CHALLENGING THE FIRST AMENDMENT

THE PRICE OF SELF-VICTIMIZATION

On the front pag?e of the USA Today section of the Monday Reno Gazette Journal, there appeared a column written by George Will that described certain statistical facts that are shocking and are having critical impact upon the present and future well being of the Black community here in America.

Various figures denote vexing social problems. They include 10,000 (the number of new baby boomers eligible for Social Security and Medicare every day), 10.2 percent (what the unemployment rate would be if 1.2 million discouraged workers had not recently stopped looking for jobs), $9.9 trillion (the Government Accountability Office calculation of the gap between the expected revenue and outlays for state and local governments during the next 50 years), $76.4 trillion (the GAO’s similar estimate of the federal government’s 75-year fiscal shortfall).

Remedies for these problems can at least be imagined. But America’s tragic number — tragic because it is difficult to conceive remedial policies — is 70 percent. This is the portion of African American children born to unmarried women. It may explain what puzzles Nathan Glazer.

Writing in the American Interest, Glazer, a sociology professor emeritus at Harvard, considers it a “paradox” that the election of Barack Obama coincided with the almost complete disappearance from Public life of the discussion of the black condition and what public policy might do to improve it.” This, says Glazer is the Black condition:

Employment prospects for young black men worsened even when the economy was robust. By the early 2000s, more than one third of all young black non-college men were under the supervision of the corrections system. More than 60 percent of black high school dropouts born since the mid-1960s go to prison. Mass incarceration blights the prospects of black women seeking husbands. So does another trend noted by sociologist William Julius Wilson: “In 2003-2004, for every 100 bachelor’s degrees conferred on black men, 200 were conferred on black women.”

Because changes in laws and mores have lowered barriers, the black middle class has been able to leave inner cities, which have become, Glazer says, “concentrations of the poor, the poorly educated, the unemployed and unemployable.” High out-of-wedlock birthrates mean a constantly renewed cohort of adolescent males without male parenting, which means disorderly neighborhoods and schools. Glazer thinks it is possible that for some young black men, “acting white” — trying to excel in school — is considered “a betrayal of their group culture.” This severely limits opportunities in an increasingly service-based economy where working with people matters more than working with things in manufacturing.

Now, from the Educational Testing Service, comes a report about “the Black-White Ahievement Gap: When Progress Stopped,” written by Paul E. Barton and Richard J. Coley. It examines the “startling” fact that most of the progress in closing the gap in reading and mathematics occurred in the 1970s and ’80s. This means “progress generally halted for those born around the mid-1960s, a time when landmark legislative victories heralded an end to racial discrimination.”

Only 35 percent of black children live with two parents, which partly explains why, while only 24 percent of white eighth-graders watch four or more hours of television on an average day, 59 percent of their black peers do. (Privileged children waste their time on new social media and other very mixed blessings of computers and fancy phones.) Black children also are disproportionately handicapped by this class-based disparity: By age 4, the average child in a professional family hears about 20 million more words than the average child in a working-class family and about 35 million more than the average child in a welfare family — a child often alone with a mother who is a high school dropout.

After surveying much research concerning many possible explanations of why progress stopped, particularly in neighborhoods characterized by a “concentration of deprivation,” the ETS report says:” It is very hard to imagine progress resuming in reducing the education attainment and achievement gap without turning these family trends around — i.e., increasing marriage rates, and getting fathers back into the business of nurturing children.” And: “It is similarly difficult to envision direct policy levers” to effect that.

So, two final numbers: Two decades, five factors. Two decades have passed since Barton wrote “America’s Smallest School: The Family.” He has estimated that about 90 percent of the difference in schools’ proficiencies can be explained by five factors: the number of days students are absent from school, the number of hours students spend watching television, the number of pages read for homework, the quantity and quality of reading material in the students’ homes — and, much the most important, the presence of two parents in the home. Public policies can have little purchase on these five, and least of all on the fifth.

The Jessie Jacksons and Al Sharptons in this country need to redirect their critical efforts inward toward correcting the problems highlighted above rather than complaining about the effects that these problems are having upon American society-increasing attitudes of racism.

One Man’s Opinion- Bud Brewer

Are We Facing Inflation or Deflation?

August 4,2010: Some of the smartest and most successful investment brains are on opposite sides of that question. The right answer matters a whole lot. A simple definition of inflation is too much money chasing too few goods. That’s easy to understand. If lots of people want the same thing and they all have money to buy it, then the seller is in the catbird seat. Looking at the action of the Fed, there is ample evidence that they are keeping monetary policy easy and flooding the system with money. Their hope is that all that cheap money will encourage people to go out and buy things. But it is simply not happening.

In fact, the response to the monetary stimulus reminds me of Japan twenty years ago. The country was in a recession (something unknown in that country since the end of World War II) and the Government was literally giving money to people and asking them to spend it. But they wouldn’t. They put it under their mattresses (literally) and saved it. The Government’s plan to encourage the Japanese consumers to spend their way out of recession was a failure.

It was hard for us Americans to understand the response of the Japanese consumers. Not spend gift money? Unheard of! However, that response should not have been a surprise because the culture in Japan for generations was one of saving, not spending. The Japanese had a 20% savings rate at that time and the insecurity associated with the recession only encouraged them to save more, even when it was free money.

“We owe too much money from the good old days when we borrowed and overspent and nobody told us we had to save. Now we have to mend our ways by simultaneously paying off our debts and increasing our saving.”

So let’s turn to the U.S. today.

We have been a population of spenders, not savers. Heading into the recession from which we are only now emerging, we were spending more than we were saving, i.e. we had a negative savings rate. Then the recession came, with the highest unemployment rate in over a generation, and spending slowed sharply.

In response, Congress enacted an enormous stimulus program to flood the economy with money. In addition, the Federal Reserve logically opened the money spigot to accommodate spending and hopefully to stimulate demand. With our propensity to consume instead of save, that should have been an easy solution. But nothing happened – or at least very little happened.

What is wrong?

Why aren’t we, the greatest spending nation on earth, spending? Why is all that cheap money not chasing the goods and consuming them and forcing the prices up?

Because we, the biggest spending nation on earth, are broke. We owe too much money from the good old days when we borrowed and overspent and nobody told us we had to save. Now we have to mend our ways by simultaneously paying off our debts and increasing our saving. Those two priorities are overriding our want and instinct to spend, and that is good. Well it is good for our financial health in the long run, but it is dreadful in the near term because it acts as a drag on consumer spending which is what this economy needs to gain more momentum.

So despite all the cheap money around, Americans are not, or better said, cannot take advantage of it, which means that there is not too much money chasing too few goods. Instead, there are too many goods – all the things consumers are NOT buying – chasing the few dollars left in consumers’ hands after they have paid their debt and tried to save. That is the opposite of an inflationary environment.

That is deflation. And that is certainly what it appears we are experiencing now and will continue to face in the short run. Unfortunately, there is a positive correlation between paltry demand and high unemployment.

On the positive side, the American consumer appears to have accepted the necessity of restructuring his/her balance sheet and once the savings rate has increased and the debt has been reduced, there will be a significant amount of pent-up demand. Then, and only then will the spectre of inflation raise its ugly head. That may be years from now.

One Woman’s Opinion- Patricia Chadwick

Founder and President of Ravengate Partners LLC

SOME BURNING QUESTIONS

Here are several investment related questions that burn in my mind every day, I would love to develop conviction regarding the answer to one or more of them:

1. Is it possible to have the sovereign debt of the United States continue to grow relative to the current or even prospective GDP of our economy without eventually having to pay higher and higher interest rates on its re-funding?

2. Are the actions of the Federal Reserve (or inaction) likely to result in a devaluation of the U.S. Dollar and cause prices to rise faster than any increased productivity in labor’s output generated as a result of managerial action or improved technology?

3. Some respected money managers predict that the U.S. and other developed economies are moving into what they call a “New Normal”. When asked what does that mean they respond: slower growth rates in domestic industrial production and even a greater shift of emphasis to services requiring intellectual as opposed to physical skills. Asked to give an average growth rate for normal, their response is 1-2% per annum. Can the U.S. maintain its contracted entitlements and pay interest and principal on the projected debt they will cause with this growth rate?

4. We are in a massive rationalization of individual and corporate balance sheets, primarily due to continuing real estate devaluation. At the same time the chaos in Europe and fears elsewhere in the world are contributing to inflows supporting demand for the U.S. Dollar and pushing the U.S. Treasury security bubble ever upward. This apparent circumstance is contributing to the Fed’s ability to keep its low interest rate policies in place without increasing its security purchases. Question, is the risk of this reversing such that interest rates could explode if and when management and individuals decide to invest their huge cash horde?

5. How can we invest comfortably in China, Southeast Asia and Eastern Europe, the emerging and dynamic growth areas, with some degree of confidence that these countries are protecting investor rights and assuring transparency in shareholder financial information?

6. The basic question I think about is: “How do we protect the purchasing power of our wealth without losing reasonable,or at least comfortable, levels of liquidity and convertibility?” I have written on the subject of Gold, but are the other investment vehicles, stocks, bonds, notes, CD’s, Money Market Funds, Commodity ETF, Foreign Currency, Real Estate, Annuities, etc.,more likely to preserve wealth? I don’t know! But I feel less uncomfortable with one or the other and so I have tried to diversify among those with good marketability and liquidity until I am able to develop greater conviction for just where we are going.

7. Of course here is the most important question: “Are Obama, Reid, and Pelosi leading this country down the path of becoming more of a social egalitarian society at the expense of its freedoms and individual’s liberty? I think you know my opinion on that. What bothers me the most about it is that there doesn’t appear to be a real leader in the conservative camp who is strong enough to turn those misguided beneficiaries of redistribution around in their understanding and conviction of which system is best for them in the long run- Free market capitalism (with all its potential exploitive risks) requiring individual responsibilities or a state controlled, highly regulated beauracratic social capitalist system with its loss of freedom and liberty to pursue and benefit from individual aspirations.

These questions keep me awake at night (or rising early in the morning) and motivate my watching and learning from “Squawk Box”.

One Man’s Opinion–Bud Brewer

HOW DID WE GET HERE

GOLD AS AN INVESTMENT

Is Gold a good investment? Over the 50 years of my investment experience, the potential for price appreciation of gold has always come into consideration by investors when the dollar is experiencing devaluation either through inflation or through excessive monetary policies of the Federal Reserve. From 1970 when President Nixon took us off the gold standard until 1980 when Ronald Reagan was elected and Federal Reserve Bank Chairman Volker (more…)

Real Estate Short Sales a “Minefield”

June 27,2010:

Homeowners in Washoe County, Nevada, are finding out just how different the Nevada real estate laws dealing with foreclosure are from most other states. When facing foreclosure, one of the methods being used by lenders to speed the foreclosure sale process is to use a method called the “short Sale”. By taking this route to settle their mortgage debt, homeowners expect to stave off the negative effect on their personal credit that would occur if they went through a lengthy foreclosure and trustee sale of their property. In 2009, almost a fifth of all private residences in the Reno-Sparks area received a notice of default, were in foreclosure or going through a trustee sale. (more…)

A Look Back to see Ahead

It is difficult to develop high conviction that the recovery of the U.S. Economy has now passed beyond a point where it could still be impacted by the “subprime mortgage” phenomena. Actually it is more than an impact. These securities had the financial sector of our economy by the throat and were squeezing with all the force imaginable. What Congress thought was a benevolent idea to make home ownership readily available to the “working poor”, (their term, not mine), cascaded into a (more…)

Buying at Discount “The Short Sale”

June 3,2010: Good investment strategies always call for some cash reserves. In todays real estate markets, those who have cash reserves and are willing to take some unusual risk, the “short sale” offerings in more modest priced neighborhoods could make it possible for those who are looking to buy a home to live in or for investment to make a good relative (more…)

America Faces a New Culture War

I read an article by Arthur C. Brooks in the Washington Post, Sunday, May 23, 2010 and thought the words so profound and illustrative of my personal fears for the future, I wanted to have them read by every reader of this blog. America is facing a new type culture proposed by a minority of its citizens. This narrative is long but every word is important.

“This is not the culture war of the 1990s. It is not a fight over guns, gays or abortion. Those old battles have been eclipsed by a new struggle between two competing visions of the country’s future. In one, America will continue to be an exceptional nation organized around the principles of free enterprise — limited government, a reliance on entrepreneurship and rewards determined by market forces. In the other, America will move toward European-style statism grounded in expanding bureaucracies, a managed economy and large-scale income redistribution. These visions are not reconcilable. We must choose. (more…)

Actions have consequences

Thursday, May 19,2010: Highlighting the failures of this administration becomes more and more redundant given the rising tide of better understanding by the American voter for just how dangerous this Presidency and his Democrat Congress really is. Continuing to Point this out may seem like trying to close the barn (more…)