Slowing Pace

Hayward Park is one of CalTrain's least-trafficked stations.

It was morning on a Spare-the-Air (smog alert, free mass transit) day. I was grateful that a coat and tie are no longer required and donned a Hawaiian shirt. Floral patterns are becoming more acceptable in San Francisco offices, thanks to growing Latin and tropical influences.

The old Camry wagon has been making disturbing noises from the front end. The mechanic we've been using for the past three years has proved less than satisfactory---when he does the work himself it turns out okay, but he uses assistants who aren’t well trained, much less legal, if you know what I mean. When the assistants work on the car, it’s never fixed right.

Browsing the web, I finally found a repairman who comes highly recommended (probably by members of his family who are posting comments under a pseudonym). His garage is next to the Hayward Park train station, so there's not far to walk on a hot day.

The pace is slow at the office, so there's no hurry to get to work. The credit crunch, vacation schedules, and the upcoming Labor Day weekend have put deals on hold. John said that he would take a look at the car and get back to me tomorrow. No problem.

As of 5 p.m. the fog promised a cooler evening.

[Update – Aug. 30: the front wheel bearings and hubs are the source of the vibration and noise. Parts and labor will cost about $900. I'm not overjoyed, but then if I don’t have to fix it again this year it will be worth it. A lot cheaper than buying another car.] © 2007 Stephen Yuen

Barry Bonds Day

Vaillancourt Fountain in July. The water's off in August.

On Friday the balconies were closed. It was Barry Bonds Day at Justin Herman Plaza, and building security blocked access to the stairs leading to the best vantage points. So life goes in the 9/11 world.

I joined the crowd on the square. We watched some of the most famous names in sports—Joe Montana, Michael Jordan, Willie Mays, Wayne Gretzky, and Hank Aaron—congratulate Barry Bonds on the big screen. We listened to Mayor Gavin Newsome, broadcaster Mike Krukow, and Giants players and owners pay tribute to the all-time home run leader.

When Barry Bonds rose to speak, everyone applauded warmly; his home town is one place where he is heckler-free. Gracious and funny, he seemed less guarded than usual. (See video below--sorry for the jitters, but I was zooming from a distance with the camera held over my head.)

There’s no question that Barry Bonds took anabolic steroids. ("Who are you going to believe, me or your own eyes?”) He was the best player in baseball before other players started to use performance enhancers. They surpassed him, were not criticized but lauded, and he needed to keep up. It was not the choice that many of us would have made or would advise a young person to make, but it was understandable.

Some say that the steroid era in baseball was a sad chapter that’s now over. That belief is a delusion. We are at the dawn of the age of human enhancement, and our ethical thinking can't keep pace with developments. Doping with our own blood is frowned upon, but taking a whiff of oxygen in Denver is okay. Coffee is fine, but caffeine pills are not. Whether a son gets his baseball genes from a father or from a syringe makes a difference. Someday we will inject microscopic robots to eradicate harmful germs and even cancer cells; but what if they’re used to make us bigger, faster, stronger, and smarter? There are many questions, but few answers.

Meanwhile, in the present, a great player became Superman, and he was amazing to watch. (He was such a dangerous hitter that he was intentionally walked with the bases loaded.) His time will pass soon enough, and Friday was a time for celebration. © 2007 Stephen Yuen

Left Behind

It wasn’t that long ago that we would sit at home by the telephone to wait for a call [pause to think “pathetic loser” if you must, then permit me to continue]. The afternoon’s highlight would be the visit from the postman, who might be carrying a letter from a loved one. Disappointment and anxiety were our lot when the phone didn’t ring or the letter didn’t come.

Those days look as quaint as a Norman Rockwell painting now that time and location are no barrier to getting in touch. We are reachable 24/7, and, with multiple phone numbers and e-mail as well as physical addresses, the problem is often too much communication, not too little.

Left behind in this wide wired-and-wireless world are many retirement home residents, who lived in the more sedate age depicted by the Saturday Evening Post and Life. Few of them own computers and cellphones, and human contact is limited to each other and the home’s employees.

A small group of us intermittently make the rounds of the fourteen elder-care home in Foster City. There’s no proselytizing (we are Episcopalians), just conversation and smiles. Last Sunday one of the kids—the presence of youth seems to brighten the residents’ day—brought along a CD of old favorites. We warbled Over the Rainbow and I’ve Been Working on the Railroad. (Although there was a hiccup with On Top of Old Smokey—see post below).

One gentleman, a long-time resident who looks forward to our visits, gave the church a small donation. We thanked him and some of our new old friends and promised to return by Christmas. © 2007 Stephen Yuen

Not Quite As Remembered

Do you know the words to On Top of Old Smokey? It’s been decades since I last sang it, and my memory of the lyrics is mashed with spoof versions that proliferated during the 60’s and 70’s. When we dropped the CD into the player, we expected another cheerful sing-a-long song, but be warned—it’s sure to put a damper on any kids’ party!

On top of Old Smokey
All covered with snow
I lost my true lover
From courting to slow

For courting’s a pleasure
And parting is grief
And a false-hearted lover
Is worse than a thief

A thief will just rob you
And take all you have
But a false-hearted lover
Leads you straight to the grave

The grave will decay you
And turn you to dust
Not a boy in a hundred
That a poor girl can trust

They’ll hug you and kiss you
And tell you more lies
Than crossties on a railroad
Or stars in the sky

Some come all ye young maidens
Come and listen to me
Never place your affections
In a green willow tree

For the leaves they will wither
And the roots they will die
And you’ll be forsaken
You’ll never know why

On top of Old Smokey
All covered with snow
I lost my true lover
Come a-courting too slow

Bette Noire

Bette Midler removed over 230 trees from her Kauai property without permission.

State conservation workers noticed Oct. 17 that Midler's vacant lot makai [on the ocean side] of the Kuhio Highway from Limahuli Valley was being cleared and that a graded road had been built to it.

Because the land is zoned for conservation uses, any activity on it must be approved by the Board of Land and Natural Resources.

A wealthy environmentalist behaving hypocritically is old news, and I won’t pile on this latest example. Bette Midler appears to have done a lot of good as chair of the New York Restoration project, which has created acres of green public space in New York City. What’s interesting is the explanation by Ms. Midler’s lawyer:

"The whole idea with cutting the trees down was with the idea of improving the lot with native species" instead of the non-native, invasive species that had grown there, [attorney Max] Graham said. "It's unfortunate that a mistake was made."

As environmental objectives expand beyond what’s good for mankind (cleaning up garbage, improving air quality, etc.), the movement’s philosophy has a few inconsistencies to iron out. In this case the idea seems to be that “native” species are better than “non-native, invasive” species (note here the use of the value-laden “invasive”). So the value hierarchy seems to be:

(1) Native trees
(2) Non-native trees
(3) No trees
(4) Paved road

But to get from (2) to (1) you have to go to (3). You may even need to build a paved road (4) to replant the native species and monitor the property against a re-invasion of undesirable trees.

Non-native species are a problem because they drive out native plants and animals and potentially reduce biological diversity. But it’s unclear what makes diversity intrinsically worthy. (Frankly, I’d prefer that there be fewer spiders and cockroaches in the world.)

Species diversity is a norm that butts up against the well-known law of natural selection. If man does not interfere, hardier species will supplant the old, just as they did on Bette Midler’s property. And there’s nothing more natural than that. © 2007 Stephen Yuen

Not Enough

Last year Mark McGoldrick made $70 million running the special-situations group at Goldman Sachs. He earned about a thousand times—give or take—what the average American family makes, yet he felt underpaid.

Mr. McGoldrick and some of the partners in his unit griped that they weren't being rewarded as well as counterparts at hedge funds and private-equity firms. Though highly paid, his team was "under-compensated."

Mark McGoldrick illustrates the importance of relative status to human happiness. It wasn’t enough that he made more money than he could ever spend or that he could already guarantee the financial security of his family if he never worked another day in his life. He was falling behind the people against whom he measured himself.

But it’s hard to fault his feelings, for who amongst us doesn’t know someone who’s more successful and admired than we are—sometimes by a lot—yet isn’t as deserving :)? If we are wise, we will accept the ineluctable fact that there will always be those whom we can never catch up to. And if we ourselves are to be truly happy, we must reach the state where we can (genuinely) rejoice in their successes and wish them well.

Mark McGoldrick resigned from Goldman Sachs and is thinking of starting his own fund. I hope he finds what he’s looking for. © 2007 Stephen Yuen

Moral Hazard, Continued

If you keep bailing your kid out of trouble, will he ever learn to stand on his own? And will he engage in ever-riskier behavior, knowing that you will ride to the rescue?

Moral hazard is easy to understand on a personal level.

Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected. (WSJ – 8/13/07)

The more people who behave recklessly, the more likely it is that government will relieve them from the consequences of their folly. And once the precedent is set, it becomes exceedingly difficult to reverse course. One familiar example is the Federal flood insurance program, which has resulted in enormous expenditures because homeowners repeatedly rebuild in flood zones and know that the government will step in where private insurers refuse to tread.

That’s why I feel like a sap for buying earthquake insurance, which costs us over $1,000 per year for limited coverage. If the Big One ever hits the Bay Area, the Federal spigot will open wide to feed what will be the mother of all disaster relief efforts. Insured or not, I’ll be able to rebuild.

But what gets my dander up is the pleas for help from the Wall Street gazillionaires who are feeling some pain now that sub-prime loan defaults are wiping out the net worth of some highly leveraged entities and severely damaging that of others.

"You don't want to see the Fed bail out these guys who have made a lot of money. They have made their bed and you want to see them lie in it," says a veteran trader at a New York brokerage house. "Then again, you don't want to see the economy go into recession."

In retrospect low interest rates and lax credit standards, aka “easy money”, fueled this echo boom of leveraged buyouts two decades after the concept was introduced in a big way by Drexel, Burnham, Lambert and Kohlberg, Kravis, Roberts. Easy money, combined with derivative instruments that didn’t behave as they were supposed to when markets underwent stress and “advances” in the equally arcane worlds of international tax, accounting, and financial structuring, led to the creation of this decade’s masters of the universe, the hedge fund and private equity players. They’re feeling pain (and so are small investors---my portfolio’s down more than 10% from its highs) but the real economy is still going strong.

I hope that governments can resist the howls for help. Letting the markets work through the lessons of this fender-bender will reduce the chances of a big crash later. © 2007 Stephen Yuen

[For a previous posting on moral hazard, see here.]

[Update - 8/17: Allen Sloan of Fortune casts a jaundiced eye at the iniquities of central banks' rescue efforts.]

August Evening

The Hayward-San Mateo Bridge.

An Appreciation

As Barry Bonds marches through the Boeing product line (737, 747, 757, etc.), as oceans of ink and exabytes of electrons are devoted to his achievements and controversies, as most of us form judgments about this man whom we don’t know personally, permit me to add a tiny observation. I have first-hand knowledge of a time when he quietly helped a stranger. There was no possible advantage, such as good publicity, to Barry Bonds for helping this person.

One of the most reliable indicators of a man’s character is how he behaves in situations where he believes that no one--at least no one of consequence--is watching. I wasn’t a huge fan before, but now I am. Go Barry! © 2007 Stephen Yuen

Tarpy's Roadhouse

After visits to the Monterey Bay Aquarium I want some good, cheap food, an eatery distant from downtown Monterey and the Wharf. Tarpy’s Roadhouse sounds like such a place—halfway inland to the farming town of Salinas and close to its airport.

But the parking lot we pulled into last month was landscaped with a pond and garden, so hopes to limit the damage to my wallet quickly vanished. But at least the food turned out to be good.

All the trendy places have a pretty, young receptionist, and Tarpy’s was no exception. She flashed a bright smile and led us to a table next to a window. The white tablecloth and flowers made us feel underdressed in our casual tourist garb until I noticed T-shirted patrons interspersed amongst the older monied couples.

The waiter enthusiastically recited his favorites on the menu. I eyed his pudgy frame and concluded that he knew what he was talking about. We weren’t disappointed by his suggestions. The California comfort foods---herb-crusted artichoke rings, meatloaf with marsala-mushroom gravy on garlic potatoes, and roast duck with a cabernet-raspberry glaze--were rich, tasty, and filling, the perfect conclusion to a day of travel. We passed around the potatoes and even had room for dessert.

Chocolate-Espresso Bread Pudding in Bourbon Crème Anglaise

We thanked the waiter for his menu advice and very quick service throughout the meal. Our next trip to Monterey will include a stop at Tarpy’s, but I have to save up first. © 2007 Stephen Yuen

This Party's Over

In the wake of the wild swings in the financial markets, it’s time to dust off an oldie:

Q. How do you make a million dollars in the bond market?
A. Start with two million…….

Afterthought - a real estate corollary:

Q. How do you borrow 100% of the value of your house?
A. Buy it with 20% down...

Bug Shredder

No, I haven’t gotten around to fixing my trusty Beetle, thanks for asking. But I’d better do it soon lest one of my neighbors is inspired by this video.

Barry, We Hardly Knew Ye

I admire Barack Obama , although I disagree with many of his policy positions. His humble-beginnings life story, his communication abilities, and his intelligence resonate with the American people and make his the freshest face of all politicians running for President. But it looks like he jumped the shark (peaked) with his comment that a President Obama would invade Pakistan, without permission of the host government, in the pursuit of terrorists.

So he wouldn’t have toppled Saddam Hussein, who violated United Nations resolutions and invaded another country, but would invade Pakistan, which is our ally in the war against extreme Islamists?

So the war in Iraq was too risky, but attacking Pakistan, a nuclear-armed (no dispute about WMD’s here) power with five times as many people as Iraq, is an acceptable gamble?

So he’d personally talk with the likes of Fidel Castro, Kim Jong Il, and Mahmoud Ahmadinejad but give the back of his hand to Pervez Musharraf, the target of repeated assassination attempts because of his cooperation with the United States?

I understand people with a consistent philosophy, be it Wilsonian internationalism, realism, isolationism, or pacifism, but Barack Obama seems all over the map.

The greatest leaders, of course, have a degree of unpredictability, but normally we grant them increasing authority over many years as their puzzling actions pan out. (A few examples from different walks of life: Steve Jobs of Apple, 49er coach Bill Walsh, director Steven Spielberg, and Federal Reserve chairman Alan Greenspan.) They see what others don’t see, their results prove that they’re smarter than the rest of us, and eventually we trust them enough to turn over the keys and go along for the ride.

Barack Obama hasn’t earned that level of trust, and, as he continues to open his mouth, it doesn’t look like he’ll ever get that chance. © 2007 Stephen Yuen