Sailing: An Odd Essay

Illusory Wealth: Can Falling Markets Mean Better Times Ahead?

I was playing with the Dow Jones graph over at Google Finance the other day.  You can pull the sliders to show different date ranges all the way back to 1970.  You can do this with any ticker symbol, actually.  It's pretty cool - like Google Earth for stocks.  But since I'm in a state of denial about my own investments now, I wasn't looking at any particular stocks or funds.  I was only in the mood for the big picture.  To remind myself that everyone else is hurting just as badly, I guess.

Anyway, looking at the big picture Dow Jones graph: from 1970 to about 1985, the Dow didn't seem to change appreciably.  That is, it goes up and down but has no steady, long-term rise or descent.

This is the reasonable behavior I'd expect of a stock market which was created to facilitate speculative investment in business: up sometimes, down sometimes.  "The market" performs as nothing more than a set of rules to allow people to invest in enterprises they're betting will be successful.  And it's also what I would expect from a market that limits participation to those wealthy enough to afford losing money here and there. 

Not everyone could play in those days, or at least it wasn't as easy.  You had to know a broker, and you had to put bigger chunks of money in at a time to make it worth paying the brokerage fees.  Things were slower and more cumbersome, and people tended to invest in a stock for a longer period of time. 

But when you get to the 1990s the character of that line is different.  It begins its steepening upward climb, and it gets more jagged and jerky overall.

Could this really be a reflection of all the world's businesses doing better, remarkably better, all at once?  Really, it seems to be a magical change. 

Or could this be the point where all the "common folk" decided they wanted to get in on the game too, but because they didn't have the nerve and the cash to place their bets stock by stock, they started pouring all their money into mutual funds as if they were magical, high-yield CDs? 

And because everyone started doing it all at once, it seemed to be work just fine, for quite a while.

Those google charts are a nifty tool, but they do something deceptive when you zoom into shorter ranges of dates.  They re-set the range of numbers on the y-axis.  Looking at shorter term-data, things seem perfectly normal, regardless of which dates you're looking at.  (Unless you look at one of the crashes in the 80s, or the bursting of the tech bubble.  Or the past month.)  It's only by zooming out the graph like this that you get the feeling that things might be dizzily insane.

It seems like that period in the 90s marked a change in how we thought about money.  Or maybe it just feels that way to me, since I came of age in that period and got married and started investing in mutual funds myself.  Money ceased to be that thing I worked for and saved and used to pay for the things I needed.  Or it ceased being only that.  Money turned into something more abstract, like a game-piece.  It became a score counter in a video game. 

Did other people feel the same way, around then?  Did older people too, or just my generation?  Because, according to this chart, the investing habits of millions of people must have changed around that time, and I wonder why that is.

The Internet was coming of age around then too, and I think this made people more comfortable with the technological abstraction of money. 

It had once been a psychological challenge to divorce cash from gold and accept that paper currency didn't represent anything tangible.  That the Fed was welcome to print as much cash as they felt we deserved was trippy enough in itself.  Thinking about that feels a little bit like staring into the void.

But in the nineties, people started getting comfortable thinking about money as data.  Money wasn't, any longer, an object you could put in your pocket and carry with you.  We discovered online brokerages and day trading to handle our investments.  On the personal level we turned to ATM and credit cards.  Hey, you didn't have to worry about losing your wallet or being mugged.  Sure, the merchants lost about 3% of every transaction to processing fees and left all their financial data electronically available to audits and hacks, but that was just more profits for the financial sector to pour back into the economy, right?  And the convenience!  Companies could track what you bought, but you could go online and check your credit score!  What a trade!

I wonder.  Is there a dollar bill printed for every dollar of profit that shows up in our investment accounts?  And does the Fed destroy cash when the economy shrinks?  Sometimes I'd like to take a course in economics.  Where does all the money come from and where does it go?  If it's just data, what happens when an asteroid hits the planet and wipes out all our data in a massive EMP blast?  Or a terrorist.  I bet they could do a lot more damage to the economy with EMPs then conventional explosives.

Anyway, looking at this chart of the DJIA with a long-term perspective, it's hard to see the prosperity of the past fifteen years as anything that can endure.  It seems like all those folks (myself included) who got giddy and threw our lot in with financial planners and mutual fund managers are pulling out and thinking about saving cash again. 

And really, I think this could be a different kind of prosperity, a simpler kind, a more sustainable kind. 

I won't resent the money we've lost on mutual funds over the years.  That speculation did finance some wonderful things; think of it as a voluntary tax that helped to build the internet and lay the groundwork for hybrid cars and, I don't know, a whole bunch of medical advances.  You know.  All that stuff we invested in.

But now it almost feels good to slow down, catch our breath.  Let's let house prices keep falling so the folks who saved their cash can put a roof over their heads.  Let's learn to waste less and get more life out of old technology.  (Hooray for Linux.  Hooray for typewriters.  Hooray for seeds and honeybees.)  Let's learn to talk to our neighbors and borrow tools, because we don't all need to own our own lawn mowers and snow blowers, do we? 

I'm looking forward to this recession with the same childish enthusiasm I used to feel before a hurricane.  Let's hope it's strong enough that we can spend some time together around the fireplace and the piano with the candles and kerosene lights to read by. 

And let's just hope it's not strong enough to knock the house down.

Morning Voting Adventure

We voted early this morning, and things seemed to move along smoothly.  I can make no report of polling malfeasance from our little corner of Cape Cod.

I did get a kick out of this:  when we got up to the machine you feed the ballots into, it was locked up with a ballot sticking back out at us.  We asked the poll worker what to do, and she said, "Oh, I've got to get a supervisor," and then spent a couple of minutes looking up and down the gym for a guy.  Then the guy came over and looked at the machine and scratched his head.

This was too much.  I saw that there was a sort of receipt sticking out of the machine with some red printing on it.  I leaned in to read.  "It says to pull out the ballot and put it back in," I said.

"I don't know if we can do that," the woman said.  "Where did the voter go?"

The supervisor tugged the ballot and said, "It's in there kind of tight."

"I think you need to pull it out harder," my wife said.

So he did.  Then he fed it in, and it spat back out again.  So he flipped it over and tried again, with the same result.

This is when I noticed that the ballot had a big black scribble across Question 1, which is an initiative to repeal the income tax in Massachusetts.  I can't know what this voter's true opinion was, but I suspect she must have resented the question being asked, because not only were both arrows scribbled over, but a good portion of the text of the question was, as well.

The machine was clearly not going to accept her ballot with this scribble.  I'm not sure what ultimately happened to it.  I'm inclined to suggest that, if you're not smart enough to fill one of these things out, and then wait for the machine to flash a green light at you (as opposed to spitting your ballot back out into your face), your vote is probably one the country can do without. 

I'm also inclined to wonder what those poll workers are there for (do they get paid?), if not to make sure that everyone can shamble through this process without tripping over their own shoelaces.

Oh, For What Could Have Been

Listening to Ron Paul speak is like stepping out of the asylum for a breath of fresh air.

Thanks to 2Blowhards for posting the clip.

Dead Cat Bounce

I was happy to see the markets come back a bit yesterday, even if it did somewhat diminish my doom and gloom posting.  A friend of mine told me not to give up the despair quite yet, though.  "It's just a classic dead cat bounce," he said.

That's the best expression I've heard in a long time.  So delightfully heavy and morbid. 

And it turns out he didn't even make it up

A Few Thoughts on the End of America

What's really staggering is not so much that the economy collapsed yesterday, but that this house of cards has remained standing for as long as it has.  While I haven't wanted to join the doom-sayers, the Malthuses, Ehrlichs, and Kunstlers, there's something fundamentally weird about living in a country that produces so little and yet consumes the greatest share of the world's resources.  Riding up a curve of exponential economic growth in these circumstances just feels creepy.

And yet I've participated in this system, too.  I have assets in the stock market as well as some real estate, and I've been a business owner as well as an employee and consumer.  So I can't enjoy this cluster-fuck with the pure, unalloyed schadenfreude I'm naturally inclined to.  It's more like watching a train-wreck when you know your kids are on one of the cars.  Will they be completely shattered and obliterated?  Or will they be in one of the cars further back that just gets thrown off the tracks and shaken around a little?

That said, you can't watch a train-wreck without a little boyish exhilaration.  Bam!  Whee!  KaBlooie! 

Allow yourself a heartbeat or two and watch the fireballs roll up into the sky.

OK, now rush in and see who you can save.

* * *

When my wife and I were trying to buy a home in the middle of the 2003 housing bubble, things on Cape Cod were particularly out of control.  I was speaking to a real estate investor who used to come into the cigar shop, and trying to avoid the subtext that his sort of people were more or less responsible for the problem.  He assured me that, despite what a strain it was to buy a house right now, home ownership would be the #1 best way to grow my assets.  There were all kinds of tax benefits, of course, and, he said, "Real estate only ever goes up.  So the sooner you act, the better."

I was too young to remember the debacle of the early 1980s, and so what he said pretty much matched my own observations.  Still, I said, "It can't go up forever, not like this.  And we're not looking to get rich.  We just want a place where we can live and paint the walls and not worry about the landlord getting mad.  How is anyone going to be able to buy their own house in ten years if the prices keep increasing 10% every year?"

He said, "Well, that's why the banks keep coming out with new products to make it possible.  They know everyone needs credit to buy a house, so they make credit easier to get.  They're offering 40-year mortgages now!"

"But that's crazy!  People either have good credit or they don't.  Why loan money to more and more people who may not be able to pay it back?"

"The banks don't care anymore," he said.  "They know the houses are always going to be worth more next year, so they're happy to foreclose on them and sell them to someone else."

"And if there's a nuclear holocaust or a zombie attack and houses do go down in value?"

He laughed.  "If that happens, the feds will bail out the banks.  They don't want to see the system fail any more than we do."

* * *

Around that time I used to see a bumper sticker around Cape Cod that said, "Housing is a right, not a privilege."  And that pissed me off, given how hard we'd worked to achieve our home and what a struggle it was every month to meet the mortgage payments.  If housing was a right, it shouldn't have taken up 75% of my income and kept me awake at night.  Why should some shlub who wasn't toiling like we were have a comfortable place to live?  And was paying the utilities and maintaining a house a right too?  If it was a privilege, I wasn't enjoying it enough.

But I recognized this bumper-sticker's view of the world and realized I had been raised with it. 

If we're well behaved, we go to school, we do what the teachers tell us, we hand in all our homework on time with our name neatly printed in the upper-right hand corner, we keep our #2 pencils sharpened and ready to fill in the ovals on the "scan-tron" test sheets, and we go home with grades assigned based on our performance, grades which will determine our level of success and happiness throughout our lives. 

The public education system trains children to expect a certain baseline level of comfort and security so long as they show up on time.  School is as systematic as a video game.  Some people are innately better at it than others.  Practice helps, and at the younger grades you get one grade for effort and another for results - a dangerous precedent.  But most of us aren't going to starve to death and we'll probably get a hot meal while we're there, too.  And after we come home and get our homework done we can play video games or watch TV.

For 13 years we live our lives completely within this system, and if we're "good" we strive to do the best we can and feel bad when we slack off or fail.  And if our parents parents are "good" they reward us when we come home with a shiny report card and punish us (but not too harshly) if it's negative.  Whatever our report cards say, we're allowed to spend at least those 13 years playing in that sandbox - maybe even longer, if we do poorly enough to repeat a grade or two. 

Public School sets that "baseline comfortable experience" we've all come to expect.  And it's such a pervasive idea that, later in life, when we can't hold down a job and our unemployment benefits run out, we say, "Well, I could always go back to school."  Student loans can make it so!

And we graduate thinking we deserve to have that baseline comfortable experience for the rest of our lives.  We're entitled!  If we find success - as lawyers, politicians, investment bankers - that's great.  We got the high score!  And if not...well, at least housing is still our right.  We're still living in the system.  We'll be kept alive so long as we can find the right government office before we starve to death.

But wait!  There's more to this system.  We now take the 1% of folks who can't play nice with their grown up worldmates and we stick them in the prison system.  Detention for those troublemakers!  See us after class!

So yeah, we were all entitled to our houses.  And the banks have been all too happy to put us in them, whether we can handle the strain of home-ownership or not.

* * *

Think for a moment about how short a time the world has been like it is. 

The other illusion public school and the "baseline comfortable experience" creates is that we're living in an unchanging normal.  Our parents went to school, sure, and their parents before them.  But their parents only stayed in school beyond a couple of years if they were wealthy.  And the poor ones had to squeeze their brief studies in between hours spent at farms and factories. 

Think back another couple of generations and consider how uncomfortable our great-great-great-grandparents were trained to feel.

The federal income tax didn't exist in any modern sense until 1913.  Social security came along in 1935 - most of our grandparents were not born into it.  Even in 1950, half of the American population lived and worked on farms!

This modern life is an aberration.  An experiment.  I'm happy with it.  I love my MacBook and my iPod, my video games, the internet.  I love the liberating power of blogging.  I'm pretty happy about running water and the modern supermarket, too.  I think it's great that half our population doesn't have to labor on farms, and that a third of us can eat enough food to grow obese. 

But to think that things are going to keep marching up this exponential curve straight to the vertical, and right on up forever - in the dark black chambers of my heart I have never been able to believe it.

I love reading Gibbon's Decline and Fall, even if I've never been able to retain much of it.  What really hits me are those passages where he says, Emperor Sustinus came to power and ruled over a period of 50 years of prosperity and was succeeded by his son, Gustibus, who ruled through 35 years of peace until he was assassinated by Festerbus, who brought intrigue, war, and famine. 

Generations lived and died across 85 years, and (fortunately for them) they hardly even merited a mention in his 3000 page book.  They lived comfortable in the false knowledge that things had always been as they were and that's how they would forever be.

This leads me to wonder: why can't politicians talk less about change?  Why don't we elect people who promise to leave things the fuck alone? 

Ambitious leaders may want to fight wars and introduce policy and get their names in the next Decline and Fall, but I'll bet most of us are happier to live our lives in obscurity.  Unfortunately, the changes of the past 100 years have set things up so change is inevitable, and it'll come faster and faster. 

KABLAMO!  Might as well enjoy the explosions, then, while we still have trains to crash into each other.

American Prison Culture Proves America Hates Freedom

This is perhaps the most horrifying thing I have read in my life: a full 1% of American citizens are in prison. 

That's a huge fucking number.  Go to a football game and look at that crowd of 69,000 people and think about what corresponding number of American prisoners that represents: 690.  190 people for a concert at the Garden.  The television audience of American Idol corresponds to 355,000 prisoners. 

How many students were in your high school graduating class?  400? 

Four of them are in prison.
   
Over three million people nation-wide.

How many wasted man-years of human potential does this represent? And what does it say about our culture that we value incarceration enough to spend sixty billion dollars a year locking away that many people in horrifying conditions at any given time, while we can't provide health care, education, or even a baseline standard of living to our people? 

I simply cannot believe that three million Americans - one in a hundred - have done something bad enough to warrant being locked away at any given time. 

And when you add in how many non-prisoners are affected by that number: the spouses, children, parents, and friends of the incarcerated - it boggles the mind.  All of those people become part of American Prison Culture.  What percentage of America does that represent?

Something has to change.  Bush can't blather on about how "Terrorists hate freedom" while ruling over the country with the largest incarcerated population on the planet.  (But I'm wrong.  He already has.)

We have more prisoners than China, more than Russia. 

Our prison population is greater than the population of 22 of our states, greater than the population of 86 countries world-wide. 

The outrage over Guantanamo Bay and Abu Grhaib centers around the fact that, whatever horrors your enemy perpetrates, once you perpetrate them yourself you have no right to fight those enemies on moral grounds.  You've come to share their values!  We forfeited our right to consider ourselves the planet's moral compass when these atrocities occurred.  And it was depressing enough when America devolved from a beacon of hope and freedom to a horde of invading executioners in the Middle East. 

How much worse is it to discover the extent to which we are abusing our own citizens? 

The Salem witch trials happened over three hundred years ago, but manifestations of the darkest corners of our imagination are still celebrated, and profited upon, by the prison lobby.  Check out this restraint chair, no doubt manufactured by a company doing just fine in the blossoming prison market while the economy of the rest of the country withers away.

Three million prisoners.  Heironymous Bosch could not have imagined it. 

The dark ages of America are today, and for a centile of our citizens at least, America is Hell on Earth.

My Retirement Grease!

This is wild.

The high price of gas has made biodiesel so attractive that people are starting to steal waste grease from restaurants--something the restaurants had to pay to get rid of a few years ago.

This may not be THE singularity, but it's a singularity of some kind.  At least it's more proof that we're living in a Science Fiction World.

Plight of the Middle Class

The middle class sure is in trouble, isn't it?

Snake has always been adamant about staying out of the middle class.  It's either super-rich for us, or vagabondage.  The more we avoid time-cards and payroll taxes, the better.  And if you're wondering, we're closer to vagabondage than the other thing right now, but we're a quantum shift away from leisure and luxury.  It may never happen, but the important thing is, we have time to enjoy ourselves.

Thanks to Michael Blowhard for bringing this article by Elizabeth Warren and Amelia Warren Tyahi to my attention.  It does a great job of explaining why the middle class is in such trouble, and beyond that, how the middle class has been made to feel guilty about their own struggle.  You know all those luxury SUVs they buy, all those vast trophy homes and all that dining out, all that brand-name mall shopping they do on credit?  Irresponsible, no?  Really the kind of behavior that makes you want to draft new legislation to keep them in line, right?

Well, it turns out that middle-classers are spending less on food, clothing, cars, and luxury items than they did 30 years ago.   The real culprit is the basic stuff.

Even as middle-class living conditions have improved only modestly, the burden of paying for a home has increased dramatically. Over a generation, the average number of rooms in a home increased by seven percent as average mortgage expenses increased by 69 percent—at a time when other family expenses were falling. The impact of rising mortgage costs has been huge. The proportion of families who are “house-poor”—that is, who spend more than 35 percent of their incomes on housing—has quadrupled in a single generation. Today it often takes two working people to support a mortgage. A police officer or elementary-school teacher earning an average salary could not afford to pay the mortgage of a median-priced home in two thirds of the nation’s metropolitan areas....

But the new family budget is notable for another reason: it is far more deeply leveraged. A generation ago, the one-income family committed about 54 percent of its pay to the basics—housing, health insurance, transportation, and taxes. That is, the one-income family spent about half its income to make the “nut”—the basic expenses that must be paid even if someone gets sick or loses a job. Today, these basic expenses, including child care so that both parents can work, consume 75 percent of the family’s combined income. With 75 percent of income earmarked for fixed expenses, today’s family has no margin for error.

So why the surprise, then, when people who formerly had good credit lose their jobs and suddenly need to resort to credit cards they cannot pay?  And why should they be made to feel so guilty about this?

One explanation is political. High-interest credit-card issuers and sub-prime-mortgage lenders operate only because a careful combination of deregulation and protective regulation permits creditors to charge fees and interest rates that would have landed them in jail less than 25 years ago. If millions of Americans believed that families were losing their homes because of deceptive marketing and oppressive contract terms, there would be a public outcry to change the regulations that favor banks over consumers. But as long as Americans believe that the only people in financial trouble are the spendthrifts, there is no reason to restrict the lenders. Everyone is getting just what he deserves.

To hell with that.  It's time somebody started taking these credit-card companies down.  "Fees and interest rates that would have landed them in jail less than 25 years ago."  How did this happen?  How did legitimate moneylending usurp the role of the mafia and then get the government's blessing?  And how can we mount a lobby against the most profitable branch of the banking industry?

Anyway, that middle class is a sinking ship.  It's a shame, because I can understand the appeal of working 40 hours a week and coming home in the evening to a decent house and a family that's well-fed as a result of your efforts.  I mean, it's very 1950s propaganda, Leave it to Beaver, tacky stereotypical etc. etc. etc., but can't we acknowledge that nice things can be nice and that that model took hold after the second world war because people tired of death and killing felt that it would be, you know, kind of pleasant to do a reasonable amount of work and then have your needs met?

It worked for our grandparents - some of them, anyway.  For us, though, vagabondage is the way to go.  It's easy and fun, so long as you don't want children.

Spirited Debate

I never discuss politics with customers - not beyond a noncomittal shrug and the honest explanation that both candidates have made promises that I find frightening. I was having just such a conversation with our UPS driver this afternoon when our Vietnam Veteran biker walked in and said, "What do you mean they frighten you? Put your fucking pants on and go fight for this country. Then you'll have the right to shoot your mouth off."

He went on to explain that we should vote for Bush because he has the "classier wife." Adding: "All Kerry's wife wants to do is sell Katsup."

So I asked him which of Bush's policies he felt made the incumbent such a strong choice this time. Forgive me, I just couldn't resist. I just wanted something, something to agree or disagree with, and maybe shed a bit of light for my own decision. Instead, he looked at me as if he'd left a bayonet at home, and was furious at himself for having forgotten to bring it along in case he needed to disembowed an upstart tobacconist. The look ended with a shrug, and he said, "The more people I meet, the more I love my fucking dog."

At least he reached a conclusion I can agree with.

Vacation Behind Bars

Gee whiz, this doesn't sound so bad.

How do I get sentenced to a minimum security prison for nine months? I could catch up on a lot of reading, get myself back in shape, quit drinking, and get another novel written. Five books at a time, exercize machines, newspapers, no distractions - it's like the walls are keeping me out!