British Prime Minister asks King to not speak at a climate change conference

In an article entitled “King Charles abandons plans to attend Cop27 ‘following Liz Truss’s advice’” by Nadeem Badshah of The Guardian, the environmentally conscious King was asked to not speak to the group by his new fossil fuel friendly Prime Minister. Here a few excerpts, with a link to the entire article below:

“King Charles III has reportedly abandoned plans to attend and deliver a speech at the Cop27 climate change summit on the advice of Liz Truss.

The monarch, a veteran campaigner on environmental issues, had been invited to the 27th UN climate change conference in Sharm el-Sheikh, Egypt, next month.

But the prime minister is understood to have raised objections during a personal audience at Buckingham Palace last month, according to the Sunday Times.

Buckingham Palace has confirmed King Charles III will not attend the summit.

A senior royal source told the newspaper: ‘It is no mystery that the King was invited to go there. He had to think very carefully about what steps to take for his first overseas tour, and he is not going to be attending Cop.

They said the decision was made on the government’s advice and was ‘entirely in the spirit of being ever-mindful as King that he acts on government advice.’ However, it remains ‘under active discussion’ about how King Charles will make his presence felt at Cop27, which runs from 6 to 18 November.

Another source said the new monarch would be ‘personally disappointed’ to miss the conference and was “all lined up to go”, with several engagements planned around his Sustainable Markets Initiative (SMI), which aims to persuade businesses to invest in environmentally friendly initiatives.

To be frank, this is a huge disappointment as climate change is such an important and urgent issue. It is my understanding from this and other articles, the new PM wants to promote offshore oil drilling, which is highly concerning given the rocky seas off Great Britain. It should be noted that Scotland is a forerunner in tidal and offshore wind energy given the rocky and windy seas, so an oil rig seems prone to disaster. And, in contrast, if an offshore wind turbine crashes into the sea, the only thing that would happen is a splash.

This has not been a good month for the new PM after winning the nod. Her embrace of trickle-down economics in her budget is of such concern, the Bank of England had to pony up $65 billion pounds to steady the cratering bond markets. Coupled with an inability to explain or understand financial matters in interviews, a poll yesterday said 71% of Brits have little confidence in her and her party to address financial matters.

While I was glad to see Boris Johnson step down given his transgressions and failure to lead, I was forewarned that his replacement may not be the solution needed or hoped. While the King (and Queen’s) role is in part ceremonial, one key function they do serve is being ambassadors for the UK. King Charles had meetings lined up at Cop to play such a role and to hear him speak on such an important topic would have made me proud if I were a Brit.

Let’s hope there is a change of heart and mnds.

https://www.theguardian.com/uk-news/2022/oct/01/king-charles-abandons-plans-to-attend-cop27-following-liz-trusss-advice

Bankers used to be trustworthy, but threw their reputation out the window – a reprise

In 2014, I wrote the following post which was predicated on yet another huge fine of a large bank for inappropriate activities in selling products. Just yesterday, per The Charlotte Observer in an article called “Bank settles with feds over claims it ‘misused’ 401(k),” Wells Fargo was fined $145 million (after earlier fines for unethical and some illegal practices) for cheating its own employees and retirees with higher stock transaction fees in the company 401(k). This latest fine was forthcoming from the Department of Labor as they govern employer sponsored 401(k) plans. It should be noted the bank settled the case without admitting guilt.

*****************

Last week, Bank of America was the latest bank to be penalized for fraudulent or aggressive marketing practices. They have had so many fines for malfeasance or aggressive marketing practices that it is hard to keep track of their sins. The latest penalty fined Bank of America $783 million for selling credit card consumers products and services they did not request. The Consumer Financial Protection Bureau (CFPB), which was newly created a couple of years ago by the Dodd-Frank Act under the tutelage of now Senator Elizabeth Warren, said the $738 million of that fine is used to restore money to those customers who were fraudulently sold these products.

In its first two fiscal years of operations ending June 30, 2013, the CFPB has fined banks and financial entities $942 million of which the significant majority goes to the consumers who were harmed or defrauded. The banks and financial institutions that were penalized include, but are not limited to American Express, Capital One, Discover, and JP Morgan Chase. While the significant majority of the penalty goes to the consumers, the remainder, which is usually less than 10% of the overall fine, goes into a Civil Penalty Fund, which has the following purpose as stated in the CFPB 2013 Annual Report:

“Under the Act, funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under the Federal consumer financial laws. To the extent that such victims cannot be located or such payments are otherwise not practicable, the Bureau may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs.”

What is interesting to me is why certain politicians are against this agency? I want them to tell me why an agency designed to protect the average Joe’s and Josephine’s is a bad thing. To state the obvious, these politicians tend to be Republican and tend to be supported by bankers. Senator Richard Shelby, who Chaired the Senate Banking, Housing and Urban Affairs Committee from 2003 – 07 is one of the key critics of the CFPB. (Sidebar – under president Donald Trump, Mick Mulvaney was appointed to lead the CFPB to hobble it).

This is one area where people who don’t want regulation need to explain how we would be better without it. Would it be OK for bankers to have full license to sell their customers services they do not need? Is it OK for banks to screw people over? I find most people confuse unwieldy bureaucracy with regulation. We need the latter, but need to guard against the former. I also find people who don’t want to be regulated tend to be those who need to be regulated more. The fossil fuel industry comes to mind, but that would be a large digression.

Having worked in Human Resources within a bank back in the 1990s, what I have witnessed is being a banker used to be one of the most trusted professions. Now, it ranks much lower in trust.  And, they only have themselves to blame. Truth be told, bankers used to be trustworthy, but threw their reputation out the window.

The slippery slope began in earnest with the repeal of the Glass-Steagall Act in the late 1990s. This act had been put in place at the time of the Great Depression and was designed to assure that banks would be banks and not investment banks, security traders or insurance companies. With the feeling everyone learned their lesson and cooler heads would prevail, the repeal of the Glass-Steagall Act reopened the can of worms. The real reason for the repeal was banks wanted the fee income that usually came with those products and services. Yet, to add another metaphor, the can of worms became a Pandora’s Box.

What transpired after that repeal is banks pushing the envelope more and cross selling products and services to unsuspecting customers. Two marketing trends emerged. “Bundling” and “Tying.” Bundling represents the concept if you do more business with us, we will give you better terms. By itself, that is not necessarily a bad practice. Yet, when married with tying, it becomes unethical and illegal. Banks started tying business marketing together, so that you had to business with them in one area to get a better deal on another service which was more vital to the buyer. Usually these offers were not made in writing, as some tying can be illegal.

But, the larger trend that occurred is a selling push to reward employees for selling you services you may or may not need. The unscrupulous ones would push the hardest and do things that now get the attention of the CFPB. One of the key reasons the mortgage crisis hit is the better mortgage market dried up and banks had all of these mortgage bankers with nothing to do.

With the push out of the second Bush White House that home ownership was good, the higher risk mortgage market became the target. It was at this time you saw mortgage-in-a-box retail stores competing against banks to sell mortgages to people who did not understand fully what was being sold to them. Variable mortgages and the dreaded Pic-a-payment mortgages that brought Wachovia down after their acquisition of Golden West, were being sold to people who were in over the heads, both economically and educationally. People should have been asking more questions, but trusted the men and women in nice suits that told them they could afford the American Dream. They failed to mention or fully explain terms like “negative amortization” and “variable mortgages” especially what transpires when the rate goes up by 200 basis points.

So, bankers used to be trustworthy, but they threw it out the window. They earned these new stripes. You have to be the navigator of your customer service experience, in general, but especially with a bank. You have to ask questions about why you are being asked to do something. You need to ask why you need another credit card. You need to ask why is the salesperson pushing so hard on this issue. If you don’t, you may need the help of the Consumer Financial Protection Bureau.

With that said, I know many fine people who work for banks. They do their best to serve their customers. Yet, the higher-ups are pushing for sales and align incentives with that push. As a result, even well-meaning people will push the envelope even more. I have been a business for over 34 years and a truism I have learned is you make more money serving the needs of your client long term. You may make more money on occasion by pushing that envelope, but you may do so at the expense of a long term relationship which might come to an end.

For full disclosure, I am a shareholder (sidebar – I am no longer a shareholder of BofA) and customer of both Bank of America and Wells Fargo. These fines disappoint me. I want them to be accountable to their customers, employees and shareholders. But, they also need to be accountable to their regulators. They owe it to all of us.

Work place humor can be found in surprising places

Sometimes workplace humor offers the funniest lines, as they are unexpected. Even in working for a large, staid bank for about four years, I came across some funny things. Some of these I have used before, but have placed them all together for your reading (hopefully) pleasure.

A new state banking president had just moved into their headquarters and was outside smoking a cigarette due to a ban on indoor smoking. To be frank, the president was probably not the one you would pick out of a line-up as the president, so a woman smoking outside asked “I have not seen you before, what department do you work in?” When he responded sheepishly, “I am the new president of the bank,” she responded quickly with “And, I am the Queen of Effing England!”

Following his non-presidential looks to a branch he was touring, the new president was told he resembled their regional manager, a man I will call Bubba Johnson, to preserve his identity. The president spoke to the employees and said “People say I resemble Bubba Johnson, but that cannot be, as Bubba is uglier than a pair of old bowling shoes.”

A young communication analyst was giving guests a tour of the floor her department was on which also was on the same floor where all the Board meetings occurred. On the walls, were pictures of all the bank CEOs and chairmen, gender identity intended. When she got to the hallway, she said to her guests, “And, here is wall with pictures of a bunch of dead white guys.” Observation duly noted.

If you ever worked for a bank or had a relative who did, titles are handed out like candy. I think they are used in part so as to give a lesser raise. So, there are several thousands of assistant vice-presidents and several hundreds of vice-presidents. One of the dilemmas of this construct was uttered by a long-time bank employee who said, “As soon as you give someone a title, they start acting presidential.”

My boss’ boss was someone who tended to invade people’s personal space getting inches from yours when he talked to you. The gender of the other person did not matter, as he was an equal opportunity space invader, pun intended. My boss, though, had a unique way to stave off said invasions. When asked how, he said “Whenever I meet with him, I always make sure there is a piece of furniture between us, a chair, a table, a desk.”

My boss had some of the funniest stories about his time working for a bank, our bank had acquired. The CEO of that bank was the most imperial of presidents I have ever witnessed. There seemingly was no perquisite he did not have. One story is he invited key bank customers to his daughter’s wedding to get the bank to pay for it. Why spend my money he thought?

He also had a chauffeured limousine for protection, which the driver/ bodyguard would circle back and drive his wife around when he was at work. It would do the same for the COO’s wife. Since they argued over the limo, the bank solved the problem by getting a second one. My boss was talking with driver about the error of his process to keep the CEO safe. He said, “You drop him at the door once you get here, but fail to understand that everyone inside wants to kill him.”

One of those perquisites was a lengthy change of control agreement. To get the money, the retired CEO would have to do various things, one of which was to file monthly reports of his activities. When he was about seven months in arrears, the actual CEO was made aware of it. His solution was simple and very effective. “Stop paying him.” Within a few weeks, the retired CEO completed the reports.

Finally, the head of security for the bank had some very funny stories that he could only share in general. A couple of takeaways from his stories are (1) avoid places that have cameras when you are having a sexual encounter with a colleague, which includes stairwells, (2) an irate spouse who confronts her philandering husband at work has a better aim with a hurled coffee cup than you might think, and (3) avoid having an affair with a person whose spouse also works for the bank. Of course, all three could be solved by avoiding the affairs altogether.

I am certain you each have some workplace humor. Please feel free to share your stories.

The real replacement practices

This concept of replacement theory where white workers are subject to a planned replacement by black and brown workers has been around for decades. In fact, the fascists in England were using this replacement theory in the early 1960s, of course, blaming Jews for its orchestration. In essence, the theory says white workers’ jobs are being systematically replaced by immigrants and those other people who don’t belong here. Sound familiar? Yet, this replacement theory well preceded the 1960s.

It is all subterfuge to create fear and blame others for your problems. Fear has been used to sell ideas and manipulate people for a long time. Overstating an inflammable cause is one way to do that. The fear of the other overlooks the deeper problems for loss of jobs and disenfranchisement. The key reasons for disenfranchisement are the actual replacement practices that we need to address. These are not some theory, but deployed routinely and recurringly in practice.

There are two key reasons, which impact all workers of all colors:

– technology improvements which reduce the number of workers needed, and

– CEOs chasing cheaper labor to lower the cost of production

The latter cause manifests itself in offshoring, outsourcing, or migration of factories. For example, the textile industry has left a trail of closed plants as the industry moved from England to the United States first in New England and then to southern states. Then in the 1980s, the heavy migration occurred to China and Mexico and eventually to Vietnam and Bangladesh searching for cheaper labor. One company that comes to mind went from 86,000 US employees in 1980 to about 4,000 today, with the rest abroad. That is not an isolated example and it is not just manufacturing work. It is call center, IT, analysis, etc. The US based insurance industry has been shipping claim forms for review to Ireland as the Irish were, on average, more literate than Americans, even before technology made it easier to get the Irish to review them.

The former cause has been occurring routinely as well, but has accelerated once again with the advancement in Artificial Intelligence (AI). Yet, a robot need not look like a humanoid to be effective. Computer driven machines and robotic appendages have evolved over time. I watched a “60 Minutes” episode about ten years ago, which demonstrated a programmable robotic machine that went for the price of a car to be used by small businesses. The tasks need not be complex to improve efficiency, so these cheaper machines could replace a half-dozen workers.

So, when you hear immigration is a problem, that does not address the main issues. Of course, the immigration system could be improved and opportunities to do so were not voted on after some agreement even by some of the most vocal critics. But, there are some industries and municipalities that need more workers. Those workers need to be trained or trainable, so some may come from abroad and some from here.

Where we need to focus our attention is working with new and old industries in transition and community colleges to train new workers. The coal industry has been on the demise for a dozen years, but some politicians have been clinging on to its protection. I have said several times, whether or not you like Senator Bernie Sanders, he was the only presidential candidate in 2016 to stand up in front of coal miners and tell them the truth – your jobs are going away, but here is what I plan to do about it.

In this vein, some towns are dilapidated by closed factories that moved. The forward thinking towns invested in bringing new workers from whereever they could. They developed initiatives to reinvest in the area using the brainpower of the new and old blood mixed together. They developed incentives to draw younger adults to their towns. And, it worked.

The issue of workers needing more opportunity and investment is where we need to focus our attention. This is a good example of a group of PR people coming up with an issue, blowing it way out of proportion as the problem, and putting it on a bumper sticker. “Build a wall” some might say as the panacea. Ironically, when the major proponent of that comment accepted a deal to get $25 billion for this wall in exchange for making DACA law, he was talked out of it. This was his number one issue, but he said no after saying yes. Why? He knew it would not solve the problems and his bluff had been called.

Our problems are complex and have multiple factors. One of the tenets of the book “Built to Last” by Thomas Friedman and Michael Mandelbaum is most of America’s major problems over time were solved in concert between some combination of government (federal, state and/ or local), venture capital, and private industry or philanthropy investment. We won’t solve our problems unless we identify them and their many causes. We won’t solve them by listening to opinion hosts and candidates who are trying to scare, who really don’t want to solve anything other than getting someone elected.

We will solve them by looking at the facts, coming up with a plan, getting buy-in and funding and making it happen. That is hard to put on a bumper sticker or define in a two-minute sound byte by an opinion host.

Friday foibles and follies

On yet another Friday the 13th, be safe and be smart. And, watch out for black cats crossing in front of you. In the spirit of the day, let me offer a few foibles and follies for your contemplation.

Per our friend Scottie’s post, it always makes sense do your homework and be prepared for whatever comes your way. Please take about two minutes to watch the video of White House secretary’s Jen Psaki’s response to a reporter question on the claim of GOP support for Senator Rick Scott’s economic plan. Trust me, it is worth the watch. See below for the link to Scottie’s post.

I apologize for a little bit of morbid humor, but it is Friday the 13th. I once read the true story of man who is about my age now being diagnosed with prostate cancer. Being married for many years, he objected to the doctor’s insistent recommendation of a more invasive surgery that would leave him impotent. He said making love with his wife was the greatest joy in his life and he pursued other procedures. After being cured for twelve years and enjoying his love life, he read the doctor passed away. The man saw the obit and smiled that he had outlived his doctor, noting to his bride, the doctor makes whoopie no more.

There is another true story I read about an older New Jersey woman who refused to sell her coastal property to a famous developer who would later become a notorious former US president. The developer wanted her property as it was next the casino he wanted to build. To his chagrin, she denied every advance to buy her property, even the threat of lawsuit and he exhibited his famous temper. A few years later, as the casino went bankrupt, her property was still standing. And, she smiled that she had outlasted the investment.

In a news report following the housing crisis in 2007-08, one of the investment banks that went under was Bear Stearns. About a year before this occurred, a financial analyst got a meeting with the CFO of the organization as he wanted to forewarn them. The analyst saw the banks and finance companies selling mortgages to people who could “fog a mirror” as their only review. These mortgages were packaged together (called Collateralized Debt Obligations) and stamped as good risk and sold to investors by folks like Bear Stearns. The analyst told the CFO he had a model which showed Bear Stearns would go under as a result. The CFO thanked him and asked him to leave. The first fallacy was the CDOs being stamped as good risk as a lot of bad risk together does not make it good. The second fallacy is the Bear Stearns folks assumed the market would always go up, which is not a realistic assumption.

These stories may seem unrelated, but at the heart of them is to two underlying themes

– do your homework and be prepared

-if you know what you want and know the options, stand firm in your mission.

The Bear Stearns story is not an outlier as several entities either went under or had to merge during the Housing crisis. The movie called “The Big Short” based on Michael Lewis’ book and starring Christian Bale, Ryan Gosling, Brad Pitt, Steve Carell, et al, defines what happens when supposedly smart people don’t know what they are investing in. See link below to a summary of the movie.

https://en.wikipedia.org/wiki/The_Big_Short_(film)

Please focus on the news

Yesterday, in my browser feed was the headline Tucker Carlson said (whatever). That is not news. Carlson is an opinion host whose modus operandi does not always include the truth, which is actually a generous comment. What he, Rachel Maddow, Sean Hannity, Lawrence O’Brien, Laura Ingraham et al, espouse is not news. It is opinion. And, in Carlson’s case, includes purposeful disinformation as he covers for the untruthful and seditious bent of the former president.

I have been a broken record that the news too often covers things that are not news. I do not care who wins or loses by an action or inaction, I want to know what it is, who will benefit, what it costs and when will it be implemented. Congress largely does nothing but run for office. The fact we have to wait, every time, to fund the government at the last minute is a travesty, in my view. Stop the stop gap measures and do something with more forethought and action.

One thing I fault the media on is focusing on too many little things with the former president. Yes, he did all those things, but by focusing on little faux pas, the bigger transgressions get overlooked. Here is an example. In the middle of the 2020 election, the former president’s foundation was ordered by a judge to be disbanded and Trump repay money he used from people’s donations for personal use. The repaid monies would be distributed per the foundation’s bylaws by a group of new trustees with no one named Trump among them. Yet, this news got overshadowed and not many people knew it occurred.

I mention this example as it is a precursor to what is happening with the Trump business today. The former president and his children have been ordered to testify in court in the criminal proceedings against the company regarding misrepresentation of financials. It should be noted the Trump accounting firm resigned from the account and said do not rely on the last eleven financial statements, which is extraordinary. This is not a witch hunt, nor was the foundation story above. This is alleged malfeasance.

This must be focused on as this person is still considering running for president again. This is in spite of his Big Lie that the election was stolen from him that he has been unable to prove in spite of a lot of money, effort and now suspended attorneys’ time. This is in spite of the investigation that the former president committed seditious actions against a branch of government leading up to and on January 6. No, Mr. Carlson, this was not a false flag operation.

These are needed news stories. Yet, I would rather we talk about addressing climate change, water concerns, shoring up electrical grids to meet the growing renewable energy production, investing in the new jobs of the future, improving healthcare access, dealing better with our debt and deficit, etc. Yet, we still have to talk about the former president’s poor stewardship, untruthful nature and alleged malfeasance and sedition.

More thoughts on saving a little money

I was reminded of the story of a fellow blogger whose car passenger wanted her to stop by the store so she could buy a lottery ticket. When the driver asked her how much she wanted to buy, the rider said $5. The driver said hand it to me and as she did, the driver threw the $5 out the window. “Hey, why did you do that?” The response was simple, “I felt if you were going to throw your money away, I might as well do it for you and give you a better story.”

Yes, I am aware some folks win the lottery. But, I am also aware, hundreds of millions of folks do not. My strong advice is get a strong box and every time you feel the urge to play the lottery, throw the $5, $10 or $20 into the box and lock it up. At the end of the month, put it into a savings (or investment) account and do not touch it. Better yet, set up automatic deposits with each paycheck into a 401(k) plan or savings or investment plan. $10 a week will amount to $520 a year without investment earnings.

I touched on investments, but investing money need not be hard. One of the safer (but not 100% safe), higher dividend paying investments is in your electric or gas company. They usually have customer stock purchase plans that are easily accessible. Often, information can be found on the billing statement, but go online and check it out. These companies are quasi-governmental because of their community purpose, so they tend to be safer (but not totally safe) investments than other stocks. Yet, you can also google high dividend paying stocks online as these stronger companies tend to have stock purchase plans. One key suggestion is to automatically reinvest the dividends to buy more stock.

But, where you should start is your company savings 401(k) plans. This is especially true when the company matches your contributions. If they match 25%, that is an automatic 25% return if you immediately sold the stock. Plus, you are dollar averaging as you invest, so the vagaries of the stock market will be less impactful if you invest the same amount with each paycheck. When you leave that employer, you can leave a large balance in the plan, roll it into an IRA or just cash it out. Some plans will automatically cash out small balances.

Finally, the best way to save money is not to spend it. I have written several blogs on this subject, but avoid buying so many name brands and plastic water bottles. If you live in an apartment, the water is usually included in the rent. So, get a filtered pitcher and save money and the environment. And, don’t throw so much food away. Based on the product, those dates are “best by” dates not expiration dates. A key thing to remember is leftovers are our friends – three meals out of one dish can go a long way to saving money.

Too many folks are looking for panaceas to make a ton of money quickly. Yet, most people make money by not spending it and investing it. If you are young, you have a huge advantage over an older person – you have more years for your investment to grow.

Note: Please do not construe the above as investment advice. These are savings suggestions. I am not an investment professional, so check with people who are for advice. Stock values do go up and down based on company and market performance. And, the stock value is based on the solvency of the company, so do some research or invest in mutual funds that hold many stocks.

Good economic news per Jennifer Rubin and Wall Street Journal

In an editorial by Jennifer Rubin of The Washington Post called “Opinion: Biden gets an early Christmas gift: Good economic news,” she discusses the good economic news hearing into 2022. In excerpts below, she cites The Wall Street Journal and The Conference Board to support her claim.

“Presidents have some control over fiscal policy, but markets, the Federal Reserve and, yes, the state of the pandemic have a lot more say on how the economy is performing. Nevertheless, if President Biden can be bashed for bad economic news during his presidency (e.g., inflation), then he also should get some credit for successes. And right now, there is plenty for him to crow about.

Heading into the new year, the economy looks in better shape than Biden’s legislative agenda. The Wall Street Journal reports: ‘A booming U.S. economy is rippling around the world, leaving global supply chains struggling to keep up and pushing up prices. The force of the American expansion is also inducing overseas companies to invest in the U.S., betting that the growth is still accelerating and will outpace other major economies.

With a projected 7 percent annualized growth rate for the fourth quarter, the United States is running circles around Europe and China. That relative strength against the rest of the world, reflected in a strong dollar that lowers the cost of imports for U.S. consumers, matters greatly.

The economy grew 2.3 percent in the third quarter (higher than the expected 2.1 percent). Moreover, for all the talk of inflation and the pandemic, consumer confidence is through the roof. ABC News reports: ‘The Conference Board, a business research group, said Wednesday that its consumer confidence index — which takes into account consumers’ assessment of current conditions and their outlook for the future — rose to 115.8 in December, the highest reading since July.

…Furthermore supply chain woes are showing signs of abating. As Biden said at a meeting on Wednesday with his supply chain task force, “Packages are moving, gifts are being delivered and shelves are not empty.” He was also able to point to concrete steps his administration has taken to address the issue, such as obtaining the ports’ agreement to operate 24/7.

The full editorial can be linked to below. Rubin’s first point about presidents getting too much credit and blame for the economy is a good one. Yet, they do provide headwinds and tailwinds, usually a little of both. Biden’s predecessor inherited an economy that was in its 91st consecutive month of economic growth in January 2017 with six consecutive years of 2 million plus annual job growth. To his credit, it continued and was lifted some by a temporary sugar rush of the corporate tax cut in 2018, before falling back to previous levels after the sugar rush waned. Once the pandemic hit, all bets were off and we retrenched.

Biden and Trump invested in stimulus payments to get the economy going providing money to spend. And, it helped tide us over until more of us started working. Was it the best use of funds? Arguably. Some contended we should have provided the subsidies to employers to keep people employed. I would preferred to have seen that, as people would still be tethered to their job. The recently passed Infrastructure Bill will provide some additional tailwinds as would the Build Back Better bill that is still waylaid.

Inflation is of course a concern. Yet, politicos like to highlight bad news when their tribe is not in charge and lessen the focus on good news. In addition to the new COVID strain, what gives me pause is the stock market continues to remain at record high levels. The question is how long can it remain there? If you know that, you are way ahead in the game.

https://www.washingtonpost.com/opinions/2021/12/22/biden-gets-an-early-christmas-gift-good-economic-news/

More Sunday soliloquys

I hope your weekends are going fabulously. For our Australian, Filipino, New Zealand et al friends, I hope yours was grand. Here are a few mix and match comments, around a theme of needed history lessons.

Speaking of that part of the world, my wife and I have fallen for an older Australian show called “Packed to the Rafters.” It lasted for about six seasons and our PBS station is doing reruns. The premise is during the housing crisis back in 2007-09 timeframe, a family called the Rafters have various adult children and even a widowed father living with them. They are an abnormally normal family during stressful times, so it makes for good theater. The writers are quite clever in focusing on one or two family members a show to reveal how they arrived to their present predicaments.

It seems the housing crisis was so long ago with the various travails we have had since then. What is interesting today is inflation is creeping up again due to guess what – housing prices going up. Hopefully lessons have been learned about selling mortgages to people that cannot afford them and then packaging crappy mortgage deals into investment products that understate greatly the risk. But, we seem to be people who are good at erasing history.

Yet, not only are we forgetting history, we have a concerted effort going on in the US to whitewash history, even if recent history, as if it did not happen. It is bad enough that Americans, as a whole, would fail miserably on history and geography lessons, but to avoid teaching some parts because it makes us look bad is just a bridge too far. While masking bad things is not new – read summaries about the Pentagon Papers, the banning of the song Strange Fruit,, the Freedom Summer murders, the Lavender Scare, McCarthyism, Native American genocide, etc. – there are parts of our history that don’t show up as much as they should.

Since we began with the housing crisis, let me close with real history lessons that do not get enough airplay. Two of the poster children for the housing crisis are Beazer Homes and Bear Stearns.

Beazer was a developer that would clear land and sell houses in a community fashion. It is reported they did not tell the prospective buyers the realtor, the inspector and the mortgage lender were all related to the Beazer business. So, many prospective buyers were sold a home that was more than they could afford, based on mortgage numbers that were presented as a perfumed pig, with variable mortgages so interest rates could go up 200 basis points each year, and a house that had few inspection issues. When the housing prices dropped beneath the mortgage owed, that caused an upside down financial dilemma. Many lost their homes.

Bear Stearns is an investment banker that no longer exists. It is reported they packaged these bad mortgages together in a bundle and called them Collateralized Debt Obligations or CDOs. The law of large numbers works only when good risks negate bad risks in large bundles, but if the majority of the risk is bad, that means the whole product is risky. Bear Stearns was over-exposed with these bad risks and it took them down. What is interesting is a financial analyst got a meeting a year before Bear Stearns collapsed and told the CFO they were going under. The CFO kicked him out and the man said he would bet against them and made a killing for himself and is clients betting that these over-leveraged entities would fail as housing prices declined. This is the theme of the movie ‘The Big Short.”

If we don’t know our history, then we will repeat our mistakes. And, as we speak there is a rise in white nationalism in this and other countries, people are trying to tell you the truth is not factual, and the financial markets cannot crash again.

The past serves as a reminder

Two old shows that my wife and I enjoy are focused on the past, especially when it rears its ugly head. An American produced show is called “Cold Case” where a team based in Philadelphia work unsolved cases that resurface. The other is “Unforgotten” which is a British produced show that works previously unknown crimes.

“Cold Case” has a unique style where they reveal the initial set-up of the crime, but not who did it. They go back and forth with the younger version of the character for a few seconds, so you know which older person that is. “Unforgotten” is told over a series of six or so shows, one crime per season. A body is discovered and the team has to begin to find out who, what, when, where and how. Both teams are led by imperfect leaders with their own set of problems.

The two shows tell us the past is never fully behind us. I know I would not want my past mistakes being brought up today, although I can confess I never murdered anyone. But, we should learn lessons from our past mistakes. Our friend Amanda revealed a quote on her blog the other day about focusing on the lesson and not the pain of the mistake (see link below)..That is easier said than done, but is a better goal than saying “woe is me.”

When people, businesses, organizations and governments do not heed the mistakes of the past, they are truly destined to repeat them. The US did not learn the lessons of Vietnam and invaded both Afghanistan and Iraq. A senator named Jim Webb who served in the military said if we invade Iraq, be prepared to stay for thirty years. That was eighteen years ago.

In the book “Built to Last,” the authors’ data revealed the most admired and successful companies tended to promote from within to the CEO position. They knew what worked and did not and who to listen to and who not to. I have seen many a new CEO come in and make changes that repeated past mistakes. Even if they came from within, I have seen CEOs repeat an earlier mistake due to arrogance. I am thinking of one large bank that no longer exists who made two of the worst acquisitions that should have been avoided for the same reason – both hurt the bank’s reputation. And, that should not have been news.

People are prone to do this in their personal lives. They believe their new partner will change for the better. They ignore signals that they have seen in previous partners. The most basic of signals is this one – if a partner treats you poorly when he or she is courting you, what do you think he or she will do once you became married or more serious?

The author Malcolm Gladwell’s excellent book “Blink” speaks of ignoring our subconscious signals when we make poor decisions. Our gut instinct is our collective history of experiences that tell us things before our conscious recognizes it, if it ever does. The examples of the book are many. A firefighter who tells his crew to back out of building as it is burning in an unusual manner. The art expert that knew immediately a painting was a forgery, but could not articulate why. The counselor who could tell with about ten seconds if a couple she was counseling was going to survive.

These people were not guided by whims. Their gut instinct told them something was amiss before they could articulate why. In the firefighter’s case, the fire was burning in the floor below, so his crew would have crashed through the floor, e.g. Their past experiences told them how to act. In organizations, the experience is collective, so sometimes a few people might know an action is poor (like Senator Webb did), but they do not have the power to influence leaders. Or the leaders were to blinded by their own arrogance to take advice.

The past tells us many things. While we should not be slaves to the past, as times do change, we need to understand what happened and why, so as not to avoid the same mistakes.

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