May 2009
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Month May 2009

The End of the Affair

PJ O’Rourke:

The phrase “bankrupt General Motors,” which we expect to hear uttered on Monday, leaves Americans my age in economic shock. The words are as melodramatic as “Mom’s nude photos.” And, indeed, if we want to understand what doomed the American automobile, we should give up on economics and turn to melodrama.
Politicians, journalists, financial analysts and other purveyors of banality have been looking at cars as if a convertible were a business. Fire the MBAs and hire a poet. The fate of Detroit isn’t a matter of financial crisis, foreign competition, corporate greed, union intransigence, energy costs or measuring the shoe size of the footprints in the carbon. It’s a tragic romance–unleashed passions, titanic clashes, lost love and wild horses.
Foremost are the horses. Cars can’t be comprehended without them. A hundred and some years ago Rudyard Kipling wrote “The Ballad of the King’s Jest,” in which an Afghan tribesman avers: Four things greater than all things are,–Women and Horses and Power and War.

Organic Dairies Watch the Good Times Turn Bad

Kate Zezima:

When Ken Preston went organic on his dairy farm here in 2005, he figured that doing so would guarantee him what had long been elusive: a stable, high price for the milk from his cows.

Sure enough, his income soared 20 percent, and he could finally afford a Chevy Silverado pickup to help out. The dairy conglomerate that distributed his milk wanted everything Mr. Preston could supply. Supermarket orders were skyrocketing.

But soon the price of organic feed shot up. Then the recession hit, and families looking to save on groceries found organic milk easy to do without. Ultimately the conglomerate, with a glut of product, said it would not renew his contract next month, leaving him with nowhere to sell his milk, a victim of trends that are crippling many organic dairy farmers from coast to coast.

For those farmers, the promises of going organic — a steady paycheck and salvation for small family farms — have collapsed in the last six months. As the trend toward organic food consumption slows after years of explosive growth, no sector is in direr shape than the $1.3 billion organic milk industry. Farmers nationwide have been told to cut milk production by as much as 20 percent, and many are talking of shutting down.

Spy Fired Shot That Changed West Germany

Nicholas Kulish:

It was called “the shot that changed the republic.”


The killing in 1967 of an unarmed demonstrator by a police officer in West Berlin set off a left-wing protest movement and put conservative West Germany on course to evolve into the progressive country it has become today.



Now a discovery in the archives of the East German secret police, known as the Stasi, has upended Germany’s perception of its postwar history. The killer, Karl-Heinz Kurras, though working for the West Berlin police, was at the time also acting as a Stasi spy for East Germany.

On Manufacturing in China

The Economist:

HE recent scandals about poisoned baby milk, contaminated pet food and dangerous toys from China have raised questions about manufacturing standards in the country that has become factory to the world. In China’s defence, it was probably inevitable that as production grew so would the problems associated with it, at least in the short term. Similarly, it could be argued that China is going through the same quality cycle that occurred during Japan’s post-war development or America’s manufacturing boom in the late 19th century—but in an environment with infinitely more scrutiny.


A response to both these observations can be found in “Poorly Made in China” by Paul Midler, a fluent Chinese speaker who in 2001 moved to China to work as a consultant to the growing numbers of Western companies now replacing factories in Europe and America with subcontracting relationships in the emerging industrial zone surrounding Guangzhou. It was the perfect period to arrive. The normal problems of starting a business, such as getting clients or providing a value proposition, do not hinder Mr Midler, who had the benefit of being in the right place at the right time.

An Interview with George Roberts & Henry Kravis

Henny Sender interviews KKR founders George Roberts & Henry Kravis on the economy, buying “defensive” companies and government intervention.

A Letter to America from a Dodge Dealer

George C. Joseph:

My name is George C. Joseph. I am the sole owner of Sunshine Dodge-Isuzu, a family owned and operated business in Melbourne, Florida. My family bought and paid for this automobile franchise 35 years ago in 1974. I am the second generation to manage this business.



We currently employ 50+ people and before the economic slowdown we employed over 70 local people. We are active in the community and the local chamber of commerce. We deal with several dozen local vendors on a day to day basis and many more during a month. All depend on our business for part of their livelihood.



We are financially strong with great respect in the market place and community. We have strong local presence and stability. I work every day the store is open, nine to ten hours a day. I know most of our customers and all our employees. Sunshine Dodge is my life.



On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them.

Southwest Airlines Enters Milwaukee

Good news for travellers and business:

Today, Southwest gave the residents of Wisconsin something to talk about around the bubbler.

We’re adding Milwaukee and General Mitchell International Airport to our network!!! Starting late this year, the home of the Cunninghams, the Fonz, Laverne and Shirley, the Bucks, the Brewers, and the Packers will become the 68th airport on the Southwest Airlines route map. (Yeah, I realize the Packers are technically based in Green Bay, but they’re the professional football team for the whole state of Wisconsin, so I’ll include them here!)

We know many of you in the Milwaukee area are already familiar with Southwest (low fares and GREAT Customer Service!)—but for our Customers that aren’t familiar with Milwaukee, you’ve got a treat in store for you. Besides having a vibrant business base, Milwaukee is just a lot of fun. Amazing food (please, PLEASE visit Mader’s for German food!), the arts (the Milwaukee Art Museum has masterpiece buildings designed by both Saarinen and Calatrava!), the home of Harley-Davidson (don’t miss their museum!), sausage, cheese, beer, sports, the lake….and of course, the people. Good people. Just don’t plan anything other than watching football on a Sunday afternoon when the Packers are playing. You could be very lonely…. *grin*

Milwaukee is going to be a GREAT addition to our network. Wisconsin’s legendary work ethic, which mirrors Southwest’s exceptionally productive Culture, is going to make us a great fit in the land of the Cheesehead.

Likely not so hot for Madison’s airport traffic….

U.S. Blues

Andrew Bary:

The bear market in Treasuries will worsen, because of a glut of government bonds. Instead, consider high-yielding mortgage securities and certain munis. (Video)



We’re talking about U.S. Treasury securities, not housing. At the end of 2008, risk-averse investors poured into Treasuries, driving down yields to the lowest levels in decades. The 30-year Treasury bond fetched less than 3%, and short-term T-bills carried yields of zero.



Since then, the economy has shown signs of bottoming, the credit markets are functioning more normally, and the stock market has roared back from its March lows. Treasuries now are in a bear market, while bullish enthusiasm has taken hold in other parts of the credit market, including corporate bonds, municipals and mortgage securities, all of which had fallen from favor late last year. The 30-year Treasury, for instance, has risen to a yield of 4.10% from 2.82% at the end of 2008, cutting its price by 20%.



Barron’s called a top in Treasuries and a bottom in the rest of the bond market in an early 2009 cover story (“Get Out Now!” Jan. 5). We weren’t alone in recognizing some of the nutty year-end developments. Warren Buffett highlighted the sale in late 2008 by his Berkshire Hathaway of a Treasury bill for a negative yield. Buffett wrote in Berkshire’s annual letter in February that when “the financial history of this decade is written…the Treasury-bond bubble of late 2008″ may rank up there with the housing bubble of the early to middle part of the decade. – How does the market look now? Treasuries still look unappealing for several reasons. Yields are very low by historical standards, the government is issuing huge amounts of debt to fund record budget deficits, and the massive federal stimulus program ultimately may lead to much higher inflation.

A Few Spring Garden Photos






Finance It Again Tim Geihtner

Ed Wallace:

They say you don’t recognize history while you’re living through it, but it won’t be long before there’s no doubt about the historic character of what’s happening now. In the not too distant future, everyone will look back on this period and shake their heads, at both the disruption to our economy and many of our solutions to it. And when that day comes and today’s events can be seen with real clarity, we will all turn to each other and ask, “What were we thinking?”



Oh, well. There is at least one man today whose mind is already focused on where he will be standing many years from now. He has coolly witnessed the turmoil inflicted on our financial system and is dispassionately observing the panic that has overtaken us all in its wake. And, knowing that foolish decisions almost always follow emotional trauma, he alone is standing out front, gladly waiting to receive the fruits of the outrageous decisions we seem ready to make. He is Sergio Marchionne, the CEO of Fiat, and he is undoubtedly a genius without peer.



Encouraging Words



Consider if you will what is happening in the automobile industry today: A near catastrophic collapse in new car sales in most countries of the world. One might think that this signals consumers’ inability to purchase new cars, either for lack of a job or — as we have been told since last September — because they can’t get a loan for their transportation needs. But those issues are not really the problem. Many of the jobs lost were low paying jobs and therefore not new car buyers, for the rest, loans are readily available.