by
Bill Bonner The latest news tells us that hedge fund Amaranth is now down $6 billion. The most amazing part of this story is the blasé way in which the financial markets took the news. When Long Term Capital Management went bust the whole world shuddered...and the New York Fed rushed to save the day. And, then, there was not even half as much money at stake. It’s time to hedge against the hedge funds, we conclude. More below... As you will see, Hedgefundland is a kind of alternative universe where none of the usual laws of nature seem to apply. In the rest of the universe, people trust age, experience and humility...but in Hedgefundland (much like Dotcomworld, which was discovered 10 years earlier), it is the callow twits and the over-confident twenty-something blowhards who get the money. And in the rest of the universe, people want to make money...in Hedgefundland, they seem happy to lose it. But we do not live in Hedgefundland; we live in the real world. And it is strange enough for us. One of the strangest things about it is how the opinion leaders have duped the average citizen. And when they didn’t mislead him, he misled himself. In the bright, daylight years following Ronald Reagan’s ‘Morning in America,’ he may not have thought he was getting richer...but he definitely believed he should. So, he spent more...he worked more...he lived bigger and bigger, until he was so big, he was ready to explode. From the Arizona Republic comes this report: "Lost in the debate over whether we're better off today is the inexorable widespread decline of job quality. Yes, the American economy is creating jobs, although at an ominously slower pace the past few years, but what kind of jobs? "Call-center jobs, which can be some of the better positions in the vaunted service economy, pay an average of $10.71 an hour. "Yet that's far below the $13.75 needed to keep a family of four above the poverty line. The average Ford factory worker makes $31.64 an hour. "No wonder most Americans have seen their earnings stagnate the past six years and watched as health care, pensions and other benefits are taken away. "In the 1980s, many people could watch the pain in the Rust Belt, when hundreds of thousands of steelworkers lost their jobs, and say, ‘Serves 'em right.’ "But the same destabilizing forces have since swept a host of industries that support middle-class jobs, including such white-collar bastions as banking." Losing ground is the sort of thing that people might get cheesed off about...if they came to believe it was happening. But for the moment, the voters still seem to believe in the American Dream. If they work hard enough...and if they put their money into a balanced portfolio of equities and real estate...they will be able to live the good life. Well, the hard work hasn’t paid off for the last 30 years...nor have equities given much in the way of return since 1998...but housing has come through. An aggressive speculator could have flipped and house-hopped his way into big money over the last five years. Alas, now it’s getting harder and harder to make a buck in housing too. Contra Costa Times: "Solano County sales also dropped 34.3 percent, and sales appreciated 1.9 percent, the lowest rate since August 1999. The median price in the Bay Area rose a scant 0.2 percent," said DataQuick spokesman Andrew LePage. "To us, this is a leveling off," LePage said. "Some counties will see their median home (price appreciation) dip below zero. We think the market is heading into a lull while buyers and sellers work out what the price level is." • A dear reader writes: "If the USA is such a terrible place to do business, how can a company like Google go from a market value of $0 to $144B in 8 years and during the Internet depression no less? "Do you have the balls to answer this publicly in your Lew Rockwell column?" • Who ever said the United States was a terrible place to do business? It’s a great place to do business...depending on what kind of business you’re doing. The Japanese are exporting so many automobiles, for example, that their trade surplus – already the world’s highest – practically doubled. But American manufacturers can’t make any money. On the other hand, we wouldn’t want to be in the business of hustling zero-interest, payment optional, negative amortization mortgages in Switzerland or Germany. But in America, they fly off the shelves like the latest Britney Spears album. Generally, our personal experience is that America is an easier place to do business than other countries. This may reflect nothing more than the fact that it is the market we know best. In France, Spain, Italy...not to mention India...we are foreigners. "You gotta know the territory," they say in the Music Man. Besides, the United States is an easier place to start a business for the simple reason that Americans will buy anything. Who else would buy drink coolers for their cars...air-conditioned doghouses...and heated toilet seats? If Americans will buy Neg Am mortgages, hedge funds and chocolate cereals, is there any product so lame, so unnecessary and so stupid that it can’t be sold in the good, ol’ US of A? • Last night, we did our parental duty. We went to a PTA meeting. It was nothing like PTA meetings we had been to in America. Both parents of practically every student were there...mothers neatly coiffed and carefully dressed – not a single fat one among them, and some very pretty – and then, the fathers arriving a little later in their business suits. As near as we can tell, our children go to an elite, Catholic school in a nice part of Paris. The qualifier "as near as we can tell" merely confesses that we are foreigners, and even after 10 years, are not entirely sure how things work. But like PTA meetings everywhere, the gathering was mostly a waste of time. Blah...blah...blah...after a few minutes we were taking notes for today’s column and trying to remember where we left our car keys. After three or four presentations by school headmasters and administrators, we followed along to a classroom where Henry’s teachers introduced themselves. Each one gave a short presentation, explaining what they intended for our children to learn this year...and what they expected from us as parents. In every case, we were supposed to make sure Henry gets to bed on time – after about three hours of homework – and that he eats a good breakfast before setting off for school in plenty of time to get their before the bell rings. If he is unable to go to school, we are to call in advance...and then, when he returns, we must write an explanation in his little "carnet." The carnet is very important...it is to be carried at all times by the student. It is the means of communication between parent and teacher...and also a record of the entire goings-on at the school...tests, trips, vacations, and so on. The teachers were almost all women and almost all lived up to the caricatures of their professions. His German teacher, for example, was a very well-proportioned blond woman with a wide face and a heavy accent. She looked and sounded like the sort of woman you would find behind those ads that say "Mistress Helga Promises to Teach You Some Discipline." We looked down...and yes, she was wearing black leather boots. By contrast, his English teacher had no accent at all – except for the Parisian tendency to put a rising ‘en’ on the end of each sentence. But she looked as though she might have come from Cheshire or Stratford upon Avon...with long brown hair and a longish, vaguely Laura Ashley dress.
"What’s wrong with your accent?" we wanted to know. "You don’t have an accent. You speak standard, middle-American English."
"Then you should explain...correct her..." "I tried that..." "Well..." "She gave me two hours of detention..." September 23, 2006 Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Copyright © 2006 Bill Bonner |
