Do You Beleive in Little Things?

Today’s science news includes the idea that scientists have created stain-free pants! I confess, my knee-jerk reaction to this news was “Wake me when they are sold at Mervyn’s for less than $100 a pair.” To my great surprise you can actually purchase them at Eddie Bauer, for a mere $10 premium. The company claims they have sold well since their introduction in 2001 — begging the question of why this is in today’s news. Shirts of similarly treated fabric are supposedly available, with jackets to follow this fall. This is clearly a boon to those who still have a propensity towards spilling things on themselves, usually at inopportune moments, such as right before a job interview.

Strictly speaking, nanotechnology is nothing more than the science of making things that are very small. Things like better skin lotions, batteries that last longer, or anti-stain coatings for fabric. The public idea of nanotech, however, includes such “flying car” ideas as microscopic robots that cure disease, and cars that can repair themselves. Nanotech is seen as “revolutionizing” everything from medical products to environmental cleanup to crime prevention. Even the government wants in on this act.

Intelligent people who you may or may not agree with, like Steve Forbes and Joe Lieberman, say this is such a clearly up and coming field that people should invest in it. Not just as individuals, but as corporations and venture capitalists and governments. They cite figures saying that it could be a $1 Trillion business in 15 years.

Others say this is a dangerous trend, which should be closely monitored, lest there be horrible unforeseen results. This is particularly true of military applications of nanotech. It does not take a tin-foil hat to see the possibility that weapons using the technology of the very small — say, pocket sized nuclear devices, or listening devices no larger than a flea, or even weapons-resistant coatings for tanks and aircraft — could be very dangerous in the “wrong” hands.

Still others think nanotech a tempest in a teapot, perhaps interesting, but not paradigm shifting. Sure, nanotech is interesting, but is it cost effective? Can it ever live up to its promises? Remember that not long ago, everyone was convinced that the Internet would change everyone’s lives in unimaginable ways. When all is said and done, the biggest change for most of us is the ability to find a startling amount of information without leaving home, and without living in a research library. The nay-sayers have a half-century of “world of tomorrow” exhibits to point to as they say that things rarely turn out exactly as planned.

I think I’d be very careful about investing in nanotech. Investors might be better off waiting for 3M and DuPont to buy out the small companies with actual viable products. In the meantime, I think I’ll see if those Eddie Bauer pants come in a 26″ inseam.

Just an Idea

Now make no mistake! I like my car, and I like driving it. I like getting around town whenever and by whatever route I choose.

The car has made suburbia possible, along with it’s unpleasant sibling, urban sprawl. It has given rise to great shopping palaces, and in some cases destroyed downtown retail districts. The car makes it possible to cross town in a timely fashion, regardless of bus schedules, and thus undercuts the feasibility of mass transit. The car gives unprecedented independence to millions of adults, including some who should possibly give that independence up, and those who perhaps should never have had it. While the car makes gainful employment possible for millions of people, they are expensive to purchase and maintain; they are a major budgetary drain on the finances of many families.

The car is also a source of pollution, including suspected greenhouse gasses. This has resulted in many states mandating regular emissions testing — a minor inconvenience to most, but a potentially disastrous expense for some. Cars are a contributor to American dependence on foreign oil. They are death on wheels to hundreds of thousands of people each year. Collectively, Americans lose years of time on freeways commuting in rush hour traffic. There is no positive aspect to counterbalance these issues.

Since it seems clear that the EPA knows more about making regulations than helping communities implement them, and that furthermore tax reform and simplification is not apt to happen any decade soon, I have a modest proposal. <Give a tax break to people who live within 5 miles of their primary work address. This can be verified by Zip code of employee and employer, although large multi-location employers may have to add the address of the work facility to the W-2 form. At the same time, a tax break could be given to both companies and employees that telecommute. Maybe even a plain old fashioned deduction for mass transit monthly passes, although I admit that many people who take the bus currently do not have enough deductions to itemize.

This proposal makes mass transit a reasonable alternative to driving oneself. It also makes car-pooling more realistic. It has the potential to revitalize urban areas. It opens the possibility that some people will choose to walk or bike to work. That could only have a positive impact on the American obesity epidemic. In any event, those who still choose to drive to work will spend less time in traffic — even those who still live relatively far from their jobs. In addition to wasting less time, wasting less energy, creating less pollution, workers may actually end up spending more time with their families, more time to participate in their communities.

Under this idea, nobody will be prevented from owning the biggest baddest SUV he can afford to gas up. Instead, individuals will be encouraged to choose complementary home and work locations. I doubt many people will move 3 miles to get the deduction, but for those moving to a new town it will be a valid consideration. It may encourage developers to think in terms of larger communities with nearby businesses and sidewalks, instead of a few hundred houses here and there.

Context Is Everything

“Context is Everything.” That was the favorite saying of a former professor and academic advisor I had. The first day I met him, my first day on campus as a fresh-faced youngster, he attempted to talk me out of my major. I rather resented it at the time. I gradually came to understand his thinking, and wish that instead of something so heavy-handed, he’d suggested a minor in another subject.

So please consider the context when you read that Dick Cheney’s Energy Task Force discussed Iraqi oil-field contracts (as well as some in Saudi Arabia and the U.A.E.) when they met in early 2001. The subject of much debate and legal wrangling, these records were formally requested by Congress on April 19, 2001. That happens by sheer coincidence to be the 8th anniversary of the Branch Davidian Fire in Waco, and the 6th anniversary of the Oklahoma City Bombing. More than two years after the fact, after a great deal of moaning about executive privilege and more than one court date, some of the requested information has finally surfaced. The fact that there were records to subpoena means the meetings took place before April 19, 2001, two years before the American led invasion and “liberation” of Iraq.

Remember early 2001? That was before there was a Department of Homeland Defense. Indeed, that was before the New York City skyline met with violent change. Iraq was, despite occasional grumbling, a dead issue. We were officially in a recession (but be of good cheer, it’s supposed to be over now). Seattle was cleaning up from a magnitude 6.8 earthquake. Bush finished his first hundred days in office at the end of April. Indeed, people were still wondering if, in the end, he was duly elected. The big chair in the Oval Office wasn’t even warm yet when the subpoena arrived. No Child Left Behind was still a pipe dream. An American spy plane was captured by China. It would be most of a year before Ashcroft spent $8000 of taxpayer money to cover a statue entitled “Spirit of Justice” allegedly because it displayed bare bosoms, forcing the civilized world to wonder if he had ever so much as driven past an art museum. It was still acceptable to have no revenues and give product away for free, or even sell product at a terrible loss, as long as your company had “.com” in its name. Indeed, that was before the California energy crisis, resulting in astronomical prices and rolling blackouts — please pay in advance for unreliable power. Enron was considered a nice, stable, energy company despite the fact that they would declare bankruptcy by the end of the year. British cattle herds were being decimated by “foot-and-mouth disease.” Kids sucking down sugary sodas was linked to obesity. The human genome was newly mapped. The Code Red virus was months away.

So, if I may be so bold as to ask, why exactly were Dick Cheney, Ken Ley, and their handpicked crew of cronies talking about divvying up Iraqi oil contracts? And should King Fahd worry that his people are to be “liberated” next?

Bond, 30-Year Bond.

This morning, the nice folks on CNBC’s Squawk Box were discussing the possibility of bringing back the 30-Year Treasury Bond. A Treasury Bond is, in short, your very own piece of the National Debt. Instead of sending the President down to the local Citibank chapter to put a mortgage on Yellowstone, the United States Treasury — the same folks to whom you write that check enclosed with the 1040 — issues bonds. They pay you interest for the term of the bond (2, 5, 10 years) in return for using your money to run the government. But wait, there’s more! These bonds are a liquid investment, meaning you can buy and sell them fairly easily. You don’t have to hold a bond to the bitter end to get your money back. Even if you don’t have one of these in your brokerage account or safe deposit box, you still probably own some of these bonds, because they are often used by banks, brokerages, and mutual funds as an interest-bearing place-holder. Treasury Bonds are considered a very safe investment because they are backed by the United States Government, an entity unlikely to default (or, declare the bonds worthless).

A few years ago, the government stopped issuing the 30-year Treasury Bond. At the time, there was a budget surplus and the national debt was shrinking. It made sense to reduce the number and kinds of bonds out there. It made sense to get rid of what national debt was left in a shorter time frame than 30 years. It made sense not to pay 30 years worth of interest. It was the government equivalent of paying down a credit line and cutting up the credit card. Besides which, the stock market had long since peaked, and I believe there was the unspoken hope that with one less type of bond available, money would make its way to corporate bonds and common stocks. Stock market recovery was vital to the idea of “privatizing Social Security.”

But things have changed since then. The budget surplus is gone. The national debt is rising, buoyed on a rising tide of Homeland Security and War On Terror and tax cuts upon tax cuts. Interest rates are at historic lows, even on a 30-year basis, as proved by America’s collective mailbox full of mortgage and refinance offers. Peter Fisher, the man credited with killing the 30-Year Treasury, is moving on. Bloomberg sees an open door.

The Squawk Box online poll results were 74% in favor of bringing back the 30-Year. Keep in mind, this is not a population of day-trading soccer moms, but predominantly licensed financial industry professionals who happen to have time to respond to an unscientific online poll during the hours when the markets are opening. If this is consistent with the opinions of people with actual authority, consider the return of the 30-year a done deal.

Should it be announced that that new 30-Year Treasury Bonds will be issued, I believe the major stock market indices will go down. This will happen for two main reasons. First, it will mean the Feds are admitting that budget deficits and the national debt will be with us for the foreseeable future. So much for shrinking the government; farewell fiscal responsibility. It will be evident that the government needs 30 years to pay its debts. That bodes ill for the economy, and therefore the stock market. The other reason this will cause market declines is that some investors will take money out of stocks in favor of the new bond. Why? Because it is perceived as safe. After all, if you can’t trust the Federal Government, who can you trust?

Health Class is Over, Have a Mountain Dew!

It probably will show my age to say that I first encountered a school vending machine in High School. The things have become ubiquitous… or have they? After years of “exclusive placement” deals, schools are being forced to either remove vending machines, or at very least offer whatever is considered “healthy” this week in the machines. These days, that means things like fruit juice, skim milk, and unsalted pretzels. To say sports drinks somehow fall in the “healthier” category is disingenuous, considering the sugars and empty calories they contain.

Of course we all know that the rise of the school vending machine is purely coincidental with rising rates of youth obesity, obesity related diseases such as adult onset diabetes, and learning disabilities such as ADD and ADHD. These things have nothing to do with giving children as young as first grade — with the judgment of children — unfettered access to all the soda and candy they can afford to stuff in their mouths. How could it be otherwise?

It is furthermore painfully obvious that students are a captive audience. If only Coke is available, students will drink Coke. If only Pepsi is there, then Pepsi is the drink of choice. If this is in opposition to what is available at home, so be it. Branding at its very worst. And that is before considering that vending machine snacks may be keeping students from eating the theoretically more balanced lunches available in the cafeteria. Theoretically. Go ahead and Google up “school lunches” and you will likely find dozens of menus in the first 3 pages of links. Decide for yourself whether you consider the meals nutritious and balanced.

Of course the reason vending machines are popular in schools is the same reason you will find them in apartment complexes and shopping malls and a hundred other places: revenue. The companies that place vending machines, as you may or may not know, pay a portion of the proceeds for the privilege of placing a sure money-maker. In an age of schools which believe they are poorly funded, this revenue may make the difference between a bare-bones no-nonsense education ad the availability of extracurricular activities. Some cynics suggest that our schools are in much more dire need, making this revenue the difference between ancient outdated textbooks and new ones.

The school day is the one chance some kids have to eat anything approaching a balanced meal, whether because of parental lack of interest of parental lack of money. Vending machines in schools undermine that ideal. To sell that dream in return for a few hundred dollars is unconscionable.

So, Where is there a 5 Star Restaurant in Omaha?

One lucky soul had the winning eBay bid of $250,000. The money goes to charity, the bidder goes to lunch. This is no ordinary lunch, of course, but lunch with the second richest man in the world, Warren Buffett.
Buffett is a legendary investor, and Chairman of Berkshire-Hathaway. Perhaps more remarkable regarding his reputation as an investor is the fact that he shuns technology stocks, claiming he does not understand them well enough to invest in them. One can imagine that his friend, the man who nudged Buffett aside from the position of richest man in the world, Bill Gates might be persuaded to tutor him in this regard.

Berkshire-Hathaway, by the way, is a rather legendary company in its own right. They are a holding company, whose subsidiaries are mostly but not exclusively insurance companies. The two subsidiaries you are most likely to have heard of are GEICO and Dairy Queen. At this writing, it will cost you over $70K to buy a single class “A” share of Berksire-Hathaway. There is no dividend. The company paid Buffett a salary of $294K in 2002. That’s not much more than the cost of this little luncheon.

As with many men of wealth beyond being able to spend it, he is also a bit of a philanthropist. Previous charity lunches, held in San Francisco and not auctioned on eBay, went for $25-32K. These lunches have gone from the price of a nice car to the price of a nice 4 bedroom house in many areas of the country. The winner does get to bring 7 companions, bringing the price per plate down to $31,250 — assuming the actual food is included in the price tag.

I sincerely hope the winner is doing this because he or she wishes to help the charity beneficiary, and not thinking to pick up a quarter million dollar stock tip.

Fannie Mae wants YOU to own a house!

Fannie Mae (the Federal National Mortgage Association) is a large, quazi-government corporation whose purpose is to make sure there is adequate funding for consumer mortgages. It usually does this by buying mortgages from lenders, freeing the lenders to go out and lend money to someone else (“making a liquid market in mortgage backed securities”). In the process, they are able to use economic means to stifle predatory and discriminatory lending practices. Fannie Mae also happens to make a lot of money doing this ($5.25B). Enough money that they can pay some $20M to the three-letter types and still send out an annual dividend of $1.56 to holders of their 978 million shares. That’s over $1.5 billion in dividends per year. The dividend alone is more than 4300 times the maximum conventional mortgage. FNMA is big. Some would argue it is too big to be allowed to fail.

But that is not today’s topic; instead I would like to direct your attention to their advertising. You wouldn’t think there’d be a lot of advertising, since after all they deal primarily with banks and mortgage companies. They actually have a surprising amount of advertising. Some of it is occasionally found on business and news oriented media. Some of it is in the form of sponsorship of organizations such as NPR. All of it is designed to make you feel all warm and fuzzy about home ownership.

All these are quotes from their website: “The American Dream of home ownership.” “Because having a safe place to call home strengthens families, communities, and our nation as a whole. ” “Revitalizing neighborhoods and creating affordable housing opportunities for over 20 years.” “A home of our own is a dream come true and symbolizes who we are.” “Homeownership has the power to green-line both neighborhoods and nest eggs.” A past ad even suggests that homeownership is directly linked to better schools.

Implied is the idea that owning real estate will magically make life happy. A house should be the foundation of your finances! You are nobody unless you own a house! Do they really think you are stupid enough to think nobody owns houses in crime-ridden, run-down communities? Are they saying that apartment dwellers are somehow not holding their own in American society? That renters by default do not live in safe places or strong neighborhoods? That anybody with stable finances should surely own, not rent, their residence?

As someone with experience in property management, I find these implications insulting, as should you. There are people who own houses in bad neighborhoods, and people whose houses are a drain on the finances, people for whom this particular American Dream is a nightmare. There are people who rent houses and apartments in good neighborhoods, and people who rent for a variety of reasons, few of which are monetary.

FNMA does some good things. They do not need to tug on Joe Average’s heartstrings to make the mortgage market liquid. Should there turn out to be a “housing bubble,” such sentimental claptrap must be accorded a fair share of the blame. They should lose these ads now.

That must have been an effective seminar

Workplace violence is a depressingly common occurrence. Most of it is small stuff, but occasionally something so large happens that it makes national news. Such a thing happened this week. An employee at an aircraft plant stormed out of an ethics and sensitivity seminar, shouted “Y’all can handle this!” and returned minutes later with both a rifle and a shotgun. He killed 5 people and injured 9 others before taking his own life. Nobody yet knows why.

This was apparently not the first time Mr. Williams had such counseling. He was said to be a hothead who had problems with black people. The union steward for the plant says there have been many “concerns” expressed by his coworkers over the years. Afterwards, none of his coworkers were surprised who the shooter had been. One victim’s husband had heard her concerns that he would hurt someone several times over the years. He described Williams as “obviously sick.”

Security expert Gavin de Becker, in his landmark book The Gift of Fear, tells us that normal, sane people do not lash out in violence unless pushed to the point that violence seems the only logical choice. Williams was by all accounts not a normal, sane person. De Becker furthermore posits that the vast majority of workplace violence can be prevented by adequate employee screening. In short, if you pay attention during the hiring process — check references, note reactions to questions — you can weed out the people most likely to become violent in your workplace. If this is not a laudable goal, then I don’t know what is.

Williams’s bosses put up with behavior that caused his coworkers to worry for a decade and a half. This surely impacted the workplace, possibly drove away really good people who went on to jobs where they did not have to deal with this nut. And this was before he killed, wounded, and gave post-traumatic stress syndrome to his coworkers. I am willing to bet he wasn’t very productive either.

If you are in charge of hiring, you cannot afford not to pay attention.

The Long and Winding Road

It seems like not a day goes by without a headline to the effect of “Bad Thing Happens in Iraq.” Soldiers killed or injured. Suicide bomber. Weapons cache found in graveyard, leaving occupying forces to either desecrate graves, or expect an attack. A mosque is blown up. Infrastructure at risk. Police cadets killed. Journalist killed. Political unrest. And Saddam himself has joined Osama Bin Laden as an Arabic Elvis, despite a large bounty on his head, and despite the fact that everyone was sure he was dead a month ago. According to the Washington Post, American Lt. General Ricardo Sanchez reports an average of 13 attacks on American and/or British forces each day for the last 6 weeks. In the face of this opposition which is not supposed to exist, the President of the United States says “Bring them on!” With this daring taunt, he places American military forces in harm’s way — men and women with families who miss them as they serve their country. Furthermore, he endangers the innocent Iraqis they were supposed to be helping.

This is to say nothing of the ongoing problems of destroyed infrastructure. Ordinary citizens have serious problems getting clean, safe food and water. Roads and electrical service are spotty. Inasmuch as “liberating” forces have taken out the Iraqi government, it is not unlike waking up and discovering that anything with “Federal” in the title was damaged or destroyed. In many cases, even local government is tenuous. Make no mistake, the Hussein regime was not a bunch of nice friendly guys dedicated to the betterment of its subjects. However, there is no evidence that liberating forces have improved the situation in the short run.

Even so, don’t say “the Q word” — quagmire — in front of Donald Rumsfeld. Like the former Iraqi Information Minister proclaiming that all is well and there are no approaching armies and a curse on whomever dares to say otherwise, Rumsfeld insists this is nothing to be alarmed about. Everything is coming along, things are getting better every day, give us some more time, and we’ll pack up and leave as soon as we can. This might be more convincing if we hadn’t heard the same thing about Afghanistan. The new administration, while philosophically a huge improvement over the Taliban regime, has yet to bring law, order, and government services much beyond metropolitan Kabul.

However questionable the reason American and British forces are involved in the first place, the current problems cannot be solved by packing up our tanks and going home. That tactic will breed a generation or two of anti-western militants who grew up in harsh conditions and crushing poverty. However, somebody needs to have a Plan with more depth than awarding some construction contracts and installing a governor. Not only does there need to be a Plan, it needs to be culturally sensitive to avoid faux-pas such as imposing western banking when Islamic law strictly speaking forbids both paying and receiving interest — why not give away ham and beer in the humanitarian aid packages, sheesh! Beyond this, the Plan has to have buy-in from the people we are supposedly there to help. Failure to cooperate with people there, who aren’t necessarily fond of us, will result in failure of the Plan. And failure of the Plan will mean having to go back and crush a dozen Osamas and Saddams in a decade or two.