This is Why I Never Fly

I love Peggy Noonan. Seriously.

PEGGY NOONAN

If Cattle Flew

Look at the airports. Why would terrorists bother with seaports?
February 23, 2006

We are debating port security. While we're at it, how about airport security? Does anyone really believe that has gotten much better since 19 terrorists hijacked four planes five years ago?

This week I flew to Florida and back to give a speech and got another up-close look at how well the Transportation Security Administration is running the show. And it's clear that no one jokes about TSA screeners frisking grandma anymore, not because it isn't still happening, but rather because it's not even darkly funny anymore.

6:10 a.m., Tuesday two days ago, LaGuardia Airport. A long line of what appeared to be roughly a thousand people was snaking down a hall past newsstands and shops. Chaos and an hour wait to get through security. A woman in an airport security uniform patrolled on the left, curtly instructing us to move to the right. A cleaning crew on the right barked, "Coming through, move please!" We stood nervously wherever we wouldn't be yelled at. No one tried to help us, to calm the fears of those about to miss their flights. There was a lot of yelling--"I need your ID open and faced forward! No, you must put that in the bin!" After 45 minutes I got to the first security checkpoint, where I was directed to stand aside for extra clearance. I walked to the rubber matt, stood spread eagled in the Leonardo position, arms out, legs out, as a sleepy stranger ran a wand around my body and patted me for bombs. "Now I know how a cow feels in a cattle pen," I said. I told her how carelessly! we'd been treated. She was surprised. No one told her there were a lot of people waiting in line.

I gave the speech that night, and returned the next morning to the West Palm Beach airport for the flight home. Here, at 9:30 a.m., it was worse. Again roughly a thousand people, again all of them being yelled at by airport and TSA personnel. Get your computers out. Shoes off. Jackets off. Miss, Miss, I told you, line four. No, line four. So much yelling and tension, and all the travelers in slump-shouldered resignation and fear. The fingers of the man in front of me were fluttered with anxiety as he grabbed at his back pocket for his wallet so the woman who checks ID would not snap at him or make him miss his flight.

This was East Germany in 1960. It was the dictatorship of the clerks, and the clerks were not in a good mood.

After a half hour in line I get to the first security point.

"Linfah," says the young woman who checked my ID.

"I'm sorry?"

"Linfah." She points quickly and takes the next person's ID.

"I'm so sorry, I don't understand."

Now she points impatiently. How stupid could I be?

Line Five. Oh. OK.

Ahead of me, throwing bags in bins, is a young mother with a two or three year old girl. The mother is tense, flustered. Bags, bottles, a stroller to break down and get on the conveyer belt. A security agent yelling: "Keep your boarding pass in your hand at all times." The little girl is looking up, anxious. All these yelling adults, and things being thrown. "My doll!" she says as her mother puts it quickly in a gray bin. "We'll get it on the other side!" says the mother. She grabs her daughter's hand roughly.

"Take off your sneakers!" a clerk yells.

The mother stops, hops, quickly removes her sneakers. Her daughter has already walked through the magnetometer and is wandering on the other side. She looks around: Where's mommy?

Mommy gets her sneakers in a bin, on the belt, gets through the magnetometer.

I'm relieved. Her daughter holds her mother's leg. They begin to walk on.

A TSA clerk shouts to another, "You didn't check the sneakers. You have to put the sneakers through."

The second clerk yells--"Your daughter has to go through again!"

The little girl is scared--What did I do wrong? I'm sorry, mommy.

The mother is tense, gets a look.

I lift my chin at the TSA agent, smile, and say softly, "Miss, that poor girl with the child, she is having a tough time. The little girl is scared and--"

"We are following procedures!" said the TSA agent. Her mouth was twisted in anger.

I nodded and said softly, "I know, I'm just saying--a little gentle in your tone."

She looked at my ticket and smiled.

"You have been chosen by the computer for extra attention."

"What?"

"You have been chosen by the computer for extra attention."

I am almost always picked for extra screening. I must be on a list of middle aged Irish-American women terrorists. I know a message is being sent: We don't do ethnic profiling in America. But that is not, I suspect, the message anyone receives. The message people receive is: This is all nonsense. What they think is: This is all kabuki. We're being harassed and delayed so politicians can feel good. The security personnel themselves seem to know it's nonsense: they're always bored and distracted as they go through my clothing, my stockings, my computer, my earrings. They don't treat me like a terror possibility, they treat me like a sad hunk of meat.

I don't think most of us get extra screening because they think we are terrorists. I think we get it because they know we're not. They screen people who are not terrorists because it helps them pretend they are protecting us, in the same way doctors in the middle ages used to wear tall hats: because they couldn't cure you. It's all show.

I boarded my plane. Settled in, took out my notebook, wrote my notes. I turned to the man next to me. "Did you have a bad time with security?"

His eyebrows went up and he shook his head. "It's terrible," he said, in an English accent. He and his fiancé had come for a few days to southern Florida, they'd had hassles coming and going. He said, with wonder, that he was a smoker, that he always carried a keepsake, a gold cigarette lighter. Before he'd left for Florida he'd emptied it so it wouldn't light, and he showed it to the security people at the airport. They told him he couldn't take it on the flight. He asked them to send it to him, they said they couldn't, he'd have to go back to the ticket area and give it to them. But then he'd miss his flight. "It's your problem," they said. He wound up giving the lighter to an airline clerk. "An $800 lighter! Empty!" He didn't know if he'd ever see it again. He said, "It's hard when"--and he put out his hands and shook them--"you're already a bit of nervous about flying!"

It is almost five years since 9/11, and since the new security regime began. Why hasn't it gotten better? Why has it gotten worse? It's a disgrace, this airport security system, and it's an embarrassment. I'm sure my Englishman didn't come away with a greater respect or regard for America.

So we're all talking about port security this week, and the debate over the Bush administration decision to allow an United Arab Emirates company to manage six ports in the United States. That debate is turning bitter, and I wonder if the backlash against President Bush isn't partly due to the fact that everyone in America has witnessed or has been a victim of the incompetence of the airport security system. Why would people assume the government knows what it's doing when it makes decisions about the ports? It doesn't know what it's doing at the airports.

This is a flying nation. We fly. And everyone knows airport security is an increasingly sad joke, that TSA itself often appears to have forgotten its mission, if it ever knew it, and taken on a new one--the ritual abuse of passengers.

Now there's a security problem. Solve that one.

Another Reason I Love Movies

No, it's not because Ray went to see The Pink Panther over the weekend and loved it.  Right.  LOVED it.  IMDB gives it 4.7 stars out of 10, which is in the bottom 5% of movies on the site.  And every movie is on the site.

 

It's because of articles like this one, which I am republishing here in its entirety just because it's terrific.

 

What 'Psycho' can teach you about inflation

The price of cheap motel rooms, new bathrooms and Madison Avenue salaries in old movies are a lot more accurate than you'd think.

By Les Christie, CNNMoney.com staff writer

February 22, 2006: 11:53 AM EST

NEWYORK (CNNMoney.com) - $25 a day plus expenses. That's what Sam Spade (Humphrey Bogart) charged to do detective work in 1941's "The Maltese Falcon."

Sometimes, money references in classic movies provide the jolt that reminds us of how inflation has changed what we pay for things. After adjusting for inflation, $25 in 1941 is the equivalent of $332 today -- a PI today might get between $80 and $125 an hour (or more).

Mike Meyers skillfully exploited the disconnect in the first "Austin Powers" epic. The villain, Dr. Evil, who has just come out of a 30-year deep freeze, is holding the world hostage and demands . . . (portentous music) . . . $1 million dollars to spare it. After some consultation with henchmen, he ups the demand to $100 billion.

Even in 1997 dollars, when the movie was made, a million 1967 dollars only comes to a little under $5 million. Either Dr. Evil was a bit of a piker or the cryogenics had frosted some of his brain cells.

Here is a sampling of some classic movie money moments, complete with a rating of how surprisingly HIGH or LOW they seem from our perspective in 2006

Of Mice and Men: Cheap land?

Some movie prices seem totally divorced from reality. Lenny and George in "Of Mice and Men" are tying to scrape together $600 to buy a rabbit farm in the Salinas Valley. In California today, $600 wouldn't buy a rabbit hutch.

Rating: LOW. The movie may be set during the Great Depression, but even adjusting for inflation, $600 then is only about $8,500 today. Perhaps Lenny and George were angling for a no-down payment, interest-only mortgage, intending to flip the property in six months.

Psycho: Cheap digs?

In the 1960 Hitchcock opus, "Psycho," the room rate at the Bates motel is $10 (including a hot shower), which sounds pretty low, but it's actually the equivalent of $66 today.

Rating: HIGH. Remember, this isn't the Ritz; it's a seedy place in the middle of nowhere that the new highway has bypassed, leaving it with no customers. For $66 you can rent a pretty good room in a chain motel and not have to worry about Norman's mom.

Double Indemnity: Cheap cigars?

In "Double Indemnity," the payoff conspirators Fred McMurray and Barbara Stanwyck hope to realize on her husband's life insurance is $100,000, a substantial pile of money back in 1944, and worth more than $1.1 million today.

But the really amusing sum mentioned in the script comes as a by-play between Edward G. Robinson and a witness to the murder, who tells him, "These are fine cigars you smoke."

Robinson's reply: "Two for a quarter." Witness: "That's what I said."

Rating: LOW. 12 and a half cents works out to $1.39 in 2006. But the price of a good cigar these days would be between $10 and $15.

Jaws: Enough bounty?

In "Jaws" (1975), a victim's relative offered a whopping $3,000 to whomever could catch and kill the shark (played, of course, by "Bruce").

Rating: LOW. In today's dollars, that's about $11,000 -- we're betting bounty hunters would need quite a bit more to put together some barrels of fish guts for chumming and seek out a three-ton, 25 foot long, great white.

Kramer vs. Kramer: A fair wage?

In 1979's "Kramer vs. Kramer," Dustin Hoffman's character gets fired from his high powered ad agency job, paying in the low $30s, and has to settle for another that pays him $28,200 a year.

Rating: LOW. That salary is higher than it sounds, worth about $76,000 today. But the Bureau of Labor Statistics reports that the average wage for an advertising VP is $83,000.

Marty: Striking out on your own

In 1955's Oscar winner, "Marty," Ernest Borgnine is planning to buy the butcher shop where he works. It means taking out a loan for $8,000. ("That's a big note to carry, boy," he says.)

Rating: LOW. A big note, indeed, worth close to $60,000 today. That still seems reasonable to buy the physical plant and goodwill of a going concern. But most of the butcher shops listed for sale on various Web sites are at least in the six-figure range.

Midnight Cowboy: Man of the evening

In "Midnight Cowboy" (1969), Ratso Rizzo (Dustin Hoffman) tells the naïve Joe Buck (Jon Voight), who has relocated to Manhattan hoping to jump start a career as a male hustler, that, with the right connections, he can make "fifty, maybe a hundred dollars a day, easy."

The equivalent in 2006 is $265 to $530.

Rating: How would we know?

The Tender Trap: What would Frank wear?

"You pay $15 for a tie, you expect it to tie!" That's Frank Sinatra in 1955 in "The Tender Trap," complaining that a tie from Bergdorf Goodman isn't up to snuff.

Rating: Low. Sure, that's $110 today, which can buy quite a nice tie. But Sinatra might easily pay $150 and higher for quality neckwear.

Mr. Blandings builds his nest egg

Few movies spell out prices as complete as "Mr. Blandings Builds his Dream House," the timeless tale of home buyer and home owner angst from 1948 starring Cary Grant and Myrna Loy. Of course the prices aren't quite as timeless.

City dwellers Grant and Loy buy a rural Connecticut home on about 35 acres that is in such bad shape, demolition is the only solution. Purchase, demolition and construction ends up costing a total of $38,000 for a home with four beds and three bathrooms -- the bathrooms costing $1,300 a piece. That translates into $308,100 total cost in 2006 dollars, with each bathroom going for $10,540.

Rating: Low. Even with all their overspending, the Blandings came out very nicely on their investment. The median price of a four-bed, three-bath home in that part of Connecticut would just over $600,000 today, and that's with a small lot, not a sprawling 35 acres. The price of the bathroom is spot-on. A bathroom remodeling costs an average of $10,499 today.

Of course, despite Mr. Blandings worries during the movie about being stretched financially, he should have been able to handle his spending spree. He was earning $15,000 as a Madison Avenue copywriter. That comes to $121,618 today, (doing far better than Ted Kramer 31 years later). He should have been able to easily handle the $18,000 mortgage identified in the movie, which would have had payments of just over $100 a month, especially if he was able to scrape together the other $20,000 on his own. 

See you at the movies.

 

Cj

 

P.S. Or at the play.  Next Thursday, Friday, and Saturday my father (Cogsworth), I (Lumiere), and my son Crispin (Chip) are all in Beauty and the Beast in Bluffdale.  Performances are 7pm each evening, with an additional 1pm matinee on Saturday.  We have cheap tickets, and we'd really love to see you.

Just HAD to Point This Out

The yield curve is now fully inverted.  Here is the listing of rates:

 

6-mo bond:    4.69%

2-yr bond:      4.67%

5-yr bond:      4.57%

10-yr bond:    4.57%

30-yr bond:    4.55%

 

You will note that these are exactly backward of normal.  Sort of like compasses pointing south.  My, what a mess we've made at the Fed.

 

Cj

 

Chain Email and Other Tidbits

Monday is a rough day, even when one does not wake to find that somehow the abysmal Pink Panther has become the #1 movie in America.  Forgive the lack of hard financial information today, or at least this morning.  You know if somethng critical were going on, I'd tell you.

You know those chain emails that are going around?  The ones that purport to give you the origins of common phrases like "big wig" and "and arm and a leg"?  Right, those.  I got one the other day from my mother-in-law that was sent to the entire family.  As I usually do, I responded by essentially ripping the origins to shreds, mostly on the basis of them defying all common sense.  Perhaps I was a little harsh (I have a problem with that, I have to admit), because my 15-year-old nephew in Maple Valley, WA (posh suburb of Seattle, for those not acquainted) wrote back a scathing email accusing me of everything from arrogance to cultural blindness.

The great thing about the First Amendment is that it makes it possible to distinguish between competing claims, since you actually get to hear them both.  This blog is not really about this sort of discussion, so I won't reproduce it here, but the link to the entire exchange is here, in case you're interested, with the entire text of the email and the assorted responses.  If you're actually interested in whether "cold enough to freeze the balls off a brass money" is a bawdy phrase, you might want to take a look.

Apropos of the First Amendment, Al Gore spent the weekend apologizing to the Arab world by deploring American "abuses" of those of middle-eastern descent in the days following 9/11.  According to the Father of the Internet (yes, I know he didn't really say that), the US "indiscriminately rounded up" people with a light tan and "held them in deplorable conditions".  Please allow me to say that I thank Heaven this man failed to become President of the United States.  And that I ferevently hope he himself is discriminately rounded up when he returns.

It is one thing to have the opinion that the US is doing the wrong thing in Iraq.  I've been known to have my doubts my own self.  It is quite another to start tossing out accusations as if they had some validity, to do so on foreign soil, and to do it with the express purpose of giving aid and comfort to the enemy.  This used to be called treason.  Now it is called "patriotism".  You can look it up.  This is why I try so hard not to get re-involved in politics on any but the most local of levels. 

Many of you know that I once ran a presidential campaign.  Al Gore was, in fact, a candidate in that campaign.  I debated his daughter, who is a lovely lady and a smart cookie.  I debated (on Al's and Bill Bradley's behalf) the late Senator Paul Wellstone.and the feisty and interesting Rep. Sheila Jackson Lee of Texas one cold January morning at the University of Iowa.  It was fun, as far as it went, which isn't very far.  After the initial rush, it was just depressing.  Stuff like this speech in Saudi Arabia remind me forcibly how depressing it actually is.

Really scrounging today, folks.  If you have some good news, I'd love to hear it.

Cj

Iceberg Right Ahead!

The 10-year bond has been getting slaughtered since about noon EST.
Nobody seems to know why. I'll try to get news and post it. Meantime,
expect 30-year rates to rise by about .125% on Monday. If you're with
us, you'll get a phone call about it, and we'll see if we want to lock.
If you're not, you really should be.

Like your broker gave you this info. He didn't, did he?

Cj

Miscellanea

Another compendium of stuff:

The journal Science has an article in its newest edition about the Science of Songs, and what makes a song into a hit.  Interesting stuff.  Reminds me of The Tipping Point by Malcolm Gladwell, which I recommend.

Great post on the Freakonomics Blog, which I also recommend, about a cool new gadget coming to a stadium near you.  Instant replay on steroids, sounds like.  A little late for the poor Seahawks, I’m afraid.

The ankle is feeling incredibly much better, thanks to the very good people at Dry Creek Physical Therapy in Lehi, up by Micron.  Dr. Jensen, who turns out to have known my father-in-law when my wife’s family lived in eastern Kentucky, is a super fellow and I enthusiastically recommend his services.

Financial markets are not doing anything of note.  Apparently Greenspan got my message yesterday.  The Chris Jones Group wishes to express its gratitude to the Fed for doing nothing visibly today to screw up the economy.

Property values in Lehi grew 12% last year.  We told you so.

Cj

He Won't Just DIE!

The crush of stuff to do never slackens, so of course I’m blogging about it instead of doing it.  Ha ha!

I’ve been cast as Lumiére in a Bluffdale performance of Beauty and the Beast.  This was an accident, I assure you.  I brought my son Crispin up to audition for the part of Chip (which he secured after reading exactly one line), and apparently the current Lumiére had just become unable to perform (a trip to Ukraine to adopt some kids, I understand).  So I am now growing a French mustache and speaking like Pepé le Pew.

How do I despise Alan Greenspan?  Let me count the ways.  Today he made a speech at Lehman Brothers at which he is alleged to have said that the low rate on the long-term bond might make it necessary to raise short-term rates farter than they otherwise might need to go.  Now this is pathological, folks.  Not only is this man contending that the millions of bond traders in the world are flat wrong, he’s actually blaming them for his destructive policies.  Message to Alan: you’re not running things anymore.  Shut up.

Message to the bond market: he’s not God.  Trust me on this.  You can stop listening for his indigestional rumblings for ideas about how the market is going to perform.

Let's Get Ready To Ruuummmble!

The NY Times (oh, man, I hate that rag) has a blog about real estate, which I never read, and can't recommend to you. However, David Porter of the Pacesetter Mortgage Blog (to which status this humble scrawl aspires) shot me an email about a post at the Times that referred to the Ameriquest commercials during the Super Bowl. Since, as I predicted, the funniest commercials this time 'round were NOT for comestibles, and were, in fact, the Ameriquest commercials (and for certain the MasterCard MacGuyver commercial), I was all ears. The link is here, for those of you that would like to read the article and my response.

The "Don't Judge too Quickly" ads were very, very good, I thought. And the MacGuyver ad was priceless. No pun intended. None of the others struck me as being worth the money, though there was a Budweiser ad that was fairly clever (the crowd doing the sign-holding thing). If anyone can explain to me the GoDaddy.com ad where the straps busted on the fairly homely model's tanktop, I'd be appreciative. I think.

But wait - you were a radical resister and you didn't see these ads, did you? You don't watch football on Sunday, or you don't want to support the hype. Fine. The ads are here. Watch them for yourself. Nobody has to know.

Wait - this is a mortgage blog, isn't it? Then let me mention an email I got from one of our clients earlier today. John English (my favorite movie critic and a very good man) wrote to ask (following a very interesting back-and-forth about Munich, the Spielberg film) why his mortgage rate has risen from half a point below the 30-year rate to half a point above it in about 8 months. Happy, is he, you think? No, he's not. I completely understand. I'm not happy, either (my own mortgage goes adjustable in 90 days), and we two have lots of company. Let me take a second to copy here my response to him, since it applies to pretty much everyone that has an adjustable mortgage, especially those that have option-pay ARMs:

Your rate is indexed to prime. The prime rate is available here and here, and it rises every time the Fed raises its interest rate, which is the rate that banks can borrow from the Federal Reserve. My blog has a fairly large amount of analysis of this phenomenon.

Your loan - all option-pay adjustables - decouple your minimum payment from your interest rate. This is a useful feature for those in payment difficulties, which at the time you were, since your investment house had not sold. You took a couple of days to think about this when you signed for the loan, and I know it was not an easy decision to make. I believe you made the right one, given the information you had at the time. You were weighing possible future higher interest rate against lower payments for the immediate-term, and this loan did make it likely that you could hang on until your house sold. That took again some months, as I recall, during which time you benefitted from a lower minimum payment. You still have that payment, of course, though as you correctly point out, your actual interest rate is somewhat higher. The Fed has raised interest rates 14 consecutive times over a 2-year period, an unprecedented rise in interest rates beyond any possible calculation of necessity. It is a thing over which we have no control. You are far from the only client we have that made the same calculation - it was the same one we made, most of the time - and determined that the short-term payoff made the longer-term risk worth it. All our clients with this loan wish (as do we!) that Greenspan had acted differently. Most of them are still pretty sure (as are we) they did the right thing.

Remember: option-pay ARMs do not adjust payment (in the first 5 years) with rising interest rates. The repayment is at a fixed rate, which can be (and right now almost invariably is) below the actual interest rate that your loan uses to calcualte interest due. The mortgage can "neg-am", or principalize your unpaid interest, using the equity in your house as an overdraft protection. Your loan amount can rise. This is not the end of the world, and in some cases it is even a desirable thing. Not always. This is why we ALWAYS say about these loans that they are like chainsaws. They are very powerful tools, and like any power tool, it has the capacity to do very impressive work if used correctly, with skill, on the proper job. Like all power tools, however, it has the capacity to cut your leg off, too. So be sure that it's doing what you want it to do before you sign anything.

John was smart enough to spend an entire afternoon poring over the paperwork to be sure he understood the loan thoroughly. We ran numbers half a dozen times. He then walked out of the closing and took a day to think it over. This was, I think, exactly what he should have done. He used the tool for what it is good at. That the market has turned on him is nothing he could have forseen and, indeed, we've been saying on this blog for months that it shouldn't have happened. Sometimes it does. Everyone does the best he can to make the right decision, then you live with it and go on.

Greenspan is still an idiot. I just couldn't go the whole day without saying that at least once.

A Show Worth Waiting For

Have to post this, first news of the day. Tim Ziegler, a Friend of the Chris Jones Group and one of the best men I know, is doing a show in the Denver area for Valentine's Day. I personally despise Valentine's Day, but I'd go see this if I were closer. Tim's wife Margaret is a terrific lady and a very, very talented singer. Here's the link. Follow.

And just so you know, we like nothing better than to promote the worthwhile activities of our clients. If you're doing something, let us know about it.

If I Had A Hammer

We’ve been hammering the Fed pretty hard lately, so maybe today we should give them a break.

Nope.

Today’s big economic news was the jobs report, which was very strong and drove unemployment to 4.7%, the lowest level in five years.  Good news, right?  Should be good for stocks?  No.  And here’s why:
"I think the report was quite strong and will ultimately be positive for stocks," said Stuart Hoffman, chief economist at PNC Financial Services Group, noting a big upward revision to job growth in November and December on top of the gains in January.
However, the negative reaction was due to "worries that if wages are rising and unemployment is down, the Fed will react," Hoffman said. "The Fed said that they are watching resource utilization, and people are a resource."
Hat tip: CNN Money
Ah.  So inflation, which normally helps stocks (if you own something, inflation makes it worth more dollars) and hurts bonds (fixed rate of return of, say, 5% is no good if inflation is 6%), is now hurting both stocks AND bonds, because everyone is afraid of the Fed raising interest rates some more.

So perceived inflationary pressure by itself is cooling off the economy, not because inflation is a terrible thing in moderation, but because the Fed response destroys economic productivity.

Remind me what these people are doing to help us, again?

I’m just so tired of telling my clients that their rates are going up because Alan Greenspan doesn’t understand Say’s Law.

In other news, I guess there’s some football game this weekend, which they hold to give them something to broadcast between commercials.  I predict that the best commercial this year will not be for a food product, either beverage or snack.  Now THAT’S going out on a limb, since beer commercials and Doritos have basically been the best commercials for a decade.

Sorry for the poor performance on the blog.  I’m just tired this week.  We have a loan that has taken – no exaggeration – 17 months for us to get to the point where we really, really believe it will close next week.  Along with the five or six other deals that are on the point of closing – most of them being negatively affected by the Fed’s complete brainlessness – it’s been hard to defend my clients and their money the way I feel like I should.  No, there isn’t a thing, not one thing, that I could do to make it better.  But I hate to see people I care about get less than they should.