Media coverage of the crisis era

[John]

It would be funny if it weren't so serious -- financial media like
CNBC, the Wall Street Journal, etc., have been consistently
presenting the most Polyannish view of what's going on.

And it's amazing to see things unfold exactly as they did in 1929,
when politicians were always saying, "The economy is sound" and "The
fundamentals are strong," and the media say the same thing.

I've been extremely contemptuous of the media in the web log, because
the reporters are supposed to be knowledgeable about finance and
economics, and yet they and their guests say the most unbelievably
stupid things.

There have been some incredibly stupid things said, but if I had to
pick out the worst, it's hard to beat the one where two "experts"
said that people with brain disorders make better investors because
they buy rather than sell:

** Do people with brain disorders make better investors?
** http://www.generationaldynamics.com/cgi ... 25#e080125

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.GenerationalDynamics.com/forum

[John]

Some interesting stuff on the Sunday morning news shows:

• Everyone is looking for someone to blame. The Democrats blame
  the Administration. The Republicans blame the regulators. Everyone
  blames the financial executives.
  
  Nobody blames the generations -- the Boomers and the Generation-Xers
  -- which, as regular readers of the web site know, is the only
  possible explanation.
  
  ** Markets fall as investors are increasingly unsettled by bad economic news
  ** http://www.generationaldynamics.com/cgi ... 21#e071121
• The big argument is over "deregulation." However, the politics
  is very muddled on this issue, since most of the deregulation
  occurred in the 1980s and 1990s, during America's generational
  Unraveling era. This particularly includes "the era of big
  government is over" and the repeal of Glass-Steagall Act in the
  1990s.
• One silly question that comes up is whether this bailout is
  "socialism" or "communism" or "the end of capitalism." Communism and
  socialism have always failed as economic systems, and they're really
  no different than Fascism. As I've written several times, successful
  Communism is mathematically impossible, and you can prove it using
  the mathematics of Computational Complexity Theory. Basically, as
  the population size grows, the number of regulators must grow
  exponentially faster, so for Communism to be successful, everyone has
  to become a regulator. China has 2.4 billion people, and 2.4 billion
  equals infinity for all practical purposes. (For some reason, only
  mathematicians seem to get that joke.) At any rate, as population
  grows capitalism is the only possibility, not because of ideology,
  but because of mathematics.
• If you want to measure how dense a particular pundit or analyst
  is, try to discern when he believes that the financial credit
  started. Some believe it began two weeks, some believe it began a
  year ago, some believe it began in the early 2000s, and occasionally
  you'll find someone who believes it began with the dot-com bubble.
  
  The rule is: The more recently the pundit claims the crisis began,
  the denser he (or she) is.
• Another measure of denseness is how soon he (or she) believes the
  crisis will end. The densest believe that the worst will be a
  recession, and that the current bailout will be the last one.
• Nonetheless, there are clear signs of convergence from the right
  and the left. In particular, I didn't see a single person from the
  loony left being interviewed this morning. Both Republicans and
  Democrats were really quite sober and reasonable.
  
  From the point of view of Generational Dynamics, this is the
  regeneracy in action -- the beginnings of regeneracy of civic unity
  for the first time since the end of WW II.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.GenerationalDynamics.com/forum

[John]

A question from a web site reader:

> I came across your 11% solution article today while looking for
> historical Dow P/E's- in my search for a bottom ( who isn't) I
> have felt for a long while that most stocks are way overvalued.

> When I read your article, all I could say was WOW!

> I had been following your advice, unknowingly for about the last
> 6 months. It has been very gratifying to me, and most recently
> very lucrative. The last week has been very rewarding.

> I have just begun to look around your site, and a question
> occurred to me .

> Have you ever read Barbara Tuchman's 'March of Folly"? If not, I
> recommend it. I think you'll find it enriching and in line
> somewhat with your thesis.

I read a review of Barbara Tuchman's book.
http://www.stoneschool.com/Reviews/MarchOfFolly.html

This looks like an interesting book, but books like this drive me
crazy because they would be so much better if the authors understood
generational theory. The Trojan war was a full scale crisis war,
while the American Revolution and the Vietnam war were crisis wars on
one side and non-crisis wars on the other side. Furthermore, folly
or not, neither of these wars was avoidable. The American Revolution
and the Vietnam War would have happened no matter what the
politicians did. These wars were driven by generational forces
beyond any politician.

Now, if someone ever wrote a book that reflected those realities,
then it would be very interesting indeed.

Thanks for your message.

Sincerely,

John

[John]

Listening to the Sunday morning news shows today gave me a headache.

I don't believe I heard anyone make any sense whatsoever. Pretty
much everyone took an ideological position, with the Republicans on
the defensive. Several people blamed Ronald Reagan and George Bush
for the current situation, but no one blamed Bill Clinton for the
dot-com bubble.

Of those who said things that weren't purely ideological,
they all followed the Nouriel Roubini formula: "Do exactly what I
tell you to do, or we'll have a major worldwide crisis." That way,
even though they have absolutely no idea what's going on, they've
covered their asses no matter what happens, and if there's a crisis,
they can blame it on the fact that no one listened to them.

What's really sickening is that no one gives a f--k what happens to
anyone else, as long as they're protected. "It's everyone's fault
but mine."

As always, there were the usual soothing words that people were
saying in 1929: "The fundamentals are sound." "This will pass soon."
"We've had recessions before."

The most amazing time in my life, and also the most sickening.

Sincerely,

John

[gary]

Hey guys, I know I'm a day late and a dollar short on this, but since Saturday I've been trying to find a video copy of Paulson's Friday night press statements that includes the Q&A with the press pool. I can find it without the Q&A. There were some mannerisms that Paulson was consistently using. I know an expert on people's unspoken words and I wanted to run it past them.

Me? I about fell out of my chair as I watched the Q&A portion. Not having Tivo sucks.

[John]

Excerpts from Meet the Press this morning
http://www.msnbc.msn.com/id/27752329/

Moderator: Tom Brokaw

Two of the guests:

Sen. Carl Levin (D-MI)
Tom Friedman of The New York Times

MR. BROKAW: Senator Levin, let me just read to you something that Tom
Friedman wrote in The New York Times last week. "The blame for this
travesty not only belongs to the auto executives, but must be shared
with the entire Michigan delegation in the House and Senate, virtually
all of them, year after year, voted however Detroit automakers and
unions instructed them to vote. That shielded GM, Ford and Chrysler
from environmental concerns, mileage concerns and the full impact of
global competition that could have forced Detroit to adapt a long time
ago."

At a time when Toyota was producing the Prius and Honda, much more
gas-friendly cars, GM, in fact, was turning out the Cadillac Escalade,
the Hummers and other big SUVs that were eating a lot of gasoline when
a lot of people were raising flags.

SEN. LEVIN: We just voted to increase the mileage requirements
earlier this year. We all voted for that, we came to an agreement on
it. We can all look back at history and look for plenty of fault in
plenty of places, by the way, including the Big Three. But this has
changed, and what Tom Friedman and others have not recognized is the
significant changes that have taken place. Half of the, of the hourly
workers at GM have been let go in order to restructure GM. Over a
third of the white collar workers, the salary workers, have been let
go in order to help restructure. The, the unions have taken major
hits on benefits. And we've also seen GM, Ford and Chrysler shift
their product mix. It was under a lot of pressure from the Tom
Friedmans and others. Fine. But it has had an effect. And what
troubles me is that people do not see that that restructuring and that
move into the high-tech and advanced technology vehicles has begun
significantly.

As I said before, GM now produces more models getting more than 30
miles per gallon, twice as many, as any of its competitors. Ford,
Chrysler are moving into the hybrids. We're doing the plug-ins. GM
is going to lead the way in plug-in hybrids if people will recognize
that this isn't the '70s when the, when the Big Three were producing
inferior products. Things have changed, if people will only
recognize what the Big Three, what the UAW have worked out in terms
of concessions, in terms of pay cuts, cuts, in terms of benefit cuts.
Recognize that change, but let it happen. We can't get there unless
we have this temporary infusion to get it over a problem which is not
the creation of the Big Three. This economic collapse is not
the--was not the caused by the Big Three. They had problems that they
did cause 10 years and 20 years ago. They've changed. But the
economic circumstances that we find ourselves in is an international,
global economic problem that, again, no other country with an auto
industry will allow their industry to drop out and die.

...

Tom, let's begin with you. Can Barack Obama, the newly elected
Democrat, as president of the United States look Detroit in the eye
and say, "Drop dead."

MR. TOM FRIEDMAN: I think he can. He may have to, Tom. You know,
Carl Levin, what did he say? He said, "You know, just give us this
$25 billion and, and we'll be OK." Tom, if I thought with $25 billion
we could save this industry, I'd be for it, OK? But I see no plan
right now, no reason to suggest that these people who have driven this
industry into a complete ditch have a plan to get it out in the long
term and not come back to a six, three months from now, for another
$25 billion. Show me that plan.

Remember, what was Detroit's plan two years ago when they, when they
confronted this problem? It was to subsidize gasoline at a $1.99 a
gallon if you bought a Hummer or Suburban or a big truck--that was
their idea of innovation. So, you know, it was like a crack dealer
offering subsidized crack rather than, you know, going to a clinic to
get--to get off the drug. And, and who is the enabler of that? The
enabler of that were the Carl Levins, all the Michigan delegation who
didn't go to these people. The outrage of these people, "Now they--we
have to save these jobs!" Where was their outrage two years ago, OK,
about getting them to be more innovative, to getting them on top of
the energy efficiency question? They have been enabling the
destruction of this industry. So show me a plan. Show me a plan that
says if we give you this $25 billion you're actually going to change.
Absent that--remember, Tom, we're going to charge this $25 billion on
our kids' Visa cards. This goes on our kids' Visa cards, and we have
a moral obligation to make sure this is spent wisely.

MR. BROKAW: That's a pretty tough position, Katty. Do you think the
president can do that?

...

MR. FRIEDMAN: Well, I think this is no normal transition, Tom. We
are in a unique economic crisis, and for four reasons, I think. One,
we've never seen this combination of this much leverage that was
extended over all these years, this much globalization with this much
complexity, this many derivatives, you know, synthetic products that
people didn't understand on the upside, let alone on the downside, and
then it was started in America. Not in Thailand, not in Mexico. You
put this much leverage with this much global integration with this
many complex instruments started in America, and I tell you, Tom, you
have a cocktail that is so explosive. What is it doing? It started
as a credit crisis, then it morphed into an equity crisis, your stock
portfolio went down. Then it morphed into a consumption crisis;
nobody went out and bought. Then it morphed--now it's morphing into
an unemployment crisis. Then it's coming back and intensifying the
credit crisis. That's the loop we're in now. And if we don't find a
way to get America to go back shopping, to, to get the economy
restimulated again, to get a catalyst there, Barack Obama could have
some of his inaugural balls in, in soup kitchens. I mean, I don't
know where this is going to be a couple of months from now.

As I, you know, said in my, my, my column this morning, you know, rent
the movie, "Jaws," look at that last scene where Roy Scheider, you
know, look at that scene where Roy Scheider first glimpses the shark
and he comes in and turns to the captain and says, "You're going to
need a bigger boat." We're going to need a bigger boat. This shark is
so much bigger. And, therefore, I think, to go back to your question,
Tom, I don't know what--we do only have one president at a time. Not
sure what Obama can do. But to Tavis' point, we need to get money to
homeowners, and we need to recapitalize the banking system. And
people say, "Wait a minute, that's unfair." Banks who were
irresponsible are going to get bailed out, that's true. Homeowners
who shouldn't have taken out mortgages are irresponsible--were
irresponsible are going to get bailed out along with people who worked
hard and paid their mortgages. But I--they say that's unfair. I
say--I tell you, Tom, fairness is not on the table any more. There's
only two things on the table. Systemic risk in which we all get wiped
out, or we find a way out of this.