Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

People Magazine or WSJ?

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In Friday’s Wall Street Journal was an article titled “The Accidental Renters” with the subtitle “After Losing Homes to Foreclosure, Tight Rental Market Poses More Indignities”. The article ostensibly covers the difficulties that people who lost lost their homes face trying to rent.

It is incomprehensible to me how the WSJ, which usually is a very well written newspaper, occasionally slips in an article so badly written, conceived and executed that I think I am reading People magazine. Isn’t that why they have editors? Let’s take this apart…

The most typical flaw of mainstream journalism in my opinion is 1) “humanizing” a complex problem with a few interviews or out of context “examples” 2) not challenging basic flaws in logic in these “examples” 3) failing to add a knowledgeable and topic-based analysis of the facts at hand based on experience.

Here are the examples in the article:

“Ray and Trish Vangas recently found themselves contending with the indignities of renting. The couple lost their first home… after their adjustable rate mortgage reset and the bill jumped by about $900 a month, to $3300… the couple moved into a rented townhouse… almost immediately, they discovered problems, including a deck that wobbled, dead electrical outlets, missing smoke detectors, and bad plumbing. With the help of the town’s health department they moved out… paying $2250 a month. “I can’t believe I worked so hard for a house, only to lose it.”

The interviewer never takes the Vangas to task for their obvious mistakes. They picked up an adjustable rate mortgage which was scheduled to reset to a level of payments that they could not afford. Why did they do this? And the odd part is that the mortgage didn’t reset very far – it moved from $2400 to $3300, a large but seemingly manageable increase. Were they living that close to the edge? The article doesn’t mention them losing a job or suffering any sort of financial crisis, so that doesn’t seem to be an explanation.

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Madison Too Reaps What They Sow

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Since Dan took a (well deserved) pot shot at my town of Chicago recently I couldn’t help but notice this article in today’s Chicago Tribune titled “Public casts colder eye at homeless” subtitled “In Madison, rising suspicions in wake of unsolved slayings fuel backlash”.

The article states that there are 224,000 people in Madison and 3,400 homeless. By some simple math that means that 1.5% of Madison’s total population is homeless, if these statistics are correct. Per the article:

“A backlash against street people is under way in this renowned liberal college town after an uncharacteristically violent turn of events. Two unsolved murders in the span of a little more than two months have shaken Madison’s secure sense of small-city living and, even though no suspect has been named, the eye of suspicion has been fixed on panhandlers who work the streets.”

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A Sea Change

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When I was a kid I remember that teaching “history” went out of fashion. For instance, we didn’t talk about stuff like wars, such as WW1, WW2, or even the civil war or Vietnam. The teachers themselves did not seem to have much direct knowledge on the topics, either – often they’d let me teach the WW2 sections (when they came up) rather than have me continually interrupt (since they didn’t know anything more than what they were reading of the 2-3pp that summarized WW2). It was only a day here or there out of years of classes, after all.

What did they teach instead of history? From what I remember it was mainly “sociology“, which according to Wikipedia is “the study of society, including patterns of social relationships, social interaction, and culture”. I don’t remember learning too much, except that every page of the book featured multi-cultural interactions and photos; really that was all I remembered at all.

It is ironic that the study of history fell off the map (except for alternate histories where everything that the USA has ever done was crap, i.e. Chomsky / Michael Moore) and this sort of social “imagineering” picked up the pace, because, in reality, history of course moved on in completely opposite direction.

This months’ issue (March / April) of Foreign Affairs punches that issue right in the head with an article titled “The Clash of Peoples – Why ethnic nationalism will drive global politics for generations”.

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“Then We Came To The End”

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“Then We Came To The End” is a novel published by first time author Joshua Ferris. The novel is about an ad agency from the height of the dot-com boom down through its eventual nadir, when almost everyone gets laid off.

This book received good reviews from many sources and I was eying it for a while; recently I have been down for the count and had a bit of time to catch up on my reading so I pulled it off my shelf and read it cover to cover.

I used to work at something “close” to an ad agency; during the height of the dot-com boom many firms were gluing together their existing consulting and technology practices with ad agencies to put together a dot-com sheen that led to high (short term) market values. Thus I have some level of experience with the environment that Ferris is describing.

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China Markets

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In recent years foreign equity markets have trounced US equity markets. While the US equity markets have stayed effectively flat since 2000, many foreign markets, such as China, scored robust gains.

To many people, myself included, any time stocks rise at this rate without “fundamental” positive changes to the environment, it smells of a bubble. Remember prior to 2000 when the dot-com stocks were going to remain at a “permanently high level”, or that the economic cycle had been tamed? These thoughts were shattered when the NASDAQ swooned 78% from peak to trough during its brutal fall.

I run some individual stocks for my nieces and nephews at this site and let them select from a list of stocks; in recent years there has been a strong emphasis on these well performing overseas issues. One stock that had a meteoric rise was China Mobile – the largest wireless firm in China (and the world) – whose stock went from under $40 / share to over $100 / share in about a year – remember this stock had an enormous market capitalization to begin with and anytime a large company has this type of stock performance it is extremely abnormal. We took our winnings and left; the stock has subsequently dropped significantly.

This chart from the WSJ article “China Stocks, Once Frothy, Fall by Half in Six Months” shows clearly the runup in the China index from 2006 (near 1000) to almost 6000 in late 2007, down to near 3000 today (April 2008).

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