Dead Presidents…Part Two

"By the summer of ’29, every American firmly believed that he was going to get rich."

The American Clock
by Arthur Miller

"They took all the guns out of the house."

"Who did?"

"The family…you remember his brother," continued my cousin…catching me up on the local news. "He shot himself about 15 years ago. They’re afraid Bobbie Ray will do the same thing. I wouldn’t put it past him. If he figures it’s time…he’s got the stomach for it."

Bobbie Ray, 63 years old, has lost everything. The bank came and repossessed his bulldozers, backhoes, trucks, bobcats – all his earth-moving equipment. He’s out of business.

"I guess it’s hard to make a business like that pay," I said.

"Especially when your work crew is drunk half the time," replied my cousin, who knows Bobbie better than I do.

"I don’t know…the crew was always half drunk…maybe they did their best work when they were drunk. When they were sober, they were awful…" I recalled.

Bobbie Ray had been on intimate terms with alcohol himself. For much of his life, he would work all day – "from before sun-up until I fall out at night," he used to say, in his old Southern tidewater accent – and drink a case of National Bohemian, a local brand, everyday too. The drinking didn’t seem to matter. Bobbie worked so hard, he sweated it out.

That’s what America is all about, says a character in Arthur Miller’s "American Clock." People work hard in order to get rich. That’s all there is to it.

Bobbie worked hard. But he didn’t get rich. He seemed to do it just to do it, like the field of tobacco he kept planting long after other farmers had given it up as unprofitable.

"Just a bad habit," he said.

The dead presidents didn’t seem to interest him enough to take his business seriously. He hired drifters and ne’er do wells. He dried them out when they needed it, and occasionally bailed them out of jail.

Slavery went out of fashion in the tidewater area more than a century and a half ago – but Bobbie still treated his workers a little like slaves. He provided houses and tried to work them night and day. But the workers – white and black – acted like slaves too…they dodged the boss, skulked around, and wasted the equipment. Bobbie probably rarely got a full day’s work out of any of them.

Once, I remember, Buddy – a skinny man with a full, white beard – did not come out of his house for a week. Finally, Bobbie broke down the door and dragged him out. Buddy was a mess…and occasionally needed straightening out.

But now it is Bobbie who is a mess. He has not come out of his house for the last 5 days.

"I called Alice [his wife], and asked if I could stop in and see him…I thought I might cheer him up," my cousin reported. "But Alice said he didn’t want to see anybody…

"Too bad about Bobbie," he went on…"but it’s just not the same world down here…"

I drove down to Southern Maryland from Baltimore on Saturday morning. I don’t get back there very often. Maybe I shouldn’t get back there at all.

Everything has changed.

People in the tidewater regions of the Chesapeake resisted change the way the Romans resisted the barbarians. For centuries they held them at bay…and then, suddenly, gave way.

There was something almost un-American about the area. America is a place where people re-invent themselves. Arriving from the Old Country, immigrants learned a new language, changed their names, and often began a new profession. No matter what station in life they may have occupied in Europe, here in America they could be whatever they wanted to be. Within a few years, there was hardly a trace of the old country left.

But the tidewater area had been forgotten by time…and place. Overlooked by the new democracy and the throbbing cities of new immigrants, life went on as it always had. It was as if a piece of England had drifted across the Atlantic and attached itself to the North American continent. Linguists say the local accent is derived from a 17th century dialect of England’s southeast coast. And many of the family names can be traced to the same region.

Here, the weather is more extreme than in England. Hot and muggy in the summer, cold and wet in winter – whether you are out on the water or out in a field, you sweat or shiver according to the season. For 300 years nothing much changed at all. The two mainstays of the local economy – oysters and tobacco – were handled in much the same way in 1960 as they were in 1660. Whether you go out on the bay and dredge up oysters…or out in the field and cut tobacco, it is hard work that has changed little over the years.

People did not seem to invent themselves on the banks of the Chesapeake. Instead, they were shaped by the place and the culture they found there, developing their own instincts in harmony with the land, the bay and the seasons. Their work was like bees’ work – not something they did for money, because there wasn’t much money in it. It was not even something they chose to do…just something people did.

The local people were suspicious of change. Maryland’s tidewater regions sided with the British in the Revolutionary War…and then with the South in Lincoln’s war. My people seem to have a knack for losing causes…

In the 1960s, though, the sweating stopped. In came a new breed of resident to the Tidewater area. This was the American Babbit – a man whose station in life was fixed neither by the tides, the seasons, religion or his land holdings. He might have moved from Chicago or New York…or up from Atlanta, following a job. He built a different kind of house – one with air-conditioning. He worked neither the land nor the water…often as not, he held a job in Washington, D.C. and commuted there every day.

And when he went to church, he chose the church like he chose his day-care center – for convenience. A few years ago, such a thing would have been unthinkable; you didn’t choose a church back then; it chose you. If you were born into an Episcopalian family, you went to the local Episcopalian church. That was all there was to it.

But the new immigrants brought new ideas. And strangely, for a race of people who had all re-invented themselves…all the ideas were the same. You can be whatever you want in America. But the newcomers seemed to have invented themselves in exactly the same way… They dressed in the same casual clothes. They built the same houses. They drove the same SUVs to the same jobs in the same suburbs.

The drab sameness of the new arrivals must have depressed Bobbie Ray. It was the baroque quirkiness of the old families and old customs that gave the area life. Cap’n Earl, for example, had been kicked out of his house by his family and took to living in a shack at the end of a pier in the West River. There he sat…drinking beer and tossing the empties right into the water. But when the sailboats came and the marinas took over…Cap’n Earl had to go. His shack had no plumbing, no zoning approval, no permits, no waivers, no nothing. And, chucking a beer can in the bay is now a federal crime.

The immigrants had two other things that the local people rarely had – money and time. Instead of slaughtering hogs or painting oyster boats or stripping tobacco, they had the time to wash their cars in the driveway. What else could they do?

Oh yes, they had time to make the area better.

This is what finally got to Bobbie Ray. Much of his land was declared "wetlands" and his farm – where he kept his piles of rusting equipment – was thought to be an eyesore. And oh, uh…though he’d been there for as long as anyone could remember, Bobbie never got around to getting a permit for his "non-conforming use" of the property. Bobbie would happily sweat all day…but standing in line at the air-conditioned zoning office was more than he could bear.

The new economy of the tidewater area demands a new kind of work. Now you can make money, but neither by tilling the soil nor trolling the bay. Now you make money by subdividing tobacco land, selling easements to the land preservationists and planting houses in every gully.

And, oh yes, you have to promise the state that you’ll never again put a tobacco plant in the ground. The state will pay you for it. No kidding…

Bobbie never had the stomach for that kind of work.

Bill Bonner
February 19, 2002 —  Baltimore, Maryland

The U.S. financial markets took the day off for Dead President’s Day. But most global markets were open for business.

So, Eric, for the faithful, what happened around the world yesterday?

******

Eric Fry from New York…

– The Nikkei continued its losing ways, falling 33 points to 10,048. In Europe, the French CAC 40 and London’s FTSE 100 both slipped more than half a percent. But, all was not gloom and doom…there were a few winners on the world stage. The Thai and Indonesian stock markets both gained more than 2%.

– Back here in the States, 2% gains have become quite a rarity. And now that the Nasdaq has tumbled about 12% from its January 4th peak, the bulls are starting to perspire a bit. Gone is the bravado borne of the Nasdaq’s robust 40%-plus rally off the late September lows. Anxiety is understandable.

– Maybe September 21st was not THE bottom, but merely a short-term trading low. Maybe reported earnings aren’t all they are cracked up to be. And just maybe, despite assurances to the contrary from numerous Wall Street pundits, the stock market CAN fall three years in a row for the first time since the 1930s.

– And what about the so-called economic recovery? Is it fact or fiction? Do the hopeful economic statistics we keep reading about testify to an economy on the mend, or – like so many defective pregnancy tests – are they merely throwing off a bunch of false positives?

– Maybe there’s no bouncing baby recovery gestating in the belly of our economy after all.

– Consider this disconcerting little factoid: "Phantom job growth showed up in the national jobs data for January," according to the New York Times. "For example, retailing jobs dropped by almost one million, but after seasonal adjustment, they rose by 62,000. And the finance and real estate sector showed a 32,000 job loss, which was seasonally adjusted up to a 9,000 job gain."

– Phantom job growth might be enough to cause Abby Cohen to raise her earnings estimates on the S&P 500, but phantom workers don’t shop much. What’s more, phantom workers hardly ever show up for work, which explains why many office buildings are looking rather ghostly. (Remember Houston’s "see-through" buildings in the mid- 1980s?)

– "U.S. office buildings last year experienced the sharpest jump in vacancies ever recorded," the Wall Street Journal reports. "Office-building vacancies jumped to 13.5% in the fourth quarter in the nation’s 72 largest markets from 8.3% a year ago, according to a new survey by Torto Wheaton Research."

– Not surprisingly, businesses that require neither additional workers nor office space tend to borrow very little money.

– "Compared to last year, business loans are down by around 7.7%, the steepest year-to-year decline by business bank loans in the last 30 years," Moody’s reports. "Over the past 12 months, the size of business bank loans outstanding has almost continually contracted, posting a month-to-month loss for all but one of the past 11 months."

– Why should businesses borrow money to invest in new capacity when they have too much of it already? Both capacity utilization and industrial production continue to sink.

– "What is wrong with January 2002’s 74.2% rate of industrial capacity utilization isn’t so much that it is the lowest rate since April 1983," says Moody’s John Lonski, "but rather that it is the failure of capacity utilization to bottom."

– Capacity utilization’s slide is hardly a mystery. The downwardly sloping industrial production trend provides little incentive to add new capacity.

– "Industrial production’s protracted slide completed its 19th month in January 2002," Moody’s reports. "After peaking in June 2000, industrial production has since declined by a cumulative 7.3%."

– Consequently, capital spending collapsed 11.9% in 2001. Is a classic vicious cycle underway?

– "The operative view in financial markets is that this is just another cycle," Stephen Roach observed recently. "The risk is, it’s not." (Thanks to Joshua, the ever- provocative and insightful contributor to the Daily Reckoning discussion board for bringing Roach’s comments to my attention).

– Roach continues: "I remain convinced that the U.S. economy is only in the early stages of what could turn out to be a protracted post-asset-bubble shakeout…It then follows that a U.S.-dependent global economy will have to face the repercussions of America’s post-bubble adjustments for years to come."

– Tech stocks, anyone?

******

Back at the DR HQ…

*** Perhaps showing their own bit of Schadenfreude, the Mercury News – considered "the newspaper of Silicon Valley" – reports "commercial rents for prime office space (in New York City) have plummeted – by as much as 50 percent in some high-profile buildings. Newspaper ads are going unanswered, landlords are offering more incentives and tenants are getting calls from brokers encouraging them to look for better deals elsewhere."

"You can’t just dwell on the negative," the SMN quotes a 14th-floor office worker. Still, colleagues on higher floors in the Empire State Building – now Manhattan’s tallest skyscraper – are getting out fast. The building’s vacancy rate has tripled to 15 percent since the Sept. 11 attacks.

*** Bill’s off the grid in Nicaragua…but do you suppose he’d let a little detail like that get in his way?

Naaahh…

More Daily Reckoning below.