Warm Up
Madeleine with her cake, which she lovingly made last night and will consume this afternoon. No doubt. Here is something to make long-term investors perk up: the US stock market, on the whole, trades at .9X the replacement value of the economy's underlying assets (Van Hulzen Asset Management). One interpretation is that general managers are expected to reduce the value of their hard-properties by, er, managing them. It also means that taking over a company, breaking up the pieces, and selling them off for cash would net an instant return. We have not been in this territory since the early 1990s. As my friend Joe would say: "It's like picking up dollar bills on the street for 50 cents." The peak, by the way in 2005, was 2.4X. While we are thinking of this, consider Florida which the New Yorker magazine profiles as the ultimate ponzi scheme. Florida's business-model has been tourism and population growth, fueling a real estate market that became speculative. Thanks to Jeb, who was in the pocket of "pro-business" and their dollars, there was no over-sight. Bank tellers earning $20,000 could obtain financing >$300,000 sight-unseen. No wonder 10,000 convicted criminals were in the mortgage business, including four thousand as licensed brokers (until recently changed, felons in FL lost the right to vote but could still sell homes). Think there was fraud? In 2005 alone prop values up 28% and today these same communities gutted with foreclosure, vacancy and neglect. So the house of cards worked like this: since FL one of nine states without income tax it is disproportionately dependent on real estate deals and sales taxes. Counties therefore issued bonds on unrealistic property growth assumptions which are now, of course, under pressure or in default. According to Lance deHaven-Smith a public-policy professor at Florida State, Florida's policies are "the most disingenuous system of government." The visible circus: people leaving in droves. Disney's stock price down 38% on the year. Unemployment accelerating, officially 8.1% in December '08 up from 7.4% in November (including unemployed no longer seeking work and in certain areas, it is >10%). The state is in need of a bail-out. Line up with the rest, you chumps. The whole thing depressing: crooked mortgage dealers, home-buyers flipping houses (estimated two-thirds of all buyers), conflicted oversight and peddled regulation. And another Bush. Thank God my Grandmother not around to see this pathetic place. It makes me cry for my kids. I wonder if we are out of this mess by the time they are working age? I wonder if Europe presents a viable alternative?
Hot-chili clock a gift from Katie BTW and my favorite thing in our kitchen after Sonnet's cooking.
