Waiting for someone to explain it

The global financial crisis: life imitating art? It’s hard to see the connection, but as with any great work of music or literature, we could be smack in the development section, when themes or characters, introduced in an earlier time, are permanently changed and emerge as something very different. This period in the financial crisis is being played out with the dissonance of a Shostakovich, or the absurdity of postmodern literature. As Eugene Ionesco wrote in the program notes for his play The Chairs, “as the world is incomprehensible to me, I am waiting for someone to explain it.” Perhaps we all feel the same way about the global financial crisis. It would indeed be an absurdity to conclude that after these convulsions, it will be business as usual.

But the day-to-day machinations of the market, bailouts, and politics obfuscate the possible outcomes. Are the capitalistic underpinnings of the new world economy at an inflection point, to be changed for better or worse after this economic turmoil has passed? For some insight into a speculative, but well argued bigger picture I give a hat tip to my friend Bruce who put me onto the article After capitalism written by Geoff Mulgan and published in the UK Prospect Magazine.

Capitalism, in spite of several boom and bust cycles has survived, although the US economy has changed drastically, abandoning some of its manufacturing capabilities to cheaper overseas labor, focusing on intellectual capital, and becoming more of a service oriented consumer economy. It is now just a part of a highly interconnected world economy dominated by multinational corporations. With an insatiable appetite for goods and energy, however, we’ve become a nation of borrowers, living on leverage and the largess of countries willing (still) to buy our debt.

At the same time the nature of capitalism has changed. The financial institutions that once existed to solely support industry are now an industry onto itself, trading derivatives and exotic financial instruments and, with this fundamental change, perhaps we’ve arrived at another precipice of “creative destruction,” Joseph Schumpeter's term for the consequence of radical departures.

Mulgan argues that capitalism is sure to change but will not disappear. Instead, it will not dominate in our culture as it did in the “greed is good” era. Capitalism has been adaptable but in some ways has sown seeds of its own destruction. He cites the “collapse of the savings rate—to around zero by 2007 in the US when it needs to be closer to 30 per cent to cope with ageing…a stark symptom of a capitalism that has lost the ability to protect its own future.”

Then, in retrospect, the Great Depression can be seen as both “a disaster and an accelerator of reform. One implication of [Carlota] Perez’s work, and of Joseph Schumpeter’s before her, is that some of the old has to be swept away before the new can find its most successful forms. Propping up failing industries is in this light a risky policy. Perez suggests that we may be on the verge of another great period of institutional innovation and experiment that will lead to new compromises between the claims of capital and the claims of society and of nature.”

Mulgan postulates, “If another great accommodation is on its way, this one will be shaped by the triple pressures of ecology, globalisation and demographics.” This will lead to changes away from consumption to savings and will underscore capitalism’s need to come closer in balance with nature rather than its destruction. Capitalism, in effect will become the servant rather than the master. But “it remains to be seen what political visionary will seize upon ‘servant capitalism.’ (Obama should be ideally suited to offering a new vision, yet has surrounded himself with champions of the very system that now appears to be crumbling.)”

Where today’s seismic financial activity will settle is still a black hole of the unknowable, but for an interesting macro view on the future of capitalism, check out Mulgan’s piece.
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He jes' keeps rollin’ along

Last night we had the pleasure of seeing the last of the season’s Florida Sunshine Pops series of concerts at our nearby Eissey Campus Theatre. I’ve written about the Pops before and its gifted, octogenarian conductor, Richard Hayman.

This was a special concert devoted to Rodgers and Hammerstein, the undisputed Broadway innovators who, with Oklahoma!, changed everything about the Broadway musical. Their contributions to the Great American Songbook are legendary.

So yesterday’s concert was a “grand night for singing” and that is what makes this series so special: the level of the talent and professionalism that accompanies the orchestra. Last night’s featured performers were William Michaels, Lisa Vroman, and Stephen Buntrock all leading players on Broadway. They were joined by the Fort Lauderdale Gay Men's Chorus, giving a truly inspirational dimension to those particular songs that so readily lend themselves to choral accompaniment such as Climb Every Mountain or Oklahoma! (which we learned, last night, was written by Rodgers and Hammerstein in a half hour while the show was being previewed in New Haven).

Another highpoint was the Florida Pop’s rendition of the beautiful Carousel Waltz, no doubt orchestrated by the maestro himself, Richard Hayman. If it were not for Johann Strauss, Jr, I think Richard Rodgers would be known at the “waltz king” as so many of his greatest pieces were in three quarter tempo.

But for me, the solos by Michals, Vroman, and Buntrock, were especially remarkable, not only for the quality of their voices but as Broadway trained actors, by their ability to communicate the emotion of the song as they comport themselves on the stage.

Naturally, I had my favorites, Lisa Vroman has a Julie Andrews voice and in fact sung The Lonely Goatherd, the yodeling ditty so closely identified with Andrews from The Sound of Music.

William Michaels is currently appearing in the landmark revival South Pacific at Lincoln Center. His rich baritone voice lends itself to the role of Emile de Becque but last night he sang what some have called the greatest song from the American musical theatre, Ol’ Man River from Showboat (artistic license: music by Jerome Kern, but lyrics by Oscar Hammerstein). Hammerstein described it as “a song of resignation with protest implied.” Perhaps it is a song for our times and my piano rendition is here.

Then there was Stephen Buntrock’s rendition of Oh, What a Beautiful Mornin the opening song from Oklahoma!, sung by the cowboy, Curly. In fact, Buntrock recently appeared as Curly in the Broadway revival of Oklahoma! so he follows in the tradition of Alfred Drake, Howard Keel, and Gordon Macrae. It’s a delicate, beautiful song, an uncharacteristic opening song for a Broadway musical, but after all, this was the musical that established a new direction for the musical theatre, making the music intrinsic to the plot, driving character development. My piano rendition of Oh What a Beautiful Mornin can be heard here.

It’s All a Mystery

We were away the last few days, visiting Ann’s friend in Tampa, Arlene, to celebrate her 70th birthday, and then my cousin Joan and family in Sarasota the next day and my dear friend, Martin (my former English professor) the following day in his new Sarasota “digs.” Meanwhile, the economic scene continued to go from mildly inexplicable to downright unfathomable during the same short period of time.

The Federal Reserve is now buying up to $300 billion in Treasury securities, and $750 billion of mortgage-backed securities using the “Supplementary Financing Program” which in effect gives it the ability to raise its own debt: “The Treasury has in place a special financing mechanism called the Supplementary Financing Program, which helps the Federal Reserve manage its balance sheet. In addition, the Treasury and the Federal Reserve are seeking legislative action to provide additional tools the Federal Reserve can use to sterilize the effects of its lending or securities purchases on the supply of bank reserves.”

Then, the Congressional Budget Office claims the national debt under the president’s budget could be $2.3 trillion worse than the White House estimates. This could result in a $9.3 trillion dollar deficit over the next ten years, which would nearly double the present deficit. All this depends on so many variables that it really is impossible to forecast what they (the deficits) will be. (It is rumored that in the 1960’s Senator Everett Dirksen once said “A billion here, a billion there, and pretty soon you're talking real money,” something he later said he was misquoted on. Still this quote has persisted until recently when trillion has become the “new” billion. How long will it be before “quadrillion” becomes the new “trillion?”)

On Monday, while driving back from Sarasota, the Dow surged by almost 500 points, a Pavlovian response to the long-awaited Geithner “plan” of creating an auction mechanism for removing the toxic assets from banks’ balance sheet “Essentially the Geithner plans creates a vehicle in which private equity accounts for 3%, public equity for 12%, and the rest is provided as debt by the public sector (through the Federal Deposit Insurance Corporation, FDIC).” The latter is from Eurointelligence, which also has a number of good links with views on this development as well as an explanation of the proposed auction formula. It seems like another excellent opportunity to privatize gains and socialize losses.

As a respite from this financial turmoil, I include a few photographs of our visit, first from Arlene’s 70th birthday party (the lady standing), her childhood friend, Arleen, on the left and Ann on the right.

Then we visited my favorite cousin, Joan, in her Sarasota home. As the unofficial family historian she gave me two photos, which I promptly scanned once I returned home. The first was taken in 1944 while my Dad was in Europe as a Signal Corps photographer. My mother is at the upper left, Joan is in the middle and my Aunt Lillian is on the right, while Joan’s mother, Marion, is seated on the left and our (Joan and my) grandmother is at the right.

The second photograph was probably taken on Long Beach, LI, in the mid 1920’s, with my Aunt Lillian on the left, then my father, my Uncle Phil, my Aunt Ruth, and then my grandmother and grandfather. I look at my grandfather and see a resemblance while my father has the same endearing smile he had as an adult. Joan and I speculate that her mother, my Aunt Marion, was not there as she was probably dating my Uncle Walter.

Enough for family history, but we concluded out Sarasota visit the next morning with my dear friend, Martin, my former English professor who is still actively writing poems and plays. Here we are in his new home in Sarasota.

Upon our return I checked some of my favorite blogs and was touched by my friend Emily’s mention of me in her “Your Blog is Fabulous” entry. Her words are humbling, particularly as I have a high regard for her writing abilities and the passion she brings to her love of literature. I worked with Emily and her husband, Bob, who is now a minister in Amish country. They were the kind of co-workers I admired the most, completely committed to excellence.

Her words made me think about why I do this and I responded in her comments section as follows: Oh, Emily, I am honored and humbled by your acknowledgement and more than slightly embarrassed by any notoriety, as my blog is such an unfocused botch of stuff. As I think I once said to you, I’ve always thought of myself as a jack-of-all-trades, master of none. I wish I could have lived many different lives, and among the ones I would like to have pursued, besides publishing which is the one I did out of economic necessity (but, loved nonetheless), is music (specifically jazz piano), writing, economics and investing (have always been fascinated by markets ever since I read Gustave Le Bon’s The Crowd: A Study of the Popular Mind in college – a pioneering work in social psychology -- which has applicability to “the market”), photography (I think of Diane Arbus or Alfred Stieglitz as role models). In fact, at one time I almost left the publishing business as I had developed a VisiCalc (the precursor of Lotus 1-2-3 which was the precursor of Excel) template to evaluate Convertible Bonds (best if you Wiki the term so I don’t have to explain here). Sometimes I feel like Mozart’s Salieri, having merely attained a measure of mediocrity. My on-and-off-again blog reflects my incongruous interests and of course, over the last year the historical presidential election encroached as well. So, I’m afraid your readers may be disappointed by the content. You have a central passion and your blog reflects that focus so well. Your blog IS fabulous.

Finally, my friend Bruce emailed me, “Did you read the Updike poems in the March 16th New Yorker? He writes these strange unrhymed sonnets. They are at times prose but become poetry on the strength of their emotions and concision.” I had not seen these but Updike mentioned his excitement about publishing again in the New Yorker in his last interview. I had heard that these new poems would be included in the collection Random House is about to publish, Endpoint and Other Poems, and some are about his final illness. I wonder whether this collection will include his 1990 masterpiece or others will match it in its stunning clarity about the mystery of life and death:

Perfection Wasted

And another regrettable thing about death
is the ceasing of your own brand of magic,
which took a whole life to develop and market -
the quips, the witticisms, the slant
adjusted to a few, those loved ones nearest
the lip of the stage, their soft faces blanched
in the footlight glow, their laughter close to tears,
their warm pooled breath in and out with your heartbeat,
their response and your performance twinned.
The jokes over the phone. The memories packed
in the rapid-access file. The whole act.
Who will do it again? That's it; no one;
imitators and descendants aren't the same
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$11,033,157,578,669.70

Here’s a landmark worth noting: From The Debt to the Penny and Who Holds It, over the weekend (as of March 16) the National Debt quietly surpassed $11 trillion, rising almost $50 billion during that brief period. Here’s what we can do to help out.
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The View From Here

Although we are some 140 miles from Cape Canaveral, the view of yesterday’s shuttle launch into the twilight sky was spectacular. The shuttle program is one of our nation’s greatest accomplishments. To the left and below are some photographs of the launch, the view from here but beginning with CNN's.

There were other developments over the weekend impacting another sort of “view from here.” One story that grabbed some headlines, but then quietly went into the night was China’s prime minister’s concern about their holding some $1 trillion investment in American debt. Clearly there is some anxiety about the long-term safety of their investment, a remarkable public admission by such a large holder of US debt, one that is symbiotically attached to our hip -- something akin to yelling fire in a theatre while sitting far from the exits. But in Barack We Trust, President Obama saying that our debt is safe in spite of our record deficits, bailouts, and our national debt about to pass the $11 trillion mark. I mentioned this “Black Swan” before, that is confidence in the ability of the US to meet its financial obligations, without hyperinflating its currency.

The other story that will not go quietly into the night, because of the measure of outrage, is the $165 million in bonuses that are being handed out to the same executives that had a hand in creating the alchemy of credit default swaps. We’ve heard this song before, when Congressional Hearings revealed the extent that bonuses were handed out to the banks.

Then there is also outrage that foreign counterparties profited by receiving some money through AIG’s $170 billion bailout, but the main focus will continue to be the bonuses, although its size is but a pimple on the ass of the bailout vista.

The irony is the performance criterion of the bonuses is probably the very short-term thinking that encouraged leverage creation, AIG superimposing a hedge fund business on top of its, then, AAA rating. So why pay these bonuses? We’re told they are “retention bonuses” to keep the “best and the brightest” in the AIG stable -- as if there are not hundreds of unemployed qualified financial professionals who could immediately replace each of the AIG financial wizards. We are also told that these people will sue if they are not paid. Let them sue. Do they really want their names and reputations to go down in the annals of financial infamy?

But on to the happier news of the successful, although delayed, shuttle launch. Here are a series of photographs, only three minutes apart, from the launch as televised on CNN to the shuttle’s appearance only one minute later over our home, to the vapor tail just three minutes after the launch: beautiful and breathtaking.

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Ambushed

Jim Cramer walked into Jon Stewart’s studio last night and instead of his trademark rolled-up sleeves, he might as well have been dressed like a clown, ready to take a big cream pie in the face, intended for CNBC rather than Cramer personally, although he is emblematic of his “news’ organization deserting its traditional 4th estate role for that of an “infotainmentmercial.” Cramer at least is somewhat honest about his role. Some other CNBC “reporters” have become clandestine right-wing cheerleaders.

I deserted CNBC as a serious source for financial news the day that Lehman went under last fall as I was watching CNBC’s “Squawk Box” and the show’s Cheerleader-in-Chief, Joe Kernan, made some sort of a statement criticizing the critics of Lehman’s leader, Dick Fuld, reminding them that poor Mr. Fuld had lost a fortune in the value of Lehman stock, conveniently neglecting he had extracted $484 million in salary, bonuses and stock options since 2000, failing to mention the equity value of Lehman had been built on spurious leverage. “Squawk Box” itself has turned into quick sound bites and chatty banter, and when they do have a serious interview, they superimpose sound effects, whooshing noises of charts, stock quotes, inundating the senses akin to watching a video game. Some of CNBCs confrontational interviews border on a financial version of the Jerry Springer show.

What a reversal of roles, the host of a comedy show becoming a spokesman for the questions the supposedly serious financial station failed to ask. Stewart was unrelenting in his probing and Cramer, to his credit, simply ate humble pie. I think he knows Stewart is right asking such questions as: Who is CNBCs audience, the Wall Street traders or us stooges trying to keep our 401ks afloat in a “fast trading” environment promoted by CNBCs endless litany of buy, sell, buy, etc.? How does this help us? Shouldn’t CNBC be asking the tough questions of Wall Street instead of gaming our pensions? Wasn’t CNBC, supposedly knowledgeable about financial matters, remiss in not recognizing that consequences of infinite leveraging would surely end in calamity? Isn’t there a measure of responsibility that goes with reporting, and the freedom of the press, especially for a news platform that purports to be serious? “Let’s face it, we’re both snake oil salesman, but at least we [the Comedy Channel] label our product as such.”
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Hope

Two stories today. This first one is from the New York Times Timeless Lincoln Memento Is Revealed describes the very careful opening of the back of Lincoln’s first watch -- by the National Museum of American History -- as it was thought a secret message was inscribed therein. Indeed, there was “a message secretly engraved by a watchmaker who repaired it in 1861” which read as follows: Jonathan Dillon April 13- 1861 Fort Sumpter was attacked by the rebels on the above date. J Dillon April 13- 1861 Washington thank God we have a government Jonth Dillon.

Here was an immigrant watchmaker who grasped the significance of the moment and felt compelled to inscribe his observations for some future generation, inside the watch of the President of the United States, which, as fate would have it, he happened to be repairing.

I juxtapose this story to this magnificent NASA photograph of the Shuttle that was taken last night with the full moon. It is scheduled to blast off tonight. We visited the Kennedy Space Center a couple of years ago with our friends Beny and Maria who live in Sicily. Another Shuttle was on the launching pad at the time, almost an incomprehensible sight because of the scale of the Shuttle and its supporting structure.

From the near dissolution of the United States to the technology that can achieve such a scientific feat, in less than 150 years. Any country that can accomplish that should be able to find the resolve and the means to end the present financial crisis. We would all like to say: thank God we have a government.