Last night, we went to a fancy restaurant in LA. What a place. There were beautiful women. There were sleek young men in Italian suits. And there were men who just looked like they walked out of a lumber camp. More below…
Back to the world of money…
The Dow went up more than 70 points yesterday. The higher it goes, the more dangerous it becomes.
What’s the matter with this downturn? Shouldn’t it lower stock prices? Shouldn’t it empty tables at fancy restaurants? Shouldn’t it close down some of these luxury shops and make it easy to upgrade to business class?
Nah… The Great Correction is a failure. At least so far. It’s correcting only the people at the bottom.
Last week, we went shopping for a birthday present. We went around Bethesda, to Bloomingdales…to Saks…even to Tiffany’s. In one shoe store there were five middle-aged clerks, ready to help us. How could there be enough profit in a pair of shoes to support so many clerks? Then we found out…when Elizabeth bought a pair. Leaving the store, she picked up the wrong bag… The clerk called her. He offered to meet her to exchange bags. “Just look for me. I’ll be in my black Mercedes,” he said.
What? How can shoe clerks afford Mercedes?
Then, we went to Tiffany’s, where there were so many Asian customers, the clerks barely gave us the time of day.
Everywhere we went we found shockingly high prices – and people paying them.
Here in LA too…the numbers show typical families are poorer – thanks largely to falling house prices. But there are still many people at the top…with expensive cars…expensive habits…and the money to keep at it. And despite all the talk of downsizing chic – we don’t see much evidence of it.
At the upper income levels, there doesn’t seem to be much correction happening. And why should there be? The feds give them money.
Stocks have recovered most of their losses. Bonds – which should be worthless by now – still trade hands at par. Corporate profits are at record levels.
Where’s all this money coming from? You guessed it, the feds.
But pity the poor lumps at the bottom. The official unemployment rate has gone down…but most of the improvement in the numbers comes from dropping people off the list of those who are looking for work.
So, what happened to those who didn’t find jobs? They’re getting food- stamps (42 million of them at last count). Or, they’re living hand to mouth.
Many of them have now been out of work for so long they’ll probably never work seriously again.
In this case, the leftists are right. The feds have re-flated the rich folks’ bubble…largely at the expense of the poor. Even Fed governor Thomas Hoenig says so. From Bloomberg:
The Federal Reserve’s “highly accommodative” monetary policy is partly to blame for rapidly increasing global commodity prices, said Kansas City Fed President Thomas Hoenig, who called on colleagues to raise the benchmark interest rate toward 1 percent soon.
“Once again, there are signs that the world is building new economic imbalances and inflationary impulses,” Hoenig, the central bank’s longest-serving policy maker and lone dissenter at meetings last year, said in a speech today in London. “The longer policy remains as it is, the greater the likelihood these pressures will build and ultimately undermine world growth.”
Those “inflationary impulses” are making it hard for the middle classes to make ends meet.
Hershey’s is raising prices 10%. At least it’s being honest about it. A New York Times article tells us that many consumer brands are passing along “stealth inflation” by reducing sizes or lowering quality.
You go to the grocery story. You’re given opportunities to buy new “healthy” items – smaller, and more expensive. Or they are “green” – which makes you think that maybe they are better for the environment in some way. What they are for sure is more expensive.
Not that we blame the companies. They’re caught in a squeeze too. The Fed has driven up prices for their raw materials. Sugar, wheat, cotton, oil – almost all their costs are higher.
The big exception is labor. The cost of employing people has barely budged. Too bad. Because customers are also employees. If they don’t earn more in wages, how can they keep up with the inflationary cost increases?
And more thoughts…
Neil Barofsky has given up his job as chief auditor of the TARP stimulus program. He had this to say about how the program worked:
“The basic idea of a well-run government program is to have clear goals; have a plan to meet those goals; measure progress along the way against those goals; change your program when necessary so you can still achieve those goals.”
But that’s not how it worked at TARP. Instead, the modus operandi:
“Set goals. Ignore goals entirely. Hope for the best. When the best is different, change your goals, and say you never really meant it when you had those goals. Pretend that the program is a success even though it is not meeting those goals.”
Just what you’d expect, in other words.
*** This must be the latest style. Or maybe it’s an LA thing. The “boulevardiers” are dressing up like working men. They’re wearing clothes…and beards…that make them look like real men. We saw one young man in a railroad cap – something we haven’t seen in years. He also had on a pair of steel-toed work boots.
We were having dinner at a fancy restaurant in Hollywood, with two of the most beautiful women in LA. One was our own daughter. The other, her friend, an Australian actress.
“Acting isn’t all glamour,” the girl from Down Under explained. She’s come to LA to broaden her career, she says, after completing filming of a new TV series in England, called Camelot.
“It’s pretty miserable some times. And it’s not all about being the center of attention. In fact, it’s surprisingly lonely some times. I go to do a film. Unless I have a major role, I’ll only be there for a few days. And then, I do my part…and spend the rest of the time in the trailer. It’s not very nice, really.
“And on low-budget projects, you never know what they’ll want you to do. I did one film in England. It was all very improvisational. We had to make it up as we went along. And most of the filming was at night, because it was a horror movie – naturally.
“A lot of the shooting was outside too. And it was below freezing. In one scene, I had to cross a river…and almost drown. My clothes were literally freezing when I got out of the water… and, remember, it was the middle of the night.
“And then, the director said he didn’t like it. He wanted to do it again. So, I did it again. But this time, I almost really did drown. They had to pull me out of the river…and I went into shock and nearly died.”
for The Daily Reckoning Australia