Growth of the U.S.A.

I've posted a time-lapse historical map of Europe here before, but I've never seen a similar map of the United States. With the Olympics ongoing, now seems like a reasonable time to take a look back at some of our nation's history.

Like with the map of Europe, I think it's both interesting to see the changes as they took place and also somewhat unsettling to see how long we've now gone without a significant change. Not that I'm predicting anything, but I do wonder whether we're overdue for a little shakeup of one sort or another. Time will tell.

If that gif moves a little too quickly for you to take it all in (it's definitely too fast to fully appreciate), you can check out a slowed-down YouTube version of it here.

Eat More Chikin (at Wendy's?)

By now, I'm sure that you're all aware of the latest election-year distraction from our nation's real problems, namely Chick-Fil-A—if not, there's a decent op-ed on the topic here. Personally, I think the whole controversy is a little silly, even if the underlying issue (gay marriage) may not be. The silliness, as I see it, is best summarized by this little gem, passed along to me by my man Grew.

Terrific. Sure, there are some pretty obvious bones to pick here—not all of the 12 OPEC nations execute homosexuals, and we get 50% of our imported oil from nations in the Western Hemisphere anyway (mostly Canada, Mexico, and Venezuela)—but the idea here is nonetheless important.

If we're going to start boycotting companies' products based on their human rights records, we should probably start with Apple... or Chevron... or Hershey's... or hell, just look at this list and be done with it, mkay? But we don't do that, because damn we love our iPhones and SUVs and we just can't bear to imagine our lives without them, consequences be damned. The cost of any of those boycotts would be way too high for us to handle, but a boycott of Chick-Fil-A? Hey, no problem. Commence patting selves on backs.

More and more frequently in the U.S., we're seeming to tend toward symbolic displays of our beliefs, without actually laying anything on the line. This "boycott" of Chick-Fil-A is a perfect example of the low-risk "show of support" that doesn't actually require anybody to sacrifice anything at all. Okay, so you're not going to eat at Chick-Fil-A anymore—from now on, you'll go down the street to Wendy's and order a spicy chicken filet (side note: highly recommended) instead. Some sacrifice.

I happen to be a strong supporter of gay rights, but I'm certainly no activist, and I refuse to pretend that I would magically become one simply by boycotting a second-tier fast food restaurant for a few months. Shunning Chick-Fil-A as a dining destination doesn't (or wouldn't) make me any more of a gay rights activist than putting a "these colors don't run" bumper sticker on my car would make me a decorated war hero.

Sadly, though, these hollow displays of support seem to have become the new American way, and this Chick-Fil-A issue has all the marks of being a classic election year distraction. Don't look at the real issues, America, like bankers flagrantly violating federal laws (who's Jamie Dimon?) or our nation's rapidly deteriorating financial position—just speak loudly, pound the table, and tell the world how passionate you are about the issues. He who shouts loudest, shouts best.

Quite frankly, America is rapidly becoming a nation of wimps and whiners, unable to back up our tough talk with anything resembling bold action. We like to make symbolic statements of our beliefs (we really do talk a great game), but when it comes right down to it the vast majority of us are unwilling to do much of anything to back up those beliefs, not even paying more in taxes or performing public service (like military service) of any kind. In fact, most of us can't even find our way to the ballot box on Election Day to perform our most basic democratic responsibility of voting.

Until that dynamic changes, I don't think any of us can expect meaningful change in this country, except as a campaign slogan. It's about time we all recognize that, and do something about it, before it's too late. See you at Wendy's.

Song of the Week(end)

Alright, time to welcome the 2012 Summer Games with my first of what will presumably be several Olympics-related posts. To honor the host city of London, I'm welcoming the weekend with a song straight out of England. And while I gave some serious consideration to Sheena Easton's "Morning Train" (if only because of this scene in "Eurotrip"), I thought we could do a little better than that.

But I don't really love any of the contemporary British artists, and the Beatles are from Liverpool, not London... so let's just go with the Stones' "Get Off of My Cloud".

L.A. regulatory madness, again

Hey, Southern California, we need to talk. Are you guys going out of your way to antagonize me out there, or are you really just that stupid?

Some Southern California cities fine residents for watering their lawns too much during droughts.

But in Orange, officials are locked in a legal battle with a couple accused of violating city ordinances for removing their lawn in an attempt to save water.

The dispute began two years ago, when Quan and Angelina Ha tore out the grass in their frontyard. In drought-plagued Southern California, the couple said, the lush grass had been soaking up tens of thousands of gallons of water -- and hundreds of dollars -- each year.

They said they were trying to do something good for the environment...

But city officials told the Has they were violating several city laws that require residents to cover significant portions of their frontyards with live ground cover. On Tuesday, the couple is scheduled to appear in Orange County Superior Court to challenge the city's lawsuit against them.

Soon after the city complained about the yard, the Has placed wood chips on top of the dirt, with help from neighbor Dennis Cleek.

"It's their yard, it's not overgrown with weeds, it's not an eyesore," said Cleek, whose own yard boasts fruit trees. "We should be able to have our yards look the way we want them to."

But city officials determined the fix was not acceptable, saying city codes require that 40% of the yard be landscaped predominantly with live plants.

"Compliance, that's all we've ever wanted," said Senior Assistant City Atty. Wayne Winthers.

Yes. Compliance is what we want. We don't care if the rule in question makes absolutely no sense and is completely counter-productive in every way, we demand compliance.

Seriously, what is going on out in California? Look, I understand the purpose and positive effect that zoning laws (and laws like them) can often have—I also sympathize with the counter-argument—but these laws here seem like city-planning run amok. When laws have become counter-productive, and begin to harm the overall well-being of the community they govern, they must be abolished.

Unfortunately, politicians of all types seem to hate repealing laws—they'd rather defend them to the death and let somebody else worry about the unintended consequences (or, alternatively, make another law to deal with that unintended consequence, then another, then another, etc...). What will SoCal think of next?

[LA Times]

Clip of the Week

Let's pump a few posts out here before we head into the weekend (and into the Olympics), starting with your Clip of the Week.

This is an incredibly cool music video that probably took an insane amount of time to put together (warning: boobs). And this is a mind-warping optical illusion that I can't seem to wrap my head around even after it's been explained and shown to me (sort of like this one and this one).

These time-lapse videos from Wimbledon were pretty cool, and this might be the worst idea for a bobblehead ever. Nice work, whoever signed off on that one. I also considered posting Jon Stewart's awesome rant about the LIBOR mess, but I think I've been tough enough on the banks for one week already.

So instead, this week's Clip of the Week goes to (former Red Sox) outfielder Josh Reddick, who climbed the fence in Toronto to make what is probably the catch of the year so far. Be prepared for some Olympics-related Clips of the Week starting next week, because I'm sure there will be plenty to choose from.

"Inside Job" and bank criminality

A little over a year ago, I posted a Quote of the Week (and also this follow-up) from Charles Ferguson, the director of the Oscar-winning documentary "Inside Job". Ferguson was complaining about the lack of prosecutions of fraud committed by financial executives, a topic I've also discussed here more times than I can remember.

However, until this week, I hadn't actually watched the documentary—not until Barry Ritholtz tipped me off to the presence of the entire movie on Vimeo. I'd avoided "Inside Job" in part because I (arrogantly and incorrectly) thought that I had read and learned everything there was to know about the financial crisis already, and figured that the film probably didn't have much new to add to the discussion. How wrong I was.

The greatest compliment I can give to any non-fiction piece is that it's worth reading even if you think you already know everything about the topic in question—that certainly applies here. "Inside Job" provides incredible access to a who's who of characters in the mess that is our financial system, from economists to bankers to politicians and everyone in between. Ferguson pulls few punches, and he is particularly harsh with respect to the (role of the) academic world, including my alma mater.

Like many pieces on the topic, I think "Inside Job" is a little too forgiving of the borrowers who made the real estate bubble possible, but that's certainly nothing new here (and I've discussed that dynamic before as well). All in all, though, if you haven't yet watched the doc, I highly recommend it. It does a great job of showing just how ugly things have been behind closed doors at our banks, and also how this financial crisis is far from over—in fact, it may still be in its early stages.


Inside Job, Narrated by Matt Damon (Full Length HD) from jwrock on Vimeo.

But if you don't have the time to watch the film, and you somehow still doubt my assertions that banks continue to commit crimes that have systematically gone unpunished... just read this little post (also courtesy of Barry Ritholtz) and be done with it. In fact, I'll just go ahead and reproduce the whole thing right here.

Here are some recent improprieties by the big banks:

- Laundering money for drug cartels. See this, this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)

- Laundering money for terrorists

- Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

- Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, and here

- Charging “storage fees” to store gold bullion … without even buying or storing any gold. And raiding allocated gold accounts

- Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

- Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car

- Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

- Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing

- Engaging in insider trading of the most important financial information

- Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

- Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

- Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

- Otherwise manipulating markets. And see this

- Participating in various Ponzi schemes. See this, this and this

- Charging veterans unlawful mortgage fees

- Cooking their books (and see this)

- Bribing and bullying ratings agencies to inflate ratings on their risky investments

The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees. But studies show that most of the fraud is committed by management.

Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud. See this, this and this.

But it's all okay, because Wall Street is our Main Street, love 'em or hate 'em, right? Bullshit.

That list should just about do it for the "banks never committed any crimes" line of argument, forever. So, watch "Inside Job" if you haven't already—and even if you have, watch it again. It's worth it.

[Barry Ritholtz]
[Max Keiser]

Quote of the Week

It's time for this week's Quote of the Week. I first thought about giving the honor to this article, because the concept of a "duckeasy" is just amazing. But I don't honestly like foie gras that much, so I can't get all that excited about it.

Instead, I'm going to pass along this story about George, a two-year-old basset hound who inadvertently saved his own life by dialing 999 (the British equivalent of 911) after getting entangled in a telephone cord and nearly choking to death. Smart dog... kinda.

This week's QUOTE OF THE WEEK

“He’s not usually very smart. He’s really dopey and just likes to chew socks.”
                                - Lydia Brown, owner of George the basset hound

Good for George. Let's get this guy some tickets to the Olympics.

[The Sun]

What do firefighters do?

Tyler Cowen had an interesting post up last week on his Marginal Revolution blog, noting that the number of career firefighters in the U.S. has increased 40% over the last 35 years, even as the incidence of fire calls has gone down by roughly that same percentage (largely because of improved building codes and increased usage of smoke alarms).

What are the firefighters doing, then? Mostly they're tagging along with ambulances on car accident calls and other miscellaneous medical emergencies. Cowen cites a 10-year-old article from Fred McChesney, the facts of which almost certainly still apply today.

Taxpayers are unlikely to support budget increases for fire departments if they see firemen lolling about the firehouse. So cities have created new, highly visible jobs for their firemen. The Wall Street Journal reported recently, “In Los Angeles, Chicago and Miami, for example, 90% of the emergency calls to firehouses are to accompany ambulances to the scene of auto accidents and other medical emergencies. Elsewhere, to keep their employees busy, fire departments have expanded into neighborhood beautification, gang intervention, substitute-teaching and other downtime pursuits.” In the Illinois township where I live, the fire department drives its trucks to accompany all medical emergency vehicles, then directs traffic around the ambulance—a task which, however valuable, seemingly does not require a hook-and-ladder.

Interesting stuff. For a graphical representation of the effect described above, Cowen passed along this chart:

When you see trends like this, it's hard to argue that fire departments really need to be as expansive as they have become. And with state and local budgets coming under more pressure by the day, don't be surprised if there are increasing calls to cut back on firefighters (and maybe return to volunteer fire departments?). It doesn't take a trained firefighter (or a large and expensive fire truck) to direct rubbernecking traffic around a wreck, and we really can't afford to pretend that it does.

[Marginal Revolution]

On droughts and inflation

Hey, have you noticed? It's been really hot this summer. Like, absurdly hot. And dry. And this could be a really, really big problem for our economy.

The nation is experiencing its worst drought in over half a century. Grain crops, particularly corn, are being devastated as only 31% of the domestic corn crop in is good shape versus 40% just one week ago. The same is true for soybeans as only 34% is in good shape versus 40% last week.

As a result both commodities have hit record highs on the world futures market. For the first time in history corn exceeded $8.00 per bushel to $8.05 (one year ago--$5.50) and soybeans are at a high of $17.12 per bushel ($10.90 a year ago). It is projected by some commodities experts that these price may go up yet another 20-30%. The inflationary impact of these vital grains will be felt very soon in the nation's grocery stores as virtually all meat and many processed foods are dependent on these commodities. This on top of an economy that is already languishing in recession levels.

Right. Food inflation is bad, especially for those of us on already-strained budgets when unemployment remains stubbornly high. Things have gotten so bad that ranchers can no longer afford to keep/feed their cattle herds, so they're selling them off at auction at bargain-basement prices. So the corn and grain shortage in turn causes a meat shortage, meaning that the spillover effects on food prices are likely to be far-reaching. (Check below for a graphical representation of this year's drought versus previous years).

Chart from NY Times via Barry Ritholtz; CLICK to enlarge

But in my opinion, the more concerning issue here is what this might mean in terms of future Fed policy, which we haven't taken much time to discuss here in recent months. Now seems like a good time to change that.

Over the last few years, our economy has become increasingly dependent upon loose Fed policy to keep itself going (and to allow the federal government to finance its ever-growing debt). Recently, the economy has begun to show significant signs of slowing growth, and as a result people everywhere are calling for a third round of "quantitative easing"—a policy that I absolutely hate—to help out the economy.

That's great and all, but can the Fed really afford to engage in inflationary monetary policy at a time when American consumers are already getting squeezed at the supermarket? Yes, the Fed claims to largely ignore food and energy prices when considering their policies (because those prices are "noisy"), but there's no way they can ignore the impact that the ongoing drought is likely to have on national price levels. This drought will likely give the Fed even less room in which to operate, making a declaration of QE3 that much more difficult to sell to an increasingly-skeptical American public.

If nothing else, this drought should serve as a very loud reminder to everyone in the world that the Fed and other central banks are not the only determinant of price levels in the global economy. Maybe Ben Bernanke's consistent attempts to play God angered Mother Nature, and she decided to show him who's boss after all—like Icarus before him, the Chairman flew a little too close to the sun, and all of us got burned.

For all of us, if we're looking to the Fed (or the federal government) to be our savior, we should know that there are limits to the bank's power—this drought threatens to make those limits pathetically obvious to all of us, and in the long run that may be a very good thing. But it may be a very bad thing over the next several months, for those of us who like to eat.

[American Thinker]

Song of the Week(end)

I've got a lot of good material coming up next week, so stay tuned. I was actually going to throw a few of those posts up here today, but I thought it would be better to let my Colorado post stand on its own for a while.

Either way, until next week, enjoy your Song of the Week(end), from Little Big Town. This song is inexplicably catchy—I almost hate myself for liking it, but it just feels like a good summer song to drink some beers to. So that's exactly what I'm gonna do. Happy weekend, people.

About Colorado

In the wake of the horrifying incident in Colorado last night, there's bound to be quite a few boneheaded comments being made—like wondering if the shooter was a Republican or Democrat (I won't link to them here because I refuse to glorify the behavior, but believe me, it's happening already), or trying to cast blame on the entertainment industry in general (also inevitable).

So I think it's relevant and necessary to read a truly thoughtful piece on the subject—not this incident in particular, but in fact the Columbine shooting 13 years prior. Courtesy of my man Grew, I present to you an amazingly insightful piece from Marilyn Manson, penned over a decade ago.

Presented without further comment:

Columbine: Whose Fault Is It?

by Marilyn Manson (May 28, 1999)

It is sad to think that the first few people on earth needed no books, movies, games or music to inspire cold-blooded murder. The day that Cain bashed his brother Abel's brains in, the only motivation he needed was his own human disposition to violence. Whether you interpret the Bible as literature or as the final word of whatever God may be, Christianity has given us an image of death and sexuality that we have based our culture around. A half-naked dead man hangs in most homes and around our necks, and we have just taken that for granted all our lives. Is it a symbol of hope or hopelessness? The world's most famous murder-suicide was also the birth of the death icon -- the blueprint for celebrity. Unfortunately, for all of their inspiring morality, nowhere in the Gospels is intelligence praised as a virtue.

A lot of people forget or never realize that I started my band as a criticism of these very issues of despair and hypocrisy. The name Marilyn Manson has never celebrated the sad fact that America puts killers on the cover of Time magazine, giving them as much notoriety as our favorite movie stars. From Jesse James to Charles Manson, the media, since their inception, have turned criminals into folk heroes. They just created two new ones when they plastered those dipshits Dylan Klebold and Eric Harris' pictures on the front of every newspaper. Don't be surprised if every kid who gets pushed around has two new idols.

We applaud the creation of a bomb whose sole purpose is to destroy all of mankind, and we grow up watching our president's brains splattered all over Texas. Times have not become more violent. They have just become more televised. Does anyone think the Civil War was the least bit civil? If television had existed, you could be sure they would have been there to cover it, or maybe even participate in it, like their violent car chase of Princess Di. Disgusting vultures looking for corpses, exploiting, fucking, filming and serving it up for our hungry appetites in a gluttonous display of endless human stupidity.

When it comes down to who's to blame for the high school murders in Littleton, Colorado, throw a rock and you'll hit someone who's guilty. We're the people who sit back and tolerate children owning guns, and we're the ones who tune in and watch the up-to-the-minute details of what they do with them. I think it's terrible when anyone dies, especially if it is someone you know and love. But what is more offensive is that when these tragedies happen, most people don't really care any more than they would about the season finale of Friends or The Real World. I was dumbfounded as I watched the media snake right in, not missing a teardrop, interviewing the parents of dead children, televising the funerals. Then came the witch hunt.

Man's greatest fear is chaos. It was unthinkable that these kids did not have a simple black-and-white reason for their actions. And so a scapegoat was needed. I remember hearing the initial reports from Littleton, that Harris and Klebold were wearing makeup and were dressed like Marilyn Manson, whom they obviously must worship, since they were dressed in black. Of course, speculation snowballed into making me the poster boy for everything that is bad in the world. These two idiots weren't wearing makeup, and they weren't dressed like me or like goths. Since Middle America has not heard of the music they did listen to (KMFDM and Rammstein, among others), the media picked something they thought was similar.

Responsible journalists have reported with less publicity that Harris and Klebold were not Marilyn Manson fans -- that they even disliked my music. Even if they were fans, that gives them no excuse, nor does it mean that music is to blame. Did we look for James Huberty's inspiration when he gunned down people at McDonald's? What did Timothy McVeigh like to watch? What about David Koresh, Jim Jones? Do you think entertainment inspired Kip Kinkel, or should we blame the fact that his father bought him the guns he used in the Springfield, Oregon, murders? What inspires Bill Clinton to blow people up in Kosovo? Was it something that Monica Lewinsky said to him? Isn't killing just killing, regardless if it's in Vietnam or Jonesboro, Arkansas? Why do we justify one, just because it seems to be for the right reasons? Should there ever be a right reason? If a kid is old enough to drive a car or buy a gun, isn't he old enough to be held personally responsible for what he does with his car or gun? Or if he's a teenager, should someone else be blamed because he isn't as enlightened as an eighteen-year-old?

America loves to find an icon to hang its guilt on. But, admittedly, I have assumed the role of Antichrist; I am the Nineties voice of individuality, and people tend to associate anyone who looks and behaves differently with illegal or immoral activity. Deep down, most adults hate people who go against the grain. It's comical that people are naive enough to have forgotten Elvis, Jim Morrison and Ozzy so quickly. All of them were subjected to the same age-old arguments, scrutiny and prejudice. I wrote a song called "Lunchbox," and some journalists have interpreted it as a song about guns. Ironically, the song is about being picked on and fighting back with my Kiss lunch box, which I used as a weapon on the playground. In 1979, metal lunch boxes were banned because they were considered dangerous weapons in the hands of delinquents. I also wrote a song called "Get Your Gunn." The title is spelled with two n's because the song was a reaction to the murder of Dr. David Gunn, who was killed in Florida by pro-life activists while I was living there. That was the ultimate hypocrisy I witnessed growing up: that these people killed someone in the name of being "pro-life."

The somewhat positive messages of these songs are usually the ones that sensationalists misinterpret as promoting the very things I am decrying. Right now, everyone is thinking of how they can prevent things like Littleton. How do you prevent AIDS, world war, depression, car crashes? We live in a free country, but with that freedom there is a burden of personal responsibility. Rather than teaching a child what is moral and immoral, right and wrong, we first and foremost can establish what the laws that govern us are. You can always escape hell by not believing in it, but you cannot escape death and you cannot escape prison.

It is no wonder that kids are growing up more cynical; they have a lot of information in front of them. They can see that they are living in a world that's made of bullshit. In the past, there was always the idea that you could turn and run and start something better. But now America has become one big mall, and because of the Internet and all of the technology we have, there's nowhere to run. People are the same everywhere. Sometimes music, movies and books are the only things that let us feel like someone else feels like we do. I've always tried to let people know it's OK, or better, if you don't fit into the program. Use your imagination -- if some geek from Ohio can become something, why can't anyone else with the willpower and creativity?

I chose not to jump into the media frenzy and defend myself, though I was begged to be on every single TV show in existence. I didn't want to contribute to these fame-seeking journalists and opportunists looking to fill their churches or to get elected because of their self-righteous finger-pointing. They want to blame entertainment? Isn't religion the first real entertainment? People dress up in costumes, sing songs and dedicate themselves in eternal fandom. Everyone will agree that nothing was more entertaining than Clinton shooting off his prick and then his bombs in true political form. And the news -- that's obvious. So is entertainment to blame? I'd like media commentators to ask themselves, because their coverage of the event was some of the most gruesome entertainment any of us have seen.

I think that the National Rifle Association is far too powerful to take on, so most people choose Doom, The Basketball Diaries or yours truly. This kind of controversy does not help me sell records or tickets, and I wouldn't want it to. I'm a controversial artist, one who dares to have an opinion and bothers to create music and videos that challenge people's ideas in a world that is watered-down and hollow. In my work I examine the America we live in, and I've always tried to show people that the devil we blame our atrocities on is really just each one of us. So don't expect the end of the world to come one day out of the blue -- it's been happening every day for a long time.

Clip of the Week

No posts for a couple days—sorry, been busy with work. But it's Clip of the Week time, and you know this is one place where I never disappoint (if only because we all need some entertainment).

This is an amazing catch by a Phillies minor leaguer—I've seriously watched that video 100 times and I'm still not sure what happened. He might have cheated, I can't be sure. Also, Jay Cutler is Mr. Enthusiasm at Wrigley Field. And Germans amuse me.

This video of a shark stealing a lady's fish was pretty fantastic... hey, speaking of fishing, maybe she should head on down to my neck of the woods and check out the Master Bait Shop. They've got the fattest worm in town, you know. Well played, central Virginia, making me proud.

But this week's top honor comes to you all courtesy of the Red Cowboy. This one made me crack up laughing, because I'm a simple-minded idiot. I give you... men throwing rocks with the other hand.

Quote of the Week

This week's Quote of the Week was a bit of a tough choice. I first wanted to reward fellow Harvard grad Teresa Hsiao (a writer for Family Guy) for her anecdote about Harvard passed along in this article—"asymptotic strippers" is seriously the clubhouse leader for phrase of the year. Slow clap.

But it's not your Quote of the Week, and that's because of Stockton, California. If you don't know anything about Stockton, here's an enormous infographic to get you up to speed—if you just want the basics, it's a city in California that recently went bankrupt, making it the largest municipal bankruptcy in American history. Wanna know how it happened? Let's go to the mayor for a quick overview (original WSJ article can be found here).

This week's QUOTE OF THE WEEK

"We didn't have projections into the future what the costs might be. I learned that you don't make decisions without looking into the future."
                                        - Ann Johnston, Mayor of Stockton, CA

Jesus, what is this, an Onion article? And yet, scoff as we might at the people of Stockton, the reality is that this kind of brutally short-sighted financial planning is far closer to the norm than the exception in our country.

For proof, check out this post from Mish Shedlock, which shows that CalPERS—the fund that manages pension benefits for more than 1.6 million California public employees—returned only 1% on its investments last year, despite operating with a (ridiculous) 7.5% return assumption. That assumption, incidentally, is the amount CalPERS needs to achieve on an annual basis in order to remain anywhere near solvent.

Lest you think one year of underperformance doesn't matter, this year's 1% return means that CalPERS will need to earn a 14.5% return next year just to get back to where it needs to be. And if it returns the same 1% again next year, which is entirely possible? Then it'll need a 21.8% return in year 3 to get its head back above water.

You see, the problem with this kind of pension math is that even a relatively small amount of underperformance (not even something as drastic as this year's 1% return) can have a significant impact on long-term solvency of the pension fund, if it persists for long enough. For example, if a fund with a 7.5% return assumption were to earn 5% per year over the next 5 years—which would honestly be a pretty solid performance, given prevailing interest rates—it would still need a 20.9% return in year 6 (or, alternatively, an equally long period of equivalent outperformance, which seems doubtful) in order to get back to even.

So when it comes to projecting the future, is projecting an unrealistically rosy future—like CalPERS is doing—really any different from not projecting the future at all like Stockton? I'd suggest not, and I'd also suggest that anyone who relies on CalPERS for their retirement plans should start looking elsewhere. Soon.

[Falkenblog]

I'm too busy to write a blog post

Guys, I'd really like to write a blog post for you today, but I'm just way too busy. Maybe tomorrow, I don't know. Sorry, I'd really like to help, but you know... busy.

Busyness serves as a kind of existential reassurance, a hedge against emptiness; obviously your life cannot possibly be silly or trivial or meaningless if you are so busy, completely booked, in demand every hour of the day.

Damn straight. I'm important, see? Unfortunately, all this busyness has me totally stressed out, so I'll probably need to go to a stress-reduction workshop or something to cool down.

So what can you do about the stress and frustration that comes from unmet expectations? You have two choices: Either change the reality around you or change your expectations...

But often the reality around you is difficult to change...In my experience, trying to change reality isn't usually a stress reliever, it's a stress creator. A small thing — like changing my seat on an airplane — can be such a pain that even if it works it's often not worth the struggle. And the bigger things — like getting more accomplished in a day — can be even more frustrating. That last example is especially frustrating because it's an expectation I have of myself so I really believe it should be in my control.

Which leaves us with what I've come to believe is the best strategy for reducing stress: Change your expectations...

If changing your expectations proves too hard, your next best move is to get some perspective.

Imagine a scale from 1-10 with 10 being the worst reality you can imagine. Like living in a war zone or being in the World Trade Center on 9/11. Maybe 9 is a serious illness that most probably will result in death. Perhaps 8 is something that will forever alter your life, like going to jail or an accident that puts you in a wheelchair. Let's say 7 is something that temporarily alters your life like losing your job or having to move out of a home you can no longer afford.

Do you see where I'm going with this?

No, dude, I don't at all see where you're going with this. You're taking forever and I'm way too busy to just sit around reading your whole article. Can't you just give me the Cliff Notes or something?

Incidentally, that HBR article is one of the better things I've read from HBR in a while (if you remember, I've been a little tough on them in the past), and I recommend you take a look at it. Unless you, like me, are just way too busy, in which case... you're probably not still reading anyway.

[NY Times]
[HBR]

Song of the Week(end)

This week's song is inspired by this video, which I talked about in Clip of the Week but you might have missed. Check it out if you get the chance—it's definitely worth your time. At any rate, one of the 100 guitar riffs that our man plays is from Santana's "Black Magic Woman". I've always been a huge Santana fan, and Carlos is fantastic in concert—in fact, I've been to more Santana concerts than any other artist besides DMB, including one concert that featured them both (and The Roots... great show).

So this week I'm going to give some love to Santana, with a version of "Oye Como Va" (performed live, because that's the best way to hear it). Have a good weekend, people. Enjoy your Bastille Day.

Clip of the Week

We had some pretty decent stuff to work with this week, none of which came from the MLB All-Star Game (or the unfortunately just-as-dull Home Run Derby). We did, however, have an emotional speech from Andy Murray after his loss to Roger Federer in the Wimbledon final—it brought my wife to tears, with good reason. It's always tough to watch a guy's dream get dashed, even if he did walk away from the experience with a pretty sweet paycheck.

Staying in the world of sports, I also saw something out of an MLB umpiring crew that I thought I'd never see, as well as something that was more along the lines of what I've come to expect. And if you're looking to get excited about the upcoming Olympics, check out this clever series of animated athlete bios from Duck Studios.

A lot of people wanted me to check out this guy's conversation with his 12-year-old self, and I have to admit that it was strangely intriguing. I was also impressed by this guy's one-take performance of 100 great rock-and-roll guitar riffs, which may or may not have sent me off on a spree of music downloading.

Finally, if you're not sick of "Call Me Maybe" yet, you should probably check out this take on it from Sesame Street. But you probably are sick of it, in which case the only reason to watch it is if you share my love of Cookie Monster.

But after all that, this week's Clip of the Week goes to Detroit journalist Charlie LeDuff, whose "golfing the length of Detroit" news segment was one of the more oddly compelling bits of video that I've watched in a while. I think the plight of Detroit has been fascinating to watch (from afar), and I think that all of us in America are doing ourselves a disservice by ignoring the city's struggles (and lessons).

Watch this, and draw whatever conclusions you will.

The downside of homeownership

In an article this week, The Economist wonders whether the decreasing labor mobility in the United States—which I've covered here before—is a result of a "more efficient market". They write,

The drop in mobility shows up almost exclusively in gross migration, the total number of interstate household moves... The trend predates the housing boom and bust; the crisis cannot explain it.

Some reckon the decline is caused by demography. Young workers, at the start of their working life, have most to gain from moving. An ageing population may therefore be less mobile. Growth in two-earner households could also play a role. When both partners work, it is harder to move if one of them loses his job or is offered a post somewhere else. New research by Greg Kaplan of the University of Pennsylvania and Sam Schulhofer-Wohl of the Federal Reserve Bank of Minneapolis casts doubt on these explanations...

The authors analyse census data gathered monthly between 1991 and 2011, and find that the pattern of falling mobility persists across all parts of the workforce. Mobility is down across “all education levels, for people of all marital statuses, and for both single-earner and multiple-earner households.” Ageing is a red herring: mobility rates have dropped most for young workers. It isn’t so much the American worker that is changing, they argue, but the American economy. Reduced mobility largely reflects two shifts in the nature of economic activity...

The first is that the mix of jobs offered in different parts of America has become more uniform. The authors compute an index of occupational segregation, which compares the composition of employment in individual places with the national profile. Over time, their figures show, employment in individual markets has come to resemble more closely that in the nation as a whole. 

This homogenisation reflects the rising importance of “non-tradable” work. As the name suggests, non-tradable goods and services are not traded across long distances. Californian dentists tend not to clean Floridian teeth; every city has its own dentists. Cars, by contrast, are tradable, so not every state has its own car plant... With more of the country’s employment mix present in each state, it is less necessary to move to find work.

... The authors suggest another force is also reducing migration: the plummeting cost of information.

Young workers in particular used to have to move to gather information: to see whether they could stand a Boston winter, say, or cared enough about the Californian climate to pay Californian rents. In recent decades, however, it has become much easier to learn about places without moving house. Deregulated airlines and innovative online-travel services have slashed travel costs, allowing people to visit and assess different markets without moving. The web makes it vastly easier to study every aspect of a potential new home, from the quality of its apartment stock to the surliness of its baristas, all without leaving home. Falling mobility isn’t simply caused by labour-market homogenisation, the authors argue, but also by greater efficiency. People are able to find the right job in the ideal city in fewer hops than before.

These explanations are, in theory, quite compelling. It's certainly interesting that labor mobility is falling the most among younger workers, and this does indeed seem to beg an explanation beyond just the housing bust and underwater mortgages.

Nevertheless, I can't help but think that the housing dynamic—or, at least, the wider debt bubble that fueled it—has a significant role to play here, if only indirectly. Might it be that young workers, overly burdened with student loan debt and unable to afford places of their own (either to rent or to buy), are shacking up with their (perhaps underwater) parents so as to avoid rent costs? Clearly these two dynamics can play off of each other, given that they both stem from the same basic problem of overwhelming debt, leading workers of all ages to stay closer to home.

In thinking through these problems, I was reminded of this blog post from Tyler Cowen from last month. Citing a study in El Pais, Cowen writes:

Here are the European countries with the highest owner occupancy rates:

1. Romania, 97.5%

2. Lithuania, 93.1%

3. Croatia, 90.1% 

4. Slovakia, 90.0%

How about the lowest rates?

1. Switzerland, 44.3%

2. Germany, 53.2%

3. Austria, 57.4%

Get the picture?

Cowen's point is clear. For years—decades, even—we heard politicians and economists touting homeownership as an integral part of the American dream, and a huge key to our future economic success as a nation. Now, we're starting to see the flip side of that coin, and we're not alone. The most prosperous nations in Europe in fact have very low homeownership rates, while the nations with high rates flounder. This absolutely cannot be a coincidence, and it must have at least something to do with labor mobility.

That, or a high homeownership rate is just a great indication of a society with a lot of debt, a lack of flexibility, and therefore a general lack of entrepreneurship. I hope that we won't some day be reading statistics similar to Cowen's list there regarding levels of college education, but I certainly have to wonder. Debt is an ugly beast, and we can't very easily explain it away by spitballing theories about "lower costs of information". It's a good effort by The Economist, but I remain unconvinced.

[The Economist]
[Tyler Cowen]

The great touring Olympic games?

Yesterday I was tipped off to this spooky Yahoo slideshow of Beijing, four years later. It shows what's become of many of the city's Olympic venues, many of which never had any real use after the games had concluded. I'll include some of my favorite pics, but I suggest you look at the whole presentation, for the full before-and-after effect.

Track & Field (and Opening/Closing Ceremonies)

Kayaking

Baseball Stadium

As I mentioned briefly in my post earlier today, the maintenance costs alone on some of these facilities is often more than the municipalities can bear, to say nothing of the ongoing burdens of the construction costs (especially if debt was used). This can often leave huge scars—and often, safety concerns—in these cities once the Olympics have left town.

It is for exactly these reasons that Chicago and many other cities have proposed the idea of "disposable" stadiums for the Olympics—facilities that are intended to be torn down or immediately repurposed, with the steel beams and sheet metal and concrete and whatever else to be recycled or re-used for some other project elsewhere in the city or surrounding areas.

I say, why not go a step further? What's the purpose of constantly purchasing and building and recycling and purchasing and building and recycling in a different city every four years when the types of venues needed rarely change in any meaningful way from one games to the next? Why can't the Olympics be more like a giant concert tour (maybe like the U2 360 tour) that just rolls into town and sets up shop somewhere every four years, then packs up and heads on down the road to the next tour stop? We could have facilities that are literally built and torn down in less than a month (remember, many of these venues are pretty small undertakings, not giant stadiums like those that host the track and opening/closing ceremonies), only to be rebuilt and torn down again somewhere else—with the same materials.

No, that solution wouldn't work for all venues, but it could certainly work for a few, couldn't it? And it would have to be a whole hell of a lot more cost-effective than doing it the way we're currently doing it, right? Of course, the problem is, who's gonna pay for the equipment and the tour? The IOC? Not likely. They're perfectly happy with the way things are, and they're probably not changing anything any time soon. But with municipal budgets in this country and around the world becoming increasingly strained, the IOC may ultimately be left with no choice, as nobody has any money left to build all these venues to the specs that the Olympic powers-that-be require.

This is all probably another one of my pipe dreams, but I'm nevertheless interested to see what shapes up over the next couple of decades.

[Yahoo!]

Quote of the Week (Malinvestment Edition)

One of the greatest criticisms of the extraordinarily expansionary monetary policies that we have seen over the past couple of decades (and past several years in particular) is that they create a widespread culture of malinvestment—companies and governments launch projects that look attractive solely on the basis of ultra-cheap financing, projects which then go sour when economic reality (or a higher interest-rate environment) returns. This exacerbates the booms and busts of our economic cycles, making recessions more severe than they should be (and much more difficult to cure).

This dynamic helps to explain the severity of the housing bubble (built as it was on ARMs and subprime mortgages), and also... Spain. Spain is in some pretty tough shape lately, asking for bailouts from people who probably can't afford them and possibly won't even provide them anyway. A big part of Spain's problem lies beneath the surface in the regional governments, which can no longer afford to finance their debts. It's essentially a bigger and more dangerous version of the budding problems with local pensions here in the United States, and it's a situation that seems like it pretty clearly could have been avoided.

This week's QUOTE OF THE WEEK

Ciudad de la Luz [an extravagant, publicly financed, near-bankrupt movie studio] has become a prominent example of Valencia’s frenzy of modern-day pyramid building, which left a legacy of $25.5 billion in regional debt and bankrupt infrastructure projects as well as the backlash now building against it.

Valencia’s other investments included a harbor for superyachts, an opera house styled like the one in Sydney, Australia, a futuristic science museum, the biggest aquarium in Europe and a sail-shaped bridge, not to mention an airport that never had a single arrival or departure. It also attracted extravagant events like the America’s Cup and Formula One racing.

                                             - Doreen Carvajal and Raphael Minder, New York Times

When governments of any kind begin to make "investments" in the economy to attract big events or simply more tourists—especially when such investment is geared toward attracting big international events like the America's Cup and Formula One (and the Olympics... more on that later)—it rarely ends well. At best, the local economy receives a short-term jolt, and then is left trying to figure out what to do with the infrastructure (and how to pay for its maintenance) after is it no longer in active use. At worst, we end up with a Valencia situation, with taxpayers on the hook for failed ventures, looking for bailouts from anywhere they can find them.

Yes, the taxpayers themselves are always to blame for allowing their governments to spend like this, but the central banks' "expansionary" monetary policies are aggressive enablers in the process. Appropriate, then, that they should find themselves under increasing scrutiny in the aftermath of these sorts of bubbles. But be aware, "doing more" is not the solution—on the contrary, it's at the very heart of the problem.

[NY Times]
(h/t Tyler Cowen)

Song of the Week(end)

Time to send you all off into the weekend with some tunes. I know I've been neglecting this feature lately, but I'm back in action today, and I intend to keep it going in future weeks.

So, let's get to it. Like most people who grew up in yuppie little suburbs in the '90s, I own about a dozen Dave Matthews Band albums of one type or another, and I've memorized a bunch of their songs. Now that I live down in the town where the band got its start (and still has a significant presence), their songs are even harder to avoid--not that there's anything wrong with that. I've even written about them here once before.

Anyway, DMB has a(nother) new album coming out this year, and they've already released a couple of singles. One of those is "Mercy", which is this week's Song of the Week(end). Is it the best Dave song ever? No, of course not--these guys lost their songwriting fastball back in about '98, but that's not the point. (This is the best DMB song, of course. This is #2. This is #3. You're welcome). They're still fun to listen to, and this song is as listenable as any DMB track. So enjoy it, and enjoy your weekend.

On Wimbledon and tennis dominance

I'd like to first congratulate Andy Murray on becoming the first British man to reach a Wimbledon final since 1938, way back when Neville Chamberlain was espousing appeasement on the European continent. Yeah, it's been a while. And if you know anything about me, you'll know that I've got some familiarity with long sports droughts.

Of course, Murray has his sights set a little higher, hoping to become the first British champion since 1936. He'll have to beat Roger Federer to do so, and as former Sports Illustrated journalist Joe Posnanski points out, that'll be a feat that's easier said than done.

Since start of 2006, all but one of the 26 grand slams have been been won by Federer, Nadal, Djoko.
— Joe Posnanski (@JPosnanski) July 6, 2012

Wow. That is some serious dominance. In case you were wondering, the one outlier was the 2009 U.S. Open, in which Argentine Juan Martin del Potro beat both Nadal and Federer to take the title. He hasn't reached another grand slam final (or even a semifinal) since.

For comparison's sake, over in golf land, there have been a staggering 19 different major winners since '06, including guys like Louis Oosthuizen and Keegan Bradley. Only four players (Tiger Woods, Padraig Harrington, Angel Cabrera, Phil Mickelson) have won multiple majors during that time, none more than Woods' 4.

Notably, Federer and Nadal also won the final 3 grand slam titles in 2005, making it a run of 28 out of 29 for the group. They've also garnered 15 runner-up finishes since '06, meaning that three men have combined for 77% of the 52 available spots in the last 26 grand slam finals. Only 8 other players have even reached a final since '06, and 5 of those 8 made only one--such is the dominance of the Fed/Nadal/Djoko triad. (The three men who have made multiple finals? Andy Roddick and Robin Soderling with two each... and Andy Murray, now appearing in his fourth.)

Simply put, the dominance of the current tennis kings is unmatched by anything in golf or tennis history--Nicklaus/Palmer, Agassi/Sampras, Connors/Borg/McEnroe, nothing comes close. The only thing that's even in the same ballpark is the reign of Bobby Jones and Walter Hagen (toss in Gene Sarazen if you want)... but that was a different era (and sport) entirely.

So let's enjoy this current tennis era for what it is, and realize that a win by Murray on Sunday would not only be historic--it would be almost miraculous, breaking the British drought in what is perhaps the unlikeliest of decades. Go Andy.

[Twitter]

Where we spend our booze money (and why)

There's an interesting set of charts over at NPR's Planet Money that shows the changes in Americans' spending habits on alcohol over the last 30 years. We don't generally spend more money on booze now than we did then (it accounts for roughly 1% of income, same now as in 1982), but we've certainly changed where we're spending it.

Here are the two primary charts:

As the author (Lam Thuy Vo) points out, it's clear that we've spent a much bigger portion of our booze money at bars and restaurants, but it's not because we've been going out more often--it's just that the prices of alcohol-at-home and alcohol-at-the-bar have gone in wildly different directions.

The author suggests a productivity argument to explain the disparity ("Over time, you expect productivity gains and falling prices in manufactured goods. But a bartender today can't make drinks any faster than a bartender 30 years ago. In other words, there haven't been major productivity gains at bars. When a sector lags in productivity growth, it tends to have increasing prices."), but I'm not buying that dynamic as a sufficient explanation.

I think that if it was a brutal lack of bartender productivity that was to blame here (to the tune of a 79% overall increase in cost of providing the service, despite a plunge in the primary input cost), then bars and restaurants would have figured out a way by now to bypass the bartender entirely--pre-mixed drinks, auto-pouring wine dispensers, self-serve beer taps, something, anything to get that pesky bartender out of the way and bring liquor prices back down. So instead, it seems like booze prices at restaurants are headed higher as a matter of business choice, not necessity.

What I think is most likely is simply that there has been a fundamental change in the restaurant/bar business model. Instead of enticing customers with super-cheap drink specials--selling the booze at a loss in hopes of making up the difference on profitable sales of food--restaurants have mostly gone in the other direction, selling their food at cost or at a loss in hopes that their customers will buy super-marked-up drinks to wash it all down. That business model would frankly make a lot of sense, and I know from anecdotal evidence that it can also be incredibly lucrative.

I spent some time over at the Bureau of Labor Statistics website trying to track down some more granular data to support my theory, but my eyes glazed over in a hurry and I quickly gave up the chase. Nevertheless, I think that given the data presented, it's highly illogical to presume that booze prices at restaurants are skyrocketing simply because of lagging bartender productivity. More likely, those prices are increasing (or, at least increasing more rapidly than they otherwise would be) in tandem with decreasing prices elsewhere, probably on another part of the menu.

There are also other potential factors that might drive a business choice in this direction--for example, it's possible that restaurants are deliberately setting their prices high so as to discourage binge drinking and the negative consequences that can result from that behavior (fights at the bar that create property damage, DUIs that result in lawsuits, etc). Whatever the explanation, I think it's fairly clear that the upward pressure on in-restaurant alcohol prices has been a conscious choice on the part of businesses, rather than an unfortunate accident.

Of course, if my theory is correct, then the best move for us as consumers would be to order take-out food from restaurants, then eat that deliciously cheap food at home with booze that we bought for ourselves at the store. That's a move that I've already pulled quite frequently myself, and might just do tonight as a matter of principle.

[NPR]