Friday, December 31, 2010

Christmas joy - Danville redux

This Christmas had our little family of four all together again. I did my usual detailed random shopping in Manhattan, picking up this and that over a month's time, not spending too much but in my mind spending right. The results were fine with just the slightest rejects and some smiles and laughs. Almost all gifts were unexpected keepers. Spend enough time and that's not so hard to do here. Well, not so easy, keeping the lid on the wallet and the credit cards is not a foregone conclusion but the 23 year old would have none of over spending.

Thinking about this pattern of gift buying brought me back to its beginnings in Danville, VA circa 1956 or 1957. Those days were so different. At the age of eight or nine I could go to the downtown(bike or we even had regular bus service that stopped at my corner of College and Averett) and buy presents(maybe age seven years old since I do remember buying an Elvis 45 at Benyunes in defiance of my father, who for for some reason had no problem with Chuck Berry or the Everly Brothers, and obviously not with my other taste at that time for Pat Boone and Marty Robbins). Anyway, those days were the beginning of my joy of buying gifts, child with no siblings buying this and that everywhere, at Kresges, Woolworths, Thalhiemers, and Belks, too young yet for Kahns, Rippes, Saters, and Bermans. With the little money from my Grandmother Borden, my Great Aunt Virginia and my allowance, and even then shoveling, I was set.

That was such a rip. Going from place to place, accumulating merchandise like hand lotion, ties, gloves, and really small stuff like mirrors and cups, that was such a mission. Wrap it up privately? in my room and then on Christmas Eve(our family day for presents) it was seemingly such a pleasure to my parents. Well, it was.

Friday, December 24, 2010

Walking Manhattan during the holiday season

Today is a day of acquiring food, planning food, wrapping presents, cleaning up, and staying home. It occurs to me that I have been in Manhattan every day for the last ten days or so. The excuse has been shopping for presents and meeting up with a few folks. The reason is that I like the crowds, the activity, and the expectation of celebration that pervades the place. From neighborhood to neighborhood there is a combination of good cheer and crowd chaos.

Subway buskers do not seem to be as plentiful this year but those in play are high quality. Sister Monk and her two guitarists at Union Square were the best seen in a long time - can't believe they're underground. Central American pipe bands dominate the train station areas and they are more like orchestras now, not three or four but maybe ten people. Beautiful but predictable, they now soothe more than entertain. Really spontaneous performances are rare at the moment, but some solo acts can be attention grabbing like the old style blues guitar man at 34th, the 1,2,3 platform steel drum guy, or the Asian man playing a mildly screeching and nerve tingling saw of sorts at the Shuttle.

Walking requires patience at this time of year. The place is packed with locals, tourists, and with suburban folks in with families for that visit to see the tree at
Rockefeller Center or to shop and eat for a day of pleasure and bonding. Some of these happy people are not accustomed to moving well in crowds. Hit the bottom of a station escalator, why not stop and look where to turn, forgetting that fifty people are coming down on top of you in the next 30 seconds. Your smart phone alerts you, stop on a sidewalk that's 95% humanity and contemplate the text, causing gridlock and heel creasing behind you. Having a nice conversation, then walk haltingly three abreast on a narrow sidewalk blocking progress in both directions. It's Christmas, take your time.

Shopping may be a rationale but looking for that unique non-impressive gift that makes an impact takes time. I may look around for a day and come back with two six dollar tins of mints, the mints being beside the point and the tins being keepers. How do you get to that coffee cup that is the perfect fit for a certain person or the wooden box of marron glaces from Nice that makes the gift stand out, contents worth sampling by all. It's looking off the department store and chain store grid that lots of fun with benefits hopefully accruing to the recipients.

Eating is a fundamental reason to be in New York City at any time but in this season it's the best. Every restaurant with good food, from casual and inexpensive to off the charts on both counts, is full of people in a generally good mood. A lively setting is a good thing, totally offsetting any inconvenience. Hey, you know the food is not sitting around and the competition brings you the best to the table. Any neighborhood can bring a surprise but downtown east and west is the prize, hell's kitchen is the surprise, and the upper west side without some shoe leather is almost hopeless.

It seems that the Feds have done away with their terrorist alert color coded system but every day as I left Manhattan over the past few weeks the level of concern was telling. Three weeks ago Penn Station was covered by the usual array of uniforms, NY PoPo's and Transit Authority overweights. Last week the Army folks in fatigues, desert style, showed up, walking the floor with their holsters mid thigh. For the last few days the Army personnel include guys carrying the big automatic guns and rifles, right there at every turn. I guess we're at an alert stage.

The last day, yesterday, finally found me dragging home, shopping done, and ready to walk the local small town today for a quart of Manhattan clam chowder at Louie's, a chicken roll at Gino's, some real sliced bacon at A&F, and sea bass and salad at Casa Mia.

Now to hang all of the cards on door sills. Family at home, candles lit, fireplace set, remembering those before us - not thinking about all the dishes, pots, and pans that will need to be cleaned. WWOZ on now(New Orleans) keeps me level.

Thursday, December 23, 2010

Congress functions but why...

The Start Treaty with Russia passed, funding for 9/11 workers illnesses approved, "don't ask don't tell" done away with, unemployment benefits extended as part of what amounts to an additional $858 billion stimulus package, all in a few weeks. Why so much so quickly after almost two years of partisan fighting?

Simply put, the more left leaning Democrats capitulated on the Bush tax cuts for the wealthy and the estate tax limits in order to avoid middle class tax increases and the Republicans decided to stop blocking legislation that the majority of Americans support while in this lame duck period that is two years before the next elections("maybe our right wing anti-libertarian base will forget").

The one bill that missed is the immigration reform proposal to benefit children of immigrants, and to benefit our society, as it did not make the hurdle. Maybe that kind of constructive charity was just one bill too many, and the issue may be a tea party essential that cuts across a wide demographic of insecure and intolerant citizens.

The biggest question now is how this third stimulus package,combined with quantitative easing(printing money and debasing the currency), will play out. Are we priming the pump so that by third quarter 2011 the economy will be growing on its own and creating jobs or are we doubling down with a tenuous bet, one that will be painful when the economy continues to improve in an ever so gradual way and unemployment stays well above 9%.

Monday, December 20, 2010

Grant as culture of late observer

Jim Grant, the editor of Grant's Interest Rate Observer, has a book review in today's WSJ. As is always the case with Grant, in his newsletter, in essays and book reviews, in speeches, in conversation, and on occasional television and media interviews, there is always a brilliantly precise, or biting, sense of humor subtly coursing its way through his serious financial system observations. This review was no exception and the following paragraph is notable and requires no context.

"Which is to say, in the author's own words: 'Neoliberal penality and its earlier iterations have fertilized the carceral sphere.' Mr. Harcourt writes in two languages. The first you have already recognized as a servicable kind of American. The second, just quoted, is the tongue indigenous to the race of college professors who inhabit Planet Tenure. One can tease out some meaning from this tribal patois, but only with application."

Sunday, December 19, 2010

The shape of the recovery

The last post suggested a possibility that a real U.S. economic recovery could take place and yet leave behind a significant number of unemployed and underemployed. This would imply that the old model of recession recovery in which increased demand soaks up available workers no longer applies. At a gathering last night, an acquaintance questioned that suggestion saying, "That's not possible. If consumers don't fully recover, the economy does not recover. It will be gradual, but as consumer demand slowly grows, employment opportunities will be a lagging but certain result."

I hope that he's right, and the lanquid pace of recovery in the jobs area is simply a function of the depth of this recent recession rather than any structural change. What concerns me is another model.

The spectrum of economic country development went from banana republic, to third world country, to developing nation, then to emerging market and finally to a legitimate market power. On this path a country developed a functioning government, financial markets, export industries, indigenous commercial enterprises, and the growth of a middle class. At no point on this spectrum does a country necessarily deal with the fact that, pick a number, 20%, 30%, 40%, of the country's citizens live at the poverty level. Look at the BRIC's, those countries that have reached the market power stage. They have had rising stock markets, rising aggregate wealth, but have a financial baseline that does not include a significant portion of the population.

So there's nothing to say that this model could not work in the United States or, in fact, that it already does on a much smaller scale. That these countries have a modest but growing legitimate middle class while the U.S. has one that is shrinking or more correctly being compressed into something called lower middle class suggests that our economic structures may meet in the middle, and with globalization begin to look alike.

Thursday, December 16, 2010

The consumer is spending - how many and for how long

Holiday consumer spending has been positive relative to the last year. How could it not be. The growth in spending has been a relief to investors.

This growth is a result of the gloom and anxiety modestly lifting for many of those Americans with jobs. After all, for those who have consistently had a job throughout the downturn the corner must seem to have been turned and now the holidays can be celebrated with a little more enthusiasm. People like to give and many expect to receive. It's that time of year.

This spending has been facilitated by merchants still being highly competitive with pricing and discounting early and often to avoid any surprises and to maintain their customer base in the early stages of the recovery. Weak earnings could only raise questions about management tactics while weak or falling revenue raises questions about a retailer's concept and brand, and that's everything.

Spending has also been held up by the ongoing extensions of unemployment benefits for the unfortunate and the rising stock market for the fortunate. Then there is also the issue of the underground economy, somehow an off-limits subject generally, but it has always existed in tight knit communities and has probably expanded as small businesses have work that needs to be done but put off adding employees as they wait for clarification of regulatory issues(tax and healthcare) and as they wait to have a clearer view of the economy's direction. It's also a possibility that with extended unemployment benefits available a few folks have been putting in some hours on the side. We are Americans.

So the consumer is loosening up and spending more, but that's an aggregate fact. With 10% unemployment, plus a significant number of underemployed in the workplace(former white collar worker behind deli counter as an example), and a completely uncounted number of people who have just given up looking for work, there are many people who are certainly not part of this growth in spending. The interesting, understandable, and disturbing fact is that the economy and financial markets can adjust and just move right along without them. A new foundation can be created for economic analysis and the growth off of this base can lead to a continuing recovery.

So the two questions now are, first, will this holiday spending be sustained into 2011 and build into something that can really be called a sustainable recovery, and second, will this possible recovery reach into the ranks of the un and under employed or will it simply benefit those who have ridden through the downturn intact?

"As It Is in Heaven", a film

Once again demonstrating cutting edge knowledge of film, this is a recommendation of one released in 2005. Netflix makes better late than never a possibility. This Oscar nominated Swedish drama is both unusually entertaining and profoundly thoughtful, generously so.

Monday, December 13, 2010

Pawlenty's WSJ op-ed on municipal unions

Former Minnesota Governor Tim Pawlenty, often mentioned as a Republican presidential contender, has an op-ed in today's WSJ("Government Unions vs. Taxpayers") on the subject of government unions and the burgeoning obligations to fund employees salaries and benefits at all government levels. It mentions the often quoted "fact"(in quotes because I don't know the real numbers) that public sector pay, including benefits, is now twice that of private sector pay for most employees(obviously not at the very top).

This is a subject often raised here in various ways and one that I've considered writing more about recently. Pawlenty does an almost surprising good job of addressing the issue and raising many concerns. The status of many state and local budgets makes the problem obvious. The underlying social aspect of this is less obvious but not hard to see. While private sector employers have spent the last twenty years streamlining, becoming more efficient, and focusing on shareholder returns, public sector employees on the other hand have benefitted from a business as usual mindset like the one that drove GM into the ground.

I'm not sure if Pawlenty's slapping himself on the back for his great job with Minnesota's budget is totally accurate and I diagree with his suggestion that unions have absolutely no place in public institutions. Where I do agree with him, something he implies but doesn't explain, is that there is no natural friction between unions and ultimate management in public institutions. In the private sector the friction that leads to compromise over time is obvious; that's cost cutting, return on capital focused management versus hard working(usually) labor. In the public sector the ultimate bosses(politicians) can actually benefit from overly generous contracts, getting both votes and contributions from those they supervise.

There is not better example of this than Fannie and Freddie, the huge failed mortgage banks run by a congressional committee. They failed and will ultimately cost the government more than all of the bailouts of all banks and auto companies combined. At this point some estimates are that Fannie and Freddie will ultimately cost taxpayers at least $500 billion while most "bailout" banks have already paid back the government with 8.5% interest. That's the only place the taxpayer can get that kind of interest for sure.

This situation has been replicated across the country in municipalities big and small. Many federal employees have the same cozy arrangement with their political management. If both parties bring attention to this issue, that would be a good thing.