[Posted 7:00 AM ET…from Des Moines, IA]
Wall Street…and 1929
A strategist in Europe was quoted as saying this week, “We’ve
had a long period of greed…and the chickens are coming home
to roost.” I’ve called the current era ‘Great Gatsby II.’
Coincidentally, on Thursday I drove east a ways from Des
Moines to exit 254 on Interstate 80 and the little town of West
Branch, Iowa, birthplace of our 31st president, Herbert Hoover
(b. 8/10/1874), and site of his impressive presidential library and
museum. It’s a bit of a hike and wasn’t part of my original plan
but I thought ‘How could I pass it up at this time in the markets?’
Hoover, a famous engineer and great humanitarian, as well as
commerce secretary under presidents Harding and Coolidge,
came into office just 8 months before the crash of 1929. He had
been troubled by the excesses in society and the markets, and it’s
interesting to note that both in the 1920s and today, the middle
class was largely getting crushed while Wall Street and the elite
partied.
Hoover asked the magazines and newspapers to run stories
warning of the dangers of rampant speculation but his calls were
largely ignored. Then on Oct. 19, ten days before Black
Tuesday, Hoover requested an emergency analysis of the stock
market from Thomas Lamont of J.P. Morgan.
“There is nothing in the present situation to suggest that the
normal economic forces, working to correct excesses and to
restore the proper balance of affairs, are not still operative and
adequate,” Lamont wrote. Kind of sounds like current Treasury
Secretary Henry Paulson, a former Wall Street kingpin himself,
doesn’t it?
Hoover’s treasury secretary, Andrew Mellon, had wanted to
go back into private life but stayed on at Hoover’s request when
Herbert assumed office. Following Black Tuesday, and as the
market began to swoon in earnest in 1930 after a brief rally,
Mellon proclaimed:
“Let the slump liquidate itself. Liquidate labor, liquidate stocks,
liquidate the farmers, liquidate real estate…It will purge the
rottenness out of the system. People will work harder, live a
moral life, values will be adjusted, and enterprising people will
pick up the wrecks from less competent people.”
Well, imagine if Hank Paulson made a statement like that today.
It’s probably what Federal Reserve Chairman Ben Bernanke
thinks, but on Friday he came to the rescue, perhaps, in lowering
the discount rate 50 basis points (from 6.25% to 5.75%); though
this is the rate charged member banks, not you and I, and it’s not
the 5.25% rate that remains on fed funds, which has more to say
with the level of economic activity. In other words, you could
say the discount window, as it’s called, is where they dish out the
gruel during a crisis…kind of like a food pantry. But Wall Street
still liked the move, at least for the time being, because it sees
more handouts coming down the road, and maybe this will be the
case.
But back to 1929, Hoover’s Fed had actually reined in
speculation in August, only to see National City Bank promise
$100 million in fresh loans. To put it mildly, Hoover and Mellon
were furious as this only added fuel to the fire, as future action
would prove.
Well, you know the rest. Hoover not only made some big
mistakes, such as in the Smoot-Hawley Tariff Act that
exacerbated the emerging global depression, but being a private
person, owing to his humble Quaker roots, at a time when he
needed to be out front leading, wasn’t a good thing. Between
1929 and 1932, U.S. GDP was cut in half and $3 billion in
uninsured deposits lost as thousands of banks went under.
Needless to say, the real estate boom of the 1920s was another
victim.
Hoover had entered office as an activist president with a goal of
firming up the middle class and taking care of the poor,
especially children. [He later founded the forerunners to CARE
and UNICEF.] In fact during his Inaugural Address, he set a
goal of eradicating poverty across America.
So even during the evolving depression, Hoover wanted to fund
his anti-poverty, pro-children programs while maintaining a
balanced budget. As the economy swooned, though, this just
wasn’t possible so in 1932, Hoover raised the tax on the
wealthiest from 24% to 55% in a last effort to come up with the
funds. By this time he was very tired of the elite.
“The only trouble with capitalism is capitalists. They’re too
damned greedy!”
Time magazine quipped:
“Mellon pulled the whistle
Hoover rang the bell
Wall Street gave the signal
And the country went to hell.”
The comparisons to today in the above history are quite telling,
in the mind of your editor. And to those who say, well, the
global economy is the strongest it’s ever been, that was the
largely the case, too, in 1929. Even then, without the mass
communication tools of today, we were still very much
connected.
Well, FDR came into office in 1933 and what was the first thing
he did? Declare a 4-day bank holiday…a timeout. It was as if he
told the bankers, ‘You all go into your corners and think about
the sins you committed the past 10+ years. All the stupid
lending for crackpot schemes, the loans to fund real estate
projects that made zero economic sense, and the illegal trading
that was rampant in the markets and that proliferated under your
watch.’
But even still, as you well know from your history books, it’s not
as if FDR had any real influence on the actual economy until war
broke out. But where he was different from Hoover was he was
a leader, and at least made Americans down on their luck feel a
little better.
—
So what of today and the crisis in the financial markets, globally,
that started in the subprime mortgage market…loans made to
people who for the most part didn’t deserve them, who didn’t do
their homework, and are now up the creek without a paddle?
In one of the dumbest op-ed pieces in the history of mankind,
one that received quite a bit of play, financial commentator Ben
Stein, writing in the New York Times, tried to convince us that
the current market turmoil was much ado about nothing; because
when you break down the numbers, the subprime issue, versus
the size of the total economy as well as the value of all financial
assets in the U.S., is miniscule.
Stein wrote nothing of the impact on the consumer, insisting in
true Thomas Lamont fashion that “This economy is extremely
strong. Profits are superb. The world economy is exploding with
growth…for now, the sell-off seems extreme, not to say nutty.”
Heretofore, Ben Stein has more often than not been a voice of
reason in his opinion pieces and I’ve quoted him favorably on
more than one occasion. I think that’s what so many of us found
unbelievable when we saw this piece of trash.
Amazing that there are some out there who feel it’s only about
subprime mortgages, but before I go to Henry Kaufman for a
more reasoned analysis, let’s get one thing off the table.
Those who say the stock market is fairly valued today, citing a
price/earnings multiple on the S&P 500 of around 17 based on
trailing earnings, are only correct if they feel that decent earnings
growth is going to continue well into the future. In that case I
would agree; the market is fairly valued. But I believe corporate
profits are on the verge of falling off a cliff, and, anyway, fairly
valued is not the same as cheap.
Let’s look, though, to what legendary economist Henry Kaufman
wrote in an op-ed for the Wall Street Journal.
“Tremors from America’s quaking subprime mortgage market
have spread throughout the financial world. This latest
disturbance in global financial markets is neither isolated nor
idiosyncratic. It points to deeper, enduring changes in the
structure of our markets – changes that have profoundly altered
the behavior of market participants in ways that tend to
encourage risk-taking beyond prudent limits. Just as troubling is
the failure of official policy makers to effectively rein in such
excesses, leaving our financial system vulnerable to similar
turmoil in the near future….
“(Structural) and institutional changes have, in turn, encouraged
a new understanding among market participants of liquidity. In
the decades that followed World War II, liquidity was by and
large an asset-based concept. For business corporations, it meant
the size of cash and very liquid assets, the maturity of
receivables, the turnover of inventory, and the relationship of
these assets to total liabilities. For households, liquidity
primarily meant the maturity of financial assets being held for
contingencies along with funds that reliably would be available
later in life. In contrast, firms and households today often blur
the distinction between liquidity and ‘credit availability.’ When
thinking about liquid assets, present and future, it is now
commonplace to think in terms of ‘access’ to liabilities.”
[Ed. I just have to interject that this last paragraph is not only
brilliant, it should be on a laminated card for every student in
high school and college today. It’s probably too late for Wall
Street and Corporate America, however.]
On the topic of quantitative modeling Kaufman notes:
“(Models can’t) take into account the impact of growing
financial concentration in the making of markets and in the
pricing of securities that are traded infrequently, or that have
tailor-made attributes. And what about the risks to financial
markets of a major military flare-up, the ravages of a pandemic
flu, a terrorist attack that would immobilize computer networks,
or even shifts in the broader monetary environment? Do the
models quantify these and other profound risks in any
meaningful way?”
Kaufman concludes:
“What is missing today is a comprehensive framework that pulls
together financial-market behavior and economic behavior. The
study of economics and finance has become highly specialized
and compartmentalized within the academic community. This is,
of course, another reflection of the increasingly specialized
demands of our complex civilization. Regrettably, today’s
economics and finance professions have produced no minds with
the analytical reach of Adam Smith, John Maynard Keynes or
Milton Friedman.
“It is therefore urgent that the Fed take the lead in formulating a
monetary policy approach that strikes the right balance between
market discipline and government regulation. Until it does so,
we will continue to see shocks of even greater intensity than the
one now radiating outward from the quake in the U.S. subprime
mortgage market.”
—
David Rosenberg, chief economist of Merrill Lynch, is another
who has been all over the risks to our financial markets, though
he is bit too sanguine for my book in terms of future growth
prospects. That said, Rosenberg, in a piece for the Financial
Times, summed it up. “The stresses to the system that started
with the subprime mortgage upheaval have expanded not just
into junk but also to high-grade corporate debt, to the prime
mortgage sector and beyond the U.S. border to hedge funds in
Europe and Australia.”
There are innumerable examples of the above, with each day
bringing, it seems, news of another hedge fund that has fallen
prey to the contagion Ben Stein can’t see. Personally, I couldn’t
give a damn about these guys, but their actions can, and have,
nonetheless roiled markets, especially when they’ve loaded their
portfolios with investments for which no one has a clue as to the
true value, as in collateralized debt obligations.
And despite what Mr. Stein said up above, the subprime mess did
indeed spread to the jumbo mortgage market, many of which go
to the best credit risks. One outfit specializing in jumbos
(technically, any mortgage over about $420,000…the
Fannie/Freddie limit), Thornburg Mortgage, cut off funding them
this week as the CEO said there was a “severe crisis” in his
sector. Countless other mortgage lenders have closed their doors
and laid everyone off (this part of the carnage has yet to be
accurately tabulated), never to be seen or heard from again.
And then you have Countrywide Financial, the nation’s largest
mortgage lender with over 61,000 employees, as well as a large
bank to boot (Countrywide Bank). Countrywide’s operations
seized up this week and it was forced to access its full credit line
of $11.5 billion. Rumors spread that the bank was about to go
under and in the Los Angeles area, as reported in a great story by
the LA Times on Friday, even the likes of former NHL goalie
Rogie Vachon were in line to get their money out. In Rogie’s
case he said his own deposits were over the insured limit….good
advice for all of us. Keep track of this.
Meanwhile, globally, the situation was chaotic with Tokyo’s
Nikkei index declining 5.4%, its worst performance since 9/11.
There are signs the average consumer in Europe is beginning to
cut back, and you had a large Aussie mortgage bank that couldn’t
refinance $5 billion to keep its operations afloat, while emerging
market bourses were beginning to tank as well. Foreign direct
investment in some Latin American nations, for example, could
grind to a halt at a time when this has been fueling their growth.
The Fed itself, in slashing the discount rate, admitted the
“downside risks to growth have increased appreciably,” though
the market liked that the Fed added it was “prepared to act as
needed,” which offered hope of actual cuts in the funds rate.
But in wrapping up this segment, here’s a summary. CEO
confidence is at a 5-year low and this obviously impacts capital
spending; consumer confidence in America is plummeting;
homebuilder confidence is at a 16-year low; the leveraged buyout
era as we knew it is over (though here it’s not such a bad thing
for employees because all private-equity has been doing is raping
and pillaging in taking out egregious dividends for itself, while
loading up the company they had just acquired with humongous
amounts of debt, thereby virtually assuring its future demise in
any recession).
In the end, though, it all can still largely be reduced to real estate.
It’s always also been about affordability and far too many having
stretched beyond their means. And now countless mortgage
holders, at least in the U.S., face further damage in the form of
resets. There is far more pain to come and millions of jobs to be
lost in all housing-related industries. Good paying jobs, as
President Bush would say.
But I fall down in the camp of those who say it is not up to
government to bail out those who made poor decisions. Here I
agree with former Treasury Secretary Mellon. Government is
supposed to, however, attempt to provide a stable climate from
which we can conduct our business and on this front history will
show our current leadership failed in its latter years. President
Bush, for example, was trumpeting record homeownership levels
at a time when far too many were in way over their heads and
were in the process of making mistakes for which they will pay
for a long time.
It’s a fine line, though, I’ll grant you. The Federal Reserve, for
one, doesn’t want to see a deep recession, or worse. So it is
attempting to figure out a formula that will lead to a more
responsible environment for both investors and homebuyers
without sending everyone out into the streets.
But the process set in motion today is also largely out of the
Fed’s control. One can always hope for the best, but as in the
days before a hurricane, prepare for the worst.
Street Bytes
–You may want to glance at my current “Wall Street History”
offering on volatility, if you think things have been particularly
wild these days. Historically, this is nothing. That said, thanks
to a 233-point rally on Friday the Dow Jones was able to pare its
losses for the week to just 160, or 1.2%, as it closed at 13079.
Thursday morning it was closer to 12500. The S&P 500 and
Nasdaq also recorded losses of 0.5% and 1.6%, respectively, and
all the broad market indices hit the magic 10% correction level at
one point or another.
There was some other important financial news on the week.
Earnings out of leading retailers Wal-Mart, Home Depot and
Macy’s all spoke of a dim outlook for second half activity, and
overall retail sales for July were up just 0.3%. Friday’s release
on consumer confidence was also hideous.
This coming week, however, could be dominated by talk of
Hurricane Dean if it were to enter the Gulf of Mexico and
endanger our oil and gas infrastructure. We’re also entering the
two top vacation weeks for Wall Streeters and that could have an
impact on the direction. But most importantly, we’ll learn a lot
more whether the credit crisis is in need of more Fed action, as
well as learning of more bodies, I imagine.
–U.S. Treasury Yields
6-mo. 4.19% 2-yr. 4.17% 10-yr. 4.67% 30-yr. 4.98%
Short rates absolutely plummeted as bond traders treated as a
certainty future Fed rate cuts, even if the Fed itself said
otherwise, until Friday.
Fed Governor William Poole roiled the markets early on with his
pronouncement that only a “calamity” justified a rate cut today.
The sky is not falling with regards to the economy, he said, and
the Fed should wait until its 9/18 meeting before acting. The
Fed’s decision on Friday to toy with the discount rate argued
differently.
For the record, there was some news on inflation and both the
core producer and consumer price indexes for July were tame.
The core CPI, ex-food and energy, is now up 2.2% year over
year. If the Fed is still worried about the CPI being over their
2% target, they are indeed nuts. [And, again, sports fans; I know
the true rate of inflation is much higher, as in the cost of things
you and I pay for, but the Fed doesn’t act on that.]
–China’s product safety issues continue as Mattel recalled
another 19 million toys, including Batman and Barbie (the truth
comes out…they are spies) due to more concerns over the use of
lead paint, as well as magnets; though the latter is not necessarily
China’s fault, the magnets being a design flaw. China is
responsible for 80% of the toy’s being sold in America, which
could be good news for the Island of Misfit Toys come
Christmas. Time to gear up for the rush, guys.
[To prove China is serious about cleaning up its act, Vice Prime
Minister Wu Yi was named to head up a product and food safety
panel.]
–Nokia recalled 46 million cellphone batteries, also made in
China by a Matsushita of Japan unit, because they overheat.
–In reading a piece on Japan in the July/August issue of The
American (a new publication worth checking out), I couldn’t
help but include the following from Rowan Callick.
“(We, the U.S.,) ignore Japan at our peril. While China gets all
the attention, Japan, still firmly ensconced in second place
among the world’s economic powers, is quietly enjoying its
longest period of sustained growth since World War II. Japan’s
global brands have never been stronger: Toyota surpassed
General Motors in car and truck sales for the first quarter of
2007, knocking it out of the world’s top spot for the first time in
76 years; patent royalties deriving from Japanese inventiveness
hit $4.2 billion in 2006. Sony and Canon, Honda and Panasonic,
Fujitsu and Hitachi: throughout the world, Japanese brands are
respected and profitable. By contrast, despite the best efforts of
personal-computer giant Lenovo and white-goods producer
Haier, China has yet to build a single brand that most Americans
could name. Japan is back.”
And Mr. Callick wrote this before the latest product safety
concerns from the mainland emerged.
–In a bad sign of the times in biotech land, stalwart Amgen
announced its first wide-scale layoffs…2,600. I also just saw
that one of the big mortgage players alluded to above, First
Magnus, laid off 6,000 in folding up its tent.
–And layoffs have started on Wall Street, with Bear Stearns
handing out 240 pink slips to employees in its mortgage lending
units. Recall, employment in the securities industry recently hit
a peak, always a contrarian indicator.
–Dell restated four years of earnings after an intensive
investigation but the changes are relatively minor; though it’s
still fraud, for crying out loud, and the SEC isn’t done with the
company. Meanwhile, rival Hewlett-Packard, which once had its
own accounting issues, issued a solid earnings report.
–When I was at PIMCO, from time to time someone would
come into our offices and talk about a product that was based on
back-testing some model and my associate Andy and I would
look at each other during the presentation and signal, ‘This is the
biggest bunch of crap we’ve ever heard.’ Alas, many of the
“quant” products have been huge successes, but now so many of
them are doing the same thing, it’s tough to separate yourself
from the crowd. Which means you have to come up with a new
model. Mine would be based in part on the price of beer. Or
solely on it, actually.
–Here’s a funny one. You could be a multi-millionaire, yet have
trouble closing on a $500,000 mortgage this week; but the New
York Giants and Jets had no problem obtaining a $1.3 billion
loan for a new stadium. Undoubtedly, the CEOs at the banks
that were part of the consortium will get their own luxury boxes,
and at the end of the day in this chapter of Great Gatsby II, isn’t
that what’s most important?
–I haven’t finished with my fieldwork here in Iowa, so I’m
holding off on more expansive commentary until next time. For
now, as Rudy Giuliani noted this week during his visit…I have
never seen more corn in my life!
Thanks to ethanol and booming exports, the economy is strong,
as reflected in part by the housing market. The other day the
second quarter figures were released and existing home sales in
the state were up 4% over a year ago. This compares to declines
of 41% in Florida, 37% in Nevada, 23% in Arizona, 21% in
Tennessee, and 20% in California.
I’ll explore next week whether Iowa is headed towards a bust.
[Separately on California…for the month of July, the six-county
southern market saw the slowest home sales pace in 12 years, but
the median home price was still up 3.7% from a year earlier
thanks to the upper end of the market remaining strong while the
lower end craters. But that was July…before the credit crunch
that reached into the jumbo loan (read ‘high-end’) market.]
–The U.S. federal budget deficit could come in below $200
billion for the fiscal year ended Sept. 30. But the issue for F2008
is will the record revenue stream continue? [Not likely by my
way of thinking] And can the government rein in spending, such
as on Medicare and Medicaid, $560 billion, currently, Social
Security, $516 billion, and the military, $437 billion? [Not
likely.] Then there is the interest on the public debt, now a
staggering $385 billion. You want to know why it’s difficult to
fund your favorite social welfare program? Look no further than
this last figure.
–According to the National Association of Realtors, of the 149
metro areas they track, the place with the lowest median home
price is Elmira, New York…just $71,700. No Elmira jokes
allowed.
–If you are a Disney shareholder, you may want to know that
traffic at its 2-year-old Hong Kong Disneyland may decline 20%
in 2007 over the first year figure. This is not good. [South China
Morning Post]
Foreign Affairs
Iraq: One thing we’ve learned in the 4 ½ years of this war; if you
start to feel optimistic, wait 24 hours. Such was the case with
Tuesday’s unfathomable massacre of the Yazidi sect near the
Syrian border that killed 400; al Qaeda in Iraq clearly being
responsible. The surge has worked in some respects by pushing
al Qaeda outside the urban areas, but there are simply not enough
U.S. troops to police the entire country and the Iraqi military is
not capable of protecting its own.
That said; the White House and General Petraeus are both
floating ideas for a drawdown in forces by next summer in order
to maintain Congressional support.
Iran: And related to the above, the White House is preparing to
name Iran’s Revolutionary Guards as terrorists in order to go
after its financial interests through increased sanctions that the
administration is hoping it can get the UN Security Council to
approve in September.
But that’s only part of it. As the New York Post’s Ralph Peters
first brought up (and others have since followed), the move
would establish a legal basis for air raids on IRG bases in Iran.
Israel: He’s baaaack! Former prime minister Benjamin
Netanyahu took 73% of the vote for the leadership of the Likud
Party and it’s only a matter of time before he once again holds
the reins of state. Meanwhile, Hizbullah’s Sheikh Nasrallah
warned Israel that if it attacked his bases in Lebanon, he had
some surprises up his sleeve. One thing you can count on when
Netanyahu takes over and that is war.
Turkey: Big week coming up here as Islamist-AKP member
Abdullah Gul, the foreign minister, announced he is running a
second time for the presidency; an act that the secular military
establishment blocked last spring and warned against following
the recent election that solidified the AKP’s power.
The vote in parliament starts Monday and Gul’s election seems
certain. Secularists have long said they will not accept Islamist
control of all three major posts; the presidency, speaker, and
prime minister. The risk of a coup has risen another 3- or 4-fold.
Russia: Terrorists of unknown origin (probably Chechens) blew
up a train (no fatalities), while members of a heretofore unknown
Neo-Nazi group were arrested following the release of a
gruesome video clip (said to be authentic) that showed two men
from the Caucasus being killed (one beheaded).
Separately, keep an eye on Kosovo. Its leaders remain hell-bent
on declaring their independence from Serbia by year end. Russia
isn’t helping in negotiations with the U.S. and European Union
as it adamantly supports Serbia. If and when the Albanian
majority declares statehood, violence is a certainty and while the
number of casualties won’t approach those of the Balkan War,
the scope of the brutality will.
And on Friday, Russian President Vladimir Putin announced his
air force would restart Cold War-era bomber runs over the
Atlantic, Arctic, and Pacific…just to remind us what a pain in the
ass he can be.
India: Both sides of parliament blasted the prime minister for the
nuclear deal with the United States, saying it gives up too much
of India’s sovereignty and control over its nuclear weapons
program (which is hardly the case). The majority do not want
closer ties with the U.S., in yet another example of just how
hated we are these days, though members of parliament in India
are also playing up to the sizable Muslim minority.
North Korea: The peasants can’t catch a break. More historic
flooding has left hundreds of thousands homeless and destroyed
at least 10% of their farmland. The summit between North and
South has also been put off until October.
Afghanistan: The tribal jirga was a total bust, though for the
record Pakistan’s President Musharraf did show up, three days
late (last week I wrote he was a no-show). The ‘council’ was to
adopt measures to combat terrorism in the region but instead, I
imagine, they compared notes on the poppy crop. “Yes, our
harvest was good….and yours?”
Peru: An earthquake claimed over 500 lives.
European Union: You want some good news? At least 16
countries have seen an uptick in their birthrates from 2004 to
2006. As reported by USA Today, while the increases are small,
at least it bucks a 20-year trend of declining fertility rates; a
critically important issue as Europe faces gigantic costs in social
services for its rapidly aging population.
Random Musings
–To say the least, I wasn’t a fan of Karl Rove’s. Good riddance.
–I arrived in Des Moines on Tuesday and saw that Joe Biden and
Hillary were speaking at the State Fair on Wednesday so I
checked them out. I’ve always liked Biden, being a sucker for
anyone who’s a student of foreign policy as he has been for
decades. And let’s face it; he’s entertaining and a great guest on
the Sunday talk shows.
But in all sincerity, I was blown away by his speech that focused
on Iraq. It helps that he has so much credibility on the topic, far
more than anyone else running for president, frankly, save
McCain. But what got me and the 70 or so others that bothered
to hear him in the stifling heat was how moving he was. It was
the best political oratory of any kind I’ve ever heard and I’ve
been a student of this game for a long time. You had to be there,
I’ll admit, but the man looked like a leader in a field of
charlatans.
Biden is the only Democrat talking the truth on Iraq and in one
example he blasted his fellow candidates for offering that all we
have to do is cut and run. As he said Wednesday, “You know
how long it would take to get our troops out if we wanted to
today? Ten months…minimum.” And he’s right. I could go on
but I’ll spare you.
As for Hillary and her appearance, I only stayed for the first five
minutes. She drew 500, as noted later by the Des Moines
Register, and I did snap off a few pictures. But her speech
started off on a phony note and I was running late to get to John
Wayne’s birthplace and the Bob Feller museum. We all have our
priorities.
[For the archives, Mitt Romney won the Iowa Republican straw
poll with 31.5% of the vote, with Mike Huckabee coming in a
solid second at 18%. So Huckabee survives, while Tommy
Thompson became the first to say, “This is stupid. I’m outta
here.” I did not have a chance to see Fred Thompson at the fair
on Friday but the local press gave him decent coverage.]
–Romney got in some hot water for an incredibly stupid
comment when he compared his kids’ stumping for him to
military service. I could never vote for this man.
–Iowa has the cleanest roadways I’ve ever seen. In driving 125
miles each way to West Branch, I didn’t see a speck of litter; nor
have I seen any in my other travels here thus far. Now that
speaks volumes about the character of the people.
–I’m going to cover Herbert Hoover’s life in more detail for a
future “Wall Street History” piece, I’ve decided, but related to
the above comment on character, I have to make note of an
episode from Hoover’s life when he was based in London and
asked by the U.S. ambassador to help 120,000 Americans
trapped on the wrong side of the Atlantic at the outset of World
War I. Hoover was well known at this point for his successful
business ventures (and he would later lead the relief effort in
Europe following the war), but during his mission to get
Americans home, his organization lent $1.5 million to folks and
all but $400 was returned.
That’s incredible. Now contrast that with today. In both the
aftermaths of Katrina and 9/11, hundreds of millions of dollars
were stolen in fraudulent schemes by our fellow citizens….
dirtballs all. I’m sorry, friends, but we are far from a great nation
these days, if you define it by its people. It’s also why I take
trips out to places like Iowa to see the best of what remains.
–Driving along I-80, I was at a rest stop and read the marker that
was placed there. You learn a lot by doing this. And so I read
on this one that when Horace Greeley first said “Go West, young
man,” he was referring to one Josiah Grinnell, who indeed did
head west and settled the town of Grinnell, as well as founding
the college of the same name; which I also didn’t realize was the
first west of the Mississippi to offer a bachelor’s degree. So
having read this, I took a little detour to check Grinnell out. Nice
place to go to school, I concluded…and it has a fine reputation.
–The Iowa State Fair is a huge moneymaker. Average
attendance is 90,000, at $10 a ticket. Tack on $5 for parking
(and say an average of 3 in a car) and you’re over $1 million in
revenue per day just from these two sources.
–As reported by Steve Fainaru of the Washington Post, “The
U.S. military has paid $548 million over the past three years to
two British security firms that protect the U.S. Army Corps of
Engineers on reconstruction projects, more than $200 million
over the original budget, according to previously undisclosed
data that show how the cost of private security in Iraq has
mushroomed.”
What’s $200 million or so among friends?
–Hall of Fame pitcher Bob Feller, who grew up in Van Meter,
about ten miles from Des Moines, served heroically in World
War II and at the age of 88 doesn’t hesitate to speak his mind
about the current state of affairs he finds his country in. Back in
March of this year, Feller was interviewed by the New York
Times’ Tyler Kepner.
“Feller has strong opinions about the war in Iraq, and he
bemoaned what he called a lack of leadership.
“ ‘We should have gone in there with 450,000 troops and
declared a military dictatorship or martial law, enforced a
curfew, taken over all the oil and given them the going price,
same as we did with Japan when the war was over, and then
given the country back to them when it was over,’ Feller said.
“ ‘It would have been over years ago. The last good general we
had, in my opinion, was Schwarzkopf,’ he added….‘We haven’t
had a lot of good leaders anywhere in our nation. I’m really
concerned.’”
–Feller would also probably agree with a statement Joe Biden
made at the fair. “America has been in more trouble, but never
more isolated.”
[I also have to add that when I walked into the Feller museum,
there was an elderly woman at the admissions desk and she goes,
“Are you a senior?” “Huh?” “Are you 62?” “Uh, no….” “Well
then it’s $3.” Gee willickers, as my grandfather used to say. I’m
not even 50 yet! Talk about a depressing moment in my life.
But I did end up having an interesting political discussion with
the woman later on. She doesn’t trust Rudy, for starters. I also
couldn’t believe I could purchase a Bill Mazeroski Hall of Fame
card with his real autograph. Very cool.]
–I see that Jimmy Stewart is being honored with a stamp. You
talk about your great Americans…he’s at the top of the list, more
for his World War II service than even his awesome Hollywood
career. And he was indeed the humble man you saw on the big
screen.
–Jenna Bush is marrying a Wake Forest grad! I wouldn’t have
been accepted there these days, by the way. The school’s
standards have been elevated.
–Lastly, for all you engineers out there…Herbert Hoover, fellow
engineer, once said:
“It is a great profession. There is the fascination of watching a
figment of the imagination emerge through the aid of science to a
plan on paper. Then it moves to realization in stone or metal or
energy. Then it brings jobs and homes to men. Then it elevates
the standards of living and adds to the comforts of life. That is
the engineer’s high privilege.
“The great liability of the engineer compared to men of other
professions is that his works are out in the open where all can see
them. His acts, step by step, are in hard substance. He cannot
bury his mistakes in the grave like the doctors. He cannot argue
them into thin air or blame the judge like the lawyers. He
cannot, like the architects, cover his failures with trees and vines.
He cannot, like the politicians, screen his shortcomings by
blaming his opponents and hope the people will forget. The
engineer simply cannot deny he did it. If his works do not work,
he is damned….
“On the other hand, unlike the doctor his is not a life among the
weak. Unlike the soldier, destruction is not his purpose. Unlike
the lawyer, quarrels are not his daily bread. To the engineer falls
the job of clothing the bare bones of science with life, comfort,
and hope. No doubt as years go by the people forget which
engineer did it, even if they ever knew. Or some politician puts
his name on it. Or they credit it to some promoter who used
other people’s money…But the engineer himself looks back at
the unending stream of goodness which flows from his successes
with satisfactions that few professions may know. And the
verdict of his fellow professionals is all the accolade he wants.”
Won’t be saying this about today’s hedge fund kings 100 years
from now, that’s for sure.
—
Pray for the men and women of our armed forces. And the
miners and their families.
God bless America.
—
Gold closed at $666
Oil, $71.98
Returns for the week 8/13-8/17
Dow Jones -1.2% [13079]
S&P 500 -0.5% [1445]
S&P MidCap -1.5%
Russell 2000 -0.4%
Nasdaq -1.6% [2505]
Returns for the period 1/1/07-8/17/07
Dow Jones +4.9%
S&P 500 +1.9%
S&P MidCap +4.2%
Russell 2000 -0.2%
Nasdaq +3.7%
Bulls 43.8 [unchanged]
Bears 32.6 [was 18.0 just three weeks earlier…Source:
Chartcraft / Investors Intelligence]
Back to the fair now to check out the pigs…and eat a few pork
sandwiches.
Have a great week. I appreciate your support.
Brian Trumbore
