Category Archives: Current Affairs

Warren Buffett on Housing

This excerpt from Warren Buffett's letter to shareholders should be required reading for everyone involved in the housing and financial industries:

Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans). Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay. Homeowners who have made a meaningful down-payment – derived from savings and not from other borrowing – seldom walk away from a primary residence simply because its value today is less than the mortgage. Instead, they walk when they can’t make the monthly payments.

Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.

The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified. 

Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.

Newest Investment Scam Has Piedmont Ties

The newest investment scam, the alleged $8 billion fraud perpetrated by a Texas billionaire named Allen Stanford who had himself knighted in Antigua, has ties to the Piedmont Triad.  In 2007 the operation opened a Greensboro office that was run by eight executives from US Trust Co. who were charged with targeting wealthy investors.

In July 2007, the company hired a team of eight executives from U.S. Trust Co. to work out of Greensboro, North Carolina, where the firm’s private-client group planned to target wealthy investors, according to statement at the time. The team was made up of John Rich, Glenda Burkett, M. Jo Brooks, Ken Dimock, Anthony Monforton, Virginia Saslow and William “Wes” Watson and Suzanne Wilcox.

FYI, a big part of the scam was selling investors financial products that they called CDs and pitched as even safer than FDIC insured certificates of deposit.  The money for the "CDs" was then funneled to a bank in Antigua controlled by the company accused of perpetrating the scam.  The company implied that the funds were insured, but never explicitly said they were insured.  By all appearances it's a nasty little scam.

Between this scam and the Madoff thing I've never been so happy to be an unconnected, unwealthy guy.

Bipartisan Sleaze

Have you heard about the latest high-end scam artist?  No, not Madoff, but this joker Sir Allen Stanford who is accused of running an $8 billion fraud that on the surface sounds an awful lot like Madoff's scandal. Part of the emerging Stanford story is his soft money donations back in 2000 to prominent Democrats, and I think it's an important reminder because it reminds us that the sleaze in Washington is bipartisan.  The next time you hear someone slamming all Republicans or all Democrats but giving their side a free pass please remind them that the problem isn't the parties it's the politicians.  As a breed they make ambulance chasers look good by comparison.   

Don’t Sell Me a Recession

So, raise your hand if you aren't aware that we're in the midst of a recession of epic scale.  If you raised your hand then please let me know what cave you've been living in so I can move there with my family.  My point is that we all know there's a recession on and we're not likely to forget any time soon.

I confess to a morbid fascination myself, as is abundantly evidenced by my posts about the economy, real estate, etc.  I've watched with fascination as people started pointing fingers at each other in blame.  "It's the bankers' fault" some say.  Others blame homeowners, the media, the government, the…well, almost everyone.  Basically the recession is the most significant event since at least since 9/11 and it has had arguably a greater impact on our daily lives than any event for a couple of generations.  As much as we'd like to we can't escape it.

All this has me wondering: why is every company out there playing off the recession to sell their services.  Many seem to be using gimicky plays on the 'stimulus plan', as in "Come shop at ACME shoe store and take advantage of our toe stimulus plan!"  Or they come across with messages like "We know times are tough, that your budget's tight, so we're offering deep, deep discounts on…"  My problem with this approach is:
  • I hear enough about the recession on the news, at the water cooler, etc.  I don't need to be reminded of it by every merchant out there.
  • How is it effective marketing to remind me that I'm broke as you try to sell me your discounted wares?  The reality is that if I'm broke and if your product isn't a staple (milk, bread, eggs, Nintendo Wii) then I'm not going to be swayed by your discount.  In effect your discount is going to woo people who have money and still have their jobs so why create a negative association with the recession? 
  • If everyone else is doing it how are you separating yourself from the herd? 

My advice?  Go back to the basics and play up your strengths.  Better quality, better service, customers are treated like family, etc.  Unless you're Wal-Mart the likelihood that you'll win on price is pretty low, and who really wants to be known as the cheapest shop in town?

So merchants of the Piedmont Triad please, please, please do me a favor.  Don't sell me a recession, sell me what you've got.

Well at Least Our Bankers Haven’t Sued…Yet

Bankers, who probably are now in the same league with lawyers and politicians in terms of popularity, are not happy with potentially losing their bonuses.  Here in the US there's been at least one prominent case of bonuses being granted despite some putrid performances by the company.  Still, the bankers here haven't gone so far as to sue to keep their bonuses.  In England?  Bankers are gearing up for legal battle.

Apples and Oranges

We had to know this was coming; now that the President and some in Congress are seeking to limit executive pay at companies that received bailout funds, and since many of these same executives are being criticized for perks like flying on corporate jets, there are some who are comparing those perks to what POTUS gets.  They point out that he gets to use a bigger jet than they do, that he has a fleet of cars at his disposal, that he gets free lodging, that he has an entourage, etc.  Hmm, what could be different about their situations?

BTW, did you know that the President and his family have to pay for their own groceries?  The White House chef will prepare the meals for them (nice perk for sure), but they have to pay for the food themselves.  Learn something new every day.

Senator Burr Visits Guantanamo and Blogs About It

Senator Burr (R. NC) recently visited Guantanamo and blogged about it.  Here's an excerpt:

From my visit today, it appears to me that everything from the design of the facilities to the detailed operating procedures of the guard force, medical professionals, and support staff is well thought out and in keeping with our Nation's highest ideals.

If anyone receives mistreatment at Guantanamo, it is the guard force.  They must endure frequent verbal and physical attacks from detainees while maintaining the highest standard of care for those same individuals.

Instead of focusing on closing the facility at Guantanamo Bay, we need to think long and hard about where we can hold some of these very hardened and dangerous individuals, many of whom could never be incarcerated in the United States.

I read this just days after reading a column by Karen Greenberg who has written a book about the early days of Guantanamo.  She wrote:

The Joint Task Force, advised by U.S. Southern Command, was essentially left on its own to improvise a regime of care and custody for the allegedly hardened al-Qaida terrorists — whom the Bush administration famously called "the worst of the worst" — who would be coming their way. The idea, as Lehnert told me he understood it, was to detain them and wait for a legal process to begin.

In the absence of new policy guidance about how to treat the detainees, Lehnert told me that he felt he had no choice but to rely on the regulations already in place, ones in which the military was well schooled: the Uniform Code of Military Justice, other U.S. laws and, above all, the Geneva Conventions. The detainees, no matter what their official status, were essentially to be considered enemy prisoners of war, a status that mandated basic standards of humane treatment. One lawyer for the Judge Advocate General Corps, Lt. Col. Tim Miller, told me that he used the enemy-POW guidelines as his "working manual."

The task force set to work around the clock, processing the detainees upon arrival, administering medical treatment and providing general care in the cells of the newly built Camp X-Ray. Lehnert's lawyers studied the 143 articles of the Geneva Conventions, paying particular attention to Common Article 3, which prohibits "humiliating and degrading treatment." The head of the operation's detention unit, Col. Terry Carrico, summed up the situation to a team of Marine Corps interviewers several weeks into the mission: "The Geneva Conventions don't officially apply, but they do apply."

She goes on to write that early signs of trouble appeared when the commanders on the ground asked for representatives of the International Commitee of the Red Cross (ICRC) to be sent as was required by the Geneva Conventions.  Their request was ignored by Washington and absent any direction from their civilian bosses the military commanders called the ICRC directly to get advice on ensuring the prisoners' safety and dignity as required by the Conventions.  That ticked off the folks in DC to say the least.  Eventually the military commanders were replaced and the Guantanamo that we came to know in the ensuing years took shape:

Once Lehnert's troops departed, a new Guantanamo took shape — the Guantanamo that an appalled world has come to know over the past seven years. Inmates were kept in isolation, interrogation became the core mission, hunger strikers were regularly force-fed, and above all, the promise of a legal resolution to the detainees' cases has eluded hundreds of prisoners.

As Obama moves to close Guantanamo down, the story of Joint Task Force 160 takes on new significance. Had the United States been willing to trust in the professionalism of its superb military, it could have avoided one of the most shameful passages in its history.

Lehnert still regrets the legal limbo that Guantanamo became — and the damage that did to America's "stature in the world." As he put it, "the juice wasn't worth the squeeze."

I'm not going to dispute Sen. Burr's assessment of the current atmosphere at Guantanamo, but I am going to say that from what I've read and heard over the years it's a political necessity for the facility to be shut down because it has come to represent a lot of very negative perceptions of the US.  Undoubtedly there are some very bad people being held there, but we've heard over the years that lots of not-bad people were swept up with the very bad people and were treated much the same way as the very bad.  Unfortunately for them, and us, they were held for years without any recourse and now our country has to deal with the black eye that their treatment has given us.  It's too bad because Guantanamo probably is the best place to keep the remaining truly bad guys, but because we screwed up we are pretty much forced to shut down Gitmo and move them.

Last point: one of the facilities being considered to hold the prisoners is being run by the guy who led the initial set up of Guantanamo Bay.  

Normal Abnormal Times

Fec quotes Krugman Jim Collins who essentially said that the second half of the 20th century was abnormally stable thanks to having two superpowers keeping the world in constant, tense balance.  That means that our current state of global economic instability is more normal than the relatively stable late 20th century. However it's what Fec wrote himself that I really enjoyed:

In my case, it’s normal that what few businesses remain choose to outsource their IT functions. For that, I blame Microsoft. OTOH, my best client, who chose to embrace MS, is in their back yards eating their lunch. This leads me back to my original thought: leaving IT problems to someone else is an act of immaturity and evidences itself in other aspects of a business.

It’s normal that manufacturing has gone overseas. For that, I blame our various governments. The founders of Home Depot said some time ago that creating such a business under current regulations would be impossible.

It’s normal that I spend nearly all my income paying for one kind of insurance or another. For that, I blame lawyers and runaway juries.

It’s normal that the banks have done what banks do and are having to pay for it. Scratch that – we have to pay for it.

Finally, it’s quite normal that we’ve elected another charismatic pol and have unrealistic expectations. So long as the above mentioned offenders have lobbyists, one man, no matter how great, can make not a whit of difference.

Anyone else noticed that lobbyists have become the most reviled people in America with the exception of politicians?  Have you also noticed that many lobbyists and politicians start out as lawyers?  Coincidence?

More Retail Vacancy

My wife just called me from the Harper Hill Commons shopping center at the corner of Country Club and Peace Haven Roads.  She informs me that the Starbucks that had been located there is closed and the Dewey's Bakery shop that had recently opened there is also closed.  I'd read that the Starbucks was going to close but Dewey's closure surprised me. I checked the Dewey's website and they list Harper Hill Commons as one of their holiday locations so it sounds like it was only planned as a temporary location all along.  I'd say it's a sign of the times that Dewey's could find temporary space in a relatively new and upscale location like Harper Hill, and of course it's not a good sign that both the Starbucks and Dewey's locations now sit vacant.