Political Realism

I believe we are on an irreversible trend toward more freedom and democracy - but that could change.
-- Dan Quayle (1947 - )


One of the problems in dealing with the current realities is that it is often not pleasant. A Hobson’s choice comes to mind. But, as we all know, not making any choice at all is giving way to a degree of pessimism that makes this blog seem positively serendipitous. Remember, though, if we can’t get what we want, we may get what we need.

There is no secret, for example, that Bloomberg, who is both arrogant and narcissistic (basic requirements for politicians) is probably qualified to lead in these parlous times. Of course, he’s not the only one. Tony Avella is an activist who inspires trust. Bill Thompson is the Comptroller for God’s sake, he knows numbers. Weiner is a hard worker.
Even Chris Quinn, who helped Bloomberg and may now regret it, seems a hell of a lot more human than he does. She’s tough, talented and real.

The fact that Hi-Rise Mike is worth only $11 Billion now instead of $20 Billion that he was approaching during the bubble, simply means that he is feeling a bit more human. But, why bother running again? Oh, right, the narcissism.
There’s also the problem that, as one insider described, “he’s a prude.”
Nightclubs are closing as a result of phoney drug busts, Disney has moved in, Dominatrices have been arrested or moved out (courtesy of Feinblatt who runs the Mayor’s Task Force) – and Sin City is now Disneyland East. Convictions are easily obtained because the money dictates, along with his underling Ray Kelly's corrupt cops, just who gets real justice. In two recent busts of NYC Dungeons, for example, the cops who “investigated” and extensively surveilled each had four sessions of roleplay on the taxpayers dime before they arrived with a battering ram and made off with $100K in cash. Apparently, to Feinblatt, the cop who receives the attention of a young lady in leather is entitled to "hazardous duty" pay scale for numerous visits.
A well-known principle of Criminal Justice, were you to ask a reputable defense lawyer, is that cops perjure themselves but judges accept anything they say in State Court. But even deep pockets do not ensure Justice when the prosecutor is holding all of the cards.

So, the money has cleaned up Manhattan and soon the Death of Fun will be our new moniker instead of Fun City. But Manhattan used to be, well, Manhattan. Now, Daffy Duck will excite the tourists from Idaho.
The real problem for all of us is that what we used to accuse the Mob and criminals of doing (lying, stealing, cheating and making a mockery of justice) – is now what prosecutors and the cops do when politicians want something accomplished quickly. They go directly from political decisions to fait accompli – no constitutionality or messy legal questions in between.
Giuliani was bad but at least he had charisma. His father was a mobster and he understood.

So Bloomberg will now be re-elected because he has managed the media situation and can afford to cram it down our throats. And, never expect to get past Ray Kelly’s dislike of bloggers for press credentials. Once on the ballot, the PR and the pressure will continue and we’ll have four more years to sanitize Manhattan. We all know that we’ve been managed.
But, let’s not allow each other to believe that this is anything more than a high-level con job. In The Grifters, it was called “the long con.”

A footnote to the Kennedy Senate matter brings us to a few salient points.
First, the fix was in once the Kennedy clan supported Obama and no doubt contributed to putting him over the top. That negotiation was clear.
Caroline may not be the most experienced candidate but, irrespective of the royal family fantasy, she wants the job, is bright and connected and is also NOT corrupt. We should appreciate the clean linear quality that is far from Joe Kennedy but not so far from Robert Kennedy. Idealism was their hallmark. While the brothers paid the price for moving off Joe’s script, and contrary to Henry Stern’s opinion, Robert was not a New Yorker and knew little about our state when he ran. It was simply an available Senate seat. It was a vehicle and he almost immediately became a national figure who did little for our state. Of course, most of us didn’t mind since he was going to replace JFK for many of us.
The notion that Bloomberg is a Kingmaker in this matter is insulting. He may be waiting in the curtains (perhaps arranging a late curtain call when Caroline moves up the ladder) but Teddy sealed the deal earlier on.

Historic Shifts

It's a recession when your neighbor loses his job; it's a depression when you lose yours.
--Harry S Truman (1884 - 1972)

One of the problems with the blame game affecting the views of our contracting economy is that we fail to recognize the seismic shifts that occur among populations ranging from aging baby-boomers to new births – as well as flows of capital, business cycles and markets. The ebb and flow of capital and degrees of risk and risk-avoidance – as well as major financial cycles -- are outside of our control. Some of these sometimes generational factors are completely independent of toxic financial vehicles likes SIV’s and CDO’s and whether Bear Sterns or Lehman Brothers have taken the pipe. The shell games going on in corporate America are as much a result of the cyclical forces as they may be the cause of current pain. Even the Madoff fiasco is a symptom, not a cause. In short, nothing that the Federal government or we can do will alter what is about to happen.

We are entering a deep Recession that will become a Depression by 2011. During that segment in our history there will be a stock market rally lasting for perhaps several months, a very brief improvement in lower end real estate numbers and a resurgence of inflation – but will shortly be followed by an even more calamitous collapse.

Knowing this may or may not prevent the S.E.C. or D.A.’s office from trying to blame individuals for what is about to happen. But, it’s important to know that there is no correlation between specific events and the macro cycle we now face. The events we are about to witness are cyclical and inevitable. Those macro events currently affect the evaporation of capital, the downsizing of business and the deflation (and inflation) about to ravage the economy. The inflation, which will occur within the next year or two, will be short-lived and prepare us for the precipitous drop shortly thereafter.
Credible predictions for the local economy in Manhattan and the Hamptons see the loss of 4 to 5 million jobs, a reduction in the number of retail companies and stores through closure or bankruptcy, and a further deflation in the value of real estate. In the Hamptons, home prices will have fallen by 50% by the end of 2010. According Harry Dent author of The Great Depression Ahead, in order to arrive at values consistent with long term trends, real estate must drop between 40 and 60 percent from 2007 values in order to attain balance.

In Manhattan, where prices have just started to drop – meaning, that brokers have finally admitted that it is happening – the slide has just begun. Projects have stopped in some locations and commercial real estate will deflate at an alarming rate – which will cause bankruptcies and rents to drop precipitously. Harry Macklowe’s tribulations are a symptom of what will happen to many major developers and landlords.
Manhattan apartment rentals have already started to drop and we are only at the beginning of what will become a full-blown Depression by the end of 2010 to 2011. The reduction in services in Manhattan will be difficult to believe and the quality of life stemming from the relentless fines and fees that Bloomberg resorts to will sour any positive feelings towards his Savior image. A respite to this scenario may not occur until 2013 to 2016.

In the Hamptons, an economy that is entirely built and paid for on the backs of New Yorkers who buy summer homes and investment property, the only question is whether a Chapter 11 is in their future. In recent months, one broker described his business succinctly, “the phone doesn’t even ring.”
A broker in East Quogue reported that even the houses in the $300,000 to $500,000 range are not selling. Many McMansions have already dropped by 50% in value (if not price) – and have further to go on the downside.
There will be a modest upsurge in Hamptons real estate activity as people try to rent a summer house and pool their money to share it – as the Code Enforcement police (who will be getting pink slips along with many more of the Town of Southampton’s employees this year) try to fine and criminalize this last and only form of income.
Regardless of how Southampton Town or East Hampton Town treats this brief shot in the arm for the summer season, after the Spring “selling season” is over the slide in that economy will start in earnest. The deflation in real estate will be the new long-term trend – along with the tax base that once propped up the local economy. The brief resurgence of $200/barrel oil (which will collapse again to $30) will exacerbate local conditions that are made worse by with a corrupt political bureaucracy. The
flow of easy money in the Hamptons is gone and this will end decades of political incompetence.
Look for oppressive attempts by the local governments to squeeze money out of tourists and property owners who will abandon properties in growing numbers.

While the towns in the Hamptons might seek a political solution by reaching out to New Yorkers in order to solve the impending disaster by working together, that will not happen. Lip service was once given about hiring a Public Advocate to bring New Yorkers – who pay for the economy – into the local political process but until the vote is garnered that would not happen.

Sell all real estate if you can and buy 30-year Treasury Bonds. It will be a long and difficult ride. Even buying food (which will escalate in cost) will become an issue for many families.