Saturday, April 30, 2016

"Not on the renewal list"

For the last week or more it seemed as if "The New Yorker" magazine was late.  The post office here is at times incompetent so there seemed to be no reason to obsess about it, no matter how much the magazine means here.  I had noticed as this evolved over the last week or so that the address label said that my subscription lasted until mid-April.  Today I called the magazine.

The perky call center worker that picked up after a five minute wait confirmed my general information.  I explained that I had not received the last couple of issues and wondered if it was our post office or a problem at "The New Yorker".  She promptly answered that my subscription had ended.  I questioned her about why I had not received any renewal notices.  Her answer, "you were not on the renewal list".  She did allow me to renew on the phone, $66 for one year or $169 for two years.  My instant math is not as good as it once was, but I did choose one year.

What's going on here?  It is fairly obvious that "The New Yorker" must be an expensive magazine to produce and mail, and it is completely obvious that the magazine does not quite have the advertising income like that other Conde Nast publication of note "Vanity Fair".  It is also obvious that my favorite magazine is trying to cull its subscriber base for some reason.  Are our spending patterns not up to snuff for the subscriber profile that they want to show to advertisers, or is it age related, or is it something else?  I could come up with some things...but how would they know?

For many years there has been a New Yorker subscription coming to wherever my address has been. It started in the early to mid-70's, took a hiatus in the late 70's and very early 80's as I went to Arizona to get an MBA(too demanding social life), and then settled into a new job in New York(too much basketball at St. Barts). Since 1982 until now, I have been a consistent subscriber.  Wouldn't that count for something.  This felt like a rejection.  Isn't it obvious that the magazine is read here?

Whether it's Vanity Fair, National Geographic, Consumer Reports, the Atlantic, New York, The Economist, and others, there have always been renewal reminders, extensions not asked for in some cases, and if I do not follow up they do for months afterward.  A daughter is 22, out of college, and works in Texas, and Seventeen still sends the magazine here.

Maybe we need to take a weekend trip to Paris to get our New Yorker attractiveness rating back up. That would be nice if we could do it.  Hey, what about the fact that I am almost certainly at the top of the list of mail order food and book spenders in this area, in items purchased and possibly dollars as well.  I must be. Doesn't that count for something.

We will welcome the magazine back, and extend the subscription with one of those specials that pop out of the magazine... or are they still there?

Sunday, April 17, 2016

"Evicted", an important book

The subtitle of this book by Matthew Desmond is "Poverty And Profit In the American City".  It is a third person but first hand non-fiction account of what is happening with lower income housing in this country.  It is a devastatingly accurate portrait.

This phenomenon has been seen forever it seems, beginning in my mid-sized hometown in southern Virginia.  The poor exploit other poor, an ethnic group exploits its own, shopkeepers are set up to benefit unreasonably, and outsiders approach from all sides.  When a person, a family or a community, a block, or an area starts sliding down, they are subject to predators from all sides.  The government has those within it who mean well and are trying to manage this situation, but mostly they are just processors of the inevitable, paperwork piles from day to day.

This book chronicles the lives of a group of individuals and families in the less advantaged parts of Milwaukee, and the grating challenge housing is for many.  While public sector programs exist with many limitations, the private sector real estate market, mostly rental, serves(wrong word) the needs of at least two thirds of the poor.  It beats the heck out of them, damages them, especially children.  The government programs with their rigid parameters can be impossible for many to take advantage of or manage.  The courts are terribly burdensome for those without transportation and limited time for breaks from work.

This book should be number one on the New York Times non-fiction best seller list*.  This is an urgent issue that is so well described by Desmond* from the ground up.  The stories of lives in this book bring to mind the seminal books about poverty from the 1960's, and while it's a different time now the angst and agony may even be greater due to the break up of extended families and the vision of existing wealth around them so apparent on television.  One could lament what little progress we seem to have made on the most deeply entrenched problems in housing, a fundamental building block of society.

Whether the solutions suggested in the book are feasible cannot be judged in the short term.  It is more important to get this problem onto the agenda.  This is an important book.

*it is number 13 now

*Harvard professor now but no stranger to the world of hard knocks

Friday, April 15, 2016

Social Security tax rate issue mauled in debate

In last night's debate, listening to the yelling about social security tax rates and the level of income that is taxable was painful to hear, as was much of the debate.  Some commentators, who one could have presumed were smart, viewed this as a big Sanders' win.  In fact Sanders' contradicted his own goals and goaded Clinton in an unattractive manner.

Sanders supports raising the amount of income taxable for Social Security purposes from $118,000 to $250,000.  In his words, this is "tax the rich".  Much of the time Sanders talks about the top 1% of the population that is rich, or just as often the 1/10th of the 1%, or sometimes even a smaller sliver.  At those levels he is easily understood even if all of his proposals are not.  His characterization of families making up to $250,000 being viewed as rich may well be true in my southern Virginia hometown or in many small towns around the country, but that is not remotely the case in the city that he was speaking in.

In New York City the sales tax is 8.875%, the state income tax is for most with any income of consequence is between 6.85% to over 8%, and one can guess a federal income tax of 28% or more. Add up all of this plus the 6.2% Social Security tax and the starting point for spendable income is dramatically reduced.  Factor in the cost of housing in any area with an adequate school system and reasonably manageable access to mass transit, and for a family of four $118,000 is just scratching into the middle class while $250,000 doesn't come close to making that family rich.  Yet Sanders rigidly proposes expanding the regressive 6.2% social security tax to further burden those trying to get by, or build some wealth, maybe save for their children's education or for their own retirement.

He would not let Clinton get a word in without interrupting as she was trying to lay out ways like taxing passive income that would actually touch the vaunted 1% that Sanders always rails against. With the crowd shouting, Bernie pressed his case for here to commit to the 6.2% up to $250,000.  She never completely gave in, and that's to her credit.

Bernie's proposal is wrong headed, but maybe he did win the debate point as the issue could not come close to being fully discussed in that setting.  His vague explanations of many of his own proposals, added to this unattractive exchange, won him no points here as if that's of any consequence. He did come ready to raise awareness of himself as a candidate, and that he did.

Thursday, April 14, 2016

Too big to fail...

The "too big to fail" analysis by the regulators may be constructive, but the discussion is too opaque for any outsider to understand.  It all seems to be an exercise in mass delusion.  It is absolutely obvious that any of the banks being analyzed would cause havoc in the financial system if they began to fall apart.  How Citibank passed the grade in this exercise for government public relations purposes and others did not boggles the mind of someone who knows Citi's culture.  In fact Citi was the only firm of the eight held up to the highest standard to receive a passing grade by both the Fed and the FDIC.

Yet Citi still has on the ground locations in more countries than any of the other banks, certainly making their plans more difficult.  Hats off to them for getting it right, but can anyone remotely suggest that a catastrophic fraud or systems breakdown at Citi would not be an event requiring government intervention.

In all of this discussion, what keeps getting lost is the fact that all of the "taxpayer money" involved in the "bailouts" of the banks was PAID BACK IN FULL within five years at a max, often much earlier, with in most cases 7% interest.  That's not a bad rate for the government given what the general public has been able to look forward to for the last eight years.  The only bailouts not fully repaid have been in the auto industry and with AIG.  With any intelligent hindsight, there are few people that think that letting the auto industry, with all of the ancillary jobs it supports, fail for some rigid principles.  It would definitely not have been good for the economy in the short term and long term.  With AIG, the government still owns most of it, and in that sense it definitely is being repaid on a market basis.

The other fact is that some of the well managed big banks had the diversification and capital to save some of the failing firms.  JPMorgan absorbed the rapidly collapsing Bear Stearns and the pathetically managed Washington Mutual, and Wells Fargo saved Wachovia, a firm that could not shoot itself in the foot any longer, no foot left.  As all know, the run on Lehman seemimgly could not be stopped(too fast, too complicated, limited management team), and for the market the wheels came off the bus, creating a chaotic situation until the ultimately biparisan, to some extent, major TARP bill was put in place.  That took months to begin to kick in, but it eventually did

This is certainly not meant to say that the regulators' work on stress tests and the plans for a crisis that exist at major financial institutions is not constructive.  It is for the most part if the government bureaucracy is not overly burdensome, and will hopefully prepare U.S. institutions better for whatever totally unpredictable crisis may happen in the future. The truth, however, is that there will always be risk in markets.  In 2008, some of the biggest banks were best prepared for the crisis.

Wednesday, April 13, 2016

Banking industry bounce

It makes sense that many retail equity investors would invest more in the industry that they worked in for their time in the business world than they would in other areas.  It might not be best for diversification but it could be better for their performance.  They would have opinions and knowledge about that area that might dwarf what they know about other businesses.  For that reason, today was a good day here.

Banks have been on their backs for months for a variety of reasons.  Investing and trading in them over the long term has been a good experience here and, except in extreme events, the yield is reliable. What is also reliable is that they will go through sluggish downturns.  Following JPM's earnings report today, the market bounced, more on the notion that there was no bad news than some spectacular earnings performance.

The result was that investors can see that there is potential life in this sector.  Big banks did well, with JPM up 4.2%, C up 5.6%, MTU up 4.7%, and BAC up 4% among others, and the small banks followed here like CUBI up 5.6% and FIBK up 3.7%  participated as well.  Whether this can be seen as any kind of inflection point is unknown, but any sign of life is welcome.  It is clear that institutional investors had been sitting on their hands waiting for a signal that they could move, at least for a day.

There had been a small glide up from the absolute doldrums since mid-February, but not enough to be especially reassuring.  Now we wait for the follow up

Here I chased a foreign bank that trades on the pink sheets all day, and missed on three attempts as trading with limit orders is essential for stocks like that.  I had been following the stock for several weeks closely as the new management team is exceptional(the stock was up 9% today).  If I am typical at all, and if that is typical of the overall bank equity market, tomorrow could be positive as well.  That I am typical may be a bad bet.

"Jackie Robinson" a documentary by Ken Burns

Ken Burns is the documentary film maker who is best known for two epics of war, one on the Civil War and the other on World War II.  He has made many other films that are not quite as well known and his latest, "Jackie Robinson" should end up near the top of the heap.

It debuted Monday for two hours and Tuesday for a second two hour segment on PBS.  The first half was the only partially familiar story of his early life, and then joining the Brooklyn Dodgers as first black player in Major League Baseball.  Among the many things not familiar was that he was a four star athlete at UCLA, and superb at each sport.  That is comparable to Jim Brown who was raised in the town we live in now.  Brown was an All-American lacrosse player, the sport of choice here, as well as exceptional in basketball and track.*

The second half was totally unfamiliar, a revelation.  Following his own admonition of "you never steal the base behind you", Robinson led a successful business career when he left baseball, and among his endeavors founded Freedom National Bank which became the largest black owned bank in the country, meant to serve those who could not get mortgages or other credit from white owned institutions.  More importantly he played a constant role in the civil rights movement of that time in a way that used his fame to advance the cause, but did so in a way that did not seek to have attention on himself as much as others.

This is a remarkable documentary about a man who did so much in a life that was far too short.

*About 15 years ago, the local high school was raising money for major improvements to the modest sports stadium, and one way of doing that was to create a brick walk.  Families and friends of the school were invited to buy bricks.  We did for the four of us and just put our names on it, youngest first and on down  When the walk was laid we noticed that a few bricks to the right of ours was one with the names Jim Brown and Spike Lee.

Saturday, April 02, 2016

"Dark Money"

This book by "The New Yorker" magazine writer Jane Mayer is subtitled "The Hidden History of the Billionaires Behind the Rise of the Radical Right".   It is primarily the story of the Koch brothers and their outsized contributions to the political right wing.  Published this year but written over the four previous years, it is especially riveting now as their obvious supported candidate is the hyper conservative and relentlessly manipulative Ted Cruz.

While the book also details the activities of other billionaires supporting far right wing causes, like the families of Scaife, Mellon, Coors, Bradley and others, the primary focus by far is the Kochs'.  As major players in the fossil fuel industry, this not too well known family has given more in contributions for anti-climate change issues than Exxon Mobil or any major corporate, by far. Beyond that, whether it's family values issues, or voting rights, or health care, any initiatives leading to any central government regulation have been opposed the Kochs.  At the time of the publication of this book, the Kochs and their network were expected to spend $889 million on this election cycle.  That's more than any political party and dwarfs what any industry plans to spend.

This is an extremely well written book.  It is, in fact, an extraordinary tale.  That said, it comes with a bias from the outset that everything Koch is, to be blunt, bad.  That is reminiscent of Tim Weiner's National Book Award winner "Legacy of Ashes" on the history of the CIA.  That took on the same slant on the CIA, and indeed much of that history was bad, often ridiculously laughable, as these young entitled preppies took on the world with almost unlimited resources but with limited personal intelligence.  Still there were things mentioned in the book that seemed valid.  As the book detailed the CIA funneling disguised money through the Marshall Plan to European political parties in France, Italy, and other countries as almost criminal, when one puts that against the backdrop of Stalin's funding of European communist parties, a Stalin who would starve his own people to get funds to spread his power, it seemed to be exactly what one would want an intelligence agency to do.

Mayer's book is important and it is correct that the Kochs' are playing an unprecedented role in national politics.  It is correct that there is no way that the Kochs', with their chronically high polluting industries,  are not doing all of this organizing and spending just for ideological or selfless reasons.  What they are doing should be known and should be counteracted to the best extent possible.  That said it is all not necessarily wrong, and mostly it is not illegal.  It is, however, terribly unfortunate what it is doing to our democracy.  Laws need to be changed, especially the campaign finance laws that were blessed by the Supreme Court.

Friday, April 01, 2016

Flowering trees stun with beauty

It's sunny and in the mid-70's here today, and the flowering trees in this town  have exploded.  The process had begun over the last week and a half but today the impact is overwhelming.  Windows down in the car and driving back from the grocery store, the sights were, as they say "picture perfect", literally.  This town is in an area with many trees that are large, but there are so many smaller ones that are flowering and are not noticed until a day like today, when no one could possibly ignore them and their reds, yellows, and pinks.  Unnoticed bushes abound too with yellow and red flowers.  No doubt that is why this area is called Flower Hill.  What a lucky sight we see.

The drive around was extended with no directional purpose.  It was just an excuse to be outside and see the sights that will last in this form for no more than a week.  It's a good week to be out.