Sunday, April 29, 2007

Remember The Maine

Katie Couric, on the CBS evening news on April 26, was breathless as she launched her lead story. “Now, in a CBS exclusive,” she announced, “there are new reports suggesting that Iran is only three years away from having a nuclear bomb.”

Thus it begins, the drumbeat for war with Iran, this time not with speeches from the White House or from Paul Wolfowitz, but with hype from the major news agencies, trying to convince us that they are on to Something Big. Have we forgotten that, in early 2003, the same TV networks had the same doomsday message about Iraq? President Bush and the neocons are now generally pilloried for leading us into war under false pretenses, and that’s a valid charge, but they couldn’t have done it without the press – the same press that now leads the posse to lynch Cheney and the other hawks.

In the run-up to the Iraq invasion, I don’t remember the networks warning us that maybe, just maybe, the WMD evidence was rigged by people hell-bent on regime change in Iraq. Instead, we heard the same dire warnings about chemical weapons (“he used them on his own people!”) and aluminum tubes and yellow-cake uranium. It made good copy, and it kept the viewers from changing the channel. You don’t bump your ratings by telling your audience that on a list of threats to the U.S., Iraq ranks just above Uzbekistan.

But what if Iran is really three years away from a nuclear weapon? The fear in some quarters is that this threat could prompt Israel to launch a preemptive attack on Iran - with planes and missiles supplied by the U.S. It could happen. There is so much hatred in the Middle East that an explosion is always possible. In fact, it’s more likely now than ever, and we are smack in the middle of it, because of the horrific carnage we’ve triggered in Iraq and because of our unquestioning support of Israel. There is, in short, more than enough real danger in the world without our news media piling on. It is a time for restraint on the part of the TV anchors and the headline writers. Alas, restraint is not in their toolkit. Ratings and circulation depend on excitement, not restraint, and the most exciting stories are stories of wars waged and wars threatened.

In 1898, the U.S. battleship Maine blew up in Havana Harbor (either because of a mine or spontaneous combustion; no one knows for sure), triggering a wave of outrage on the pages of the New York tabloids. Artist Frederick Remington was dispatched to Cuba to supply drawings of the scene in a well orchestrated campaign to prepare the public for war against Spain.

“There is no war,” cabled Remington to his boss, William Randolph Hearst. “Request to be recalled.”

“Please remain,” answered Hearst. “You furnish the pictures, I’ll furnish the war.”

And he did.

Friday, April 27, 2007

The April Storms

Five inches of rain, winds gusting to 50, and astronomical high tides made a mess of this area a week ago. The roads are still covered with fallen branches, the beach has been eroded, and the pumps are going around the clock in the neighbors’ basements. At the storm’s peak, sea water washed across our road at its entrance, changing our little peninsula into an island. The little sand spit on which this house and 20 others sit will probably be gone in 50 years, maybe sooner. Just a few miles north of here, a seacoast community called Cape Ellis, in the City of Saco, typically sees a house or two wiped out with every major storm. This time, three houses were reduced to rubble. At Kennebunk Beach, the seawall was destroyed.

Somewhere I read that half the country’s population lives within 100 miles of the coast. Without question, the sound, sight, and smell of the sea exert a strong pull on most of us, leading many otherwise sane people to build houses on the most precarious sites. It’s true in Florida, in the Carolinas, on Cape Cod. Here, the zoning ordinance mandates that new or modified construction along the beachfront by placed on pylons, so that the tidal surge will pass beneath the house instead of slamming against it. I like the sound of the surf on a summer night, but I’m not sure I would like to hear it underneath me.

Of course, as evidence mounts that global climate change will cause the sea level to rise, people may lose their appetites for oceanfront living, but don’t count on it. This town, like so many others around the country, now has an oversupply of houses for sale. But only a few of them are oceanfront, and their prices are all in seven figures, with no indication yet that the soft real-estate market is forcing the prices down.

So what does the future hold for little seacoast communities like Kennebunkport? Unfortunately, the irrepressible urge to live on the edge (of the sea) will translate into weakening of the zoning laws, the construction of more condos and other multiplexes, and as a result, ever-higher population density. Those who try to retain the Town’s small-town atmosphere will be brushed aside by arguments based on the need for affordable housing. Which is better, the developers will ask, one $10 million mansion or a 40-unit condominium on the same parcel? Politically, that’s a slam-dunk.

So we will enjoy it while we can. We will even enjoy the wild storms, because if the contest is between nature and Mammon, most of us are pulling for nature.

Thursday, April 19, 2007

The Untouchables

Richard Perle gazed off into the distance, looking as profound as the seated Abraham Lincoln in the background. The message wrought by the image was clear: Sometimes a true statesman has to do things that are unpopular and difficult in the greater interest of the Republic. Like invading a sovereign country on questionable grounds. Like taking the heat when things go wrong. “You,” said a woman on the capitol mall, looking Perle in the eye, “are a weapon of mass destruction.”

The scenes were from the excellent PBS documentary, “America at a Crossroads.” The horrific pictures of carnage in other episodes had to be balanced, the producers felt, by an hour given to “the case for war.” So Perle was out front; give him that. He could have begged off, staying in the shadows like his neocon ally Douglas Feith. But there he was, squaring off with Pat Buchanan, who called the Iraq invasion “the greatest foreign policy blunder in U.S. history” and with Richard Holbrook and other foreign policy gurus, most of them severely critical of the war. The most articulate and persuasive of these was Simon Jenkins, an ex-editor of the London Times, who reminded Perle that the Soviet Union, with 300,000 troops, was unable to pacify Afghanistan. That was different, said Perle, because the Afghans didn’t like the Soviets. Oh.

Later, interviewed by Charlie Rose, Perle waved off his role as the architect of the Iraq War. Yes, he had long advocated regime change in Iraq, he said, but if he had been running things, the U.S. would have turned everything over to the Iraqis the day after Saddam was ousted. “Did you argue that position at the time?” asked Rose. Perle said he had, forcefully. At that point, one imagines, Rumsfeld, Rice, Bremer, Franks, and Powell all started throwing things at their TV sets.

Perle, like President Bush, insists that victory is attainable in Iraq. He now wants regime change in Iran just as ardently as he wanted it in Iraq, though he says he is not advocating sending the marines into Iran. (Here Charlie Rose did not ask the obvious follow-up: Why not? If a pseudo threat like Iraq justified sending in the marines, shouldn’t a real threat like Iran justify an invasion? Has Perle, despite his bravado, learned a lesson?)

Being a neocon means never having to say you’re sorry. Richard Perle sees himself as the essential patriot, with no patience for those who want to cut and run with the first casualties. He claims moral kinship with Abraham Lincoln and especially with Ronald Reagan. He is sure that he was and is right. Even if not a single other country on the face of the earth agreed with us, he says, it was right to invade Iraq.

The big three neocon hawks – Wolfowitz, Perle, and Feith – are no longer in the offices they occupied when they pressed for war. Paul Wolfowitz, for his role in rationalizing the invasion, was rewarded with the presidency of the World Bank, where he is dogged by his reputation and by ethical missteps involving his girlfriend. Wolfowitz has apologized for botching the girlfriend matter, but to those who attack him for the baggage he carries, he says, “That was my old job. I’m not in my old job anymore.” But some observers, noting that the World Bank stopped funding Uzbekistan soon after that country closed a U.S. airbase in its territory, wonder whether he ever left his old job.

Wolfowitz, Perle, and Feith are all survivors. The pro-war movement is strong in this country. The President will defend them, no matter what. The Wall Street Journal’s editorial page idolizes them. All three are passionate advocates for Israel, and that brings more political clout. Someday they will retire comfortably and write memoirs, swapping dust-jacket blurbs with each other.

Meanwhile, they buzz around the world, meeting kings and emirs and presidents and doing their best to intimidate them, because, as Perle says, “there’s got to be some advantage in being a superpower.” The advantage includes money, which follows power. Perle was an investor in a venture capital group (Trireme Partners) specializing in defense investments, a consultant to Global Crossing, a Director of Hollinger International. Controversies swirled around all these connections, but no one laid a glove on Perle. He, Paul Wolfowitz, and Douglas Feith are essentially untouchable men.

Historians 20 or 30 years from now will render their verdicts on the influence of the neocons on the course of human events. If their vision of a mid-east swept by democracy, free markets, and human rights comes to pass, they will be properly credited (along with President Bush, of course) with lighting the spark. If it does not, they will have left in their wake hundreds of thousands of wasted lives and incalculable damage to the country they served.

Sunday, April 15, 2007


August 17, 1924: An 18-year-old girl named Mary disembarked the White Star steamship Celtic in Boston. She had boarded the ship seven days earlier at Queenstown, the port for Cork, Ireland, after riding in a horse-drawn wagon from her parent’s home in Callan, in the county of Kilkenny. On the trans-Atlantic crossing, Mary shared a second-class cabin with two Irish girls en route to a novitiate in the States. Her father had died when Mary was only six days old, and a few years later her mother had remarried, and in time the new couple had three children of their own – along with the stepchild Mary, who, it was decided, would emigrate to Boston, where an aunt and uncle would see her safely settled.

Mary, who was my mother, never saw her mother or stepfather again. One of her half-sisters followed her to Boston five years later, only to drown in a Vermont lake at age 21. She was my godmother.

It’s a familiar story, told with only slight variations by thousands of first-generation Americans. In the stories I have heard, the emigrants rarely came as a family unit. More often, there was a solo crossing, like Mary’s, or a husband came as an advance party of one and then, once he had a job, sent for the rest of his family. They came from across Europe. In the neighborhood where I grew up there were Irish immigrants, Italian immigrants, Russian immigrants, and German immigrants. The members of each ethnic group clung together for security and solidarity, and it would take another generation before there was any melting in the pot. Mothers would admonish their young to “stick to your own kind,” but it was ultimately a futile warning, because this was America.

The American experience leads many to wonder why the Shia and the Sunnis can’t learn to get along. But the situations are starkly different. The Irish who lived in Dorchester did not have a centuries-old hatred of the Italians who lived in East Boston. In time the various immigrant groups were assimilated into an embryonic American culture, as were the Poles and the Russians and Swedes. Into what culture do we expect the Shia and Sunnis and Kurds to be assimilated?

Decades after stepping off the S.S. Celtic in Boston, Mary returned to Europe several times, warmly embracing her half-brother and the children of her other half-sister. For 50 years she wrote regularly to the family she left behind, and our old coats and jackets were routinely packed in cartons and shipped to Kilkenny, where they were gratefully received. This, of course, was in the 40s and 50s, long before Ireland became the star of the European Economic Community. These days, the Irish are doing quite nicely, thank you. There are still waves of immigration, but nowadays they are always inbound.

Thursday, April 12, 2007

The Great Buying Opportunity

They come in legions, the analysts and the money managers. The CNBC anchors ask them what they think of the day’s 100-point drop in the Dow, and one by one they say that after the recent run-up a retrenchment is not only to be expected but healthy. They say that with so many new jobs being created the country can’t possibly slip into recession. They say you shouldn’t worry about the subprime mortgage problem, because that’s only a tiny sliver of the economy. They say that the stock-market correction is a buying opportunity, and then they tell you which stocks to buy.

Does anyone believe these guys? Does anyone wonder why, of all the guest experts paraded in front of the cameras, not a single one of them says, “Stay out of the stock market, put your money in the bank or in Treasuries or in your mattress, but don’t put it into stocks”? There are times, and this may be one of them, when this is the very best advice you can get, but CNBC is not in the business of scaring viewers out of the stock market, because for a business TV channel that would be suicidal. So today’s buying opportunity becomes tomorrow’s bigger buying opportunity.

Here are some inconvenient truths you will not hear out of the mouths of CNBC commentators:

New subprime loans reached more than $600 billion last year, almost 20% of the total mortgage market (vs 6% in 2000).

House prices would have to fall 22% to get back in sync with consumer price inflation.

85% of all subprime mortgages are of the adjustable-rate variety, and 60% of these have fixed teaser rates for two years and then float upward for 28 years.

The average teaser rate for subprime mortgages was 7.5% in 2005. On the average, that rate will reset to 10% this year.

In the category just above subprime (Alt-A), $400 billion in mortgages were written last year, up from $85 billion in 2003. The default rate on these mortgages has doubled in the last 14 months.

Last year, 47% of total mortgage loans featured buyer inducements (adjustable rate, interest-only, “no-documentation,” etc). That figure was 2% in 2000.

Loans as a percent of property value averaged 94% in 2006.

(I am indebted to economist and friend Gary Shilling for these statistics.)

Mortgage debt, credit card debt, margin debt (a record $321 billion), car loans, student loans – and that’s just the private debt. We will not mention the public debt, because this is a family blog.

Our economy in fact rests on a mountain of debt, or maybe a row of dominoes is the better metaphor. People squeezed by mortgage resets are likely to default on car loans and max out their credit card debt. Watching the dominoes are the politicians, who have already begun to display “righteous anger” at everyone – bankers, Wall Street, fund managers, brokers – everyone, that is, except the individuals who were gullible enough or greedy enough to grab the money and join the rush to the real-estate casino.

Underlying our economic system is the principle that a loan is a contract whose sanctity will be defended by the law. There are cracks in that foundation. Increasingly, borrowers who default are treated, not as deadbeats, but as victims. Ohio is planning to sell a $100 million bond issue to bail out troubled mortgagees, and several other states are drafting similar measures. Congress, with Senator Schumer leading the charge, is making similar noises. The next entitlement may be universal debt forgiveness.

Although our economy is obviously very vulnerable, most stock-market professionals remain complacent. In fact, the majority remains steadfastly bullish. There must be a code of honor here, sort of a “you tout my stocks, I’ll tout yours” understanding. Maybe I’m a cynic, but whenever I hear a stock-market guru telling me to buy a certain stock, something inside me says that if I do, I’ll be buying shares that he (or his wife or his brother-in-law) is selling.

Monday, April 09, 2007

The Candidates

When I started this blog, I said that it would steer clear of politics, and so it has, for the most part. But it is a constraint that as of now is inoperative. Too many important matters cannot be discussed without reference to their political context, so off with the shackles, and into the fray.

We plunge in with a look at the politicians who have announced their candidacy for the presidency. At this point in the cycle, each major party usually has a clear front-runner. That is not so this time around, so let the games begin.

Senator Hillary Clinton. Solid experience in the senate, plus the knowledge that comes from being the president’s wife for eight years, plus a ton of money, plus the highest name recognition in the field. She is also one very brainy lady, and she is attractive. With all that, how can she lose? She can, because she has been typed for too long as a steamroller, and a media-savvy public resents being programmed. Also, because of…..

Barack Obama. In the age before television, Obama would have come and gone in a news cycle. But he looks good on TV and is loquacious and smart, and he has enough money to carry his smile and his words to all our living rooms, month after month. He has two handicaps: his inexperience and his race. He could overcome either of these, but probably not both. But his day will come, possibly in 2012.

John McCain. It is probably foolish to count anyone out 19 months before the election, but I am counting John McCain out. His hawkish pronouncements on Iraq sealed his fate. Also, he is just too serious by nature. Serious should be good in a president, but in a candidate it can be tiresome.

John Edwards. Used goods, though he was not atop the ticket in 2004. His populist message (“two Americas”) plays well to the Democratic base, but not to the country at large. “Americans,” The Economist once observed, “aspire up and resent down.”

Mitt Romney. The recent record of presidential candidates from Massachusetts is not encouraging. Dukakis and Kerry were both liberal Democrats, and Romney is a Republican, but still….. He has a war chest and is considered by many to have a presidential bearing, but that’s not enough. If it were all about being handsome, it would be Edwards vs Romney, but most people want a face with character, like that of…

Rudy Giuliani. Until and unless Fred Thompson enters the race, Rudy is the most adept TV personality in the field. In fact, he sparkles, as he recently did on Larry Kudlow’s show on CNBC. They say he will have a problem with social conservatives, but he is the Republicans’ Obama: street-smart, good-looking, and refreshingly unscripted. He is the one to watch.

Fred Thompson. With practically zero exposure as a presidential candidate, Thompson recently polled 6 percent. That may sound small, but to get 6 percent before spending one thin dime is impressive. He has a “just folks” demeanor that is well honed from his roles as an actor, and he could be a sleeper. An actor as president? It can happen.

Then there are the supernumeraries, the ones who will fill up the stages at the debates: Biden, Dodd, Richardson, etc. Finally, there a few long-shots, who haven’t declared but who could decide to make waves at any time. Jeb Bush or Colin Powell, say.

Flash back to the Republican National Convention in June, 1920. A heat wave had settled in, and the temperature inside the Chicago Coliseum ranged from 90 to 100 all week. On the first ballot, called on Tuesday, there were two front-runners, with the favorite counting 249 delegates. Finishing a dismal sixth, with 58 delegates, was Warren Harding. By the fourth ballot, the leader’s count had climbed to 314, and Harding’s had dropped to 54. By Saturday, eight ballots had failed to yield a winner. The heat was unbearable, and the delegates had used up their supplies of clean white shirts. There was a deadlock among the top contenders, and in desperation the back-room bosses turned to what one of them later called “the best of the second-raters.” Thus, on the tenth ballot Warren Harding became the Republican candidate for President. (He won the general election in a landslide.)

Will 2008 be another year when a dark-horse candidate comes out of nowhere to steal the prize at a deadlocked convention? Probably not; the convention centers these days are all air-conditioned. Still, it’s an intriguing thought.

Saturday, April 07, 2007

The Inventors

When one counts the people who have the greatest influence on the quality of our lives today, two men stand atop my list: Bill Gates and Steve Jobs. No political leader even comes close. You can say the same about Thomas Edison and the trio of scientists – Shockley, Brattain and Bardeen - who invented the transistor in 1947. Without semiconductors, of course, neither Gates not Jobs could have launched their revolutions. In science, giants always stand on the shoulders of earlier giants.

Parents who struggle to ante up today’s obscenely high college tuitions might mark the fact that Gates and Jobs were both college dropouts – Gates from Harvard, Jobs from Reed. It would be foolish to conclude from that fact that a college education is a waste of money, but there was something in the DNA of these two legendary inventors that would have flourished with or without the college experience. In fact, it is possible that, had either man spent more time in the classroom, he might have missed the moment and the inspiration.

A college education is essential for a doctor or a lawyer, but it is not essential for an inventor. Thomas Edison, the greatest among those earlier giants, lacked even a high school education, let alone college. Edison considered that his education was his own responsibility, not that of his parents or the government, so he read incessantly. Of course, people like Edison, Gates, and Jobs are rare, and most of us need a little help.

The country and the world desperately need people like Steve Jobs and Bill Gates. We need such people more than we need any of the wannabe presidents who fill our TV screens these days. (Come to think of it, a President Gates or a President Jobs might not be the worst thing that could happen to this country.) Inventors can transform our lives in ways we can’t even imagine, and almost always for the better.

We also need people who can recognize genius when they see it. In late 1979, I had dinner at the Oyster Bar in New York with a securities analyst. In those days, securities analysts were expected to analyze companies, not just deliver sound bites on CNBC, and to write long, detailed reports on their subjects. This analyst was one of the best in the business, and at the moment he was filled with enthusiasm for his latest discovery: a personal computer armed with a spreadsheet program called VisiCalc. He fairly bubbled over as he described the power of the spreadsheet to me and my daughter Lucy, a CPA. It was clear that the analyst was on to something big, but we couldn’t see how big or where it would lead. He saw, because analyzing was what he did, and in time that analyst, whose name was Ben Rosen, would parlay his analytical ability into a position atop the computer industry, as Chairman of Compaq. I have to believe that his impressive writing ability helped, too.

We don’t make enough of our great inventors. Yes, the best of them make a lot of money, but their wealth seems to attract resentment as much as it does admiration. I don’t begrudge Gates or Jobs one dollar of their fortunes, which are insignificant compared with the total economic prosperity their inventions have generated. Consider a world without personal computers, word processors, spreadsheets, and data processing. I don’t think we could afford it.

And, most amazingly, both Gates and Jobs are still working hard to bring us all even more technical advances. It can’t be the money; it must be love of the process. Or noblesse oblige: Once you have been designated a w√ľnderkind, it would be almost churlish to pack it in and retire to St. Bart’s. Whatever the reason, we are all lucky to have them thinking up new wonders for us.

So say I, as I type this with the aid of Microsoft Word on my Macintosh computer. Thanks, Bill. Thanks Steve.