The town meeting vote Monday to approve the Second Avenue Planned Development District continues a trend in Burlington over the past few years of approving almost anything the development community asks for.
This trend includes a complete disregard for zoning provisions that have been added in the past. The most obvious example is the FAR or foot area ratio that was passed a number of years ago. The purpose of that provision was to control density and reduce the amount of impervious surface in these developments. This is of particular importance in the aquifer resource district. By preventing the entire area within the development from being covered with building or asphalt, the idea was that it would enable ground water to be able to recharge itself around the Great Meadow, the area of the town's main well field.
At the conclusion of the meeting Monday I asked how the development would fit in the FAR restrictions and a member of the planning board told me the project completely "blew the FAR out of the water."
The Aquifer Overlay District was passed years ago primarily because of events that occurred in the area of this particular development. In the early fifties the town was anxious for industrial development and had approved a number of manufacturing companies that were involved in up to that point unfamilar chemical processes. The major use was manufacturing of printed circuit boards and other electronics facilities that used strange new solvents which later much to our chagrin we learned were volatile organic compounds such as trichlorofluoroethane.
As the years wore on these companies were found to have been discharging these chemicals directly into the town's sanitary sewer lines. This would have been Boston's problem because the lines go down to Deer and Nut Island and finally out to Boston Harbor. These chemicals, however, had a very corrosive effect on the asbestos lined cement sewer pipes and ultimately the flow simply dissolved the lines so that eventually the effluent was seeping into the ground as it left the facilities.
The town first caught wind of this when these solvents began to be detected in the drinking water and ultimately led to the town shutting down a number of wells. The source was a mystery until the sewer lines caved in and the culprits were found out.
This began an almost ten year legal battle that concluded with a settlement that enabled the town to build an enormous treatment plant to rid itself of the damage. It also resulted in the passage of the aforementioned Aquifer Overlay District, the purpose of which was to prevent certain uses in the area of the well field.
Under this back drop it was somewhat stunning to hear a consultant paid for by the developer to represent the town, saying at town meeting that not to worry about a bio tech use on the property. Again, the consultant was presenting the idea that the town should violate it's own bylaws. No one in town government thought this absurd. This was surprising when you consider that a golf course was proposed for the land locked land a number of years ago and it was defeated because of concerns for the water supply.
The end result is that we now have a new 560,000 square foot development coupled with the other nearly 3 million square feet approved but not built. If the purpose of this is to solve our revenue problem through a commitment to unrestrained growth then recent history would seem to condemn this strategy to failure. I have pointed this out in a recent piece, the town has been on an unprecedented expansion over the past few years and the residential taxpayer has seen their taxes dramatically increase while the commercial industrial sector has decreased.
I suggested to a friend of mine in government that the net effect of all this expansion was to simply drive down commercial values and commercial taxes because of intense competition, he suggested "that was my opinion." No I replied "it is a fact." The phenomena can clearly be born out by our own data. In the accompanying chart, take a look at the percentage of the tax rate that the commercial industrial sector was paying in 2002 and what it paid in 2007. The answer is 64.69% then and 54.96% now. Skeptics will say, no that the swing is a result of an increase in values of residential real estate but the decline in values and tax revenue can be verified by real numbers. The current commercial industrial value of $1,361,394,435 is well below the 2002 value of $1,473,890,731. http://www.burlington.org/AssessorsDepartment_files/CL-RATE.pdf
If the feeling of the towns' leadership is to continue this development strategy and maximize value and tax revenue then what action do we take to raise those values as high as possible and reap the tax windfall for the resident? Clearly the answer is to propose that the state locate one of its casinos on the land locked land.
Let me preface the following remarks by saying that I am opposed to such use of a pristine 270 acre forest property and that the best use of the property would be to wait another fifty years or so and let another generation make a decision. My theory on that is a community should leave a legacy for others that follow.
However, if growth is what you want then a casino makes magnificent sense from a variety of different perspectives beginning with the fact that the town can offer a unified title on an enormous piece of property directly adjacent to route 95 and Route 3 North. Access to either highway would be a very simple construction process. None of the other talked about locations can offer the location, access and number of potential gamblers that Burlington can. With highways, an airport and a steady stream of out of staters going by every day we could become a gambling Mecca!
Construction potential on the site would be huge. Let's assume for a moment that 170 acres would be used for wetlands, streets and parking. That would leave one hundred acres for casinos, hotels and other amenities. This amount of space could easily accommodate 20 million square feet of development. Think of the potential, all of the towns commercial development times 2 could fit on the property.
The revenue stream would be enormous starting with the sale of the property itself. The property would be worth a minimum of $100,000 an acre up to as high as $200,000 per acre or a range between 27 million and 54 million dollars. That amount of money would eliminate all of the towns outstanding debt and put some money in the bank.
The annual flow to the tax coffers would be realized by a combination of cash flow cows. The casinos and ancillary buildings would generate tax revenue, the hotel room tax would double or triple and the surrounding commercial values would most likely increase as well.
In fact, the property could generate as much as 8 to 10 million a year in taxes to the town or equal to what the town lost for it in the court battle over the the eminent domain taking of the property nearly 20 years. Remember we can't sign a deal for another 2 years because *Prentiss Properties (successor to Cadillac Fairview) still has a right of first refusal option on the property.
If the town does get involved in this type of discussion let's make sure we get some really competent representation. The most recent tax and land deals the town has been involved have not worked out that well.
* We have since been informed at the January town meeting that the option has been acquired by a local developer.
Sunday, September 30, 2007
Sunday, September 23, 2007
Drop out Ginny
The decision by Senator Robert Havern to resign from his seat to take a position with a large Boston law firm provides a rare opportunity for district politicians to move up in the political pecking order.This has naturally resulted in a free for all and a plethora of candidates jumping in the race.
The district itself is comprised of Burlington, Arlington, Billerica and 6 wards in Woburn and 6 precincts in Lexington (different terminology because Lexington is a town and Woburn a city).The announced candidates so far in the democratic field are state Rep. Charles Murphy of Burlington, state rep. Patrick Natale of Woburn, state rep James Marzilli of Arlington, Robert Peters of Lexington and Virginia Mooney of Burlington.
The seat has been dominated by Arlington (Krause and Havern) since Bedford's Carol Amick held the seat some 20 years ago and after the lines of the district were redrawn. The reason for this is primarily numbers oriented. With a population of over 42,000 Arlington can get behind a single candidate and carry the day.
Those of us who occasionally speculate on these things have often come up with a scenario in which the seat could move North in the district if a couple of things happened. If a candidate could get solid majorities in Billerica and Burlington and there were candidates in the other cities and towns then it might be possible for a Billerica or Burlington candidate to win the seat.Just such a scenario is developing now.
If another candidate gets in the race from Arlington then the weight of the Arlington numbers would be diluted and offer an even better chance for Charles Murphy if he gets a solid Burlington and good support in Billerica.
The math works equally for other candidates in other towns but if we are interested in having a senator from Burlington it makes little sense to analyze those numbers so let’s cut to the chase.
In a race that could be decided by a small number of votes, Burlington has a fly in the ointment in this scenario. That would of course be Virginia Mooney. If we make a simple examination of Virginia's campaigning and spending efforts in her previous runs for state representative and selectmen it leads to the obvious conclusion that Virginia is not going to win this race.
There is no denying that Virginia has every right to get into any race she wants to, however there is also no reason not to call this effort what it is. Virginia is nothing more than a spoiler for the local candidate's chances and a stalking horse for the opposition. If this assessment is incorrect then Virginia should run a serious campaign or move over for a Burlington candidate that has a chance. That would be a decision with the community's best interest in mind.
The district itself is comprised of Burlington, Arlington, Billerica and 6 wards in Woburn and 6 precincts in Lexington (different terminology because Lexington is a town and Woburn a city).The announced candidates so far in the democratic field are state Rep. Charles Murphy of Burlington, state rep. Patrick Natale of Woburn, state rep James Marzilli of Arlington, Robert Peters of Lexington and Virginia Mooney of Burlington.
The seat has been dominated by Arlington (Krause and Havern) since Bedford's Carol Amick held the seat some 20 years ago and after the lines of the district were redrawn. The reason for this is primarily numbers oriented. With a population of over 42,000 Arlington can get behind a single candidate and carry the day.
Those of us who occasionally speculate on these things have often come up with a scenario in which the seat could move North in the district if a couple of things happened. If a candidate could get solid majorities in Billerica and Burlington and there were candidates in the other cities and towns then it might be possible for a Billerica or Burlington candidate to win the seat.Just such a scenario is developing now.
If another candidate gets in the race from Arlington then the weight of the Arlington numbers would be diluted and offer an even better chance for Charles Murphy if he gets a solid Burlington and good support in Billerica.
The math works equally for other candidates in other towns but if we are interested in having a senator from Burlington it makes little sense to analyze those numbers so let’s cut to the chase.
In a race that could be decided by a small number of votes, Burlington has a fly in the ointment in this scenario. That would of course be Virginia Mooney. If we make a simple examination of Virginia's campaigning and spending efforts in her previous runs for state representative and selectmen it leads to the obvious conclusion that Virginia is not going to win this race.
There is no denying that Virginia has every right to get into any race she wants to, however there is also no reason not to call this effort what it is. Virginia is nothing more than a spoiler for the local candidate's chances and a stalking horse for the opposition. If this assessment is incorrect then Virginia should run a serious campaign or move over for a Burlington candidate that has a chance. That would be a decision with the community's best interest in mind.
Sunday, September 16, 2007
Good luck and be safe Tim
The fruit of a community and the only true measure of a community's values and collective effort is its children. How they grow up, and the values, traditions, and qualities they absorb, are spread throughout the rest of the nation and their accomplishments are reflection on the place they come from.
Over the years Burlington has produced so many fine young men and women that have gone on to achievement in many endeavors. Olympic medals, an Oscar, a Nobel prize, national championships and great business achievements are indicative of the many things we can be proud of as a community.
On Wednesday another young person will be leaving Burlington to take on life's challenges. Sunday morning I had an opportunity to have breakfast with and interview Timothy Cummings, who will be leaving Burlington for Quantico Virginia to enter the United States Marine Corp and its officer training school.
Tim is 26 years old and a 1998 graduate of Burlington High and a graduate of Suffolk University with a degree in business and government. Tim is well known in Burlington community service circles as he has served as State Representative Charles Murphy's aide. His other involvement is extensive including a seat on the Ways and Means Committee, as a Burlington Rotarian and involvement in many political campaigns.
With a nice cushy job at the state house and a bright political future ahead of you why go in the military now, why you Tim? "The question is not why me, but more why not me? I was a congressional intern to Rep. David Camp of Michigan and was on the floor of congress when the Iraq War vote was taken. At the time I realized that many young people would be affected by such a vote and at the time I asked myself that question."
"I have always wanted to be a Marine. I admire the values, tradition and discipline that the Corp represents. I want to take on the challenge to see if I can measure up to the mental, physical and academic standards necessary to be a Marine Corp officer. I want to serve my country in this way"
What about your mom and dad's thoughts and concerns? "It is a bittersweet decision for the whole family. I come from an extended family that has always held community service in high regard. There is fear for me of the uncertainty but also pride in my commitment."
What role did Charley (former Marine captain) have in your decision, did he recruit you? "No I want to be clear on this, it is just the opposite. When I told him of my decision to move on he played devil's advocate. When I made clear what my intentions were, he did something that I am indebted to him for. He offered to help me in any way that he could to prepare me physically and mentally in ways that only someone who went through it could. What that meant was running every morning at 6 o'clock. Not a commitment for a day or a week, but every day for three months. The result of his role model was that I shed 30 pounds and have met or exceeded the physical requirements in the various categories."
You are a politically astute Massachusetts Democrat. You know the general attitude in the Commonwealth's delegation regarding the military and the current climate within your own party regarding the Iraq War. What about the politics of your decision?
"The very essence of our system is one of checks and balances. The military is an instrument of public policy presided over by civilians. Regardless of my politics, regardless of republican or democratic civilian leadership, I am prepared to serve the commander in chief. There has been many before me in Burlington who have served the country with this principle in mind and it is one I believe in strongly. I understand anti-war and anti military sentiment however issues like Darfur and others are not settled by holding hands and singing Kumbaya."
What is in store for you when you get to Quantico? "Up first is 10 weeks of basic training. Rise at 4:30 and work till mid morning, followed by five hours of academic work then more physical and skills training till 10 at night. The next day is more of the same. After that I will spend 6 months in TBS which is the Basic School of Leadership. Following that I will be deployed operationally."
What has been the reaction of your friends and peers? "Mostly people have been concerned with my well being, I understand this and I am fully cognizant of the risks. The overall reaction has been one of support for my decision. There has been a little disappointment in a very few places but primarily because my decision might have conflicted with someone else's politics."
Good luck Tim in your new quest, be safe and come home soon.
Over the years Burlington has produced so many fine young men and women that have gone on to achievement in many endeavors. Olympic medals, an Oscar, a Nobel prize, national championships and great business achievements are indicative of the many things we can be proud of as a community.
On Wednesday another young person will be leaving Burlington to take on life's challenges. Sunday morning I had an opportunity to have breakfast with and interview Timothy Cummings, who will be leaving Burlington for Quantico Virginia to enter the United States Marine Corp and its officer training school.
Tim is 26 years old and a 1998 graduate of Burlington High and a graduate of Suffolk University with a degree in business and government. Tim is well known in Burlington community service circles as he has served as State Representative Charles Murphy's aide. His other involvement is extensive including a seat on the Ways and Means Committee, as a Burlington Rotarian and involvement in many political campaigns.
With a nice cushy job at the state house and a bright political future ahead of you why go in the military now, why you Tim? "The question is not why me, but more why not me? I was a congressional intern to Rep. David Camp of Michigan and was on the floor of congress when the Iraq War vote was taken. At the time I realized that many young people would be affected by such a vote and at the time I asked myself that question."
"I have always wanted to be a Marine. I admire the values, tradition and discipline that the Corp represents. I want to take on the challenge to see if I can measure up to the mental, physical and academic standards necessary to be a Marine Corp officer. I want to serve my country in this way"
What about your mom and dad's thoughts and concerns? "It is a bittersweet decision for the whole family. I come from an extended family that has always held community service in high regard. There is fear for me of the uncertainty but also pride in my commitment."
What role did Charley (former Marine captain) have in your decision, did he recruit you? "No I want to be clear on this, it is just the opposite. When I told him of my decision to move on he played devil's advocate. When I made clear what my intentions were, he did something that I am indebted to him for. He offered to help me in any way that he could to prepare me physically and mentally in ways that only someone who went through it could. What that meant was running every morning at 6 o'clock. Not a commitment for a day or a week, but every day for three months. The result of his role model was that I shed 30 pounds and have met or exceeded the physical requirements in the various categories."
You are a politically astute Massachusetts Democrat. You know the general attitude in the Commonwealth's delegation regarding the military and the current climate within your own party regarding the Iraq War. What about the politics of your decision?
"The very essence of our system is one of checks and balances. The military is an instrument of public policy presided over by civilians. Regardless of my politics, regardless of republican or democratic civilian leadership, I am prepared to serve the commander in chief. There has been many before me in Burlington who have served the country with this principle in mind and it is one I believe in strongly. I understand anti-war and anti military sentiment however issues like Darfur and others are not settled by holding hands and singing Kumbaya."
What is in store for you when you get to Quantico? "Up first is 10 weeks of basic training. Rise at 4:30 and work till mid morning, followed by five hours of academic work then more physical and skills training till 10 at night. The next day is more of the same. After that I will spend 6 months in TBS which is the Basic School of Leadership. Following that I will be deployed operationally."
What has been the reaction of your friends and peers? "Mostly people have been concerned with my well being, I understand this and I am fully cognizant of the risks. The overall reaction has been one of support for my decision. There has been a little disappointment in a very few places but primarily because my decision might have conflicted with someone else's politics."
Good luck Tim in your new quest, be safe and come home soon.
Friday, September 14, 2007
Much a do about nothing
According to Colts coach Tony Dungy it was a really sad day for the NFL after hearing of Bill Belichik's penalties for video taping the Jets defensive signals. Most if not all the rest of the coaches had the common sense not to utter such non sense. This is after all, a league with a guy behind bars for murdering his wife, another who plead a murder rap down to a misdemeanor.
We could go on and on regarding other NFL problems such as previous rampant steroid and amphetamine abuse, animal abuse and other criminal activity but why bother? Let's focus on the main accusation against Belechik which was cheating, that by comparison is a mountain out of a mole hill.
Many in the media are appalled and just shocked and at the same time gleeful, that the arrogant and high and mighty Belechik has finally been brought back to earth by being caught red handed in the act of stealing defensive signals. This of course is the same media that has stood by for years with out so much as a single line or investigative report on the subject. A subject by the way that is acknowledged in some circles as common place. What they are really shocked and appalled about is that he simply refuses to allow the media to dictate what subjects he will address them on.
The whining in the media room today almost resulted in some of them breaking out in tears because Belechik would not speculate on how his reputation and the reputation of his players and their Super Bowl wins by the team are now tainted.
The NFL more than any other sport is a league whose principal method of analysis of opponents is done almost exclusively on film. Every single player and every single play in the NFL has been recorded for years. One of Belechik's great claims to fame was that as a kid he was always in the film room when his father was a college coach.
Since the advent of the quarterback helmet receiver there has always been a diligent effort by offensive coordinators to steal the opposing teams defensive signals and relay them to the quarterback. Any offensive coach that wasn't trying to do that should be fired. By the same token, any defensive coach that wasn't changing his signals on a regular basis must be a moron.
The use of signals in football is no different than that of baseball. Every person in the stadium can see the third base coach giving the signals to the base runners as well as the batter. Despite this, the pitcher and defensive players on the field still don't necessarily know what the batter or runner is going to do. I am sure a similar system is run by NFL coaches.
The circumstances surrounding Belechik's bust has some stench about it. The team that was playing the Patriots is the Jets coached by a Belechik protege by the name of Eric Mangini. Young Eric formerly served as the defensive coordinator for the Patriots. Of all people on Belechik's staff,the defensive coordinator would know exactly how the team was observing the opposing team. In fact, the son of one of Belechik's current coaches apparently works in the video department of the Jets.
It is rumored that Eric and Bill have a very chilly relationship since Eric's departure from the Patriots. Under the circumstances, if Belechik thought it was a big deal do you think he would have had a well known employee standing in full view on the sidelines taping the Jets? What is more likely to have happened is that Commissioner Goodell has been attempting to make a name for himself as a tough guy and knowing this Mangini saw an opportunity to embarrass Belechik and did so.
The bottom line is that this is an utterly foolish rule that should be eliminated so that everyone can conduct business the same way. The end result is that no matter what signals you have stolen your team still has to make plays on the field. The perfect example of this is the Green Bay power sweep and the USC student body right. At the height of their power each team operated the same way. The opponents knew they were going to run the play and they still couldn't stop it. This was in evidence last Sunday by Goodell's own admission. The taping of the signals had nothing to do with the butt kicking that was delivered to the Jets.
The Patriots won three Super Bowls because they were a physically more dominant team that out played their opponents. Certainly Belechik had a hand in preparing the club but once on the field of play Belechik did not catch a single pass or make a tackle.
We could go on and on regarding other NFL problems such as previous rampant steroid and amphetamine abuse, animal abuse and other criminal activity but why bother? Let's focus on the main accusation against Belechik which was cheating, that by comparison is a mountain out of a mole hill.
Many in the media are appalled and just shocked and at the same time gleeful, that the arrogant and high and mighty Belechik has finally been brought back to earth by being caught red handed in the act of stealing defensive signals. This of course is the same media that has stood by for years with out so much as a single line or investigative report on the subject. A subject by the way that is acknowledged in some circles as common place. What they are really shocked and appalled about is that he simply refuses to allow the media to dictate what subjects he will address them on.
The whining in the media room today almost resulted in some of them breaking out in tears because Belechik would not speculate on how his reputation and the reputation of his players and their Super Bowl wins by the team are now tainted.
The NFL more than any other sport is a league whose principal method of analysis of opponents is done almost exclusively on film. Every single player and every single play in the NFL has been recorded for years. One of Belechik's great claims to fame was that as a kid he was always in the film room when his father was a college coach.
Since the advent of the quarterback helmet receiver there has always been a diligent effort by offensive coordinators to steal the opposing teams defensive signals and relay them to the quarterback. Any offensive coach that wasn't trying to do that should be fired. By the same token, any defensive coach that wasn't changing his signals on a regular basis must be a moron.
The use of signals in football is no different than that of baseball. Every person in the stadium can see the third base coach giving the signals to the base runners as well as the batter. Despite this, the pitcher and defensive players on the field still don't necessarily know what the batter or runner is going to do. I am sure a similar system is run by NFL coaches.
The circumstances surrounding Belechik's bust has some stench about it. The team that was playing the Patriots is the Jets coached by a Belechik protege by the name of Eric Mangini. Young Eric formerly served as the defensive coordinator for the Patriots. Of all people on Belechik's staff,the defensive coordinator would know exactly how the team was observing the opposing team. In fact, the son of one of Belechik's current coaches apparently works in the video department of the Jets.
It is rumored that Eric and Bill have a very chilly relationship since Eric's departure from the Patriots. Under the circumstances, if Belechik thought it was a big deal do you think he would have had a well known employee standing in full view on the sidelines taping the Jets? What is more likely to have happened is that Commissioner Goodell has been attempting to make a name for himself as a tough guy and knowing this Mangini saw an opportunity to embarrass Belechik and did so.
The bottom line is that this is an utterly foolish rule that should be eliminated so that everyone can conduct business the same way. The end result is that no matter what signals you have stolen your team still has to make plays on the field. The perfect example of this is the Green Bay power sweep and the USC student body right. At the height of their power each team operated the same way. The opponents knew they were going to run the play and they still couldn't stop it. This was in evidence last Sunday by Goodell's own admission. The taping of the signals had nothing to do with the butt kicking that was delivered to the Jets.
The Patriots won three Super Bowls because they were a physically more dominant team that out played their opponents. Certainly Belechik had a hand in preparing the club but once on the field of play Belechik did not catch a single pass or make a tackle.
Saturday, September 08, 2007
Egg on their faces
On September 6, four Federal Reserve Bank presidents were quoted on Bloomberg as essentially declining to endorse a Fed rate cut in the up coming Federal Open Market Committee meeting on September 18. The fundamental reasoning behind these comments was that Kansas Fed President Hoenig, Lockhart of Atlanta, Poole of Atlanta and Fisher of Dallas had not seen enough convincing evidence as of yet to warrant a cut in the primary over night Fed rate.
If Lockhart and Hoenig have not seen enough spill over from the housing crisis, then they are two of the very few in the financial industry that have not. The bulk of the people who study this issue are betting on at least a 25 basis point cut if not 50 points.
The markets on Friday morning were quick to react to the Fed comments by opening down and staying down until the job report was issued by the Labor Department that only accelerated the decline. The consensus number from the experts who follow these matters was that the U.S. economy was to have created 110,000 new jobs in the August payroll report. Much to every one's chagrin that report showed a decline of 4,000 jobs, the first decline in over four years.
Adding further fuel to the fire was former Fed chief Alan Greenspan who likened current conditions to previous catastrophic events in this way;
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907." Greenspan, who was Fed chief for 18 years was much more tight lipped and nuanced in his comments when he had the job.
In 87 we saw an almost 22% decline in the Dow Jones Average on the now famous Black Monday. I wonder if the Fed president's wanted a mulligan on their comments after hearing what big Al had to say?
The fact of the matter is that the sub prime crisis and the housing slowdown are now visibly spreading through out the U.S. economy. There is also an another ominous development on the economic front as Chinese goods available in this country have been blemished in a way that may take a few years to recover from.
One of the great drivers of consumer spending is the U.S. mommy. When Mattel recalls over 21 million items because they pose a danger to children you know that she is taking very clear notice of where the product she buys comes from.
The circuitous route back to American manufacturing is easy to trace. American consumers have been a large reason for the tremendous growth of the Chinese economy, that growth has then enabled China to both buy high end American manufactured technology and infrastructure products. If there is a slowing of the Chinese economy there will be resulting fall out in the U.S.
The most effective tool available to the Fed in dealing with economic events is a reduction in interest rates. The sooner they start the less likely that the on coming slowdown will be longer and deeper.
If Lockhart and Hoenig have not seen enough spill over from the housing crisis, then they are two of the very few in the financial industry that have not. The bulk of the people who study this issue are betting on at least a 25 basis point cut if not 50 points.
The markets on Friday morning were quick to react to the Fed comments by opening down and staying down until the job report was issued by the Labor Department that only accelerated the decline. The consensus number from the experts who follow these matters was that the U.S. economy was to have created 110,000 new jobs in the August payroll report. Much to every one's chagrin that report showed a decline of 4,000 jobs, the first decline in over four years.
Adding further fuel to the fire was former Fed chief Alan Greenspan who likened current conditions to previous catastrophic events in this way;
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907." Greenspan, who was Fed chief for 18 years was much more tight lipped and nuanced in his comments when he had the job.
In 87 we saw an almost 22% decline in the Dow Jones Average on the now famous Black Monday. I wonder if the Fed president's wanted a mulligan on their comments after hearing what big Al had to say?
The fact of the matter is that the sub prime crisis and the housing slowdown are now visibly spreading through out the U.S. economy. There is also an another ominous development on the economic front as Chinese goods available in this country have been blemished in a way that may take a few years to recover from.
One of the great drivers of consumer spending is the U.S. mommy. When Mattel recalls over 21 million items because they pose a danger to children you know that she is taking very clear notice of where the product she buys comes from.
The circuitous route back to American manufacturing is easy to trace. American consumers have been a large reason for the tremendous growth of the Chinese economy, that growth has then enabled China to both buy high end American manufactured technology and infrastructure products. If there is a slowing of the Chinese economy there will be resulting fall out in the U.S.
The most effective tool available to the Fed in dealing with economic events is a reduction in interest rates. The sooner they start the less likely that the on coming slowdown will be longer and deeper.
Monday, September 03, 2007
No argument against the Bush homeowner proposal
In a recent investment outlook published by bond guru Bill Gross of Pimco, he describes in easy to understand detail, the problems besetting the United States financial and housing markets as a result of the sub prime mortgage lending fiasco.http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+September+2007.htm
For the moment we can leave the cause of the problem to the rise in alternative, lesser regulated investment strategists who came up with various mortgage derivatives that in recent months few people have been able to value never mind find buyers of.
So far the primary victims of the subsequent liquidity crisis have been some smarty pants hedge fund managers who were touting their strategies as market neutral with ability to make money in up or down markets. Once again the markets have proven that no one is immune from getting a spanking in the wood shed of turbulent conditions.
It would be nice if they are the only victims however with foreclosure rates rising rapidly on the underlying properties securing the derivatives it won't be long before a large number of Americans homeowners are dramatically affected.
The fundamental point of the Gross argument is this "If we can bail out Chrysler, why can’t we support the American homeowner? The time has come to acknowledge that there are precedents aplenty in the long and even recent history of American policy making." The examples Gross uses go beyond Chrysler to include the Long term Capital Management and S&L bail outs in the 90's.
The stakes involved in the current situation are much higher than the previous situations. At risk are as many as two million American home owners who have gotten caught up in the squeeze of raising rates and falling values that is a cocktail likely to result in more and more foreclosure actions.The travails of those two million homeowners will reverberate throughout the rest of the U.S. economy if they are left to sink or swim on their own.
Apparently President Bush is a reader of Bill Gross or just by coincidence the White House has arrived at some of the same conclusions Gross has. On August 31st, President Bush announced a plan to intervene in a way that is likely to greatly assist those home owners who have the greatest threat of losing their homes.http://www.whitehouse.gov/news/releases/2007/08/20070831-4.html
It is inevitable that some of those Wall Street wizards who helped create this problem will likely be bailed out as a by product of federal intervention in the housing market. No matter how distasteful that is, it can't be a reason to oppose this type of legislation. A wholesale collapse of the U.S. housing market and the financial instruments used to support it must be avoided at all costs. In terms of over all impact from a social and financial stand point, this crisis might be the defining moment in the Bush presidency.
For the moment we can leave the cause of the problem to the rise in alternative, lesser regulated investment strategists who came up with various mortgage derivatives that in recent months few people have been able to value never mind find buyers of.
So far the primary victims of the subsequent liquidity crisis have been some smarty pants hedge fund managers who were touting their strategies as market neutral with ability to make money in up or down markets. Once again the markets have proven that no one is immune from getting a spanking in the wood shed of turbulent conditions.
It would be nice if they are the only victims however with foreclosure rates rising rapidly on the underlying properties securing the derivatives it won't be long before a large number of Americans homeowners are dramatically affected.
The fundamental point of the Gross argument is this "If we can bail out Chrysler, why can’t we support the American homeowner? The time has come to acknowledge that there are precedents aplenty in the long and even recent history of American policy making." The examples Gross uses go beyond Chrysler to include the Long term Capital Management and S&L bail outs in the 90's.
The stakes involved in the current situation are much higher than the previous situations. At risk are as many as two million American home owners who have gotten caught up in the squeeze of raising rates and falling values that is a cocktail likely to result in more and more foreclosure actions.The travails of those two million homeowners will reverberate throughout the rest of the U.S. economy if they are left to sink or swim on their own.
Apparently President Bush is a reader of Bill Gross or just by coincidence the White House has arrived at some of the same conclusions Gross has. On August 31st, President Bush announced a plan to intervene in a way that is likely to greatly assist those home owners who have the greatest threat of losing their homes.http://www.whitehouse.gov/news/releases/2007/08/20070831-4.html
It is inevitable that some of those Wall Street wizards who helped create this problem will likely be bailed out as a by product of federal intervention in the housing market. No matter how distasteful that is, it can't be a reason to oppose this type of legislation. A wholesale collapse of the U.S. housing market and the financial instruments used to support it must be avoided at all costs. In terms of over all impact from a social and financial stand point, this crisis might be the defining moment in the Bush presidency.
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