Stock Market Jitters? Remembering A Stock Market Earthquake

  

first published in North State Journal 8/14/19)
 
People have been wringing their hands over the past several weeks about the volatility in the market, especially the day when the stock market fell over 800 points on Aug. 5.

Many attributed it to President Trump trying to force the Chinese to play by fair rules in international commerce. The 3% dip in the stock market was a sign to them that he doesn’t know what he is doing and is just costing a lot of us a lot of money with his incompetence.

The 3% drop last week was a jitter. If you really want to know what a stock market crash looked like, Black Monday, Oct. 19, 1987, was an 8.6 earthquake by comparison.

Early that morning, most of the Republicans in Congress who played golf showed up to play in an annual fundraising event, the Bob Michel golf tournament, to raise money for the next campaign.

We were scheduled to tee off in a shotgun start around 9:40 a.m. Former Congressman Alex McMillan and I were in the same foursome with the chief legislative counsel for the Securities Industry Association, Jack O’Rourke, one the smartest and best lobbyists I ever met in Washington.

Jack met us on the first tee with a somber look on his face. “The stock market opened down 100 points” he said. Congressman McMillan, a former investment banker and chief executive officer for Harris Teeter Supermarkets, tried to calm Jack down and said, “Probably just a temporary dip, Jack.
The market will probably recover by the time we make the turn.”

It didn’t. By the time we made it to the clubhouse after the front nine, we found out the market was down 300 points.

“It will probably recover by the end of the round” everyone at the clubhouse said in unison as they ordered food and drinks for the back nine.

Two jets were flying overhead across a beautiful clear deep powder blue autumn sky as we putted out on the 18th hole.

While we all shook hands after the round, Congressman McMillan ruminated out loud, “Well, Jack, it looks like there are jets still flying out of Dulles Airport and I don’t see a mushroom cloud over Washington, D.C., so it must not have been quite the catastrophe we all were worried about.”

The stock market closed down that day 508 points. It had plummeted 22.61% from the previous day’s close of 2246.74 to 1,738.74 in one day. Counting the 9% loss during the previous week, the market had fallen over 31% in a week.

There was a palpable sense of doom in the clubhouse after the round. No loud bragging about their game, no celebration of the winners. There was more straight whiskey being consumed without mixers or ice cubes than anyone could remember at any event in recent memory.

As horrific as Black Monday was, and despite the fact that from 2008 to 2010, we suffered through the worst recession since the Great Depression; we experienced the largest attack on American soil on Sept. 11, 2001, since Pearl Harbor and a myriad of economic stresses domestically and overseas since 1987, the market is now trading at levels 10 times higher than Black Monday.

If we can keep the socialists from destroying the American dream, the stock market could grow 10 times more to get to the 270,000 level by 2049.

President Trump may be unconventional, but he is addressing serious unfair trade practices by the Chinese government for the past 40 years and trying to help American businesses and workers regain what is rightly theirs.

Suffering through several days of relatively minor stock market volatility by comparison to Black Monday in order to rectify the trade imbalance and injustice with China seems to be a small price to pay.

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We Need To Learn More From The Civil War, Not Less

(first published in the North State Journal 8/7/19)

At a time when our very real history in America is under siege from those want to expunge any mention of the sins of our past, Ron Chernow’s well-written and researched biography of former Union Army General and 2-term US President Ulysses S. Grant is an important book to read.

Eradicating all mention of slavery in the full context of American history would render our shared life together as “fake history”, not “real” history. There is no way to talk about how great it was that “Lincoln freed the slaves!” without bringing up how Africans were brought to the US in bondage in the first place.

If you listen closely to the abolitionists of our collective US history because slavery existed in the beginning of our Republic, they really want to ban all mention of the so-called ‘peculiar institution” of slavery. The only mention of it presumably would be in footnotes with the comment that “slavery was terrible and perpetuated by a rich, ruling class of entitled white men in the Southern aristocracy”.

Try to imagine what would be lost if we stopped talking about slavery in the South altogether. We would lose perspective on how far America has come since then in terms of racial integration and diversity since 1865.

We would lose the fact that 2 million white Union soldiers fought to preserve the Union and eradicate slavery from the South, 350,000 who died doing so.

Why would leaders such as Abraham Lincoln and white abolitionists in the North sacrifice so many soldiers to the cause of preserving the Union while ending slavery unless it was the right thing to do morally, spiritually and ethically?

If we stop talking about slavery and the Civil War, historians 10,000 years from now would look back on the United States of America as a small blip on the scale of human progress instead of a seminal event where a free society of mostly white people, the Union, prosecuted a war that freed 3 million black people from slavery instead of re-enslaving them as ancient Romans and Greeks regularly did.

Abraham Lincoln and General Grant employed revolutionary enlightened forward-thinking primarily as a tool to expediate the end to the war but later both adopted as the right thing to do as a matter of policy.

Mid-way through the first year of the Civil War, Chernow writes:

“A central aim was to have newly liberated blacks work on abandoned plantations, picking cotton and corn that could be shipped north to assist the war effort. ‘We together fixed the prices to be paid for negro labor”, Grant recalled. “whether rendered to the government or to individuals”.

It was a remarkable moment—the sudden advent of a labor market for former slaves, who could now be rewarded for picking cotton. Grant found himself overseeing a vast social experiment, inducting his black charges into the first stages of citizenship. Taking the proceeds from their labor, he created a fund that was “not only sufficient to feed and clothe all, the old and young, male and female, but to build them comfortable cabins, hospitals for the sick, and to supply them with many new comforts they had never know before.”

Think of it as the first ESOP corporate takeover in American history.

“This brand-new Grant never wavered to his commitment to freed people” Chernow went on to say.

Not as Lieutenant General of the Union forces. Not as President of the United States for 2 terms from 1869-1876 when he mercilessly attacked and severely diminished the Ku Klux Klan throughout the South and implemented Reconstruction along the terms of enlightened racial relations that he knew President Lincoln would have pursued had he survived to serve a second term and possibly more.

We should never forget the lessons of slavery and the Civil War. Perhaps we should try to teach it better to our children.

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This Is The Worst Budget Deal Ever!

If you love fiscal sanity, prepare to be sorely disappointed this week. Again.

The Committee for A Responsible Federal Budget (CRFB) calls the most recent budget deal expected to be passed by the Senate and signed into law by President Donald Trump this week “The Worst In History.”

That is saying something. There have been plenty of budget deals that were flat-out terrible. All the bad ones increased deficits dramatically and, therefore, our national debt. Only a few — the 1990 Budget Agreement and the 1997 Balanced Budget Act mainly — did anything to arrest the steady inexorable climb to $22 trillion in debt today.

Elected politicians used to at least try to give credence to their claims they were serious about “balancing the budget.”

Now they don’t even try anymore.

According to CRFB:

• President Trump and Congress will have increased discretionary spending by 21 percent over his first term insuring annual trillion-dollar deficits into law for a long time.
• President Trump said after signing the 2018 omnibus bill that exploded discretionary spending that he would “never sign another bill like this again.”
• Republicans used to insist that a dollar of spending had to be cut for every dollar increase in the debt limit.

Before that, in the 1990s, a majority in Congress made up of Republicans and Blue Dog Southern Democrats forced Congress and President Bill Clinton to abide by the following simple rule of PAYGO (pay-as-you-go):

• For every dollar of increase in new domestic or defense spending, a dollar had to be cut in some other existing program.
• For every dollar increase in new proposed entitlement spending, a dollar in a new tax had to be raised on someone to pay for it.
• For every dollar in new tax cuts, a dollar had to be found in savings in entitlement programs through budget reconciliation legislation to make it “budget-neutral.”

The end results of such budget discipline from 1990 to 2001 were four budget surpluses from 1997-2001 and $600 billion of federal debt retired. The national debt owed to the public in 2001 dropped to just over $3 trillion.

The cardinal rule to climb out of any financial hole is to stop digging the hole deeper first. That means stop spending more money on expanding existing programs or starting new ones which Presidents Bush 43, Obama and now Trump, along with complicit members of Congress and Senators have failed to do for the past two decades.

Ross Perot, who recently passed away, ran for president in 1992 and 1996 as an independent. He was famous for two things: “The giant sucking sound you hear is jobs going to Mexico because of NAFTA!” and, essentially, “It is the national debt, stupid!”

He did not win a single electoral vote. He did draw national attention to the dangers of never balancing the federal budget. A Republican Congress worked with President Clinton’s chief of staff, Erskine Bowles of North Carolina, to pass the Balanced Budget Act of 1997 that birthed the only four budget surpluses we have seen in most of our lifetimes.

Perot helped make voters ready to listen to federal spending restraint.

Are we going to wait for another economic calamity such as what we experienced from 2008-10 to get our fiscal house in order? Everyone thought that catastrophe was going to trigger an era of fiscal sanity.

They were wrong; President Obama and the Democratic Congress from 2009-11 went on an orgy of spending that put any real orgy in ancient Rome to shame.

Where are our brave and smart elected members of Congress and senators who understand budgets, economics and who can count? Why don’t they produce a budget that 218 representatives in Congress and 51 senators can support to save us from this colossally stupid build-up of debt, the largest America has ever amassed in peacetime?

Who is going to be the next “Ross Perot” 2020 at either the congressional, Senate or presidential level?

(first published in North State Journal 7/31/19)

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A Man Walks Into A $15/hour Minimum Wage Restaurant in Seattle

Washington state in the summer is the place to be if you are from hot, sticky, humid North Carolina. So is Maine. 

The high at Hurricane Ridge in the Olympic National Forest last Friday was a chilly 49 degrees. Seattle never got above 70 while we were there. 

When we travel to moderate climes to escape such uncomfortable heat, we try to find great restaurants that serve simple food made very well. The Walrus and Carpenter in Seattle came highly recommended so we went. 

Seattle is one of the large cities that has mandated a $15/hour minimum wage for everyone who works in Seattle. While it might be a “cool” place to live in terms of lifestyle, ambiance and temperature, it might not be the “coolest” place to live if you are running a small business like a family restaurant. 

When the bill came, the following explanation was attached at the bottom about why there was a mandatory 20% “service charge” included in the bill. 

“The Walrus and the Carpenter distributes 58.75% (of the 20% service charge) as a gratuity to employees directly serving guests. 16.25% is distributed to employees not directly serving guests. … The remainder is retained by the house to provide living wages and benefits to employees.” 

Essentially, the city council of Seattle raised everyone’s restaurant bills by 20% to pay everyone the $15/hour minimum wage. 

On top of that, the fresh oysters cost up to $4 apiece. They were great, but for our money give us a bushel of fresh Harker’s Island North Carolina oysters instead. 

A conversation could have ensued between me and the waitstaff person but due to family considerations, such conversations have to be imagined instead: 

“So, tell me about this 20% service charge. Do you get it whether you are great at what you do or not?” 

“We split it between the people who prepare the food and the people who serve it.” 

“So you might get $10 from our order tonight?” 

“Yes, that is about right.” 

“If we thought you were great and wanted to give you a 25% tip solely because you were such a great server and give you $25 alone, that would have to be paid on top of the mandatory 20% service charge, right?” 

“Right.” 

“How does that make you feel as a hard worker?” 

“Do you want another Rainier, sir?” 

“I got another question. These oysters are pretty danged expensive. I guess they have to be to cover the $15/hour minimum wage here in Seattle, huh?” 

“I don’t get your drift, mister.” 

“What happens to the less expensive restaurants where the total bill for dinner comes out to, say, $20 instead of $120? How do they pay the $15 minimum wage when 20% of their bill winds up being only $4? What if they can’t sell enough $20 dinners in an hour to be able to pay a waiter or waitress $15 for that hour of work?” 

“You are losing me, sir. I didn’t major in economics in college.” 

“You don’t have to. If a business can’t produce over $15/hour in revenue to cover the $15/hour minimum wage for each employee, they won’t stay in business.  

“How many people are going to be thrown out of work at thousands of Seattle establishments because it costs too much to pay people $15/hour when they can barely afford to pay them $7.25/hour as it is? We just saw a totally automated McDonald’s in the Sea-Tac airport.” 

“It is what it is, sir.” 

“Not everywhere. We just got back from Kalaloch where the waitress said they don’t have a $15 minimum wage. ‘We have great weather, great views and great fish,’ she said. ‘Enjoy it. I do.’” 

“Maybe everyone will move to Kalaloch, then, sir.” 

“Maybe they will have to, ma’am. Maybe they will have to.” 

(first published in North State Journal 7/24/19)

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