Archive for the 'business' Category

This too shall pass (probably)

Saturday, April 21st, 2018

Way back a decade and a half ago we were very optimistic about the direction the so-called New Media would take this country. Creative Destruction, new business plans rendering obsolete the Rathergate-infested old media’s, and so forth. We even trotted out Thomas Kuhn from time to time. By “optimistic” we meant of course that things in the country would develop along a line pretty much compatible with our quite brilliant views.

How times change. Universal internet and universal mobile devices took things in a different direction. Instant cursing is in the trillions, and soon there may be a Nobel Prize for vilest tweet. The creators and lead marketers of instant everything (Facebook, Google, Twitter, Amazon, etc) often can combine leftism with monopolistic zeal in business to an extraordinary degree. Actually the two things aren’t that different in some ways, which is why we and Ralph Nader can find ourselves in agreement on aspects of this.

So now we see author, scholar and broadcaster Dennis Prager getting censored by YouTube for videos with Alan Dershowitz and others in a series sometimes featuring distinguished MIT and Princeton professors; he also is mocked by the NYT for saying perfectly true things about its so-called best seller list. And we see 40 year litigator, CEO of Center for the American Experiment, and founder of TIME’s blog of the year John Hinderaker censored by Twitter for perfectly innocuous stuff.

Maybe the thought monopolists can endure forever. We don’t know. But if things can change this much over the last 15 years, there’s no safe way of predicting what can happen over the next period of time. Meanwhile, we’ll watch but not comment much on today’s comey-this-or-that; too many slings and arrows. So back to China and fan blades.

China speculators moving into commodities, Soros commentary

Saturday, April 23rd, 2016

Bloomberg:

Chinese speculators have a new obsession: the commodities market. Trading in futures on everything from steel reinforcement bars and hot-rolled coils to cotton and polyvinyl chloride has soared this week, prompting exchanges in Shanghai, Dalian and Zhengzhou to boost fees or issue warnings to investors. While the underlying products may be anything but glamorous, the numbers are eye-popping: contracts on more than 223 million metric tons of rebar changed hands on Thursday, more than China’s full-year production of the material used to strengthen concrete.

“The great ball of China money is moving away from bonds and stocks to commodities,” said Zhang Guoyu, a Shanghai-based analyst at Tebon Securities Co. “We’ve seen a lot of people opening accounts for commodities futures recently.” The frenzy echoes the activity that fueled China’s stock market last year before a rout erased $5 trillion, and follows earlier bubbles in property to garlic and even certain types of tea. China’s army of investors is honing in on raw materials amid signs of a pickup in demand.

Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, says the improvement in fundamentals and the availability of leverage to bet on commodities is making them irresistible to traders. “These guys are going nuts,” Hong said. “Leverage exaggerates the move of the way up, but also on the way down – much like what margin financing did to stocks in 2015.”

The gain in steel prices isn’t just on the futures market, with spot prices for the physical product also rallying amid a sudden shortage as construction activity accelerates. Rebar prices have risen 57 percent this year on average across China, according to Beijing Antaike Information Development Co., a state-owned consultancy. Even after output of steel increased to the highest monthly volume on record in March, rebar inventory is still falling, signaling a supply deficit.

Bloomberg:

George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession. China’s March credit-growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.

What’s happening in China “eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth,” Soros said. “Most of the money that banks are supplying is needed to keep bad debts and loss-making enterprises alive.”

Soros said at the World Economic Forum in Davos in January that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past.

Soros said China’s banking system has more loans than deposits and has “troubles on the assets side but also increasingly troubles on the liabilities side.” “Other banks have to lend to each other and that’s an additional source of uncertainty and instability,” he said. “The problem has been deferred and it can be deferred for another year or two but it’s growing, and growing at an exponential rate.”

China’s economy gathered pace in March as the surge in new credit helped the property sector rebound. Housing values in first-tier cities have soared, with new-home prices in Shenzhen rising 62 percent in a year. While China’s real estate is in a bubble, it may be able to “feed itself for some time,” similar to the U.S. in 2005 and 2006, Soros said. “It can reach a turning point later than everyone expects,” he said. “Most of the damage occurred in later years. It’s a parabolic cycle.”

We never saw 2008 coming. We didn’t understand the August 2007 Bear Stearns conference call. Driving to work in 2006 and 2007, we had no idea what the radio ads meant when they said “no income verification” for getting a mortgage — meanwhile the guys on the shop floor were flipping expensive condos on Collins Ave in Miami. Back then our classmate figured it all out, and now he has a school named for him at Harvard.

Soros is right, as are others, about the over 3x GDP and accelerating debt. He’s also right: “It can reach a turning point later than everyone expects. It’s a parabolic cycle.” Barton Biggs was right about Japan’s crash, just 3 years too early. In a way it’s funny that the latest Chinese investment craze is commodities, since the country is so overflowing with crazy debt-fueled infrastructure capacity that there is only one way things can go, eventually. (The country was building empty cities 6 years ago and there’s only so long that can go on.)

One difference between 2008 and now is that back then private shareholders took big hits when sub-prime exploded, but in this case China controls the banks that own the bad debt, and they lend to each other to put off recognizing the bad debts and zombie companies. This would appear to be very bearish both for commodities prices and the renminbi and other Asian currencies, as well as — eventually — for any publicly traded securities of those banks. It remains to be seen whether there are hidden risks like the CDS’s of 2008.

New Silk Road

Friday, July 24th, 2015

CFR:

More than two thousand years ago, China’s Han Dynasty launched the Silk Road, a sprawling network of commerce that linked South and Central Asia with the Middle East and Europe. Today, the idea of a “New Silk Road,” an intertwined set of economic integration initiatives seeking to link East and Central Asia, has taken hold. By 2013, Chinese President Xi Jinping was assertively articulating his own vision for a China-led Silk Road that would streamline foreign trade, ensure stable energy supplies, promote Asian infrastructure development, and consolidate Beijing’s regional influence.

The original Silk Road came into being during the westward expansion of China’s Han Dynasty (206 BC–220 AD), which forged trade networks throughout what are today the Central Asian countries of Kyrgyzstan, Tajikistan, Kazakhstan, Uzbekistan, Turkmenistan, and Afghanistan, as well as modern-day Pakistan and India to the south. Those routes eventually extended over four thousand miles to Europe.

Central Asia was thus the epicenter of one of the first waves of globalization, connecting eastern and western markets, spurring immense wealth, and intermixing cultural and religious traditions. Valuable Chinese silk, spices, jade, and other goods moved west while China received gold and other precious metals, ivory, and glass products. The route peaked during the first millennium, under the leadership of first the Roman and then Byzantine Empires, and the Tang dynasty (618–907) in China.

But the Crusades, as well as advances by the Mongols in Central Asia, dampened trade. By the sixteenth century, Asian commerce with Europe had largely shifted to maritime trade routes, which were cheaper and faster. Today, Central Asian countries are economically isolated, with intra-regional trade making up just 6.2 percent of all cross-border commerce. They are also heavily dependent on Russia.

China has multiple reasons for pursuing the New Silk Road. Xi has promoted a vision of a more assertive China, while the “new normal” of slowing growth puts pressure on the country’s leadership to open new markets for its consumer goods and excess industrial capacity. Promoting economic development in the troubled western province of Xinjiang, where separatist violence has been on the upswing, is another major concern, as is securing long-term energy supplies.

China’s strategy is conceived as a two-pronged effort. The first focuses on overland infrastructure development through Central Asia—the “Silk Road Economic Belt”—while the second foresees the expansion of maritime shipping routes through the Indian Ocean and the Persian Gulf—the “Maritime Silk Road.”

In 2013, Xi told an audience in Kazakhstan that he wants to create a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, toward Pakistan, India, and the rest of Southeast Asia. Such a network would also expand the international use of Chinese currency, the renminbi, in transactions throughout the region, while new infrastructure could “break the bottleneck in Asian connectivity,” according to Xi. The Asian Development Bank, highlighting the need for more such investments, estimates that the region faces a yearly infrastructure financing shortfall of nearly $800 billion. Xi subsequently announced plans for the maritime silk road

The New Silk Road Strategy should be expanded to include aviation and other supply chain innovations as well. BTW, here’s Thomas Sowell: “Freeman Dyson has called the 1433 decision of the emperor of China to discontinue his country’s exploration of the outside world the ‘worst political blunder in the history of civilization.’ The United States seems at this moment about to break the record for the worst political blunder of all time: Iran.” China is fixing its problems while the USA is making its own problems much worse, and completely unnecessarily.

That was then, this is now

Wednesday, July 15th, 2015

2014:

In 1998, Kas turned down an offer by Calvin Klein to raise funds for the construction of the New Acropolis Museum in lieu of showcasing the fashion house’s collection at the 2nd century AD Herod Atticus theatre beneath the Acropolis.

Greece is now required to sell $55 billion in state assets. We think the entire problem could be solved in a couple of minutes. They have all these old, run-down buildings that need fixing, right? Partha-something, acropo-whatnot. For the solution, try humming the tune to “It’s a small polis after all.”

Interim report

Friday, July 10th, 2015

We haven’t drawn any firm conclusions yet about the market unrest in Asia, but we draw your attention to a recent Bloomberg interview of Patrick Chovanec. We cant’t get a direct link to the interview from our location. His observations are well worth thinking about, and we’ll have more on this in a little while.

Double dog dare you

Thursday, July 9th, 2015

At the Telegraph, look who’s inserted itself into the Greek situation to weigh in on one side. Can’t say we’re surprised, given the track record. Next up, Spain and Italy? Stay tuned.

May you live in interesting times

Wednesday, July 8th, 2015

Or: Better to be a dog in a peaceful time, than to be a man in a chaotic period. Bloomberg: “1,323 companies have halted trading on mainland Chinese exchanges, locking up $2.6 trillion of shares, or about 40 percent of the market’s capitalization.” We’re leaving for China in an hour. We’ll let you know what we learn.

Thoughts on Shanghai 2000 and 6000

Tuesday, July 7th, 2015

Stratfor:

The Shanghai Composite Index fell 6 percent on July 3, rounding out a 28 percent decline since June 12, when the country’s stock markets peaked. The deterioration occurred despite intensive government efforts to stabilize prices and revive investor sentiment. Overt attempts by Beijing included cutting benchmark interest rates and reserve requirement ratios and loosening restrictions on investor access to margin loans, in addition to less overt moves, such as direct interventions to prop up the market with government-backed purchases of blue chip stocks. On Friday, in a clear bid to win investor confidence in its oversight abilities, the securities regulator announced it would investigate signs of potential market manipulation. Yet so far, Beijing’s efforts have failed to achieve the desired effect of stimulating, or at least stabilizing, China’s leading stock markets.

In the days and weeks ahead, Beijing will not meekly accept the natural winding down of the past year’s stock boom turned bubble. Rather, it will continue to work, both overtly and covertly, to prevent prices from collapsing outright — all while seeking to reshape investor sentiment and expectations through investigations, like those recently announced. The question of why Beijing feels compelled to take action remains, especially when any intervention risks exacerbating whatever financial and political fallout may come from an eventual market decline or crash. The answer to this question lies in understanding the role of stock markets in China’s economy and Beijing’s broader policy priorities, as well as evaluating the potential effects of a stock market crash on both.

The Chinese government’s core policy goal — the crux of its entire economic reform and rebalancing program — is to cultivate a domestic consumer base capable of supporting nationwide growth that is stable, sustainable and less exposed to fluctuations in external demand. To do this requires a boost in average incomes to a level where non-essential purchases become feasible for ordinary people. Additionally, China needs to instill in its citizens a sense of financial security adequate enough to convince them to spend — rather than save — their disposable income.

China has struggled on both fronts over the past two decades. Until recently, China was a country of near-universal poverty. Its post-1978 economic growth model, grounded as it was in low-cost exports and state-led investment into infrastructure construction, necessitated two policies: the systematic repression of manufacturing wages to maintain the competitiveness of exports and the suppression of interest rates on savings deposits. Keeping interest rates low ensured cheap financing for China’s state-owned sector, which was responsible for the vast majority of infrastructure development and which survived on credit from state-controlled banks. These factors, more than any supposed cultural inclination to save, explain China’s extraordinarily low levels of private household consumption relative to other parts of its economy — and compared to consumption levels in other countries.

For China’s leaders, a key question over the past two decades has been how to cultivate greater household consumption without undermining the low-cost export and government investment-led economic growth model. Doing so required creating investment avenues by which ordinary Chinese citizens could achieve returns on their savings that outpaced inflation, but which did not direct those savings away from domestic export and construction industries. Allowing ordinary Chinese to invest their savings overseas was clearly not an option — not only would it direct those savings away from the domestic economy, but the free flow of capital in and out of China would constrain the government’s ability to manage the yuan’s value. Bearing this in mind, China’s leaders in the early 1990s settled on two approaches: commercial real estate markets and stock markets. Both would give ordinary Chinese new opportunities to invest their savings and reap the rewards while simultaneously directing those savings into key industries and sectors, including housing and infrastructure construction and the state-owned sector, which enjoys disproportionately higher representation on China’s largest stock exchange.

For most of the past 20 years, commercial real estate was by far the dominant avenue for ordinary Chinese to invest their savings, with stock markets playing a minor and unsteady second fiddle. Real estate and related industries formed the single largest component of China’s economy. As long as home sales and prices rose, as they did with extraordinary consistency for two decades, real estate provided an unrivaled investment opportunity, one firmly backed by the Chinese government. This was especially true after the 2008-2009 global financial crisis decimated China’s low-cost export sector, amplifying the importance of construction-related industries for employment and social and political stability. In comparison, China’s stock markets, bedeviled by opacity and poor regulations, floundered. By 2009, most ordinary Chinese viewed investing in stocks as akin to playing the lottery.

To the extent that real estate was the primary means for ordinary citizens to increase their wealth, it also became critical to Beijing’s efforts to stimulate domestic consumption. This in part explains the government’s hesitancy to implement the kinds of policies that in the long run would contribute to cultivating domestic consumption. In the near term, however, bringing in policies such as deposit rate liberalization would raise costs for the state-owned companies largely responsible for real estate-related construction.

Yet now, after peaking, China’s housing has entered a period of protracted decline. With real estate-related investments no longer promising the returns they once did, and with China’s economy slowing, Beijing must find new tools for supporting domestic consumption. This is especially critical given that China is no longer able to rely on low-cost exports or the housing sector. Beijing must now look to private household consumption and consumption-driven industries as the primary drivers of national economic growth.

This is the backdrop against which the sharp, government-supported surge in China’s stock markets over the past 12 months should be understood. It also helps explain why the government continues to support the stock market even as it becomes clear that the market is a bubble, and even as investor leverage rises, alongside the financial risks of a market collapse. In short, a collapse in the stock market, in a climate of stagnant-to-negative growth in real estate, would almost certainly lead to a drop in household consumption and thus in consumption-driven industries. This is exacerbated by an environment that lacks substantial alternative investment avenues, in a period of slowing economic growth, slowing wage increases and rising unemployment.

Private consumption is increasingly critical, not only to Beijing’s long-term reform goals but also to maintaining economic growth, employment, and social and political stability in the near term. Beijing seeks to avoid, as long as it must, any actions that infringe on private consumption. If stock markets collapsed tomorrow, the most immediate effect — beyond widespread but containable ire over lost savings and a significant hit on business cash flows — would be a surge in state-backed bank deposits as ordinary investors move their capital to the only place offering safe, if modest, returns.

This is not necessarily a bad thing for Beijing. After all, China’s state-controlled banking sector would be flush with capital and in a stronger position to pump credit into the economy as needed. At the same time, it would likely cut against the underlying thrust of China’s reform and rebalancing program — specifically, the need to curb wasteful state-led investment, reduce the state-sector’s reliance on artificially cheap financing and improve the ability of banks to price risk. All of this could ultimately combat the widespread capital misallocation that has characterized every prior instance of massive state-backed credit expansion in China. Over the past year, banks have become an increasingly important source of corporate financing. Amid a collapse in the stock market, a rapid surge of deposits into banks would force Beijing to turn once again to the financial sector to support the economy. In all likelihood, this would lead to a repeat of the same speculative bubbles that attended the post-2008 stimulus drive.

Alternatively, Beijing could try to compel banks to hang onto the surge in savings rather than expanding lending. This would realistically be done by raising deposit interest rates. Such a move would almost certainly trigger an economy-wide crisis as the state-owned sector, already suffering falling profits and hefty debt repayment costs, collapses. It would also be an enormous boon to ordinary Chinese citizens, who continue to park the vast majority of their funds in savings deposits. By forcing a broad restructuring of Chinese industry, this would substantially accelerate the central government’s long-term reform plans. It remains doubtful that the Communist Party government could survive such a crisis intact. At any rate, it is highly improbable that Beijing would raise interest rates, a policy that stands a strong chance of undermining state security in the immediate term.

This is the basic conundrum China’s leaders face in determining whether and for how long to sustain the current stock market boom. Barring a radical lifting of restrictions on overseas investment or a sharp increase in deposit rates, China effectively lacks channels for ordinary citizens to generate wealth beyond investment in real estate and stocks. Real estate is slowing, weighed down by years of accumulated oversupply. It no longer promises the returns it once did. If stocks decline, it is unclear what else ordinary people can rely upon to generate returns. The impact of a stock market decline on private consumption growth would only compound its effects on corporate balance sheets and investment, and thus on employment and economic growth.

We noted it at the time a month ago when Shanghai was back at levels not seen since 2007, and it didn’t seem vastly overvalued compared to then. We also noted the swift drop a couple of weeks ago. However, we were unaware of the interesting political element in all of this. Markets can be very helpful to governments, but when it’s markets versus governments, who wins?

Update: both the WSJ and Bloomberg have very interesting pieces on this. It turns out our question in the preceding paragraph was apt.

How can either YES or NO work?

Friday, July 3rd, 2015

Bloomberg:

43 percent intend to reject the budget cuts demanded in exchange for financial aid, while 42.5 percent will accept the conditions. The survey of 1,042 people was conducted by the University of Macedonia Research Institute of Applied Social and Economic Studies. The margin of error was 3 percent. An Ipsos survey released late Friday showed a razor-thin margin, with “yes” at 44 percent and “no” at 43 percent.

Meanwhile, retail sales are off 25% from 5 years ago, international payments mechanisms are essentially frozen and the supply chain is broken — and the country is split down the middle on what to do. If the referendum were a vote on civil war…

Our two drachmas

Monday, June 29th, 2015

FWIW, we’ll be surprised if Greece does a deal with the EU etc to stay in the euro. Alexis Tsipras doesn’t seem to have that much room to compromise, given his newness and ideology (and rhetoric). Moreover, as we noted the other day, this has been playing out in slow motion for a decade or more. However, we don’t see 2008 at the moment, with all its craziness, because oil isn’t $147 a barrel, and the CDS’s can’t be as insane as they were back then. As always, prepared to be wrong, but that’s our view at the moment.

That old Toyota ad

Thursday, June 25th, 2015

You asked for it; you got it. Heh. Good idea. Except Toyota was an excellent product.

Cause and effect

Thursday, May 28th, 2015

This, that. This, that.

38 years from Dive Bomber to Kitty Hawk

Sunday, May 24th, 2015

Of course the remarkable movie Dive Bomber aired this weekend. Filmed in color at NAS San Diego just before Pearl Harbor, it shows vividly just how far aviation had come in the 38 years since Kitty Hawk, and just how much further the technology had to go. (Of course the quarter century after the end of WWII was even more spectacular, with Americans on the moon and supersonic passenger aircraft flying around.)

So, 38 years from Dive Bomber to Kitty Hawk. What’s the parallel story looking back 38 years from now? The B-1 bomber was cancelled. The space shuttle made its first flight. The ban on the Concorde landing at JFK was lifted. A Pan Am B747SP circumnavigated the earth over the poles. By far the most striking thing about aviation in 1977 is there were so many crashes, including Tenerife.

Has technological and other progress slowed down a lot from the first 38 years to the most recent? Probably not. Engines are much more efficient now. Major programs like the B757 and B767 had their entire life cycles. Airbus was born and created a global duopoly. Airline deregulation spurred greater price competition and the widespread development of frequent flier programs. The technology of long range aircraft is much more advanced now. However, the airport experience today is generally so awful that it negates many the improvements, since pre-flight security lead times are often 2-3x what they were back then.

What does the next 38 years hold in store?

Miscellany

Friday, May 22nd, 2015

Mosul, Ramadi, all downhill from here. CK has some thoughts. How depressing to be on an ivy league admissions committee. Ok, enough downers. One other thought on the Mad Men conclusion came from this AT piece. Coke and Atlanta. We recall going to Atlanta to meet with Trust Company of Georgia in 1984, to advise the company on its upcoming merger with Sun Banks. We met with Jimmy Williams; as soon as we were seated in his office, he offered us a Coke. Not coffee, a Coke. (In 2012 Trust Company sold most of the Coke stock it received for assisting in the company’s 1919 IPO.)

Hopefully, merely a grifter

Thursday, May 21st, 2015

Some guy:

the challenge I want to focus on today, the urgent need to combat and adapt to climate change. I know there are still some folks back in Washington who refuse to admit that climate change is real. They’ll say, “You know, I’m not a scientist.” the best scientists in the world know that climate change is happening. Our analysts in the intelligence community know climate change is happening. Our military leaders — generals and admirals, active duty and retired — know it’s happening. Our homeland security professionals know it is happening.

The science is indisputable. The fossil fuels we burn release carbon dioxide, which traps heat. And the levels of carbon dioxide in the atmosphere are now higher than they have been in 800,000 years. The planet is getting warmer. Fourteen of the 15 hottest years on record have been in the past 15 years. Last year was the planet’s warmest year ever recorded.

Our scientists at NASA just reported that some of the sea ice around Antarctica is breaking up even faster than expected. The world’s glaciers are melting, pouring new water into the ocean. Over the past century, the world sea level rose by about eight inches. That was in the last century; by the end of this century, it’s projected to rise another one to four feet.

at the Academy, climate change — understanding the science and the consequences — is part of the curriculum, and rightly so, because it will affect everything that you do in your careers. Some of you have already served in Alaska and aboard icebreakers, and you know the effects. climate change is one of those most severe threats.

Climate change will impact every country on the planet. climate change constitutes a serious threat to global security, an immediate risk to our national security. And make no mistake, it will impact how our military defends our country. And so we need to act — and we need to act now. confronting climate change is now a key pillar of American global leadership. When I meet with leaders around the world, it’s often at the top of our agenda — a core element of our diplomacy.

climate change increases the risk of instability and conflict. Rising seas are already swallowing low-lying lands, from Bangladesh to Pacific islands, forcing people from their homes. Caribbean islands and Central American coasts are vulnerable, as well. Globally, we could see a rise in climate change refugees. And I guarantee you the Coast Guard will have to respond. Elsewhere, more intense droughts will exacerbate shortages of water and food, increase competition for resources, and create the potential for mass migrations and new tensions. All of which is why the Pentagon calls climate change a “threat multiplier.”

severe drought helped to create the instability in Nigeria that was exploited by the terrorist group Boko Haram. It’s now believed that drought and crop failures and high food prices helped fuel the early unrest in Syria, which descended into civil war in the heart of the Middle East.

climate change will mean more extreme storms. Typhoon Haiyan in the Philippines gave us a possible glimpse of things to come — one of the worst cyclones ever recorded; thousands killed, many more displaced, billions of dollars in damage, and a massive international relief effort that included the United States military and its Coast Guard. So more extreme storms will mean more humanitarian missions to deliver lifesaving help. Our forces will have to be ready.

climate change means Arctic sea ice is vanishing faster than ever. By the middle of this century, Arctic summers could be essentially ice free.

One hopes these are simply the words of a grifter looking to make a few bucks. Otherwise, help! (For comparison, here’s a different graduation speech.)

Coolidgean nostalgia?

Wednesday, May 20th, 2015

Pethokoukis.

Fast, slow, stop

Monday, May 18th, 2015

It took 14 months to build the Empire State Building, back when America knew how to do things. 26 months for the WTC to become the tallest building around. We were in Xiamen recently and we told that the airport is to be completely torn down and a much larger one built in 4 years. Question: given what you know about California’s $68+ billion high speed rail fantasy, how long might it take to replace tiny Santa Monica airport?

Name that sequel

Sunday, May 17th, 2015

We liked the first couple of seasons of Mad Men, which series concludes today. For a good long while, we particularly liked one of the first episodes — punchline: it’s toasted. However, on reflection, it actually understated the power and ubiquity of all those cigarette ads, with jingles everywhere and everyone from Fred and Barney to Granny Clampett pitching Winstons (Winstons taste bad like the one I just had; no flavor, no taste, just a thirty cent waste). We didn’t much care for the Mad Men personal dramas of the characters as the narrative arc mimicked 1960’s dissolution, but the ad business was very interesting. Of course the carousel pitch is our favorite bit of great writing and great acting.

We moved to NYC in 1974 to be a banker trainee at First National City Bank, and rented a furnished fifth floor walk-up with a toilet in the hall and a tub in the kitchen, all for $169 a month. The offices in our 399 Park Avenue bank HQ looked like those in Mad Men; the building itself was non-descript. However, the other 3 corners at 53rd street were marvels: the Racquet Club, Lever House, and the Seagram Building, home to the iconic Four Seasons and the 24-hour Brasserie. Magnificent views of both NYC history and recent progress from our 12th floor cubicle. FNCB would shortly change its name to Citibank and spend $100MM to proliferate and popularize the ATM.

Our trainee class sounds like a parody. We had a proto feminist who was married to someone with a different last name, a dapper and on-the-prowl Asian American, a hip African American (who took us to the Cotton Club where Slappy White made us the center of his jokes), a cropped haired lesbian who did something nasty to the Asian, a Navy veteran who had been in Vietnam, and various other entertaining sorts, from muscle men to nerds. Our first boss was a gay Baker Scholar and nobody cared. How we ended up in the group is a story as well. As a recent college graduate who majored in the intellectual history of the middle ages and renaissance and who had read maybe two or three pages of a Business Week magazine, we were probably not the most qualified class member. However, a kind gentleman who was also a scion of a famous Philadelphia banking family introduced us to an SVP of FNCB at an alumni event; when we told him that FNCB had “lost” our résumé, he hurumphed “we’ll see about that.” We got the job.

1974 and following also has its appeals for a TV series. Hard to believe, but the WTC was only 4 years old then. In 1974 Watergate was in motion and Nixon would resign. Hilarity would ensue with Gerry Ford’s inane Whip Inflation Now campaign, soon to be followed by Ford to City: Drop Dead, and then the MAC, Felix Rohatyn, the blizzard of 78, the 444 day hostage crisis and so forth. Surely the mix of this with the Young Bankers from the previous paragraph could be made interesting for 100 episodes. If you know Matthew Weiner give him a call, and naming suggestions for the series would be appreciated.

A very bad version of The Godfather

Thursday, May 14th, 2015

In retrospect, this is a particularly smarmy performance, using some nutty pronouncement by a marginal guy in order to ambush the frontrunner. But it’s par for the course. We’re living through a very bad version of The Godfather, with bad people on all sides BTW, just like the movie. So what Mitt should have said is What’s the Turk paying you?

Good TV

Monday, May 11th, 2015

If you’re tired of watching reruns of L&O or My Friend Flicka, we recommend CNBC Asia. It’s tomorrow’s news today! Also particularly good on Sunday since it’s Monday morning in the PDT afternoon. Bernie Lo is excellent, as are many of his associates. Indeed, CNBC Asia is superior in many ways to the US broadcasts. On Sunday PDT they had Marc Faber as co-host, and he was well informed and periodically funny. He interviewed the head of BOC aircraft leasing (a subject near and dear to our heart), and we learned a lot. When was the last time you could say that about US TV?