Remora



We like the LA Times -- we love LA -- we don't subscribe to the dismissive La La land stereotype -- but it is difficult for defenders of Southern California seriousness (with our pistols a-blazin'!) to read about the Post-nomadic economy, as breathlessly revealed in the Sunday Times, without, uh, wondering who put the marijuana in the arugala.

First comes the bio -- which we have copied faithfully from on-line:

"Joel Kotkin, a contributing editor to Opinion, is author of "The New Geography: How the Digital Revolution Is Reshaping the American Landscape." He is a senior fellow at the Davenport Institute for Pu"

PU is what you get in Mr. Kotkin and Ms. Susanne Trimbath's take on the new new economy, the one after that recent nasty spate of nomadism -- you remember, reader. There you were, out there with your spear, your seal coat, your tatooed cattle, wandering through desert sands and ice floes and such. Well, no more! Here's what is coming up:

The post-nomadic trend reflects changes that were building up before the stock
market's current turbulence and Sept. 11. As Americans have aged and
become ever more capable of settling where they wish, because of the rise of
digital technology and the dispersal of economic activity, fewer of them than
ever are willing to pick everything up and move in pursuit of quick riches.
Fewer than 15% of Americans change addresses in any given year, down from
a high of 20% in the 1970s. Contrary to popular reporting, most baby
boomers, suggests demographer William H. Frey, "age in place." That is, they
stay where they are. This development suggests that residential property may
be the "gold" of the emerging economy because the home has become more
important to people financially. [LI remark: that homes become the "gold" of an economy as people retain them longer must be a feature of this great new post nomadic paradigm. In the old, stinky paradigm, that houses are built and sold added value to them as investments. But no longer! Mr. Kotkin has discovered that a frozen market is a golden market. Is that great or what? We are all hoping that the Davenport Institute of PU puts him up for a Nobel Prize next year. If they can extract him from his rocking chair, that is -- the man doesn't want to contravene his own paradigm by acting all nomadic, you know).

But post-nomadism is also about values that place greater emphasis on family,
faith and community. At the height of the 1990s stock boom, according to the
Zogby International poll, only one in three Americans defined their "American
dream" in spiritual, as opposed to purely material, terms. By 2000, a spiritual definition was embraced by 42% of Americans. After Sept. 11, the percentage grew to 52% of adults."

When you get poll numbers like that opting for the spiritual, the game is up! Here I'd think that after September 11th, an increasing segment of the population would be reaching for their de La Mettrie, rejecting the afterlife, spewing contempt on the intellectual bankruptcy of the concept of "soul," throwing themselves into libertine lifestyles of finite sensuality, and ever more aware that man is doomed to a brief career of organic vicissitude, after which the worms will go in, and the worms will go out. And what do you know -- Americans start doing American dreamtime as a spiritually defined thing.

Remora

Sorry, sorry, sorry. Blogging without a computer of one's own -- to change Virginia Woolf's title around a bit -- is a difficult enterprise. We come here, to this library, and we plunge into the news, and we see the stray tasty morsel -- the story from Business Week, the Nick Tosches fan site, etc. -- but trying to capture what we want from these sites is totally frustrating. Plus, we can't take off all our cloths in the library -- some screwy policy. And how can we write with cloths on? It feels unnatural.
Plus the lack of coffee.
Plus the lack of beer (after coffee).

But okay. Remember, last week, we nominated some biz journalists for the Glassman award. That prize is named after our favorite fearless forecaster, the man who co-wrote Dow 36,000 and is still ticking away, like a watch that tells the correct time once in a century, at the Washington Post. Yesterday, we were overjoyed to see this conservative pantaloon defending his thesis on the Wall Street Journal op ed page.


It takes the tiniest bit of gall to defend the ideas set forth in that 1999 book in 2002. And there's the pesky problem with the 7 to 8 trillion dollars lost in the popping of the high nineties bubble. But Glassman is having none of it. He's still forecasting that Dow 36,000, although, uh, there's no date set for it now. Rather like the launch of the starship enterprise and various of H.G. Well's scientific romances, Glassman's Dow number is set for sometime in the indeterminate future.

What is interesting is not his popcock prediction, however. It is the political coloring that he gives to investing in the stock market. With Gilder and Larry Kudlow, Glassman is a new economics conservative. Let's quote from the next to last grafs of his piece:

"If anything has changed since our book appeared, it is increasing respect for the debunked strategy of market timing. Robert Shiller, the economist whose book "Irrational Exuberance" appeared in 2000, has been celebrated as a Timer Saint. But Mr. Shiller was bearish while the market was setting new records. His theory was laid out with fanfare in 1996, when, with the Dow at 5427, he said his data "implied an expected decline in the real Standard and Poor Index over the next 10 years of 38.07 percent." But six years later, despite a long bear market, the Dow is up about 60%; the S&P, 40%.

"Our noisiest critics, Paul Krugman in the New York Times and various Slate.com scribblers, willfully distort our arguments. And no wonder. If Americans continue to embrace long-term stock investing, the role of the state as dispenser of retirement benefits will shrink or disappear. And the "war" between capital and labor will be over. Unfortunately, many politicians and journalists have a vested interest in spreading fear and chasing people out of stocks -- even though stock investing is the most reliable route to accumulating wealth."

The "war" between capital and labor is one of those Old Economics things. And it was recognized by Old Economics conservatives. That's why the stereotype of the conservative, from the thirties to the sixties, was of a Taft voting, bondholding Republican. This kind of conservative wanted to stand athwart the stream of history, with a bond paying a secure dividend, and yell halt. While the difference between bonds and stocks -- and Glassman's silliness about what the stock market is about -- has a technical aspect around which Glassman, et al weave their tales, the synbolism of stock conservativism is more important.

That symbolism goes something like this: far from standing athwart the stream of history, the stock conservative wants to surf on it, as ever more technical marvels produce prosperity for all of us. The divide of class was not just a Marxist construct -- traditionally, conservativism has recognized and embraced the governing class -- the owners. Conservatives of the Burkean variety have always believed that this class isn't defined simply by their statistically greater wealth, but by such emergent qualities as leadership, a concern for order, and the guardianship of tradition.

Stock conservatives have a different dream. In this dream, the workers on the other side of the divide take on not only some small share of ownership, but the Burkean role alloted to the owners.

For this to actually occur, the workers have to operate like the owners. For instance, they have to keep their capital in stock, aligning their interests with the interests of corporate America. If they keep their money in bonds, even corporate bonds, their interest are eventually going to be aligned with the Treasury department -- that is, with the government.

This isn't a bad thing for the Burkean school. Burkeans aren't opposed to government tout court -- rather, they claim it as the natural heirs of rule.

If, indeed, the slug of losses mount so that the working class falls away from the role of owner envisioned by the stock conservatives, there will definitely be a shift in the intellectual framework of American conservative expression. The Buckleys will once again come to the forefront.

LI doesn't think this will happen. But LI, unlike Glassman, has no crystal ball in the house...

Remora

Dave calls LI this morning to complain about our lack of posts.

What can we say? Here we sit, in the library. Our new computer is supposedly trucking to us as we write. Our old computer, with its invaluable (at least to LI) hard drive, sits at Mac Alliance like the corpse of the family's beloved pooch, with the service people gently urging us to do the needful, bury the damn thing, etc.

But let's send out a brief recommend to this Business Week article on the failed telecosm - or did the "cosm" in George Gilder's once much quoted phrase hint at a Bataille like orgy of waste, an economy of excess that we will all have to live with, now


The first two grafs present the grim picture -- or grim for some.

"Telecom has been a disaster for just about everyone.
Investors have lost some $2 trillion as stock prices
have tumbled 95% or more from their highs. Half a
million workers have lost their jobs during the past
two years. Dozens of debt-laden companies, from
Winstar Communications to Global Crossing, have
collapsed into bankruptcy. And on July 21, the
sector sank to a once-unimaginable low when
WorldCom Inc., the company that embodied the
industry's power and promise, filed the largest
bankruptcy claim in U.S. history.

"Yet a small group of CEOs and financiers managed
to save the family silver before the house burned to
the ground. Philip F. Anschutz, founder of ailing local
and long-distance upstart Qwest Communications
International Inc. (Q ), reaped $1.9 billion from
company stock sales since 1998. Former Qwest
CEO Joseph P. Nacchio sold $248 million worth of
stock before he was pushed out of the scandal-plagued company in June. Global Crossing founder Gary Winnick sold $734 million of his shares before
his company filed for bankruptcy in January. And former WorldCom CEO
Bernard J. Ebbers borrowed some $400 million from his company before he
was ousted in April--and that loan remains to be repaid."

The story connects the dots to the fall guy du jour -- Salomon Smith Barney's own analyst of the year, all around neutral observer, and general pig, Jack B. Grubman. The man with the Midas touch in 1999, although all that was glittering turned out not to be gold -- more like the stuff you pitchfork out of stables. Dross, as Freud knew, was the other side of gold -- too bad the investors Mr. Grubman sold down the river weren't conversant in Freud, in spite of his loss of stock in the last decade, eh?

As for the inventor of the Telecosm, hmm. Poor Old George Gilder is still plugging away at the spectator, and on the Telecosm lounge he purveys some recent email from believers who urge each other to keep the faith, to recognize that new paradigms sometimes take, well, hits. Big hits, in fact. Massive, tsunami size ones. I imagine less, shall we say, sanguine gamblers have abandoned the Telecosm lounge, and the Gilder Technology report, for the more secure predictions that emerge from horoscope charts, haroscopy, and other forms of divination.

Remora
I want to stop. I want to be stopped. But no -- LI is addicted to this kind of stuff. Karl Marx and his buddy, Fred, have surely had been laughing like crazy in Commie Heaven. From today's Business Week, the article on Enron's board:


"There are, in fact, almost no real consequences for company directors who fail on the job. Instead of skating by with liability insurance paid for by shareholders, directors who fail to exercise at least a minimal level of oversight should be forced to pay some of the damages, just as executives should. Shareholders have a right to expect directors, who at Enron were paid as much as $350,000 a year in cash, stock options, and phantom stock, to be engaged and active."

Now, as you know, readers, you don't get much for 350 thou a year nowadays. Hell, I'd spit on that kind of compensation. But the Wendy Gramm's of the world (my fave board member, Wendy. Tough as nails when it comes to defendin' that old time private enterprise system, with her hubbie doing his part in the senate) have such a sense of noblesse oblige that they are willing to stoop for those dimes and nickels and generally help out when called upon. And Enron came calling. But just because a company comes calling doesn't mean a girl has to drop everything to, like, investigate all the itsy bitsy affairs of a great big megacorps, does it? Here's two items that slipped right past the board:


"-- In 2000, over several meetings, the board's compensation committee approved $750 million in cash bonuses to Enron executives in a year when the Houston-based company reported net income of $975 million. In other words, the directors handed over an amount equal to more than three-quarters of reported profits to salaried managers--at the expense of the shareholders. Apparently, no one on the compensation committee had ever added up the numbers.

"-- The compensation committee also approved a credit line for Chief Executive Kenneth L. Lay that eventually reached $7.5 million, and then allowed him to repay it with stock instead of cash. Lay proceeded to use the credit line as an express lane for dumping Enron stock. He repeatedly drew down the line, sometimes daily, always repaying right away with stock. Doing so allowed him to delay reporting some stock sales for more than a year. The chairman of the compensation committee, Charles A. LeMaistre, told the Senate investigators that he did not think it was the committee's responsibility to monitor Lay's use of this credit line. If the directors had bothered to look, they would have discovered that as Enron's position became more precarious in the 12 months preceding revelations of its infamous off-balance-sheet partnerships, Lay extracted $77 million in cash from the corporation that he replaced with Enron shares."

And so another day ends, the world turns, and I reach for my Karl and Fred. Supposedly, the Dems are my secret companeros for this kind of reading. David Brooks, at the Weekly Standard, issued this wee warning that all might not be well for Bush if this kind of thing keeps getting publicized. Gosh.

"Still, the Democrats seem to think that there is this organized entity called Corporate America, made up of senior executives, Republicans, white country clubbers, and people who were cheerleaders and prom kings in high school. If they can get the rest of the country to hate these people as much as they do, then they will win elections. Because they have this category in their heads, Democrats see the corporate scandals as tainting the whole Republican party.

But Americans who have not been suckled on the "Marx-Engels Reader" do not carry these categories around in their heads. They perceive no one organized entity, Corporate America, that ruthlessly exploits another, Ordinary Americans. Most people believe, rather, that there are some dishonest people who have done horrible things in corporate America. But also that George W. Bush is an admirable man who is doing his best for the country, even though he once worked for a corporation, and has friends who are in business. In other words, they see the scandals as a crisis of character, not a crisis of capitalism."

Gee, it is all a matter of character, and not a matter of their pensions going bye bye. I don't know, call LI foresighted, but here's my prediction for this election year: Republicans are not going to run on the Let's Privatize Social Security issue. Because, uh, they first have to address that character crisis out there -- whcih obviously stems from liberal sex education and the like!

Remora

LI can't get enough (although our readers probably have had enough) of the continuing fallout from Enron. The difference between a celebrity scandal -- you know, like O.J. murdering Condit, while Robert Blake takes pictures, or the like -- is that the corp scandal grows richer and stranger the more you look into it. That's a bit of a problem for the fast forward public. We want our National Enquirer, dammit.

But the public, upon which is gradually settling the discovery that the loss of seven trillion dollars in the market wipes out ALL of the value accrued there during the high nineties, just might stay tuned for the exciting conclusion of a number of series.

We'd recommend the Tom Paine article on Rebecca Mark, the Enron exec who lost the company, easily, a billion or two, and was rewarded with stock options to the tune of 80 million dollars -- at least by some reports. We wanted to do a Glassman award piece on her coverage, but Jeff Stein beat us to the punch fair and square. We especially like Mark's end quote:

"I'm very surprised and saddened by [what has happened at Enron]," Rebecca Mark told a reporter recently, "and I wish them all the best."

Surprised, huh?

Media is slowly coming around to criticize its own pump and pump strategy -- LI did our post yesterday, went home, turned on NPR, and listened to a program on Marketplace that actually went through the same lines we'd just typed. One interview was particularly gruesome, with some honcho at CNBC, who claimed that the journalists weren't too blame -- no, it was the greedy culture. The viewers, they were to blame.

This reminds me of something I recently read in an essay by Ricky Jay, the historian of magic. Jay says that there is a reference to loaded dice, one of the first in English, in Roger Ascham's Toxophilus -- the Tudor era treatise on archery. Ascham records a cheater's trick. If the gull is winning, the cheater insinuates loaded dice into the game, getting the gull to use them. Then the cheater claims the dice are loaded. When they prove to be loaded, it shows that the gull has been cheating.

Well, that seems to be CNBC's idea, too. The Greed is good mantra is great, as long as the greedy are people CNBC reporters can toady up to -- but greed isn't for the vulgar, you know. So it is all their fault that the info piped through the biz media in the high nineties was ninety percent garbage.

Remora

In my last post, LI proposed awarding a Glassman to the worst business reporter -- the one that swallowed the most garbage, left uninvestigated the most shady sources of information, etc. After all, one of the reasons investors are leaving the market is that the press has proven to be as intellectually corrupt as the accounting firms or the upper, overpaid management of the various scam corps. To actually survey the business press over the last five years is a daunting proposition, given that LI has, uh, let's say a limited group of researchers to work with. Luckily, cyberspace gives us a vast trove of material with which to enthrall our lucky readers.

So, just at random, we chose to examine articles from Nelson Schwartz.

Schwartz, as you will doubtless not remember, was the man who wrote the article about the Enron bust last December that was entitled, Enron Fall out, wide but not deep. Ah, my cringing readers say, you are dancing on a grave there -- but sometimes I just get all jiggly when I go through the uplift and scam of biz reporting. I really do.

Schwartz, of course, was very busy during the high nineties. He dished out his "investigative" scoops, and they were indeed spectacular. As in spectacularly dumb. Here's a typical article from the May 4, 2000 issue. Entitled B2B Boom, this is what Mr. Schwartz tells us:



"Even after factoring out the hype, it's clear that e-business offers huge opportunities for the select group of companies that do manage to thrive over the long term. Banc of America Securities analyst Bob Austrian estimates that worldwide B2B electronic commerce will grow from less than $20 billion in 2000 to roughly $13 trillion in 2004--a 650-fold increase. That's an incredible growth rate, but the cost savings inherent in B2B transactions explains why it may not be far off. On average, corporations spend $100 on paperwork alone each time they make a purchase, Austrian says. Moving those transactions to the Web could slash costs by 90%, saving billions in overhead each year. Not surprisingly, traditional firms are investing heavily in hardware and software so they can do more buying and selling via the Net. A recent Goldman Sachs survey of 42 fortune 1,000 companies reveals that more than 40% plan to spend at least $500,000 each on new B2B software this year."

Now, let's contrast this with the latest figures on B2B, shall we? Here's Cyber-atlas, as of this month:

"Worldwide B2B e-commerce will total $823.4 billion by the end of 2002, eMarketer found, and the strong growth will continue through 2004.
According to eMarketer's "E-Commerce Trade and B2B Exchanges" report, Internet-based B2B trade will reach nearly $2.4 trillion by 2004. "

Mr. Nelson's source only mistook his market by, oh, 11 trillion dollars. To put Bob Austrian in perspective, perhaps Schwartz could have asked him questions like, hey, do you think it is healthy to do massive doses of LSD every day? But he didn't. Instead, he took at face value the idea -- or is it an idea? -- the fantasy that there was a 100 dollar savings in paperwork each time a business transaction was made. Hmm. So, each biz transaction that is made is equal to +100 dollars in cost? Schwartz has some story here, if this is true. The story would go something like: Capitalism is more than doomed! Marx didn't know the half of it! More at 11...

But why think, really, if you can write such pap for the nation's leading biz mag and get away with it?

Schwartz, actually, became a New Economy pentiti. He confessed, in an article published a year after his B2B extravaganza, that he might have been a wee bit credulous.


"Although I was always careful to warn readers, as well as Mom, of the risks of investing--even saying that certain stocks could lose all of their value--I too believed in the promise of the new economy. I wanted a piece of the action. And as hard as it might be to remember now, it actually seemed as if the Internet were going to change everything. So if that meant selling blue chips to buy names that could double in weeks or months, well, that was a heck of a lot more exciting than sitting on dead money. Besides, the people behind these Silicon Valley companies were a lot more exciting, even sexier, than the old economy's gray suits. Wouldn't you rather have dinner with HP's Carly Fiorina than with Phil Condit of Boeing?

As it turned out, what I thought of as dead money wasn't so bad. At least those stocks, when they go down, don't drop 80% or more like PMC-Sierra or Kana. There's something to be said for boring old blue chips that actually pay dividends, earn real profits, and maybe rise only 5% or 10% a year. And keeping cash in a money-market account may not be just for wimps and nervous Nellies."

Get the coyness of that confession -- yeah, he's bowled over by how sexy Carly Fiorina is, heh heh. When, of course, the question is making an elementary, an elementary, analysis of what you are being told. In other words, being able to smell bs. That is what journalists are supposed to do, right?
But not if their purpose is simply to pump the market. Like Bourbon Street shills, all that noise is just supposed to attract the gawkers, and strip them of their ready cash.
Oh, and now they wonder why the rubes aren't lifting the market when it has "bottomed'? Search me.

Remora

Well, Limited Inc is going to try to write a post.
We've been thinking of extending the Bubble concept. We've mentioned the Bush Bubble. But there is another bubble that floated, in the high nineties, that has come down precipitously. That bubble was made of Media hot air. If the stock market does level out into some seventies plateau, one of the reasons will be that the business press, both mainstream and specialized, has done an incredibly poor job of reporting on business in the last ten years. Business mags popped up, got fat, got thin and died, all without questioning or in any way investigating what now appears to be incredibly easy to expose shams in major corporations. We'd like to institute some kind of prize for sheer hot air -- a prize that would go to the most intellectually corrupt reporter. Unfortunately, we don't have any bucks to do this. However, we do have a name: We'd call it the James Glassman prize in misleading reporting, after the author of Dow 36,000 -- a man who is still giving his perky advice from the pages of the Washington Post. Some would argue with this choice of name. Some would rather name it after poor George Gilder, Mr. Telecosm. But G.G. smoked his own dope, as the Enron folks used to say. He went down with his picks.

The field is vast, n'est-ce pas? and it isn't like it has been culled or corrected -- when amnesia takes away the mendacity one published yesterday, so that one can continue to make ridiculous and optimistic statements today, there's no mechanism of natural selection that would finger the unworthy. Yesterday, for example, LI was sitting in a bar. The bar TV was turned to Fox News. Now, Fox TV sit-coms are known for their appeal to the prurient puer, but compared to the intellectual level on display during the news hour, the sit coms are straight from Einstein. The hour lighted on the liberal demon act of the day, California's new standards for car emissions, and a suitable shill from Detroit, disguised as a reporter, was given the spotlight. I mean, this guy was so from Detroit he should have been wearing an SUV chassis. At one point, he made a disparaging remark about Honda's hybrid cars, to the effect that they are losing thousands per unit.
Now, Honda does seem to be losing money, right now, on their hybrids, although the figures are as yet unknown. But the gall of a Detroit shill lecturing Honda, of all companies, was enough to make me spit my vodka tonic all over the place. As everybody knows, GM is moving their mammoths not through quality improvement, but through the game of zero percent financing. They can do this because they have effectively disintermediated from financial institutions that would have refused the gimmick. Eventually, though, GM's financing department is going to have to find a way to lay that rotten egg. Talk about losing money. To lose money trying to craft a new technology is honorable, and in the long run it pays off, if the tech is any good. To lose money essentially trying to bamboozle market share for car types that haven't changed in 10 years is not only dishonorable, but eventually GM will quietly try to make the Government pay for their massive bet. Why, one might ask, does this story not attract Fortune or Forbes or Business 2.0? Because it is a story that GM does not want told. Period.

Tomorrow, if we can, we are going to start our Glassman awards with a look at the reporting on Enron. Enron, it appears, is a bigger story than even we thought a couple of months ago, because some of the effects of it are just starting to kick in globally. Todays stories about the collaboration of the banks in Enron's perpetual, perpetually disguised, deals, is not going to be good news, now that the Fed is figuring out how to cover Citibank for its WorldCom exposure.