Sin and Architecture

“It’s a sin,” says my old friend, Francois.

But Francois refers to neither Alan Greenspan’s betrayal of the free market and the gold standard, nor to George W. Bush’s back-stabbing of free trade. Francois is talking about architecture.

I only bring it up, dear reader, because my office is less than half a block from the Walters Art Gallery in Baltimore. I pass the art gallery on my way to breakfast at the Cozy Corner, where you can get a full American breakfast for only $5.99 and chat with Ms. Kim, the Korean proprietress, for no extra charge. Poor Ms. Kim. Her little restaurant faces the art gallery.

Ms. Kim, I should point out, is a woman of some taste and cultural discernment. On her radio, one is likely to hear Chopin or Sibelius. That may be why she has so few customers. On an average morning, I can take a seat in a rear booth, sliding onto the taped, naugahyde seats like an airplane coming in for a rough landing, and am assured not only of calm…but Ms. Kim’s complete attention. There are no lines to stand in. There are rarely any other diners.

I wanted to gauge Ms. Kim’s sentiments concerning the Walter’s Art Gallery, but I didn’t have the heart to raise the question. For she could not help but be appalled and disgusted. No sensible person could feel any differently.

“What’s that?” guests say when they first come to the neighborhood.

“It’s the Walters Art Gallery,” we explain.

“Oh, of course.”

Of course, because what else but an art gallery would want to trap itself in such ghastly quarters. The typical observation is that “it looks like one of Stalin’s prisons.” But such remarks merely reveal one’s ignorance. Stalin’s prisons were masterpieces of grace and beauty compared to the Walters.

“Is it finished?” out-of-towners naively ask. They don’t realize that the unfinished concrete slab look is very much ‘in’ – in some circles.

“It’s a form of sin,” Francois repeats.

Architecture is no different from central banking, Francois believes. There are essential rules and principles that must be respected. These rules are not declared by edict or voted upon. Instead, they are like common law and common language…vernacular rules that arise out of trial and era over many, many generations. Of course, architectural students at the Yale School like them no more than ambitious central bankers like the gold standard. They are limitations on what one can get away with.

“It’s a form of arrogance,” Francois once told me. “People think they are so smart they can ignore the lessons of thousands of years. They think they don’t have to learn the rules…that they can invent something better without even studying or attempting to understand why things are they way they are.”

The ancient Greeks might have built public buildings to look like giant sun-baked cakes of mud – with bars! But those were not the shapes and styles that were preserved, imitated and embellished. For more than 2,000 years, the classical motif was the template with which all serious architects began. Thereon, they improvised, doodled and improved – according to the materials and resources available to them. But the gold standards – the classical rules and proportions – were rarely abandoned…and never with much success..

But when they built the Walters, they paid no attention to the classical rules. And now poor Ms. Kim; every time she looks out her window, she sees the results.

A year ago, her spirits lifted. She looked out her window and saw scaffolding. The whole neighborhood seemed to breathe a sigh of relief. Not only was the scaffolding infinitely more attractive than the concrete dam-like faundefinedade of the Walters, it was taken as a herald of a change in trend.

Perhaps the bull market in bad architecture, which had begun early in the 20th Century with Corbusier and continued through Edward Durrell Stone, whom Forbes credits with having designed one of the 10 ugliest buildings in the world (Two Columbus Circle in New York) – was coming to an end.

Who designed the Walters, I do not know. But he seems to have been inspired by another of the winners on the Forbes list of the world’s ugliest buildings. On a trip to London, dear reader, you may have gone to the theatre at the Barbican Centre. It is a whole area that bears no resemblance to the rest of London…or to any civilized place.

The Sunday Telegraph described the Barbican Centre as “a stern place of massive pillars, rough-tooled concrete, arches and counter arches.” But, typically, the Telegraph understates the Barbican’s grotesque mocheness. All you see is brown concrete – with the grace and beauty of an aging female weightlifter and the charm of an armed tax collector.

“You must innovate,” says Sylvie, my French teacher and philosopher, “but you must also respect the vernacular wisdom of preceding generations. It is the balance that is important.”

Not until the 20th century would people have dared to spend $219 million putting up the Barbican Centre. There was enough ugliness in life already; and no urge to add to it with public architecture. But the temptation to ignore the lessons of the past became irresistible in the 20th century. People seemed to come to the conclusion that bourgeois life – with all its manners, rules, free trade, and gold standards – was a limitation they would be better off without. In art, architecture, central banking and politics…people threw out the evolved wisdom of centuries – and built monstrosities.

Looking out at the scaffolding, Ms. Kim hoped that the age of monstrosities was over. After all, the Soviet Union had collapsed. And modern art is now being laughed at in smart circles. But managed currencies are still a relatively recent innovation. And concrete can last longer than the people looking at it.

When the scaffold came down a few months ago, Ms. Kim was disappointed. The concrete was still there – with still no trace of style or charm. But at least, Chopin still issued from the radio in the Cozy Corner, an echo of the grace on which the sun set more than 100 years ago…and a perhaps a reminder of the sunrise to come.

Your editor,

Bill Bonner
May 31, 2002 — Baltimore, Maryland

The dollar down again. Gold held steady. DDGUnchanged.

How far will the trend go? How fast?

We would feel better about this were it not for two things:

First, it is too obvious. Foreigners are losing money on their U.S. stocks. Plus, they’re taking a loss on the dollar. What’s more, in the foreigners’ eyes, the U.S. seems to have fallen from grace, as Barton Biggs put it. Accounting scandals, spectacular bankruptcies, and FBI failures have taken their toll. What else can the dollar do but go down? Mr. Market rarely reveals himself so fully, we note warily.

Second, a falling dollar makes our drinks at the Paradis more expensive. Here at the Paris headquarters of the Daily Reckoning we, more than perhaps anyone, have enjoyed the results of a strong dollar. We could get a decent bottle of wine for only a few bucks and our rents were reasonable. So, we’re now anticipating a lower dollar – but without much satisfaction.

Eric, give us the latest from the Big Apple…


Eric Fry, reporting from New York:

– Two years ago, with the Nasdaq hovering around 5,000, Wall Street’s well-heeled professional investors agonized about cashmere – whether to buy a traditional three-ply Scottish pullover from Bergdorf’s, or whether to go for something a little more whimsical from “Tse” in Greenwich Village.

– Today, the moneyed set is much more concerned about Kashmir. Yesterday, rumors of heightened hostilities in this distant, desolate region between India and Pakistan drove the Dow more than 100 points lower by midday. But the blue chips recovered somewhat to finish the day with a slim loss.

– The Dow slipped 11 points to 9,912, while the Nasdaq gained about half a percent to 1,632. Gold snoozed through the session, ending the day exactly where it began. The dollar, however, fell to a new 16-month low against the euro.

– A moment of silence please, to mourn the passing of the “celebrity analysts.” We will miss them. We will miss their bravado, their predictably absurd predictions and their shameless duplicity. We will miss the entertaining style with which they took the “research” and the “analyst” out of “research analyst.”

– Do you think these celebrity analysts were even able to read an income statement or a balance sheet? We may never know. But boy did they ever know how to boost their personal income statements and balance sheets by selling “crap” – isn’t that what Henry Blodget called it? – to the public.

– “When the shares they touted doubled and redoubled, the once-lowly researchers found themselves transformed into household names,” Crain’s observes, “and into highly prized assets of their investment banks. That’s because their employers quickly realized they could grab huge underwriting fees by promising corporate clients coverage – often positive – by their high-profile researchers…In 1999, analyst Jack Grubman drew so many telecoms into Salomon Smith Barney’s investment banking fold that the bank rewarded him with total pay of $25 million.”

– But how the world has changed!

– “Instead of bringing in business these days,” says Crain’s, “star analysts have become magnets for woe in the messy and hugely costly form of shareholder suits, as well as regulator investigations.”

– So who will entertain us now? The dour class-action attorneys lining up to sue Wall Street and its analysts? The somber regulators promising reform, but delivering none? The vengeful legions of semi-complicit victims seeking retribution for their losses? Oh to have our celebrity analysts back!

– Not only is analyst fame a thing of the past, so is analyst fortune. “The settlement reached last week between Merrill Lynch & Co. and New York State Attorney General Eliot Spitzer has delivered the final blow to research analysts,” says Crain’s. “By driving a wedge between investment banking revenues and research pay, the deal will effectively slice through the last bulwark supporting towering salaries.

– “The settlement marks the end of the salad days for Wall Street’s analysts, who had enjoyed seven- and eight-digit wages, frequent TV appearances and rock-star status. Without the huge fees they formerly earned from helping investment bankers land deals, says Alan Johnson, a top Wall Street compensation consultant, analysts’ pay could ‘drop like a stone.'”

– According to Johnson, the run-of-the-mill celebrity analyst “earned” an average of only about $800,000 last year, or less than half the $2 million average of the year before. And the salaries are still heading lower. In 2002, thanks to the bear market and post-Spitzer constraints on compensation, the average analyst salaries could push “as low as $400,000,” according to Mr. Johnson.

– “That’s not exactly penury,” says Crain’s, “but it may make it mighty tough to keep up payments on all those Park Avenue duplexes and McMansions in the Hamptons.” As disenfranchised investors turn away from the Wall Street brokerage firms that have burned them, they are turning toward the investment professionals who provide independent research or investment guidance.

– When wearing my Apogee Research hat, I have noticed a definite uptick in demand for independent, objective research. Even some mutual fund managers – traditionally fans of Wall Street research – are clamoring for independent equity analysis. The demand for “short-side” research of the type Apogee produces is particularly acute, even from investors who don’t sell short.

– One friend of mine, who runs a stock-loan desk for a major Wall Street firm, tells me that the money managers he caters to are very hungry for short-side research. That’s because they know it is independent and honest. So far, no one has asked me for my autograph. But when and if short-sellers start to become celebrities, it will be time to buy US stocks again.


Back in Baltimore…

*** “It’s amazing, almost unbelievable,” said a friend. “A couple of years ago, I could have bought a big, nice house in Mount Washington (a not-so-bad section of Baltimore) for $200,000. I tried to buy the same house last month for $376,000 – and got there too late. The realtor told me they had three offers the day they put it on the market.”

*** What’s going on with Baltimore real estate? We don’t know, but for the first time in 20 years, we wished we owned more of it.

*** “The apartment smells terrible again…” Maria reported to me on the phone this morning. “Mom got some of that awful cheese…”

*** Uh oh, it’s the cheeseman…I better rush back home while I still have one…

*** “Didn’t you get my email?” asked my partner, Michel. At 5 am this morning, I received an alarming call from Europe.

*** “Something catastrophic has happened,” Michel explained. “There was a fire at our depot…the entire place was burned down, along with our entire stock… millions of dollars worth of books, our complete inventory. We have no more books to sell. As of today, our sales are zero.”

*** Sometimes you get good news. Sometimes you get bad news. On a scale of 1-10, this was a 10 in the bad business news category.

*** Not all of our books were best sellers. Some obscure titles, with fragments of text attributed to an ancient Greek no one ever heard of, rarely sold at all. But Michel loved every one of them – especially those no one would buy.

*** “I’ll tell you the full story on Wednesday when we have lunch…”

*** Life goes on.

The Daily Reckoning