

There is wisdom, humor, love, loss, pain, and nostalgia that evolves in an understated way in this original and unusual story. Sure, there are a few points at which one could see some emotional manipulation or plot predictability but they do not diminish the power of the film in any way. They, in fact, are welcome breaks for reflection. Who would expect, on the surface, that a movie built around the Japanese ritual of preparing the dead for burial could be so compelling and universal in its message.

The settings and photography are exceptional as well.

Sunday, August 01, 2010

The punishment culture

Last week's issue of "The Economist"(July 24th-30th issue) has as its cover headline "Why America locks up too many people". The lead editorial was entitled "Rough Justice" and the lead article was "Too many laws, too many prisoners". What's covered in the magazine is an important issue in this country, an embarrassment and anything but justice, that no politician dares touch. That it takes a publication from another country to focus seriously and constructively on this U.S. problem indicates how deeply embedded a vindictive and callous culture of imprisonment has become. That this magazine is generally viewed as somewhere between conservative and libertarian on social issues and a consistent proponent of free markets on economic ones should put off those who want to characterize anyone who chastises America's system of "justice" as soft on crime or bleeding heart lefties.

Much of what follows will let The Economist's writers lay out their views.

"It seems odd that a country that rejoices in limiting the power of the state should give so many draconian powers to its government, yet for the past 40 years American lawmakers have generally regarded selling to voters the idea of locking up fewer people as political suicide."

"No other rich country is nearly as punitive as the Land of the Free. The rate of incarceration is a fifth of America's level in Britian, a ninth in Germany, and a twelfth in Japan... America's incarceration rate has quadrupled since 1970." In comparison to other countries America's incarceration rate "is explained neither by a difference in criminality nor by the success of the policy. America's violent-crime rate is higher than it was 40 years ago".

Quoting Gene Healy, a libertarian scholar the article states "The founding fathers viewed the criminal sanction as a last resort, reserved for serious offences, clearly defined, so ordinary citizens would know whether they were violating the law. Yet over the last 40 years , an unholy alliance of big-business-hating liberals and tough-on-crime conservatives has made criminalization the first line of attack - a way to demonstrate seriousness about the social problem of the month, whether it's corporate scandals or e-mail spam. You can serve federal time for interstate transport of water hyacinths, trafficking in unlicensed dentures, or misappropriating the likeness of Woodsy Owl."

"The system has three big flaws, say critics. First, it puts too many people away for too long. Second, it criminalises acts that need not be criminalised. Third, it is unpredictable. Many laws, especially federal ones, are so vaguely written that people cannot easily tell whether they have broken them."

"Half of the states have laws that lock up habitual offenders for life. In some states that applies only to violent criminals, but in others it applies to even petty ones. Some 3,700 people who committed neither violent nor serious crimes are serving life sentences under California's 'three strikes and you're out' law. In Alabama a petty thief called Jerald Sanders was given a life term for pinching a bicycle."

In The Economist's editorial and lead story there are, as any good journalists would find, many examples of absurd punishments for minor and at times completely unintended crimes. A defender of the U.S. system would no doubt suggest that these are isolated cases used by the writers to exaggerate the problem. The overall statistics, however, would suggest that the problem is pervasive.

There are major parts of the article that discuss the criminalisation of minor drug offenses and the huge sentences that are given to young people for these crimes, essentially dooming them to a life of disenfranchisement, the inability to be licensed in many fields, and the stigma that follows them for what part of their lives are left. Also discussed in some depth is the coercion used in prosecuting white collar crimes where "for example, they(prosecutors) can count each e-mail sent by a white collar criminal in the course of criminal activity as a source of wire fraud, each of which carries a maximum sentence of 20 years. The decades soon add up." Those who profess innocence are often forced into plea bargains before trial with this pressure and can be turned into witnesses against others and be putty in the hands of our system of "justice". What is not discussed in the article, but could be, are the horrible conditions in many prisons, the abuse by fellow prisoners that is often tolerated if not encouraged, and the epidemic of sadistic corrections officers that often exploit and torment the prison population.

There is much more to this magazine's exposé that can't be covered in this post, and I paused before using the word "exposé" because it is all so obvious. It's just that no one in power wants to look seriously at this destructive and costly system that produces no documented benefit and so much harm to many of our citizens.

China Manufacturing Growth Slows --- good news or bad?

This evening it has been reported that China's July manufacturing growth increased at its slowest pace in 17 months. While still at a level that indicates expansion, the modest decline may lead to a negative market reaction by traders, at least at the outset of market sessions.

Looking at the reasons for the lower number one could reasonably hope that any forward looking market would see this as a positive. Those reasons are that the "Chinese government has clamped down on property speculation and investment in energy-intensive and polluting factories" according to Bloomberg news. Those actions make it less likely that China will develop a fragile bubble economy that, as we all know, leads to a destructive pop.

It's somewhat analogous to the times when U.S. economic data shows lower housing starts. The market at times knee jerks down with the spectre of less housing materials and accoutrements being sold and fewer construction jobs. What is overlooked is that with a glut of houses on the market and declining prices, the last thing the economy needs at the moment is more houses that need to be sold. For any successful longer term recovery lower housing starts is, at this moment, a positive. China's moves are a positive as well but whether the market buys into that in the short term is tomorrow's market question.

With China still expecting full-year economic expansion of between 9 and 9.5%, the announced decline in manufacturing is the least of our global economic worries, or should I say that it should be.