Sunday, October 31, 2010

Lots of Garlic


This weekend we were at the restaurant "Frankie's 5th Floor Pizzeria" a Lettuce Entertain You member, when we noticed that there were huge chunks of garlic in the pasta. When I think of garlic I remember the scene from Goodfellas where Paulie cuts the garlic so thin that it "liquifies" - here is the link. Good restaurant though, and recommended, although if they put big pieces of garlic like this in for flavoring then they should take them out once cooked or put it in much smaller so that you actually could eat it. But I will leave the real opinions up to the foodies on this blog...

Bean Dip, Anyone?

Saturday, October 30, 2010

Fun Pumpkins


Made by my nephews!
Cross posted at Chicago Boyz

Photo Contest Winner

At the blog here my photos have typically been met with helpful hints like "hold the camera steady" or set it on something solid or "read the damn manual" which I appreciate since I am about as far from a professional photographer as you can get and can certainly use the advice.  The one thing I do have in spades is that I carry my little "blog camera" everywhere which is a Canon PowerShot SD780 and I am not shy about just taking photos all the time under the theory that "quantity over quality" meaning if I have it with me and jump at the shot sometimes it works out really well.

We went on a trip to France with the tour group Backroads which I highly recommend and they decided to use one of the photos (the one in the screen shot, above) I submitted as part of their trip marketing!  I even won a credit worth $250 from them for a future trip (which I will definitely use, we will probably go to Italy again in the next six months or so).  So thanks for the advice I am definitely learning a bit and this should inspire me for even more photos or a better camera this Christmas.

I also used a Groupon for a canvas wrap from "Canvas on Demand"  for under $50 for a 16 by 20 canvas version of this photo (regularly it is about $125 with shipping) and we will see how that turns out, too.

Friday, October 29, 2010

My Very Last Halloween Costume

The year was 1977 and this photo was taken about nineteen months after we were married. It was the last time I dressed up as some character for Halloween.


We lived in a small one bedroom apartment in Park Forrest IL that cost about $160/ @ month rent. That day we were on our way to a Chicago loft that belonged to a co-worker. He was having a Halloween party. At the time, downtown warehouse lofts were just becoming fashionable dwelling spaces and were always in undesireable neighborhoods. But they were cheap.

His spacious and inexpensive loft space was in a building on the southeast corner of Lake and Wacker south of the Lake St. EL and east of the river. It was a filthy, primitive space and the neighborhood was dangerous. We didn’t even think of walking into the bar on street level.

One co-worker friend was robbed at knifepoint on the Lake St. bridge the following spring on his way to catch a late night train to the suburbs. Today that same building is in a safe, very expensive neighborhood and has been totally rehabbed. It looks fabulous. I’m sure those old rental loft spaces are now trendy, modern and very expensive condos.

My very last Halloween costume was 100% homemade. It was a combination of a belt, gloves and boots that my bro made for his art school Halloween party in Cincinnati the previous year. I combined those elements with a self-made helmet, a borrowed flashing light unit on the helmet, hand cut starburst mylar on the chest and the ray gun all made in the art department studio where I worked.

I was 25 at the time and still had the desire to dress-up as (whatever) and go out to a party. 1977 was the last time I dressed up and went out on Halloween. It’s now my preference to stay home on holidays. It’s safer, cheaper and I don’t need to hunt for a designated driver or cab to get me home.

I look back fondly on those old Halloween parties but have no desire to relive them over again. That’s best left for the kids and the few adults who can’t seem to let go of their youthful exuberance. These days I don’t go anywhere on Halloween and if I did I would “go” as myself. That’s a frightening thought right there.

In the above photo, note the hemp macramé (made by the wife) containing hanging plants behind me, the cinder block and pine plank shelving with an old RCA 19” television on the right and the bamboo magazine rack on the left. There were oak hardwood floors, a grass weave area rug, plants all over the place, a bristle dartboard that got a lot of use and a small galley style kitchen furnished mostly by Pier 1 Imports which had a store across the street. We had a ball living there, not knowing what was in our future.

Life was so simple back then and I do miss it.

But life only got better for us, much better. As it should.

Wednesday, October 27, 2010

The Power Tool Hall Of Fame

There are some power tools that are invaluable, used often and deserve great praise. They should be entered into the Power Tool Hall Of Fame.

After doing a quick search there is no Power Tool Hall Of Fame. But if there was one I would nominate the gasoline powered leaf blower. What a fine piece of work it is.


Having gone through two substandard leaf blowers in the past thirty years we finally bought a good one, it’s made by Stihl. The other two were Sears Craftsman and they were junk. Sears makes fine hand tools but their power tools have been found wanting in my experience.

For five years the Stihl has never failed to start. That’s called reliable. I made my leaf blower choice because my Stihl chainsaw is eighteen years old and has also provided years of reliability. Their power tools may cost more but are worth it in the long run, especially when you need the power tool to start and work right now.

Since we live in a densely wooded area my leaf blowing chores begin in late August. The black walnuts give up their leaves early followed by the hickory. There’s a slight break in mid September but then the ash trees start shedding followed by the maples, beech trees and finally the oaks. The leaf blowing continues thru late November and many weeks require blowing twice just to keep up from letting it get out of control. Leaves, especially wet leaves promote lawn fungus and other problems.

During the spring and summer my Stihl leaf blower helps blow grass clippings and lawn edging remnants off the concrete and I even use the blower to sweep the garage like Carl Spackler.


We recently had a big blow of a storm. It covered the entire center of the nation and it’s not over.

Blowing leaves in the wind is like pissing into it. But when the big blow is from the south as it was today it helps my cause so I took advantage of the phenomenon because I want my leaves to go north. Wind assisted leaf blowing is the best condition. But many more leaves will come to make more work.

Some neighbors are irritated by the noise of leaf blowers. I say fvckem!

Others claim that leaf blowers contribute to greenhouse gasses.

These vermin usually crawl out from under their vegan bushel baskets this time of year. They say leaf blowers are not green, not earth friendly. They want us to go back to using rakes. Au natural. Well, they can shove that crap right back up their @ss. And they call themselves ‘progressive’.

They will take my internal combustion power tools away from me when they pry them from my cold, dead fingers.

While operating my leaf blower it never gave me blisters. Try that with a rake.

Monday, October 25, 2010

Tax Policy Killing Our Manufacturing Base

Business Week is a venerable magazine that I was only minutes away from canceling because their content was the typical irrelevant journalistic crap when suddenly they were taken over by Bloomberg.  All the sudden I would say now that Bloomberg / BusinessWeek is the single most useful magazine I subscribe to, more valuable than Forbes, Fortune, or Barron's.

Their articles are in-depth and hard hitting.  Rather than assume that you are a "lay" or "casual" reader, Bloomberg does actual research and writes for sophisticated readers wanting to learn more about a topic that they have some familiarity with.  Also rarely do they use the journalistic old-hat trick of trying to link every story to some sort of "man on the street".

Bloomberg wrote an excellent article titled "Google 2.4% Rate Shows How $60 billion Lost to Tax Loopholes".  While the US corporate income tax rate is the highest in the developed world at 35% (we are neck-in-neck with Japan, but they have proposals to reduce their rate) certain industries in particular can use loopholes to avoid paying virtually any tax at all.

Google uses a strategy known as "Double Dutch" which moves income through a number of subsidiaries in Ireland, the Netherlands, and Bermuda to avoid paying US taxes.  Theoretically they are "deferring" taxes to some future period, but they can defer them forever by never bringing the cash back into the United States.

This sort of activity is most suited to those types of companies with intellectual property, and if possible, some sort of world wide presence (although this is not really required).  It is not a co-incidence that the US fields some of the most competitive companies in this space including pharmaceuticals, technology and finance.

What isn't discussed here nor typically understood is the same forces that provide a competitive advantage through low (effective) taxation to the above types of companies provide a disadvantage to those types of companies unable to reduce taxes due to the same types of arrangements and must pay the punishing US corporate tax rate.  Any wonder why heavy manufacturing sets up elsewhere around the world than in the US; it is much more difficult to do these sorts of tax arrangements if you have a physically intensive type of operation such as manufacturing, so they have fewer opportunities to reduce the tax burden. 

Remember that good tax policy has 2 key elements:
- it collects the planned revenue amount
- it does not significantly distort economic behavior

Through the use of transfer pricing and other loopholes involving multiple countries our tax policy is effectively collecting nothing for Google, and little for many other similar companies such as pharmaceuticals.  Thus the policy is failing on that front.

And the burden of corporate tax collections fall on other companies, making them less effective, and impacting corporate decision making on the margins to not invest further in the USA in many cases, thus distorting economic activity.

Hats off to Bloomberg BusinessWeek for such a well written article, putting into understandable terms the use of loopholes that enables Google to pay virtually nothing while many other US companies are hammered with the highest rates in the developed world.

Cross posted at Chicago Boyz

At The Sugar Maple Bistro...



...don’t get stung when picking up the tab!

Monday Morning Blues

Last week I was on my way to drive the LITGM Monday Morning Blues vintage Winnebago tour bus off the cliff. Suddenly the engine threw a rod.


This week it's in the shop for repairs. Oh well. Time to slow it down a bit.

Thursday, October 21, 2010

Mispricing Risk on Bonds

Interest rates are at an all-time low.  Companies are able to borrow money and pay almost no interest under the most favorable of terms.  This one caught my eye:

SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (NASDAQ:EBAY) today announced the pricing of a $1.5 billion underwritten public offering of its senior Notes, consisting of $400 million of 0.875% Notes due 2013 (the "2013 Notes"), $600 million of 1.625% Notes due 2015 (the "2015 Notes") and $500 million of 3.250% Notes due 2020 (the "2020 Notes"). The public offering price of the 2013 Notes was 99.793% of the principal amount, the public offering price of the 2015 Notes was 99.630% of the principal amount, and the public offering price of the 2020 Notes was 99.420% of the principal amount, in each case plus accrued interest, if any. The offering is expected to close on October 28, 2010.  eBay intends to use the net proceeds from the offering for general corporate purposes, which may include working capital, acquisitions and capital expenditures.
It is completely astounding that a company with a business model like eBay is able to borrow for:
- 2-3 years at under 1%
- 5 years at under 2%
- 20 years at a bit over 3%

These are not secured debt items; they are notes - and per the description above, eBay can use the money for anything they want, including working capital, which means that they can use the money for ANYTHING.  THIS IS LESS THAN 1% ABOVE THE RISK FREE RATE (i.e. what you can get for Treasuries).  This is absolutely unprecedented.

This article in today's Wall Street Journal essentially tells the same story with Wal-Mart.  Wal-Mart was also recently able to sell debt at an absurdly low premium over the risk free rate.  Per the article:

Wal-Mart sold $750 million worth of three-year bonds paying 0.75% a year. It sold $1.25 billion of five-year bonds paying 1.5%, $1.75 billion of 10-year bonds paying 3.25% and $1.25 billion of 30-year bonds paying 5%.
The difference between Wal-Mart and eBay is that WMT also has an instrument that delivers yield as well as some potential for appreciation; a stock paying a dividend.  The dividend on the shares of WMT yield a bit over 2% a year and receive preferential tax treatment (due to the dividends received deduction) to boot.  Per the article:
Wal-Mart has raised dividends by an average of 16% a year over the past decade. If it merely raises them by 10% a year in the future, the yield on the stock will surpass that on the 10-year bonds within about five years. It will surpass that on the 30-year bonds within 10 years.

I have no idea why someone would buy debt, which has many risks (the risk of inflation in the economy, as well as a company specific risk) with this sort of minuscule premium, especially when taxation is so unfavorable (it is taxed as ordinary income today and highly likely tomorrow).

This is the equivalent of a "bubble market" for bonds.

Cross posted at Chicago Boyz and Trust Funds for Kids

Monday, October 18, 2010

Agora Chicago

While walking over to the Bears game on Sunday (we had brunch nearby rather than tailgating per usual) I saw these big statues near Roosevelt Road a bit north of Soldier Field.  I don't know how I used to figure stuff out before the internet but I just typed "leg statues" into the browser and I guess they are called Agora Chicago and it is a big installation on permanent loan from the Polish government.  At the wikipedia site they quoted someone from the city of Chicago and the feedback they receive is either 100% positive or 100% negative with no middle ground and I can see why.  It seems pretty ominous to fill a public park where kids can play with a bunch of big rusty statues that are sort of menacing.  At least it looks cool with the buildings in the background and a soon-to-be drunken Bear fan in front for scale.

Flyover Bears vs. Seattle



The game may have sucked but at least the weather was beautiful and we got a jet fly over in the cheap seats.  This time it didn't include an F4 Phantom and it was a bit off the mark as far as timing it didn't come at the peak of the national anthem but still very cool.

Here At The Boondocks Bar & Grill…

...nature’s watercolors hang on the wall.






And we order very serious cocktails.

Monday Morning Blues

I'm about to drive the LITGM Monday Morning Blues Winnebago tour bus off the cliff. Watch out below.

This one really starts cooking at the 3:30 mark : )



I once had an Alvin Lee style mullet. It's true.

Wednesday, October 13, 2010

Around Chicago Late September 2010

A few more photos taken around Chicago before it turns to fall... upper left a Lamborghini Superlegra, apparently around a $250k or so car, with a "snake charmer" license plate.  Don't park it on the street, too beautiful to get banged up.  Lower left, while walking home from work on Wacker Drive I saw this shoe left behind.  You'd think someone would miss it.  Upper right - Derrick Blakley and Megan Mawicke not smiling right before they go online with the news, which you can see from the street at Dearborn avenue in the ABC TV station downtown.  Lower right - my friends broke their wine opener that they had used for over a decade and on probably a thousand bottles of wine (they are big entertainers) so I went out and bought a new one STAT from the local grocery store and it broke in a week!

Strange In Chicago


I was walking down the street by a nearby bar and was stopped dead in my tracks... apparently this bar now supports the GREEN BAY PACKERS and the Cincinnati Bearcats football.  I don't care so much about the Cincy football (are there any fans around) but I can't say I'm too happy about the bar becoming a home away from home for Cheeseheads.

I think that the beer companies (apparently Miller Lite) are out there paying bars to sponsor these out-of-town sports teams so alumni gather and, presumably, drink beer.  Probably not a bad strategy but in this case I have a bad case of NIMBY!

Monday, October 11, 2010

Brussels Sprouts And Bacon

This time of year Brussels sprouts are fresh and in season locally. These mini cabbages are a favorite of mine.


It took me a long time to realize that vegetables can be delicious if you don’t cook them to death. Use fresh vegetables only and avoid frozen completely.

The often overlooked sprouts can compliment any grilled meat entrée, and lord knows I’m a meat man.

Ultimate Brussels sprouts with bacon and onions:

Remove the stem, cut the sprouts in half and carve out the inner stem making a v-shaped cut.

Peel all the leaves apart. This can take a while but is worth the time. Peeling eight of these little beauties took about twenty minutes, they were quite large.


Place ½ lb diced bacon in a hot skillet and cook over medium heat.


Add a medium onion, large dice, to the cooked bacon and allow to sizzle with the bacon bits until transparent. Do not remove any bacon fat. Ever.


To the skillet add the peeled sprouts, a generous amount of salt and fresh ground pepper. Stir well and cook over high heat for a few minutes.

Add ¼ cup of water or dry white wine and cover for about three minutes. This will steam the sprout leaves gently into delicate submission.

Uncover, stir and serve.


If you really, really want to enjoy the sprouts serve them with garlicky baked potato wedges and grilled venison tenderloin.


I tried something different with the venison tenderloin this time. It was heavily salted and sat on an open plate for one hour before grilling. This is referred to as a dry brine. It’s a neat trick I just learned and it worked very well.

Just salt any red meat heavily with kosher or sea salt, table salt won’t work. Allow the meat to sit and dry brine for one hour before grilling. This will make any lean cut of red meat very, very juicy after grilling but is intended mainly for the cheaper cuts.

Before grilling rinse the meat thoroughly with cold water to remove all salt residue, if not then you are in for salty tasting meat.


I like to wrap my tenderloin au bambi mini steaks with bacon secured with toothpicks. No additional seasoning is necessary for venison steak, save that for beef if you must. I want that pure, natural, fat-free venison flavor coming through without any contamination. But that's me.

Before grilling heat that mother up hot hot hot! Sear the meat four minutes on each side, mine were almost two inches thick.

On gas grills turn down the far burner and shut two completely off. Place meat over the burners that are off, cover and cook for about five minutes for rare, longer if you do not respect tender red meat.

On charcoal grills use the hot side cool side technique.

Click to enlarge any photo, especially this one.


This was one incredible meal. Even the wife, who shies away from venison steaks (it’s that Disney thing) thought they were delicious.

Try the sprouts in bacon, you won’t be disappointed.

Sunday, October 10, 2010

Monday Morning Blues

Last week Dan handed me the keys to the LITGM Monday Morning Blues Winnebago tour bus. I couldn't say no.

It's an awesome responsibility since I have no insurance.

On top of that, I think the guitar player is stoned. Oh well. Down the road we go.

I don't know who this guy is but he ain't bad.

Saturday, October 09, 2010

He Would Have Been 70 Today.

Today was one of life’s milestones to me. I grew up during rampant Beatlemania.

Yes, I did watch The Beatles first appearance live on the Ed Sullivan Show with my family that Sunday night after dinner. I was in 5th grade at the time. None of us were very impressed. Maybe it was because of the small, primitive black & white Zenith CRT and lack of home theatre surround sound.

As time went on and they caught fire just about everyone had a favorite Beatle. Mine was John Lennon, who would have been 70 today. Damn.

In the 60’s you could not avoid hearing about or seeing The Beatles phenomenon everywhere you went. Girls wore pins, carried Beatles handbags and wore the ‘I Love The Beatles’ apparel that sold as fast as it was placed on the shelf. Guys wore Beatle boots, yes I had a pair. Soon suits like they wore were showing up on the hipper guys at Sunday morning mass. And there were those haircuts. That Beatle haircut angered every uncle I had. That's for pussies, they claimed.

That didn't stop me from seeing hard A Day's Night and HELP! in the local movie theatres when they were originally released. Young girls screaming ruined watching them.

The influence The Beatles had not just on pop culture but on all music to follow and society as a whole has never been matched by anyone anywhere before or since. Sorry, Wacko Jacko fans. Brian Epstein was an entertainment marketing genius, his strategies and tactics are being copied to this day. The Beatles changed the fabric of why things are the way they are today from the media to entertainment to marketing to politics. It was their creativity that inspired me, not musically but artistically. Album cover designs of the time made me want to create colorful images for profit. It led to a very rewarding and prosperous career, thank you very much.



I always gave credit to John for being the smartest Beatle. That all went to hell when he married that oriental witch-hag.

Never being a fan of peace and love hippieness I liked the music and paid little attention to what the words meant and never took them seriously but John could sure string them together well. Unlike most musical phenoms, The Beatles got better with time.

When The Beatles broke up it became obvious that John Lennon and George Harrison were by far the most talented. Paul McCartney? Not so much in my opinion. Paul could sh!t on a paper plate (he did), call it music and it would sell because women loved him. When he showed up singing to Oblahblah’s wife in the White House recently I gagged bigtime.

Both Lennon and McCartney were credited with writing the music but it was easy to tell which one had the most influence on any given tune. McCartney wrote the sappy stuff and John wrote the more clever and creative tunes.

As strange luck would have it I was also watching the Monday Night Football game when Howard Cosell announced that Lennon had been shot in Manhattan.

Music legends like Hendrix, Morrison and Joplin died due to their own excess, ignorance and stupidity. Lennon was murdered in cold blood by a psycho.

The two youtubes embedded here are among my favorite Lennon tunes.



Yes, Mother Superior jumped the gun.

What a pity. What a loss.

Update On Nuclear Power - Constellation Drops Out

Back when the US government selected 4 companies who might lead the nuclear power "renaissance" in 2009 I wrote this article and noted that of the four:

- Southern Company was a good candidate since they have nuclear experience and a substantial market capitalization
- SCANA (South Carolina)is a relatively small company, but since South Carolina has the "traditional" regulatory structure where companies can pass the cost of construction on to customers, this might work, although it would put the company at extreme risk of foundering if costs rise
- NRG is a smaller independent power company that was unlikely to be able to finance such a large venture and unwilling to take the financial pounding that will likely ensue as the projects face difficulties
- Constellation Energy (Baltimore) was a wounded company and unlikely to succeed, even with a partner in the vast French nuclear company EDF

I said that of the four companies, 1 1/2 (Southern plus SCANA, on a shoestring) might be able to pull it off.  I also said that it boded ill for this false "renaissance" that Exelon, the largest nuclear operator in the USA and one of the largest in terms of market capitalization, was bowing out of this effort, likely because they ran the numbers and risks and decided that it was foolhardy.

In this post I noted that NRG had a falling out with their nuclear effort, and according to this recent presentation, they have reduced their spend to a maximum of $1.5M a month, which is literally a pittance in a multi-billion dollar effort, dumping the rest of the work onto their partners and Toshiba.  Effectively naming NRG was a joke in the first place, as I pointed out in my original post, and now they are abandoning the giant capital efforts of nuclear plant construction and moving onto other areas to earn profits.

Today the other shoe dropped - as summarized in this excellent Bloomberg article titled "Constellation Drops Maryland Nuclear Plant Loan, Denting EDF's U.S. Plans":

Constellation Energy Group Inc. pulled out of negotiations on a U.S. loan guarantee to build a nuclear reactor in Maryland with Electricite de France SA, potentially damaging the French utility’s U.S. expansion plans and the companies’ partnership.The cost of a $7.5 billion U.S. government loan guarantee that the companies’ joint venture, UniStar Nuclear Energy, would need to build the Calvert Cliffs 3 reactor is too high and creates too much risk for Constellation, the Baltimore-based utility said in a statement today.
So now Constellation has dropped out, I am batting a thousand so far, since at $1.5M / month NRG has also effectively abandoned the effort.

As far as the 1/2 company, I have been following SCANA's efforts through their web site, which contains extremely useful information.  Since the rate-payers are on the hook for this effort (SCANA has "traditional" rate regulation), SCANA publishes detailed information on a regular basis so that the regulators can measure progress.  This document is a Q2 2010 update on their 2 units under construction and is excellent reading if you wish to learn more about nuclear plant construction.  Some relevant facts:

- at a stock price of about $40 / share, SCANA has a market value a bit above $5B
- the estimated cost of building two nuclear units as of their most recent estimates is about $6B
- scheduled completion dates for Units 2 & 3 are April 1, 2016 and January 1, 2019
- SCANA is planning on spending approximately $500M on these two units in 2010

It will be a high-wire act to see if SCANA can pull this effort off with their small market capitalization relative the potential risks on this construction effort.  Delays in the schedule or cost over-runs will pose a significant risk to their liquidity and South Carolina is a relatively small state if they need to rely on support.  That is why I still give SCANA a 1/2 as far as the 4 companies listed above - they have a shot and are certainly making the most of it but they are a LONG way from the finish line and any significant deviation will dent their capitalization significantly.  For example when the company has $5B sunk into the project, if the date is delayed the company will not only have to keep financing that $5B in debt but they will have to purchase replacement power to make up for the nuclear power that isn't yet on line, dealing them a double blow.

Southern is still moving forward with their construction and of the 4 they, and Exelon, were the only 2 companies in the US with the level of experience, commitment and financial capacity to pull this off, if they chose to do so.  I will update you on Southern's construction efforts in a future post.

But it amazes me that what I, a non-journalist who is several years removed from direct experience with the industry, could call immediately when the government named these companies and how I have been completely correct so far.  The nuclear renaissance is about to be buried, with only Southern soldiering on and South Carolina holding their breath (if they are smart) to bet that SCANA can pull this off or they will be stuck holding an immense debt and be short of power, to boot.  Given the 100% rate of overruns in nuclear plants and dates being missed by years (if not decades), SCANA's high wire act is going to be tough to pull off, but I wish them luck.

Cross posted at Chicago Boyz

Horse Racing

Dan and I were in Las Vegas recently at the Mirage sports book relaxing and watching college football when we couldn't help but notice that 1/2 the wall space was dedicated to horse racing of various stripes, from showing the races to the odds of the various races running that day.  For most of the day that half of the sports book was dead, with only a few older people studying the races and placing bets, although a couple of times a few people did cheer for the races during the 1-2 minutes that they actually ran.  I noted that the televised races didn't usually pan the crowd; I assume it was mostly empty seats.

Meanwhile, the other half of the sports book was packed as everyone was watching college football.  Given how many games were on at the same time they really didn't have enough screens and they weren't big enough, plus later some baseball games came on that they weren't televising much at all.  Also for some reason at the Mirage they would put the same college FB game up from 2 different networks so one was about 2 seconds behind the other; that was annoying and made no sense because the sound wasn't on anyways (it could maybe make some sense if the announcers were different and slanted to the home crowd of each team).

Back in the day horse racing was about the only way you could legally bet on sports, unless you went to Las Vegas and put down a bet personally.  Also most states did not have casinos nearby, which isn't the case nowadays, although Riverboat casinos certainly lack the ambiance and frills of Vegas.

While I know people that are interested in horses, I never hear anyone remotely my age talk about betting on horses.  There is a local Off-Track-Betting (OTB) parlor near me that recently opened with some fanfare here in River North that just closed its doors.  I noted that most of their recent promotions were around baseball (back when it seemed that the Chicago White Sox might have a chance) and then of course college and pro football.

The idea of betting on horses, something I know nothing about and have no affiliation for, against college football or pro football, where at a minimum I have ties to many teams and find the games exciting and interesting, is laughable if I were ever given the choice between the two. Probably 99 of 100 people would rather bet on college or pro sports than horse racing. Horse racing only had bettors because they were "the only game in town".

Also it seems pretty obvious that most of the US fans (can't speak about overseas) of horse racing are likely to die out in the near term, and no one is coming up to take their place. From the looks of it betting on horse racing isn't correlated with healthy living either so these guys (almost all men) will likely drop dead sooner than expected, anyways.

The politicians will have to find some other way to make their cut than taking part of the horse racing money. The Riverboat and local casinos probably are the most obvious route but probably someday betting on pro and college sports will be legalized formally (you can already do it pretty easily on the internet) and then you won't even hear about horse racing anymore, except for the few races that people actually know about (like the Preakness with the awesome you tube videos here of the "running of the urinals" or the Derby) which can probably be counted on one hand.

Friday, October 08, 2010

FHA and Home Occupancy as an Entitlement

The FHA used to only represent a small portion of the US mortgage market.  FHA buyers were perceived to have poor credit and use this government program (essentially a subsidy) to enable them to purchase a house that they would live in, thus increasing the "social mission" of increased home ownership in the USA.  However, after the meltdown in securitized mortgage lending in 2008, the market for non FHA loans essentially evaporated and the FHA has moved from a small percentage of the mortgage market (maybe 5%) up to as high as 90% in some regions among eligible residences.  There are limits on FHA buyers, mainly that the house / condominium can't cost more than $369,000 (or $729,750 in some high cost markets like CA and NYC) and that the owner needs to live in the house (not for 2nd homes).

In Chicago many of the condos are below the threshold where FHA financing makes sense and so the issue of whether or not a particular unit is eligible for FHA financing is becoming more important in the marketplace.  Buildings advertise in large letters if their condominium is eligible for FHA financing (on units that qualify under the cost threshold above, of course).  At some point it is possible that buildings that cannot get FHA approval (they have other criteria regarding reserves, commercial tenants, etc...) would be at a severe loss when trying to sell out for the first time to owners or for existing owners to resell to new buyers.

There has not been a lot of discussion on whether or not it makes sense for the Federal government to essentially nationalize the mortgage industry, but that is what is occurring today.  FHA loans are now the only loans in town since their low down payments and rock bottom interest rates drive out competitors at their price levels.  And it is only a matter of time before the FHA raises their cost limits which would further their dominance in the market, leaving only the high end for other types of mortgages.

I also believe that wise developers will tend to "cluster" their pricing right around the FHA limits.  If you have a $450k condo, that is a bad price point if only $384k can be financed, so shrink them down a bit or reduce amenities to hit that price point. As soon as the FHA raises their limits, then the mid-tier condo market will move closer to that pricing point, over time, as developers realize the power of FHA and the limited market for non FHA loans.  This will take a while and be subtle because development is dead now so little is coming onto the market, but I'll bet you'll see this in the next wave.

On a parallel thread, the banks that are attempting to foreclose on individuals who are seriously delinquent in their mortgages have been facing rough times lately.  This article from Fox News describes not only a recent veto of a bill to facilitate electronic notarization of documents but other issues that are slowing or even halting bank foreclosures.  Per the article:

Three of the nation's largest mortgage lenders – Ally Financial, JP Morgan Chase and Bank of America – have suspended foreclosures in 23 states after reports revealed that lenders were signing documents without reading them or filed inaccurate paperwork. That has led to several lawmakers and civil rights groups, including the NAACP and the National Council of La Raza, to call for an investigation into the foreclosure process and a suspension of all home foreclosures.
As the Federal Government nationalizes the mortgage market, you can soon see the writing on the wall that foreclosures will be protested against just as a special interest group would protest any other entitlement change.  Since it is a government program, why can't they just bend the rules for the poor or a special community, especially one that is politically connected?  While I have seen conflicting estimates of FHA losses and when they will start to need money from the US Treasury to cover the program (they had been self funding all along until now) the dire mortgages from 2007-8 are starting to go sour which will definitely raise loss rates overall for them.

I'm sure someone thought all this through in conspiracy-land but really the threads are only starting to become evident as the FHA drives out all the competitors with their low rates and low down payments on the one end, with cost levels rising over time which will allow them to control a larger portion of the total market.  Developers (smart ones) will also tend to build units that qualify for FHA loans in the first place.  Then when a foreclosure comes - use protest politics.  And FHA losses become everyone's responsibility, not the borrowers.

Now your own home is an entitlement.  You can see where this ends up.

Cross posted at Chicago Boyz

Thursday, October 07, 2010

Our Epic Planning Failure On Taxes

There are two key elements to a tax policy:

1) collect revenue amounts as planned (i.e. bring in the cash you need)
2) enable the desired behavior or minimize non-productive behaviors tied to this tax policy

The USA now likely has the most dysfunctional tax regimes on these lines collectively of any major state.

Our recent estate tax fiasco, where for the year 2010 there is NO estate tax (so the heirs of George Steinbrenner, for example, inherit his wealth without paying estate taxes), is an epic reminder of our governments' inability to drive any sort of behavior in a productive manner.  For decades lawyers and accountants have been assiduously planning various complex strategies to avoid the estate tax (any wonder why Buffet is giving away billions while he is alive?) and yet if you passed in 2010 you pay NO estate tax, but if you happen to die in 2011, you will go back to the exorbitant rate of 55%!  What sort of behavior is the US government attempting to elicit from its citizens?  It is impossible to tell.  And when you read the experts NO ONE thought that the US would just let the tax go to zero in 2010; everyone agreed that some sort of "fix" was inevitable; so they were all wrong, because clearly it is zero.

Now the situation is going to impact everyone, not just those contemplating their own morality.  This article in the WSJ titled "Delays to Tax Tables May Dent Paychecks" shows how our inability to plan is now impacting anyone who is running a business with a payroll.

Lack of congressional action on 2011 income taxes may force the Treasury Department to make unprecedented moves to prevent US workers from seeing large tax increases in their January paychecks.  The issue: 2011 tax withholding tables.  Treasure officials usually release the tables... by mid November because it takes payroll processors weeks to adjust their systems before January 1.
If you look at your pay stub and all the complex deductions done by your payroll processor you can see that there is a lot of work behind those calculations, which are also impacted by the withholding that individuals select based on their filing status. 

What happens after January 1 is that the tax cuts enacted under the previous administration expire and rates go up across the board, as well as impacting the Alternative Minimum Tax, capital gains, as well as the dividends received deduction (minimizing the double taxation of dividends).  Unless Congress acts this year, which seems unlikely since they are all up for election, all these tax items automatically occur, although they could certainly be changed by Congress before the end of 2011 and other rates or policies put in their place.

Our tax policy now is totally unhinged when it comes to incentives.  Are stocks that pay dividends going to be pummeled when the tax rate on dividends goes back up?  You don't know.  If you live in the East or California in a high tax state and aren't paying an arm and a leg in AMT, you may very soon if the taxes aren't amended.  The capital gain tax is more complex because many people are already betting that this will not be re-upped and cashing in their gains that survived the recent downturn in many cases anyways.

Don't forget that this inability to plan is at the local and state level, as well.  The State of Illinois, facing a huge deficit, decided to do nothing since elections are coming and just rolled the entire problem along to those that are elected next.

Really, I am a pessimist and I never thought that our tax policy at the Federal and State level would become so muddled.  From an incentive and planning process it is making the lives of those who do this type of work extremely difficult to execute, and impossible to explain rationally to those that aren't experts in the field.  We have absolutely reached a new nadir.

Cross posted at Chicago Boyz

Wednesday, October 06, 2010

My Skewed History

A while back I was going through all the books that line my shelves, culling some in order to make room for potential new entrants.  Although I am trying to branch out a bit, a lot of the books are on military history, particularly of the WW2 and WW1 vintage (I am trying to read some more light-hearted materials).

One of the main participants in history of that era is of course the Germans and in particular the German General Staff.  A lot of the books that had lain unread for a while related to various German military campaigns and biographies of their commanders.

As I sat looking at the stack of books going to various recyclers I started to think about how focusing on that era, and in particular the Germans, is so irrelevant to the world that we face today.  I am not talking about war in the abstract or the fact that the Germans were excellent planners and professionals in many dimensions (although not all) which is always relevant, but the fact that today the Germans are such minor players on the world military stage and their past history, so to speak, is totally irrelevant towards future behavior.

I then noticed a news release about Germans being killed in battle... but they were German nationals killed by a drone attack working against coalition forces in the middle east!  I realize that this is sensationalistic and under values the hard work and lives lost that the Germans as coalition members have suffered as part of their support in Afghanistan but still it was a jolt.

Here is the oddest thought of all... as Americans we have long made jokes at the expense of the French about their military prowess, with some foundation particularly the WW2 era.  But today, which country is more likely to stand up for themselves in a time of crisis and utilize military power - I'd put my money on France, which still has entanglements in Africa and attempts to burn a fierce nationalistic pride, while the Germans de-emphasize national identity in particular a military outlook post WW2.

These books lining my shelves were telling me about the past, but not the future.  There are many countries that will drive the future for military purposes, but the Germans aren't one of them.  While today our military is locked in struggles against terrorists and IED's (as well as a civil war of sorts in Afghanistan) there certainly could be a showdown someday against an armed and organized nation state, whether it is Iran or China.  It isn't that the nation to nation showdowns, which have been pushed to the back burner in our current era, won't come back - it is just that the players will be very different and while we may have a lot to learn from the past it is unknown how much of the WW2 experience in particular will be valuable for consideration.

I need to start over, and clear the shelves, literally as well as figuratively.

Cross posted at Chicago Boyz

Monday, October 04, 2010

Another Fine Day In The Country


We took our annual apple picking trip Sunday morning. It was about two weeks earlier than usual according to the season. The trees are quickly giving up the green I noticed, about two weeks early as well. Last year the leaves did not make the big drop until a week or so after Halloween. Judging by this year's early color they should all drop before November. Sure can't wait for that mess of work : 0


This is an annual trip we have taken since our kids were young in the early 80’s. We would take the dog along and made a day of it at an orchard in lower Michigan.

Sunday morning we went to the much closer Garwood Orchards near LaPorte IN and left early to beat the crowds of families pickin’ apples. Just me and the wife.


One thing I have noticed about getting older and being an empty nester is that we shy away from places where there are crowds of families with young kids. It’s an odd feeling because we enjoyed raising a family and participated in many traditional annual activities together. Even with the high stress career, I always made time for them. I took pride in being with them but it’s not possible these days except for very special occasions like the holidays.

We were involved in many, many family activities back then and met a lot of nice parents. But that’s not part of my life anymore. I know a few men my age who are on their second family with a younger wife and that just creeps me out. One family was enough for me and I cannot imagine splitting my attention between two sets of children because mine mean so much to me.

The wife chose to be a stay-at-home mom. While I did not earn much money at the time and could not afford the material ‘things’ others had, we sacrificed with a purpose and it paid off. We lived within our means and rarely used credit cards, which only delayed the inevitable. We saved and invested. It was the right thing to do.

Being a parent is in my rear view mirror now and I never thought I would see the day. Mine are both out of college (paid for) and working. Neither of them ever caused us any trouble. I want to think we raised them right. I give them credit for being fine young adults who think for themselves and use good judgment. It was a pleasure raising them.

These days, sitting back and enjoying crisp, sunny autumn days are nice but a bit hollow. I would love for my kids to be with us as youngsters again so we could do stuff together and relive those days picking apples among other things.

It’s an odd feeling not being able to deal with groups of young families anymore. Oh well, it must be my age.

Our trip Sunday morning to Garwood Orchards was very enjoyable. Blue sky, cool temperatures with a brisk north wind. We picked some fresh crispy apples off the trees. All were of the Fuji and Honeycrisp varieties. We ate a few while picking too. We like picking apples because they are so fresh, delicious and have no bruises. It’s been a once-a-year tradition but there are still a few weeks left to make another trip and get some more.

Here was a surprise, Garwood had fresh picked sweet corn at their produce store. Sweet corn!


How unusual to find great eating corn on the cob so late in the year. It tasted fabulous with the grilled chicken dinner.

We’re ready for seasonal autumn as well as the autumn of our lives. We’re prepared and ready to enjoy it. No regrets.

Life is much more better than good.

Monday Morning Blues



A tribute to the Blues Brothers by Hanson - really don't judge them it is quite good!

Monday Morning Blues