Aegean Adventure

We were overseas in September and are now home after a detour stay in Asheville, NC. Our trip took us to Turkey, Greece, and Croatia, a panorama of the rise and demise of civilizations and flow of religions: the early Minoan civilization, Roman and Hellenic cultures, the Byzantine and Ottoman Empires, the confluence of Christianity and Muslim, an overview of the cradle of Western civilization.

It was mid morning when we walked into the lobby of the Sultanhan Hotel in Istanbul after a 10 hour overnight flight, the beginning of a land/ship tour of the region. Another couple, obviously American and about our age, were checking in as well. We smiled at them; they smiled back. My wife said, “Are you in Istanbul for the Greek Island cruise?” “Oh, sure” I said to myself, what are the odds? “Yes,” they replied and before I knew it we had arranged dinner plans for later that evening.

Although we hadn’t slept much during the flight, after unpacking and getting organized, we took a typical tourist double-decker bus tour of this complicated, energetic city, the Topkapi Palace, Hagia Sophia, and Blue Mosque predominately perched in its center, and the Bosporus River isolating the western part of the city in Europe and the Eastern part in Asia. We were looking forward to the following two days when we would return to see those major sites in detail and even take a boat tour on the Bosporus to the point where Europe and Asia almost touch.

That night we had dinner with Stuart and Gloria, a little younger than we, but retired as well. Stuart said that he was looking for a word that might describe a vacation by a retired person (who is already on a permanent vacation). I suggested “recation” so if you see that word used, you now know its derivation!

After a lovely Turkish dinner on the rooftop of our hotel, with a view of the Blue Mosque glowing in the distance, we returned to our rooms exhausted, hopefully to sleep, getting ready for a demanding day of touring. Following a restless night, we awoke to rain (we were told it never rains in Istanbul!). Naturally we hadn’t packed an umbrella so we were left to “caveat emptor” on the rainy streets of Istanbul.

Soon after buying our knock off ‘Burberry’ umbrella and underway again, we noticed a young Turkish man was walking alongside us on the street. “Hold onto your pocketbook” I telegraphed to my wife, but he said, in polite, broken English “Hello, where are you from?” Maybe it was our sleepy fog, but we replied honestly and added that we were trying to find the Hagia Sophia, as the windswept rain made it difficult to get our bearings. He respectfully suggested that we visit the Blue Mosque first – which we admitted was our second destination – further explaining since it was the period of Ramadan that by noon we would not have access to the Mosque due to the frequent calls to prayer. He said he would take us there, to a “special entrance” but he would “appreciate it” if we would briefly visit his shop nearby after we see the Mosque. So there’s the catch I thought. If it were not for the rain, we would have gone on our way, but we said sure and true to his word, we avoided the main entrance which was mobbed with rain soaked tourists, and instead escorted to a rear stairway –still crowded but at least moving briskly up and into this back entrance, whereupon we were required to remove our shoes.

And so we entered the Blue Mosque, which is the national Mosque of Turkey, built in the early 1600’s, combining Islamic architecture as well as Byzantine elements. The interior is striking with its ceramic tiles, stained glass windows, chandeliers, crafted marble, and of course the amazing sweep of the carpeting on which hundreds of worshipers turn toward Mecca in Muslim prayer. The crowds were maddening though, so we soon made our way out through the exit, putting our shoes back on, and sure enough our “guide” was waiting for us.

We dutifully followed him (a deal is a deal) to his rug store nearby, which turned out to be a pleasant experience and we learned a little about the making of beautiful Turkish rugs, and were served some of Turkey’s famous hot apple tea…. a welcome drink on such a wet day. Although we made it clear that we were not in the market to buy a rug, they were respectful, and hoped we would “recommend” their store and so after a 15-minute detour, we amicably parted.

By then, the rain had cleared and we were on our way to the Hagia Sophia which was built as a basilica in the sixth century, survived fires and earthquakes, but after Ottoman Turks conquered Constantinople in the 15th century was rebuilt as a Mosque. It is now a museum and a testimony to the civilizations that built and rebuilt the structure.

From there we had a typical Turkish luncheon at a sidewalk café and began our walk to the Grand Bazaar where you negotiate your own price in the oldest covered market in the world – built before Columbus discovered America. The shops go on as far as the eye can see. And in spite of the shop owners clearly wanting to part you from your money, we left with the feeling that the people were friendly. In fact, everyone we met in Istanbul was wonderful.

That night we had a date with Stuart and Gloria for dinner again, this time at a very popular fish restaurant, mostly frequented by locals – which we were told offered the freshest seafood, “Easy to get to” our hotel receptionist assured us, marking it on a map that was not very detailed, “in walking distance.”

So the four of us started off, arm in arm, umbrellas overhead as the rain had returned once again. Most of our search was along ancient cobblestone streets and it was getting to the point, in the rainy darkening night that we were thinking we were entirely lost and perhaps getting into a section of town tourists should avoid. We began to ask people on the street where this restaurant might be but they generally shrugged their shoulders, until one gentleman -- more or less in sign language indicated he was going that way and he will take us. After silently following him through a labyrinth of back and twisting roads we began to wonder, even be concerned. Ten minutes later, with the restaurant not in sight, we were thinking of breaking off from him, but he kept waving his arm as we followed behind. And sure enough he led us to our destination; where we tried to offer him a thank you tip but he resolutely refused our gesture of gratitude. He was simply being a Good Samaritan.

It was an atmospheric outdoor restaurant, with an overhead awning. The rain had stopped but later during our dinner the rain became intense and waiters had to hold up the awning with broomsticks to keep everyone dry. It was an experience. No way did we want to venture back to the hotel on foot so they called a cab. With Ramadan services finished for that day, the streets were now crowded with worshipers who could finally break their day long fast to eat and drink.

The next day we were scheduled to board our cruise ship at 1.00 pm, although the ship was staying in Istanbul that night, so we devoted the morning to seeing the Topkapi Palace. Our son had been there the previous summer and warned us to get there early, as the crowds by mid morning would be swarming.

This was the official residence of the Ottoman Sultans for 400 years, that period ending in the mid 19th century. We entered the Imperial Gate and toured the Imperial Treasury and its collection of enormous and breathtaking jewels and then the mosque in the palace where an Imam was chanting from the Koran, it being translated into English on a screen. No doubt the most interesting part was the Harem where the sultans’ families were housed, the Courtyard of the Sultan's Consorts and the Concubines, and the privy chambers.

After a light lunch at the Palace overlooking the Bosporus River, we made our way back to the hotel to pick up our bags and taxi off to the ship to meet our friends, Ray and Sue, who were arriving later that day from Connecticut and joining us on this trip.

We boarded Oceania’s ‘Nautica,’ a relatively small ship of some 650 passengers and looked forward to our friends’ arrival. By the time they finally boarded late in the evening, we heard one of those “thank-God-it-didn’t-happen-to-us” stories, hours on the tarmac, repairs to the plane, missing their connection in London, having to be rerouted. We finally had a late dinner in the main dining room, an elegantly appointed space in the stern of the ship. Since we would be in port until 3.00 pm the following day, allowing for a final day to see Istanbul, Ray and Sue took the city tour and we boarded a small boat for a cruise on the Bosphorus, where we could view the entire city from the shoreline and work our way up to the point where Asia and Europe nearly connect. The tides were running strong. Small fishing fleets were on the river as well. The water had debris as flooding only a few days before we arrived had inundated Turkey. Stuart and Gloria were on the same tour so we were able to reconnect, take some photos of one another and enjoy the scenery together.

We returned to the ship to prepare for our departure, a cruise that ultimately took us 2,272 nautical miles, to Kusadasi, Rhodes, Delos, Mykonos, Santorini, Katakolon, Corfu, Dubrovnik, Crete, and finally Athens. The trip was all the more remarkable as while we learned about the development, conflicts, and ultimate demise of ancient civilizations, I was reading John Updike’s Self Consciousness, the closest he ever came to writing a formal memoir. So, juxtaposed to the colossal sweep of civilizations over millenniums, I listened to the introspective musings of a solitary man, both concerned about a core element of our lives, the ephemerality of existence, and our need to make sense of moving from nothingness to nothingness as we attempt, as individuals, and as civilizations, to mark our place: we were here.

Updike: “Those who scoff at the Christian hope of an afterlife have on their side not only a mass of biological evidence knitting the self-conscious mind tight to the perishing body but a certain moral superiority as well: isn’t it terribly, well, selfish, and grotesquely egocentric, to hope for more than our animal walk in the sun, from eager blind infancy through the productive and procreative years into a senescence that, by the laws of biological instinct as well as by the premeditated precepts of stock virtue, will submit to eternal sleep gratefully? Where, indeed, in the vast spaces disclosed by modern astronomy, would our disembodied spirit go, and, once there, what would it do?”

Kusadasi, our first port of call, is the gateway to Ephesus, an archaeological site in Turkey that has the remains of an ancient city that can be traced back to 10th century BC. Here we saw the two-story Library of Celsus, remains of temples, the city’s shops, and its theatre, which is considered to be the largest theatre from the ancient world. Ephesus was also the home to Paul and one of the birthplaces of early Christianity.

The Ephesus terrace houses are perched on a hill. Here the wealthy lived during Roman times. These are under cover and archeologists are putting these homes back together as a giant jigsaw puzzle, but they have constructed walkways so one can tour this site without interfering with this continuing work. Mosaics on the floor and frescos on the walls as well as the remnants of the homes’ heating and sanitation systems are a time capsule from the past.

As with many of the archeology sites we saw on this trip, one civilization replaces another, one layer on the other, the inevitable rise and fall, and it makes one wonder about our present “American civilization” – is it in its waning years as a political and economic power?

Updike: “…my first books met the criticism that I wrote all too well but had nothing to say: I, who seemed to myself full of things to say, who had all of Shillington to say, Shillington and Pennsylvania and the whole mass of middling, hidden, troubled America to say, and who had seen and heard things in my two childhood homes, as my parents’ giant faces revolved and spoke, achieving utterance under some terrible pressure of American disappointment, that would take a lifetime to sort out, particularize, and extol with the proper dark beauty. In the beauty of the lilies Christ was born across the sea – this odd and uplifting line from among the many odd lines of ‘the Battle Hymn of the Republic’ seemed to me, as I set out, to summarize what I had to say about America, to offer itself as the title of a continental magnum opus of which all my books, no matter how many, would be mere installments, mere starts at the honing of this great roughly rectangular country severed from Christ by the breadth of the sea.”

That night we departed for the Greek Islands, to be covered in a later post.

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The Vanishing Work Ethic

Hat tip to my former colleague, Jim Wright, who put me on to Steven Malanga’s interesting and well-researched article in the City Journal, “Whatever Happened to the Work Ethic?” which strikes at the heart of our economic crisis. Things have changed in America where we used to work hard to make things and where borrowing and bailouts were eschewed.

As Malanga states: “What would Tocqueville or Weber think of America today? In place of thrift, they would find a nation of debtors, staggering beneath loans obtained under false pretenses. In place of a steady, patient accumulation of wealth, they would find bankers and financiers with such a short-term perspective that they never pause to consider the consequences or risks of selling securities they don’t understand. In place of a country where all a man asks of government is “not to be disturbed in his toil,” as Tocqueville put it, they would find a nation of rent-seekers demanding government subsidies to purchase homes, start new ventures, or bail out old ones. They would find what Tocqueville described as the “fatal circle” of materialism—the cycle of acquisition and gratification that drives people back to ever more frenetic acquisition and that ultimately undermines prosperous democracies.”

Malanga’s full analysis of the topic is well worth reading.

On the eve of President Obama’s inauguration I wrote “The winners in this economy were not only the capitalists, the real creators of jobs due to hard work and innovation, but the even bigger winners: the financial masters of the universe who learned to leverage financial instruments with the blessings of a government that nurtured the thievery of the public good through deregulation, ineptitude, and political amorality. This gave rise to a whole generation of pseudo capitalists, people who “cashed in” on the system, bankers and brokers and “financial engineers” who dreamt up lethal structures based on leverage and then selling those instruments to an unsuspecting public, a public that entrusted the government to be vigilant so the likes of a Bernie Madoff could not prosper for untold years. Until we revere the real innovators of capitalism, the entrepreneurs who actually create things, ideas, jobs, our financial system will continue to seize up. That is the challenge for the Obama administration – a new economic morality.”

I still await that new economic morality.

Meanwhile, since the National Debt passed $11 trillion in March, the markets have moved strongly on the upside, led by the financials, anticipating a recovery from the Great Recession. I see little difference in the general shape of our financial institutions other than the federal government (uh, we the taxpayers) standing ready to bail out any deemed to pose a systemic risk to the system. As of the end of August the National Debt now stands at $11.8 trillion, so over the next several weeks that will undoubtedly pass the $12 trillion mark. That’s $1 trillion in additional debt in only 6 months. I make this observation in advance as this blog will go silent for several weeks while are traveling overseas.
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“Typical American” and the Dream

Go west young man; that is, go so far west you find the opportunity for employment and pursue the promise of prosperity which is thought to be at the heart of the American Dream. For many recent graduates, that journey might now begin in China: American Graduates Finding Jobs in China: “Shanghai and Beijing are becoming new lands of opportunity for recent American college graduates who face unemployment nearing double digits at home.”

Such are the ironies of life, a reversal of immigrants flocking to American shores in pursuit of employment and a richer, happier life.

For years Gish Jen’s Typical American (Houghton Mifflin, 1991) had sat on my bookshelf waiting to be read. I first heard about the novel from a PBS program NOVEL REFLECTIONS ON THE AMERICAN DREAM, but it was the recent extended stay of my son, Jonathan, in Shanghai that led me to finally read the novel, and to better understand the Chinese, and their assimilation into American culture. Also, I did business with the China National Publications Import Export Corporation and was impressed by their selection and importation of books we published over the years so I was curious about Jen’s novel.

I expected a story about what it means to be a foreigner in a foreign land, especially the vicissitudes of being Asian in America soon after WW II, and while there are those elements, it reminded me more about the misinterpretation of the American dream, the illusion of prosperity being the definition of a meaningful life.

What does it mean to be, or become a “typical American?” The Chang family is at first derisive of their concept of the “typical American” until they begin to desert their traditional work ethic, moral groundings, and family loyalty as they become “typical Americans” themselves, enduring a tragedy to bring their values back into balance.

This is not a conventional story about immigrants, but, instead, is a very well written novel about what freedom and responsibility mean in relation to "life, liberty and the pursuit of happiness” in a land that “promises” no limits. Or as Ralph Chang discovers: “What escape was possible? It seemed to him…that a man was as doomed here as he was in China….He was not what he made up his mind to be. A man was the sum of his limits; freedom only made him see how much so. America was no America.”

And the writing is wonderful: “And then there was another pain too, quieter, weightier, its roots in what everybody knows – that one day a person looks back more than forward, that one day he’ll have achieved as much as he was going to, loved as much as he was going to, been as happy as it was granted him to be. And that day, won’t he have to wonder – was it enough, what he’s lived? Can he call that a life and be satisfied?”

And isn’t that the essence of the dream, and of any culture?
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A Tribute in a Most Unlikely Place

This week’s Barron’s Magazine, the Dow Jones publication that purports to be “America's premier financial weekly “, mentions, as among its must “six economics books to take to the beach,” Rabbit Angstrom; The Four Novels. (“Worth Mulling: A Late-Summer Reading List by Gene Epstein). Kudos to Barron’s to include Updike and to recognize that literature is life, encompassing economics as well. As Epstein states:

“Finally, the death in January of novelist and critic John Updike must not go unremarked. The last two novels in his tetralogy about the fictional Harry "Rabbit" Angstrom -- Rabbit Is Rich (1981) and Rabbit at Rest (1990) -- capture the world of work as few novels have. If the Toyota dealership in which Harry flourishes (in Rich) and then sees destroyed by his son Nelson's cocaine habit (in Rest) does not quite make him a conscious capitalist, it comes pretty close. The four works together, including Rabbit, Run and Rabbit Redux, are also the closest thing I know to the great American novel.”

It is hard to accept that our greatest and most prolific writer is dead. I am presently reading Updike’s short story “Personal Archaeology” from his last collection, My Father’s Tears, which begins, “In his increasing isolation – elderly golfing buddies dead or dying, his old business contacts fraying, no office to go to, his wife always off at her bridge or committees, his children as busy and preoccupied as he himself had been in middle age – Craig Martin took an interest in the traces left by prior owners of his land.” It is a perfectly crafted story about the passage of time and our place in the continuum. More on that story and the collection later.
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Block Island Days

Perhaps some things are better left alone. For instance, I recently visited the offices where I used to work. The building was brand new in 1979 when I leased those offices, at first the 2nd floor of the three story building, eventually occupying the entire building and the one next door as well. The last time I was in the building was about eight years ago. Since then the interior was reconfigured leaving a maze of cubicles and now the company has changed ownership. The offices are being closed and there remains just a skeletal staff in the transition phase. So, it was a bittersweet return, seeing a few people with whom I had worked, reminiscing about the “old times.” As I left the building this one last time, it was with a sense of sadness I thought I had already overcome.

You can’t go home again. There are certain memories you should put away in the museum of your mind, leaving them perfectly preserved in their protective cases.

In a sense, the many days we spent boating to Block Island have become such a treasure. Perhaps that is one of the reasons when we last left the Great Salt Pond of Block Island a few years ago, I suspected we might never return. Not having gone back, that sense of not wanting to revisit what had such an impact on our lives, has been reinforced with each passing year.

Those were our adult to later middle years and now, with our children grown, and with the rigors of boating becoming more challenging as we age, not to mention the explosive expense of fuel and dockage, Block Island is now just a wonderful memory.

For us the journey began in our little 28’ boat in 1984 -- ‘Spindrift’-- equipped with not much more than a compass and a VHF so our ninety mile trip from Norwalk, CT through the infamous “Race” with its frequent fog, turbulent water and numerous fishing boats to navigate around, into the Block Island Sound, exposed to ocean swells, and finally into the Great Salt Pond of Block Island, was an adventure. We relied on compass headings and visual sightings of certain buoys, zigzagging our way there.

The first couple of years of venturing to Block we tried the docks at both Champlain’s and the Block Island Boat Basin, the advantage of the former being its salt water pool that our then 8 year old Jonathan loved, and the latter their floating docks – easier on and off the boat and no rafting (boats tied together, strangers trouncing across your boat to get to the dock).

Here I must detour in the story of our Block Island days. At this time we befriended Ray and Sue who have a son about the same age as Jonathan. Then we were at the same Marina, Norwest Marine in Norwalk. I briefly mentioned Ray in my article on Crow Island but I failed to mention how critical he has been to the story of our boating life.

Ray was my boating mentor, and there could be no better one. Ann and I have joked that if we were marooned on a desert island, he would be the one person we would want at our side. Give him a roll of duct tape, rope and a few other materials and he will build you a cathedral. In boating you can find yourself in unpredictable situations and Ray has frequently bailed us out. One time we arrived at Block taking on water because one engine’s muffler had burst and in the infinite wisdom of the boat manufacturer, this was below the water line. No problem for Ray, who immediately sized up the situation and decided to temporarily plug the exhaust with a large plastic coke bottle, a perfect, secure fit, stopping the leak until we could replace the muffler.

Continuing the story, my friend John was flying over to Block where he had left his boat with his wife Cathy and their two children, and he said, no problem, picking up a replacement muffler and between Ray and John, the repair was made, a perfect example of boating camaraderie and cooperation.

Ray showed us the path into Crow Island, long before the GPS made it a more accessible destination and it was there that our families spent countless weekends. Due in large part to his encouragement, in 1985 we bought a 37’ powerboat, and as a much younger man, I fearlessly took our new ‘Swept Away’ all over the Long Island Sound and its ports on Long Island and Connecticut sides, plus Newport, Cuttyhunk, Edgartown, and Nantucket for several summer vacations in subsequent years.

We cruised to those ports without Ray and his family as by that time he was convinced that there was only one port really worth going to, settling down for his summer vacation on their 44’ ‘Rascel’, at Block Island, and, specifically Payne’s Dock.

So, on our way back from one of our more distant ports we would stop at Payne’s to visit for a few days and, gradually, like Ray and Sue, we found ourselves spending more and more of our vacation time at Block until, we too, found ourselves going there for our entire summer vacations.

Payne’s is an enigmatic place, a community like no other we’ve visited on the water. It’s not just a dock, but an ongoing event, the same boaters showing up at about the same time, and settling into routines as mundane as hanging around waiting for the coffee to be made at the top of the dock, ordering a few or more of the homemade donuts we lovingly referred to as “sinkers”, sitting around the ancient wooden picnic tables sipping coffee in the frequently fogged in morning, to the evening libations at rickety Mahogany Shoals. Payne’s rafts boats during the crowded weekends but always seems to be able to match up compatible boaters. To watch Cliff Payne and his “dock geezers” move around boats, slipping them in and out of tight quarters was to watch a comical, sometimes nail biting, but effective chorography.

One weekend our older son, Chris, surprised us by biking 75 miles from Worcester, MA to the Block Island Ferry at Point Judith, RI, arriving with enough energy to join us and friends at Ballard’s in Old Harbor for lobster and then we all danced the chicken. Chris clucked and flapped his wings, none the worse for wear after his long bike ride.

After morning tasks, our families would dinghy to the eastern side of the Great Salt Pond, leaving our little boats, cross the Corn Neck Road causeway and settle in at Scotch Beach on the Atlantic Ocean for the day. Block has been called the Bermuda of the north for good reason, the water crystal clear, the waves perfect for body surfing which the kids did most of the day (OK, the adults too when we could grab their boards). Then, back to our boats, shower, and its cocktail time and pot luck dinner on someone’s boat.

We called fluke fishing at the mouth of the harbor “meat runs” as we were sure to catch that night’s dinner. Again, Ray was the leader of the pack, both in organizing those fishing parties and filleting the fish like a surgeon, squeezing every drop of edible fish leaving the waiting seagulls disappointed with the remnants tossed off the dock after surgery was completed.

Then there might be a “cook off,” the ladies preparing the fluke different ways, or sometimes as teams. To watch my wife, Ann, and Ray’s wife, Sue, cook in the galley was exhausting, pots, pans, plates, being passed back and forth in tight quarters, those beautiful, sun baked faces, flush with a cocktail or two, we expectantly awaiting the outcome of their culinary skills. Frequently, meals were served to accommodate an entire boatload of friends, everyone balancing plates and drinks in the cockpit. These feasts continued night after night, always with high praise heaped on the amazing kitchen crew!

Once we went tuna fishing off of Block. But I was the “accidental fisherman,” mainly going along to photograph the activities. The party thought it might be a good joke on our way back, after everyone had caught a yellow fin tuna in the 80 pound range, to watch me try to reel in one, using a stand-up belt (no fighting chair on the boat). They laughed as I struggled with the reel and the belt kept falling to my knees as my waist was too small, but I had the last laugh as I finally reeled in a 200 lb blue fin tuna. I couldn’t lift my arms for hours. Most of the tuna was sold at the dock at Montauk but we filleted one for ourselves and grilled it on the dock at Payne’s that night.

When not cooking up, we would pile into one of the cars that one of the family’s brought over on the ferry (this became the main means of transportation to the beach after our boys turned driving age), and went off to one of the many joints on Block Island, ending up at the one and only Ice Cream shop, which brought us to the Old Harbor, where the shops were. And when not at the beach, there was always a bike ride around Block, challenging because of its steep hills.

At one point we figured out ways of staying longer at Block, leaving our boats and families, taking the short flight to Westerly Airport where we would leave a car to commute back to our Connecticut offices for a few days to attend to business. On a couple of occasions we charted planes to Bridgeport Airport to attend to business, stretching out our Block Island stays.

Over the years we became part of the Payne’s “family.” Our son Jonathan thinks of Block as a second home and many of his friends are from the Block Island experience. At first Ray’s boat and mine were in the “pens” with easy on and off via our transoms, but later we went to the end of tees, our transoms facing each other. In our last boating days at Block we were rafted to Ray’s boat, the one they live on now, their 56’ ‘Last Dance.’

While our own boating lives have changed considerably these last few years, Block Island remains the prized destination in our boating memory.

Clunker Consequences

The cash for clunker’s program has been proclaimed a “success” by politicians lining up to take credit, to show their constituents that they know how to sprinkle a little money on the little guy, a mere $3 billion when it is all said and done, while $trillions go to Wall Street in one form or another. But, as with many of these bailout programs, when the government steps in, there are unintended consequences, some of which can’t be seen until the deed is done. Clunkers Plan Deflates Mechanics proclaims the Wall Street Journal. While car dealers are delighting in their windfall, 164,000 auto repair shops, as well as their suppliers, are left with less work. As one spokesperson pointedly said: "How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check? Who picks the winners in this game 'cause obviously the game is fixed."

And that in a microcosm is the downside of this approach to “fixing” the economy. Cash for clunkers might save some jobs, but at the expense of others. Also, the government has succeeded in doing what public corporations have long done – accelerating sales to make one quarter look better than it would otherwise. Wouldn’t these clunkers have to be ultimately replaced anyhow? Merely moving these sales forward does not fix the economy or create permanent jobs and as many automotive repair shops are independents, it certainly hurts small business. But it may make some politicians look good for a little while.
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Headline Tedium

Bailouts, bonuses and Madoff. Are we getting tired yet of the endless litany of related headlines such as the Wall Street Journal’s recent “Bank Bonus Tab: $33 Billion; Nine Lenders That Got U.S. Aid Paid at Least $1 Million Each to 5,000 Employees”?

The rock star of these “fab” financial “leaders” is Andrew Hall who makes a bundle for himself trading energy contracts for Citigroup's energy-trading unit Phibro LLC, with compensation approaching $100 million for 2008. It is interesting to read Sunday’s New York Time’s front page article on his activities and compensation. No doubt he is a talented individual and I suppose if Citigroup didn’t want his operation’s expertise in “taking advantage of unusual spreads between the spot price of oil and the price of an oil futures contract,” other firms would be lining up to pay his price. That is the American way. We know how to lavish money on our superstars, whether from the media or sports, or in this case, dice-rolling trading moguls.

The Times refers to his compensation as “his cut of profits from a characteristically aggressive year of bets in the oil market.” It also says “the company, for example, often wagers that the price of oil will rise so fast during a particular period, say six months, that it can make money by storing oil in supertankers and floating it until the price goes up. “ Finally, “right before the first Gulf War, Phibro placed an elaborate bet that the price of oil would spike and then go down faster than others were anticipating. The company earned more than $300 million from the gamble.” I emphasize bets, wagers, and gamble, as these words cut to the heart of the matter. Arbitrage and hedging can be a means of controlling risk or it can magnify risk to the point of endangering the entire financial system. Is this what our banks should be doing: betting, gambling and waging? Heads they win, tails the taxpayer loses? I have to wonder what the consequences would have been if Mr. Hall’s trades had gone disastrously against Citigroup. Would he have been personally at risk for the same $100 million he “earned” being on the right side? Do we want our banks, the bedrock of our financial system engaging in such activities – aren’t these the domain of the individual entrepreneur and private capital? To what extent does such “trading” create spikes such as $147 for a barrel of crude oil while there is a glut of the commodity?

Then there is the continuing rhetoric about having to reward the financial superstars that got us into this mess in the first place, or they will “walk.” I like Warren Buffet’s homey comments on this topic so I quote from his 2006 letter to his Berkshire Hathaway shareholders. Although this is aimed at CEO pay in general, which is also absurdly high in many (but not all) corporations, it applies to our banks and other financial service firms as well:

“CEO perks at one company are quickly copied elsewhere. ‘All the other kids have one’ may seem a thought too juvenile to use as a rationale in the boardroom. But consultants employ precisely this argument, phrased more elegantly of course, when they make recommendations to comp committees. Irrational and excessive comp practices will not be materially changed by disclosure or by ‘independent’ comp committee members….Compensation reform will only occur if the largest institutional shareholders – it would only take a few – demand a fresh look at the whole system. The consultants’ present drill of deftly selecting ‘peer’ companies to compare with their clients will only perpetuate present excesses.”

Another mind-boggling headline “Picowers Rebut Suit Tied to Madoff Fraud” is from Saturday’s Wall Street Journal. and The New York Times version of the same “Big Investor Counters Charges in Madoff Case.” According to the Madoff bankruptcy trustee, Irving Picard, Picower’s accounts posted gains of more than 100 percent a dozen times between 1996 and 2007, with one gaining 950 percent, but this counter suit contends the latter was “only” 37.6 percent and none of his accounts earned more than 100 percent “in any single year.” But the $5.1 billion Picower withdrew over the years may have represented a return greatly exceeding any reasonable return during the same period. How a knowledgeable investor (presumably Picower qualifies) could believe that Madoff can “guarantee” steady returns of 10 to 12 percent a year and be satisfied by the statements received from Madoff to bear out those returns is beyond me. I still think the “idea” of creating a new reality TV show, something we seem to be better at than regulating financial Ponzi schemes (either private or government sponsored) might be just the ticket to fund the innocent victims of Madoff.

On the eve of President Obama’s inauguration, I had written the following: “The winners in this economy were not only the capitalists, the real creators of jobs due to hard work and innovation, but the even bigger winners: the financial masters of the universe who learned to leverage financial instruments with the blessings of a government that nurtured the thievery of the public good through deregulation, ineptitude, and political amorality. This gave rise to a whole generation of pseudo capitalists, people who “cashed in” on the system, bankers and brokers and “financial engineers” who dreamt up lethal structures based on leverage and then selling those instruments to an unsuspecting public, a public that entrusted the government to be vigilant so the likes of a Bernie Madoff could not prosper for untold years. Until we revere the real innovators of capitalism, the entrepreneurs who actually create things, ideas, jobs, and our financial system will continue to seize up. That is the challenge for the Obama administration – a new economic morality.”

I haven’t changed my view and I fear that while we bail out banks, insurance companies and their like, leaving present compensation practices in place, we just continue to perpetuate financial risk taking, swinging for the fences, making “bets and wagers” that will just dig us into a deeper future hole. As the headlines attest, the “challenge” remains. A true recovery requires jobs, jobs, jobs – and how are they going to be created – by banks trading energy futures? What happened to the commitment to the infrastructure? Our roads, utilities, and public transportation are falling apart. Alternative energy seems DOA. Aren’t these the areas our financial recourses should be focused on, ones that will create jobs, in construction, technology, and finance, and can lead a true economic recovery we can pass on with pride to future generations?