“I’M ALFRED E. NEUMAN, AND I’M VOTING FOR SCOTT LEE COHEN,” Part II

9/30/10

A poll was released yesterday showing that Bill Brady and Pat Quinn are running neck and neck in the race for governor of Illinois. Bill Brady’s former big lead has evaporated as Scott Lee Cohen has attracted a percentage of respondents approximating Brady’s former leading margin. The local punditocracy is scratching its collective head, trying to figure out what happened. They could save a lot of time and effort, and have been way ahead of their peers, by simply reading my 9/5/10 post “I’M ALFRED E. NEUMAN, AND I’M VOTING FOR SCOTT LEE COHEN.”

IT’S ONLY CORRUPTION WHEN PEOPLE NOT NAMED QUINN DO IT

9/30/10

This morning’s Chicago Tribune reports that Governor Pat (no relation) Quinn has received political contributions from 77 of the people he has appointed to state task forces, agencies, or boards. The Tribune, desperately clinging to the “Pat Quinn as the Reformer on the White Horse” image it has done so much to cultivate for at least the last thirty years, partially exonerates this (at least) appearance of impropriety by pointing out that those 77 appointments were less than 10% of the appointments Quinn has made and that “many of the donations are (sic) smaller than the $25,000 contributions from appointees that became a pattern under former Governor Rod Blagojevich.” So it looks like the Tribune has given us a new standard for good government in Illinois, at least as it applies to Pat Quinn: To be not as corrupt as Rod Blagojevich is to be the very embodiment of political reform in the state of Illinois.

Even more entertaining is Governor (no relation) Quinn’s defense of taking money, in some cases, big money, from people who were appointed to various agencies or commissions or who saw their relatives appointed to such posts. The Governor told the Tribune, in response to the cited article that “I never have, I never will” give any consideration to campaign contributions when making political appointments. I guess that settles it then; he says he’s not corrupt, so he must not be corrupt. After all, he’s Pat (no relation) Quinn. But the governor goes on to elaborate:

“I had to appoint people…to positions of importance. And I wanted to find the best people, and many people who have helped me politically, I’ve known for years, decades, and they support me because they believe in my approach to government.”

Big Quinn contributors chime in with the same defense. Bill Brandt, who was donated $99,000 to the Governor and was reappointed to Illinois Finance Authority by Quinn after having been appointed by the aforementioned Mr. Blagojevich and whose wife was appointed by Governor (no relation) Quinn to the Illinois Arts Council argues:

“We’ve been friends for nearly half a century. I used to give him a ride home from high school. I’m glad I did.”

Steve Gilford, who wrote a check to the Quinn campaign for $10,000 just before being appointed to the state board of education and wrote another check for $5,000 shortly after the appointment, argued

“I have known Pat since 1970. I have contributed to him yearly, forever.”

Note that these are the types of board appointments, especially the Illinois Finance Board appointment, that led to so much trouble for the likes of Tony Rezko, Stuart Levine, Chris Kelly, and Rod Blagojevich. But those guys were corrupt politicians, and we’re talking Pat “Mr. Smith Goes to Springfield” Quinn here, right?

Doubtless some of these explanations are legitimate; Brandt and Gilford are old friends of the Governor who have supported Pat (no relation) Quinn for years. Qualified candidates for certain positions are people who also happen to be in the habit of making campaign contributions for a number of reasons that may include genuine affinity rather than a “political groupie” mentality or a desire to leverage one’s contributions or connections into a big payday for one’s self. And even if political appointees’ winding up with big jobs is not entirely legitimate, it’s just the way business has been done in this state for as long as anyone, living or dead, can remember. But would the Pat Quinn who said, shortly after becoming governor

“The source of corruption over and over again has been money, and we have to deal with that issue.”

and who has spent his life pointing his fingers at the corruption, real or imagined, of other politicians have accepted the above explanations from those he so enjoyed skewering to his own political advantage? Yes, that question is entirely rhetorical.

Pat (no relation) Quinn’s taking money, often big money, from people who wound up with big jobs in and around state government is little more than business as usual in this state. The only reason that it is especially irritating in the case of Pat (no relation) Quinn is because he has made a career out of smarmy sanctimony directed at politicians who were no more corrupt and/or disingenuous than he is proving to be.

“TO SERVE MAN”

9/29/10

Today’s Chicago Tribune is festooned with a page 1 article regarding the ambiguity regarding State Treasurer and Senate candidate Alexi Giannoulias’s departure date from the formerly family owned Broadway Bank. It seems young Alexi has been telling everyone he left the bank in 2005, which would put a little distance between him and the bank’s many foibles, including most especially the huge loan the bank made to Tony Rezko in February of 2006. However, young Alexi told the IRS that he left the bank in 2006, allowing him to take a $2.7 million tax deduction in 2009, obviating the need for young Alexi to pay taxes that year. The article goes on to tell us about the elaborately choreographed song and dance Mr. Giannoulias has been engaging in since this discrepancy has made itself into the public domain, which consists primarily of saying that he was working at the bank in 2006 but was not really working at the bank in 2006. One supposes it depends on what the definition of the word “work” is.

The main story is interesting enough, but, as is my wont, I found more compelling a line in the article that is ancillary to the main story. According to the Trib story, young Alexi’s Senate campaign website offers the following explanation of his decision to leave the bank at the age of 30 to pursue the Treasurer’s office:

“It was because my father instilled in his sons the importance of helping others that I decided to leave the bank in 2005 to pursue public service.”

Hmm…

This statement leads to a number of questions. Isn’t banking, done properly and honestly, a means of “helping others”? Apparently, young Alexi doesn’t think so, but one would think that making loans, providing a secure place to park one’s money, clearing checks, and providing financial advice would be a wonderful way to “help others,” at least as helpful as anything a politician, even a politician in such a vaunted position as the State Treasurer, can do for people. Is holding public office the only way to “help others”? From the above explanation of his decision to ditch the banking business for the glamour of public life, young Alexi apparently thinks so. If the senior Mr. Giannoulias shared his son’s apparent belief that banking does not involve “helping others,” that “helping others” is the exclusive domain of the public sector, and he placed such a high priority on “helping others,” why did he continue in the banking business? Why didn’t he, in his ardor to “help others” pursue elected, or appointed office?

Perhaps the “done properly and honestly” stipulation in the first sentence of the prior paragraph does not apply to Broadway Bank, and/or perhaps young Mr. Giannoulias is feeding us the typical bull excrement that emanates with remarkable regularity from his (and, to be fair to young Alexi, most politicians’) campaign(s) and his pursuit of public service was more a way of gratifying his own outsized ego than a good opportunity to “help others.”

BETTER THAN WHITE CASTLE TASTE TESTER?

9/28/10

People who don’t live in Chicago, or even those who live in Chicago but don’t follow politics closely, have to be asking themselves why Rahm Emanuel, the presidential chief of staff who seemingly wields so much power on the national stage, would want to leave his position at the ear of the leader of the free world in order to run for mayor of Chicago. (Let’s assume for the moment that, should Mr. Emanuel leave the White House, he would be doing so voluntarily, which may not be the case should the Democrats have a tough November this year.) Those of us who have bitten by the Chicago politics bug think this is a silly question; we agree with Rahm Emanuel, who, as David Axelrod said, “…believes that being mayor is the greatest job there is.” The incumbent, by the way, completely agrees. Further, I have gone so far as to say, in my more spirited moments, that the job of mayor of Chicago is the only job worth having in politics in Illinois. That, however, is overstating the case. Being the governor is a job worth having. It isn’t nearly as good as being mayor, but it’s a good job, perhaps not for the next four years, but a good job nonetheless. But Mayor of Chicago? That’s where the real power lies. And the job provides plenty of job security; in today’s economic and political environment, how many other jobs can one hang onto for twenty plus years?

On second thought, however, maybe all of us should calm our enthusiasms and look past the job as currently constructed by the incumbent and examine the design of the job as it exists in the abstract.

The city of Chicago operates under a “weak mayor, strong council” constitution; i.e., legally, the real power rests in the city council and the mayor’s office is a relatively weak position charged with executing the decisions of the council. This setup has been turned on its ear over the last 80 or so years, but that’s the larger point I’m trying to make: the job of mayor of Chicago is “the greatest job there is” only because of the two giants named Daley who have held it for much of the last fifty five years. Further, one can very reasonably argue that Richard I reigned in an era when power sprung not so much from his control of the mayor’s office as from his being the Chairman of the Cook County Regular Democratic Organization, a job he assumed two years before becoming mayor. By the time Richard II came along, the job of Party Chairman had paled almost to insignificance; few people know that the current holder of that job is 31st Ward Committeeman and Board of Review member Joe Berrios, and those who are aware that Mr. Berrios is nominal Party boss only know that because his party position is ancillarily mentioned in reports of his current race for Cook County Assessor. Richard II declined to run for party boss when he became mayor, explaining that he wanted to concentrate on government, not politics. But the real reason, one suspects, that he decided not to run for County Chairman is that he saw that the party office was, if not worthless, certainly not worth the political flack holding it would involve. Such political prescience, and a cabal of very smart advisors, demonstrates why Richard M. Daley has been such a powerhouse in the mayor’s office.

Note that the mayor’s office that is seemingly so attractive was not such a lofty perch for the likes of Jane Byrne, Mike Bilandic, and Gene Sawyer. Harold Washington may have been on the verge of turning the mayor’s office into the kind of power base that Richard M. Daley eventually made it. Mr. Washington had resoundingly won reelection and had achieved a peace of sorts with Ed Vrdolyak, Ed Burke, Dick Mell, and the like. So he was nicely positioned to make the mayor’s office the mythic position it has since become. But we will never know because of his untimely death.

The point is that the being mayor of Chicago can be “the greatest job there is.” It can also be a source of misery, ridicule, and public exposure of one’s impotence and incompetence. It depends on the person who holds the job. That, in relatively recent times, two master practitioners of the political craft have made the mayor’s office into what looks like a great job doesn’t mean that such attractiveness is inherent in the position.

“BANANA SPLIT FOR MY BABY, A GLASS OF PLAIN WATER FOR ME…”

9/23/10

Usually when we talk about “splitting the vote” in Chicago or, to a lesser extent, in the state of Illinois, we are talking about splitting the vote of one of the major ethnic/racial groups in the city so that a candidate of one of the other major ethnic/racial groups can win. This proud tradition goes back at least to Tony Cermak, who successfully split the Irish vote between the “lace curtain Irish” and the “shanty Irish” to get himself, a Bohemian, elected first Cook County Democratic party chairman in 1928 and then mayor in 1931.

Some might argue that we are now operating in a “post-racial” Chicago in which one’s race or ethnicity has little or no bearing on one’s chances for election to office. The most recent evidence proponents of this theory present is two-fold. First, they cite Toni Preckwinckle’s winning the Democratic primary this year for Chairman of the Cook County Board in a field that included three black candidates (including herself) and one white candidate. But bear in mind that the other two black candidates occupied a continuum running from hopeless (Todd Stroger) to hapless (Dorothy Brown). The white candidate, Terry O’Brien, was a man of more substance than, say, Bernie Epton, Harold Washington’s “Republican” opponent in 1983, but could not be considered a heavyweight contender. Still, Ms. Preckwinckle carried some white wards and did very well in others, so her election does provide some hope for those of us fervently hoping for a post-racial Chicago.

The other piece of evidence cited for a post-racial Chicago (or at least a post-racial Illinois) is Pat Quinn’s selection of Sheila Simon to replace Scott Lee Cohen as his running mate on this year’s statewide ticket, passing up State Representative Art Turner, who, by any sense of fairness, should have gotten the nod for lieutenant governor by virtue of his having placed second in the primary. Quinn’s selection of Simon, which I thought would have raised eyebrows, if not wails of indignation, in the black community, raised nary a peep. So perhaps Sheila Simon’s selection, with little or no protest, does provide evidence for a post-racial Chicago. But look beneath the surface of the maneuverings that brought Ms. Simon onto the ballot. Some argue, and I think legitimately, that her selection was engineered not to get a downstater on the ballot but, rather, to put a white person on the ballot. Note that, had Art Turner been the lieutenant governor candidate, four of the six Democratic candidates for constitutional office in Illinois would have been black. The powers that be in the Illinois Democratic Party (We’re not talking Pat Quinn here.) saw the downside of such a ticket and insisted on Simon, or someone of similar skin hue, and effectively tamped down opposition that could have arisen in the wake of the snubbing of Art Turner.

So we might be in a post-racial Chicago, and I hope we are, but I’m not betting the ranch on such a development. Splitting the vote, Chicago style, still has to be considered as we approach an historic mayoral election.

Note that splitting the mayoral vote in the old sense of splitting the opposing ethnic group’s vote, either naturally or by introduction of straw candidates, in the Democratic primary and thus winning that primary, and effectively the election, with a plurality is no longer possible. This is the way Harold Washington became mayor in 1983; Mayor Jane Byrne and State’s Attorney Rich Daley split the white vote, allowing Congressman Washington to win the Democratic primary with 37% of the vote. He then went on to squeak by Bernie Epton and in a racially charged general election. Since 1999, however, elections for mayor of Chicago have become non-partisan. Candidates don’t declare their parties and run in a preliminary election in February. If a candidate gets a majority of the vote in that race, as Richard M. Daley has done in every race since the inception of the non-partisan primary, he is elected mayor. If no one gets a majority in the preliminary, an outcome highly likely in 2011, a run-off takes place in April between the top two vote getters.

But this does not mean that the votes of ethnic/racial groups cannot be split, with great effectiveness, under the new format. The talk right now is that if there is more than one strong black candidate in the February election, the vote could be split to the point at which no black candidate makes it to April. But the same could be, but isn’t being, said for the white vote. If there is more than one strong white candidate in the primary, the white vote could be split to the point at which no white candidate makes it to April. This is so because of the breakdown of racial/ethnic voting patterns in Chicago: Hispanics probably constitute about 35% of the population in Chicago but only about 25% of the voting population, at best. The remainder of the vote is split between whites and blacks, with the white vote slightly greater than the black vote. This breakdown can be substantially affected by the level of excitement generated by the race; note the huge black turnout in 1983 and 1987.

Note, however, that both the Hispanic and black votes are likely to be split because of the political demographics of the city. Of the four formally announced candidates in the race so far, three are Hispanic (Chico, Flores, and DelValle) and one is black (Hendon). So the Hispanics are already split, though it remains to be seen how “real” the candidacies of any of the three aforementioned gentlemen will turn out to be. But the real reason that the “Hispanic” vote will likely be split is because there is no “Hispanic” vote. There is a Puerto Rican vote and there is a Mexican vote, but there is no “Hispanic” vote outside the febrile imaginations of white and black reporters. The distinction, ignored by the typical white or black voter, is large in the broader Hispanic community, and also breaks down along geographic lines, with Mexicans being concentrated on the southwest side and Puerto Ricans being concentrated on the northwest side. (This comes up in my book, The Chairman’s Challenge, A Continuing Novel of Big City Politics.) With only about a quarter of the vote in Chicago, the “Hispanic” vote cannot afford to be split.

Similarly, there is a large and growing gulf in the black electorate in Chicago between the west side and the south side. (This, too, comes up in my book, The Chairman’s Challenge, A Continuing Novel of Big City Politics.) Harold Washington was a giant who could bridge that gap; he was also something of a novelty, being the first serious black candidate for mayor (Sorry, Dick Newhouse and Dick Gregory.), there was no alternative from the west side in 1983, and the south side/west side split was not as pronounced, if it existed at all, back then. But there looms no such giant on the horizon, certainly not west sider Ricky Hendon. Perhaps west sider Danny Davis or south sider James Meeks could bridge the gap, but in order to do so, these two huge egos would have to somehow make peace. In fact, one might go so far as to say that Rahm Emanuel’s Tuesday night meeting in Washington with Congressman Davis was an attempt to exploit the south side/west side fissure to Emanuel’s advantage. Would that surprise anybody?

So if the black vote is split and the Hispanic vote is split, the white vote could certainly be split and still allow a white candidate, or maybe even two, to make it to the April runoff. But just as likely is a sufficiently split white vote allowing a black candidate, or maybe even two, to make it to April. In order for a Hispanic candidate to make it to April, he (There aren’t any Hispanic women candidates on the horizon.) will have to forge coalitions, most likely with white voters. This is one of the reasons I still think the name of George Cardenas will emerge before this race is decided; see my earlier posts on the upcoming election.

Of course, this could be meaningless if we are in a post-racial environment. The seemingly active courting of white police officers and firefighters by State Senator Reverend James Meeks, if fruitful, will prove further evidence that we have outgrown our racial fixations. But such strategizing and thinking is both necessary and fun. And be assured that it is taking place in the camps of any serious candidates for mayor of Chicago.

MARK QUINN APPEARING AT NORTH CENTRAL COLLEGE, LISLE STATION MUSEUMS

9/22/10

As I mentioned a few weeks ago, I will be appearing on Wednesday, September 29 at 7:30 PM at North Central College in Naperville to discuss Chicago politics and my two novels, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics. My presentation will take place in Smith Hall in the Old Main Building, 30 N. Brainard, Naperville, 60540. We should have a good crowd, but you could make it better! I’ll have copies of original Chairman for sale; The Chairman’s Challenge is so new that I won’t be able to have copies ready for sale that evening. I will, of course, be happy to autograph any copies of either novel.

I will also be appearing on Saturday, October 2 at 4:00 PM at the Museums of Lisle Station Park to discuss the same topics, with perhaps a bit more emphasis on my books. My lecture will be part of an ongoing series on Chicago books that includes such notable authors as (and naming only a few)

--Dean Milano (September 25, noon), a Chicago musician, discussing his book The Chicago Music Scene: The 1960s and 1970s.

--Dominic Pacyga (October 9, noon), a fellow Columbia faculty member, discussing his book, Chicago: A Biography. Years ago, I took a mini-course on Chicago neighborhoods from Dominic. He is both knowledgeable and entertaining.

--Karen Kruse (October 9, 4:00 PM) discussing her book Chicago Firehouse: Stories of Wrigleyville’s Engine 78.

--Ann Durkin Keating (October 16, noon), a North Central College history professor, on her book Chicagoland: City and Suburbs in the Railroad Age.

--Liam Ford (October 23, noon), who wrote the fascinating Soldier Field: A Stadium and its City, which touches on many of the points in my book.

--Ursula Bielski (October 23, 4:00 PM), founder of “Chicago Hauntings,” discussing ghostly phenomena in Chicago and it environs and her new book There’s Something Under the Bed: Children’s Experiences with the Paranormal. Those who listen to Coast to Coast on WLS (and on many talk stations throughout the country. Coast to Coast is one of my guilty pleasures on the few nights I can stay up late enough to listen to it.) may have heard Ursula. I’ve read Ursula’s book Chicago Haunts; she’s a great writer who can tell some very chilling tales.

--Urbanologist Joseph Schwieterman and writer Alan Mammoser (October 30, 4:00 PM) discussing Beyond Burnham: An Illustrated History of Planning for the Chicago Region.

I look forward to this series and hope to see you at my presentation and at least a few of the others. The Museums of Lisle Station Park are located at 921 School Street in downtown Lisle.

Thanks.

QUINN’S BOOK IS NOW FULLY READY TO GO, EXCEPT…

9/21/10

My new book, The Chairman’s Challenge, A Continuing Novel of Big City Politics, is now available in hardcover, paperback, and Kindle versions at Amazon.com and in the prior two versions at most other online booksellers. The book can be ordered at any book store. I have not yet been able to get copies to local independents, most notably Anderson’s in Naperville and Bookies’ on 103rd and Western in Chicago, or to my friends in the media who have been so helpful in the promotion of the original Chairman, but, hopefully, they will have their copies of the book in a few weeks.

One little detail that might make it worth your while to order now…or maybe not. We made a slight (slighter than even I thought) revision to the back cover of the paperback and the inside back dust jacket of the hardcover. I suspect that I am the one of the very few who will notice the change, or, more properly, who will notice the reason I (and only I) felt the change had to be made. However, if you order within the next few weeks, you will get the old, pre-change version, which could conceivably become something of a collectors’ item! Okay, maybe not, so try this one: Why not buy now and buy again after the new version comes out and see if you notice the slight grammatical miscue that prompted the change. Hey, anything to sell a few books!

This book is, of course, similar to The Chairman, A Novel of Big City Politics, of which it is the sequel. However, while I will always like the original Chairman more, I suspect this one will appeal to a wider audience; it moves more quickly from the start while the original luxuriated in background in the first few chapters. I, and many of you, enjoyed those first few chapters of detail, but many readers prefer more action earlier in the book. The new book satisfies that craving while leaving out nothing of the rich political background found in the original Chairman.

So…

If you liked The Chairman, you’re going to like this book. I will be curious to know which you liked more. If you didn’t like The Chairman, there’s a very good chance you’ll like this book. Either way, you should buy The Chairman’s Challenge, A Continuing Novel of Big City Politics.

Enjoy the book. Let me know what you think. And don’t hesitate to write a review on Amazon if you have time.

Thanks; I appreciate your reading the blog and my books and I strive to continue to make both enjoyable and informative.

COME TO THINK OF IT, THE GOVERNMENT FIGURATIVELY ENGAGES IN A LOT OF THIS SORT OF ACTIVITY

9/17/10

The Chicago Sun-Times yesterday treated us to an article explaining how Christine O’Donnell, newly nominated Republican candidate for the Senate in Delaware, equates masturbation with adultery. To wit:

“The Bible says that lust in your heart is committing adultery, so you can’t masturbate without lust.”

Okay, call me hopelessly old-fashioned, unhip, and out of touch with the modern world that increasingly repulses me. But I yearn for those benighted times in which politicians didn’t feel compelled to express their views on such vital political and governmental issues as masturbation.

EDUCATING THE YOUTH OF AMERICA!

9/17/10

I often send my Investments and Financial Strategies students notes alerting them to relevant and educationally productive articles in various publications, usually the Wall Street Journal. This morning, I got a little carried away in my expression of enthusiasm for the subject matter of the cited articles, so I thought I would post this particular “heads-up” note on my blog:



IN TODAY’S (I.E., FRIDAY, 9/17’S) WALL STREET JOURNAL

9/17/10

On page C1 of today’s Wall Street Journal, we learn that leveraged loans (the senior “bank debt” component of the capitalization (broadly defined) of highly leveraged companies) are making a comeback, with demand for such loans, primarily from mutual funds and pension funds, becoming nearly insatiable as investors stretch for yield in what has become a desert for those parched for liquidity. This resurgence is especially notable because the leveraged loan market was, as the Journal put it with perhaps a bit of exaggeration “one of the markets at the heart of the credit bubble…”

A few points:

--People seem to have awfully short memories (or perhaps the memories of others just seem short when one’s memory, like that of your instructor, gets so very long) or a grossly inflated sense of their own ability to evaluate credit.

--People always seem to reach for yield at the precise time that they shouldn’t reach for yield. Usually, such reaching involves moving out the yield curve, but can also, but less obviously, manifests itself, as in this case, in taking on more risk at inopportune times.

--People also seem to invest in a great deal of “rear view mirror” investing. Note that the leveraged loan market has returned 6% this year and 43% since 12/31/08, awfully tempting for those who engage in cursory analysis. A further note: I’m uncomfortable with a generic reference to the “leveraged loan market,” just as I am uncomfortable with a generic reference to the “high yield market” or the “junk bond market.” Perhaps my attitude is forever sullied by being present at the creation of the former and near the creation of the latter, but I still think both these markets are so heterogeneous as to defy pat indexation.

--Perhaps I am just an old fuddy-duddy who has grown tired of risk in his dotage and therefore reacts with a degree of trepidation to leveraged loans in companies with debt at 6 times EBITDA. (We did buy junk bonds issued by companies with far higher debt/EBITDA ratios in the ‘80s, when I was a younger and, certainly in my estimation, smarter man.) Further, I don’t think rates of 400 bps (basis points) over LIBOR, or around 5%, could possibly compensate me for the risk in most such deals. Even further, the floating nature of these rates provides some comfort in an environment of low interest rates but an increasing LIBOR rate is the least of my concerns with such paper.

Maybe, again, my conservative nature has overwhelmed my youthful sense of adventure and these leveraged loan deals are the greatest thing since the introduction of White Castle. But I am far happier with my heavy investments in gold and silver, which have returned 16% and 23% so far this year.


We talked about Carl Icahn in the MBA class this week. Speaking of Mr. Icahn, and financial leverage, page B3 of today’s Wall Street Journal informs us that Mr. Icahn has purchased a third of Blockbuster’s senior debt, and he didn’t do so to start clipping (non-existent at this stage) coupons! It’s always interesting to see Mr. Icahn and his target managements vie to create ever higher levels of “shareholder value.”

Thanks.

BOIL THE KETTLE AND WE’LL HAVE SEVERAL POTS OF TEA

9/15/10

No matter what one thinks of the ideals of what is referred to as the “Tea (“Taxed Enough Already”) Party Movement,” one has to admit that the Tea Party has made some impressive strides in the primary season, the latest being the victories of Tea Party candidates Christine O’Donnell in the Delaware senatorial primary and Carl Paladino in the New York gubernatorial primary. Both ran against entrenched establishmentarian candidates (Mike Castle and Rick Lazio, respectively) and beat them decisively. We’ll see how real this movement is in November, but, at least for now, the Tea Partiers are the most formidable political force in our country. That they have won some big primaries with some quite pathetic candidates, like the aforementioned Christine O’Donnell and equally troubling Sharron Angle, shows the depth of their resonance among what Richard Nixon called “The Silent Majority.”

To the surprise of none of my readers, I am, largely, cheered and encouraged by the progress of the Tea Partiers. I share most of its ideals, especially its rejection of enormous government spending programs, outrageous taxation, and continual insertion of the federal proboscis into the lives of citizens. I also shared the Tea Partiers distaste for, if not abhorrence of, both major parties and the lifetime politicians they harbor. Unfortunately, this non-partisan disgust seems to be giving way to an increasingly cozy relationship with the GOP, but time will tell if ominous signs of that drift prove prescient. In fact, since I held most of these ideals when many of the “leaders” of the tea party movement were burning incense to the likes of such “big government as long as it grows in our direction” acolytes as George Bush, Dick Cheney, and Newt Gingrich, one could make the argument that I am the original tea partier and that the Insightful Pontificator ought to be the manifesto generator of the movement, but even my limited store of humility prevents me from making that argument.

Three further thoughts come up in the wake of Tuesday, 9/14’s highly favorable primary results for the Tea Partiers:

--It is simply amazing, and somewhat comical, to see the reaction of the mainstream media and the political establishment to the success of the tea partiers. Such types are dumbfounded at the notion that those who do the actual work and pay the bills in this country are sick and tired of being forced to finance the social engineering schemes of those who have eschewed real jobs in favor of spending their lives, er, nourishing themselves at the mammary glands of the public sow. Such observers of the political scene exude confidence that the Tea Partiers face certain doom in November when, as one radio reporter put it this morning “moderates hold sway.” They might be right, but, in any case, I would not, and am not, as comfortable in my prognostications as these estimables appear to be with theirs.

--Always at the forefront of political and economic thought, I have long believed that the disenchanted voter who does not vote and/or finds the political system so distasteful comes not from the middle, as the “experts” tell us, but, rather, from the right, broadly defined. Most people find most functions of government, most politicians, and therefore all politics, reprehensible and therefore refuse to choose among those who merely peddle slight variations on the “we will take your money to show you how you ought to live because we so clearly know better than you and, after all, we must finance a life long sinecures worthy of our exalted intellects and obviously humanitarian natures” theme. Perhaps I am wrong and that those who run toward the middle will prevail in November; I, unlike those who hold the opposite position, just don’t know.

--All this being said, I would be a lot more comfortable with the Tea Party Movement if it were still identified with the man who is arguably its founder, CNBC commentator and former bond trader Rich Santelli, rather than with the likes of Sarah Palin, who is the poster girl of a movement, hearkening back at least to George W. Bush, that seems to equate a dearth of grey matter with a surfeit of virtue and leadership ability.

PEOPLE CALL IT AN “ECLECTIC” BLOG FOR A REASON…(PART II)

9/13/10

Paul Ingrassia, perhaps the nation’s best automobile business writer, discusses the upcoming GM IPO on today’s (i.e., Monday, 9/13's) Wall Street Journal op-ed page. Mr. Ingrassia brings up some great points, such as:

--GM’s “on the books” debt level of $8.2 billion vs. Ford’s $27 billion,

--GM’s (and Ford’s and Chrysler’s) reduced breakeven levels after the restructurings of GM and Chrysler and the adjustments at Ford made partially in response to those restructurings, and, especially,

--GM’s UAW contract and the need for investors to have certainty that GM has a partner, rather than an adversary, in the UAW.

Mr. Ingrassia, though, misses the most important consideration for GM investors, which is surprising given that Mr. Ingrassia has been around longer than I have.

I well remember the days when analysts and investors, looking over the bleak domestic prospects for domestic tobacco consumption, pronounced such companies as RJ Reynolds dead. These analysts somehow completely missed that the people who ran RJR were not fools and had set their sites elsewhere; (at least some) tobacco companies survived and some prospered because of their burgeoning operations overseas, primarily in Asia, where Marlboros are something of a luxury item. In the same way, the people who run GM (and, yes, even the people, or at least some of the people who ran GM) are not stupid. That is why they launched and nurtured GM’s extensive Asian operations and didn’t even consider selling those operations when they desperately needed to raise cash.

It is far too glib to say that the one thing potential investors in the GM IPO need to know is that in the first half of 2010, GM sold 1.2 million vehicles in China and 1.1 million vehicles in the U.S. Potential investors should know far more about a company than its sales levels. But GM now sells more cars in China than in the U.S. While we may see a quarter now and again in which those numbers reverse, the secular trend is clearly toward GM’s becoming a much more China, and Asian, focused company. (Note that Buick survives, despite selling fewer cars in this country than did Pontiac, because of Buick’s success, and panache, in China.) So while the points on which Mr. Ingrassia touches in his article are important, one misses the opportunities presented by GM when one focuses on its domestic operations, whether those operations are successful or dismal.

Am I endorsing the GM IPO? Not necessarily, or at least not overly enthusiastically; too much depends on the world economy about which I am not sanguine. Note, however, that, even in a weak world economy, China grows at double digit, or near double digit, rates. I will be looking to achieve a small foothold in GM at the IPO (at my diminutive size, success in this goal is doubtful) and probably will be adding as the months and years go by. As I own Honda, Toyota, Nissan, and a very small position in Ford, and have for years, I also hope to own GM. But I look to GM, unlike the former four, almost as a growth stock. In any case, the new GM looks like one of those stocks, like HMC, TM, and NSANY, that my children will eventually own.

PEOPLE CALL IT AN “ECLECTIC” BLOG FOR A REASON…(PART I)

9/12/10

…and long time readers know that the Insightful Pontificator has its origins in a financial newsletter that dealt extensively with, inter alia (after all, that newsletter was quite eclectic itself), cars and the car business. Though my interests have moved on and I know longer have the time to indulge my interest in things automotive, as Cook County Commissioner and R&B impresario and balladeer Jerry “Ice Man” Butler once told me, “Mark, you have to dance with the girl you brought.” And I still love cars. So here’s a letter I sent to Car and Driver this afternoon in a response to an article on the new lower cost (cheaper, really) VW Jetta:

9/12/10

VW may think the primary complaint about the “old” Jetta was its price (Drivelines, October), but this misperception is symptomatic of the manner in which VW treats its U.S. customers. Yes, price is a problem with the Jetta and with all VWs in this country. But a much larger problem is VW’s much deserved reputation for shoddy reliability and shabby customer service at its dealerships. The horror stories I have heard from people, and the only slightly less horrific tales I have read in the consumer and automotive presses, have kept me, a guy who really loves the way German cars drive, away from VW since I traded in my ’87 Jetta in 1990, a car that was a hoot to the drive, mostly to the dealer for repairs.

Rather than decontenting its cars, and delivering a GINO (“German in name only”) Jetta, in a bid to cut costs and compete with the Civic and Corolla, VW might do better to deliver reliability on a par with its Japanese and Korean competition and a customer service experience at least similar to that provided by its German (distant) cousins at BMW and Mercedes.

PRESCIENT MR. PONTIFICATOR? NOT YET.

9/10/10

Carol Marin, Sun-Times reporter and columnist and one of Chicago’s most astute political observers, reports today (9/10/10, page 12) on a McKeown poll, the first of significance, on the most interesting political race in as long as I can remember: the donnybrook that is forming to replace former Mayor-for-Life Richard M. Daley.

The two “frontrunners” (other than “don’t know,” which came in at 35%) were Sheriff Tom Dart at 12% and State Senator Reverend James Meeks at 10%. These were the only two potential candidates in the double digits. Note that in my already seminal 9/7/10 piece, “LONG LIVE THE KING!” I said:

“So who do I think will be the next Mayor? Just as God is not talking, He especially is not talking to me on this matter. But let me throw out three names, one a popular guess, one a stretch, and one completely out of left field:”

I then went on to list Tom Dart as the “popular guess” and James Meeks as the “stretch.” It’s still so early that polls are barely worth mentioning, but I think my Tuesday post showed some degree of prescience. My “out of left field” name, that of Alderman George Cardenas of the 12th Ward, has not arisen anywhere. But while he remains firmly ensconced in left field, I have not yet given up the notion that Mr. Cardenas’s name will come up before this battle royale is over.

What amazed me, as, and immediately after, I wrote that piece was that that virtually no one on the radio or television that Tuesday afternoon of Daley’s bombshell announcement, was mentioning James Meeks. This floored me. The next day, John Kass, in his Tribune column, and the Sun-Times, in its reportage, mentioned Meeks, but then only in passing. I even e-mailed John Williams’ program on WGN radio Wednesday morning, when Mr. Williams had Mr. Kass on as a guest, to ask why no one (I hadn’t read Kass’s column when I wrote the e-mail.) brought up Meeks. Only at that prompting did Kass mention Meeks on the Williams program; he had already mentioned plenty of names before my e-mail. I will be the first to assert that few people know more about the politics of this town than John Kass and yours truly, and it looks like the McKeown poll confirms that assertion, but I would have thought that someone would have mentioned Meeks before, or at least concurrently with, Kass and me.

Note also that I still consider Meeks a stretch. Why? Because he has been an ardent proponent of vouchers for Chicago public school children. See, again, the perspicacious
9/7/10 piece, “LONG LIVE THE KING!” This, along with comments he has made in the past about the deleterious impact the Chicago Teachers’ Union has had on the schoolchildren of this city, has won him the wrath of the CTU and probably will make support from labor in general difficult for him to garner. Doing the right thing, especially in this town, is quite a different thing from doing the politically expedient thing.

The McKeown poll, as I said before, is early and thus has little validity, but another interesting finding is that Rahm Emanuel, whom the national media have already coronated as Mayor of Chicago, garnered the support of only 7% of the respondents. As I said in my searingly insightful 9/7/10 piece:

“The big talk is about Rahm Emanuel. While I don’t like to make predictions, this is one I will make: Forget Rahm Emanuel for mayor of Chicago. He’s been away a long time and never was much of a power in this town. I say this even after saying that money wins elections.”

While I still don’t like to make predictions, I am growing increasingly comfortable with this one. Here is what Emanuel has going for him:

--President Obama has said his chief of staff would make a “terrific mayor.” But that and about $2.50 will get you on the CTA. Further, while this is probably a sincere endorsement of Mr. Emanuel by Mr. Obama, there could be something more Machiavellian to it: it could be a graceful way of conveying to Mr. Emanuel that his services will no longer be needed at the White House after the debacle the mid-term elections should prove to be for the Democrats. And if Emanuel does run, it may be a face-saving way for him to leave a White House that no longer wants or needs him. Just a thought.

--The national media, as I said above, has already dubbed Emanuel the new Mayor of Chicago. But the national media’s grasp of Chicago politics is so pathetic it would be hilarious if they didn’t intone on the politics of our town with such utter certainty. (They should all read my books before they pass on Chicago political matters again.) For example, they are all convinced, and especially those who inhabit the rightward reaches of the national media, that Barack Obama is some kind of political boss back in Chicago (as is, in their opinion, Rahm Emanuel). This is utterly laughable. Mr. Obama learned to accommodate the guys who run this town, but his accomplishments around here were limited to efficiently getting coffee for the like of Senate Majority Leader Emil Jones and keeping his head down while awaiting the nod from the guys who really run things around here.

--Emanuel has plenty of money and the ability to raise plenty more. There is no either denying this or denigrating its import. Money wins elections, and Chicago elections are no exception to this near rule. But will it be enough? We shall see, but I’m very comfortable betting against Emanuel in this election.

I think several local pols put the Emanuel situation best. Congressman Bobby Rush, who, by the way, handily defeated young Senator Barack Obama in the latter’s first run for national office, called the media focus on Emanuel “childish” and said Emanuel’s skills are “not transferable.”

An alderman who preferred anonymity told the Sun-Times, concerning Emanuel:

“He’s such a tyrant. We just went through that with Daley. People feel liberated (with Daley’s retirement). The last thing they want is a guy like Rahm. Can you imagine this guy coming in, pointing his finger at people and calling them mother------s? We want somebody we can work with.”

This cowardly, or perhaps just circumspect, alderman, has a point but misses the larger point. Can you imagine Rahm Emanuel, even a Mayor Rahm Emanuel, “coming in, pointing his finger at people and calling them mother------s?” when the “them” in that sentence includes the likes of Mike Madigan, Ed Burke, Jimmy DeLeo, Jerry Joyce, Skinny Sheahan, John Daley, Dick Mell, Ed Smith, etc., etc.? That might work with the lily-livered twits who inhabit Washington, D.C., but, believe me, it’s not going to work in this town. And Emanuel’s just full enough of himself to think he can treat the real guys that way.

But the pol who put it best, regarding Emanuel’s chances at the mayor’s office, at least so far, was Congressman Danny Davis, who, because he is still one of those mentioned as a potential mayor, may be talking his own book, but is nonetheless correct, said:

“Rahm, if he wants to run, he can come to town and raise money and run and run and run. But the local people of Chicago are going to determine who their next mayor is, not Barack Obama and not Rahm Emanuel.”

I might add, though Congressman Davis may or may not, that “the local people of Chicago” may not mean “the voters of Chicago,” but, rather, “the people who really decide how things go in this town.”

TWO SOUTH SIDE IRISHMEN DISAGREEING ON A POINT OF CHICAGO HISTORY? SAINTS PRESERVE US!

9/9/10

Ed Burke, 14th Ward alderman and both dean and resident historian of the City Council, is quoted in today’s (Thursday, 9/9/10’s) Chicago Sun-Times as saying:

“Historically, it’s rare that a member of the City Council becomes mayor. In fact, only twice, and then only once elected by the voters.”

I agree with the Alderman’s major point; it is a rarity for the mayor to come from the Council. (See my 9/7/10 post, “Long Live the King!”) But, while I might be wrong and hate to disagree with Burke on points of Chicago history, I can think of three mayors who came directly from the City Council into the mayor’s office:

--Levi Boone, elected by the voters in 1855, whom Burke cited.

--Mike Bilandic, elected by the City Council in the wake of Mayor Richard J. Daley’s death in 1976.

--Gene Sawyer, elected by the City Council in the wake of Mayor Harold Washington’s death in 1987.

There might be more, but there were more than two.

“LONG LIVE THE KING!”

9/7/10

Wow! The Mayor is going to retire! The announcement only came a short time ago, and I am sure I will have more thoughts down the line. But since I have an opinion on just about everything, and especially on all things surrounding the politics of my beloved home town, I have to share a few thoughts:

--Why did Mayor Daley retire? We’ll never really know because the Mayor is a private man. But we can always speculate.

A lot of the talk has swirled around “it not being fun any more,” as someone on the radio said today. This is a simple argument to make because it’s true; it indeed isn’t fun any more to be mayor of Chicago. The city is broke. The recession may be with us for awhile, so there seems to be little hope of a sudden surge of revenue. After twenty years of expanding the budget, effectively playing Santa Claus with the taxpayers’ money, Daley was facing years of reducing the budget, effectively playing Scrooge. This is not a position in which any pol wants to find himself, especially a politician who can go out on something of a good note, like Richard M. Daley.

There is also talk of Daley’s facing the facts; i.e., that he was going to lose his bid for reelection. Baloney. If Daley were to have run, he would have won. Yes, his approval ratings are down, way down. But you can’t beat somebody with nobody and the list of people who were willing to face him is just that—a list of nobodies, at least at the stage that existed up until last night. Further, money wins elections and, while the city is starved for money, Daley’s potential reelection fund would be swimming in the spondulicks. And after looking around the city and looking at the situation objectively, can one honestly say that Daley is doing a poor job or has done a poor job? Yes, we have plenty of problems and the city is run at full retail, to say the least, but Chicago, unlike many of its counterparts both in the Midwest and in the nation as a whole, is viable and remains a great place to live and work. Rightly or wrongly, people attribute our city’s more attractive qualities to its political leadership. And even if one is not prepared to concede that Daley is doing at least a decent job, is one prepared to argue that there is somebody out there who could do better?

On the fringes of this discussion are those who say that Daley quit to ward off potential problems with federal law enforcement. This makes almost no sense. First, there is no indication that the Mayor is in any legal trouble and I, for one, don’t think Daley will ever find himself in legal trouble for a number of reasons. Second, if Daley were having, or about to have, problems with the feds, it would be easier to ward off any trouble from the mayor’s office than as a private citizen. First, a sitting mayor can raise plenty of money quite easily; a private citizen cannot. Defending one’s self in federal court is expensive. Ask either of the Blagojevich brothers. Second, holding the office of mayor provides a bargaining chip for the feds; e.g., “I’ll resign in exchange for a light, or suspended, sentence.”

The most likely reason that the Mayor is quitting is the health of his beloved wife, Maggie. She has been battling cancer for years now and has not been looking very good of late. Say what you will about Mayor Daley, but no one can say he is not a man who loves and cherishes his wife and family. Maggie needs her husband now more than ever, and he knows that.

--So who will replace the Mayor? God only knows, and He’s not talking. This speculation, though, is especially fun because Richard II is the first strong mayor of Chicago to leave office voluntarily in as long as I, or anyone else, can remember. In fact, he is the first strong mayor to leave office without the assistance of the Almighty in as long as anyone can remember, with the possible exception of Ed Kelly in 1947. For those who might argue, Jane Byrne, Mike Bilandic, and Martin Kennelly (the last two, like the Mayor and Kelly, sons of Bridgeport, by the way), despite their good qualities and/or entertainment value, were not strong mayors. And, though few would argue to the contrary, neither was Gene Sawyer, though he was a particular favorite of yours truly.

Alderman Bob Fioretti (2nd) and Scott Wauguespack (32nd) have all but declared, and both were willing to run against Daley. The big talk is about Rahm Emanuel. While I don’t like to make predictions, this is one I will make: Forget Rahm Emanuel for mayor of Chicago. He’s been away a long time and never was much of a power in this town. I say this even after saying that money wins elections.

Here is a partial list of names that have been bandied about:

Alderman Sandi Jackson, 7th
Alderman Ed Burke, 14th
Alderman Tom Allen, 38th
Alderman Brendan Reilly, 42nd
Alderman Tom Tunney, 44th

I discount all six of the aforementioned aldermen. I can’t think of an alderman who became mayor by an election of the people (as opposed to an election of the City Council: Gene Sawyer, 1988 and Mike Bilandic, 1976), at least not in this century. Mayors don’t come from aldermanic ranks. And of the aforementioned six, only Tom Allen, Tom Tunney, and Ed Burke are not newbies. Having said that, a run by Eddie Burke, the dean of the City Council, would be a great way for him to cap off an extraordinary career and finally get a job he has wanted at least since 1983. He would make a campaign, and the politics of this city, so interesting that even more people would buy my books.

More names that have been mentioned by people other than yours truly:

Sheriff Tom Dart
Assessor Jim Houlihan
Former Inspector General David Hoffman
Jesse Jackson, Jr.
Attorney General Lisa Madigan
Congressman Danny Davis
Congressman Luis Gutierrez
Former School Superintendent Paul Vallas

While I am speculating on who I THINK might be the next mayor, not on whom I would LIKE to be the next mayor, of the above, I LIKE Bob Fioretti, Tom Dart, Lisa Madigan, David Hoffman, and Paul Vallas. Any of those five have the potential to be great mayors. Further, Dart and Vallas have some connection to the 19th Ward, which could be a blessing and a curse for the election but (See below.), since all politics in this town is personal, is a big plus in yours truly’s book.

Vallas doesn’t live in Chicago, but that problem could be solved quickly. I’m sure my old neighborhood would love to welcome Paul and his family back with open arms. Lisa Madigan? John Kass gave Chicago the very entertaining and apt moniker “Madiganistan” about a week ago. If Lisa were ever to become mayor, how much more apt would that name be? Therein lies the real problem for a Madigan candidacy. Further, she has young children and this is no job for some who, like Lisa (if what I’m told is true), especially values her role as a mother.

--So who do I think will be the next Mayor? Just as God is not talking, He especially is not talking to me on this matter. But let me throw out three names, one a popular guess, one a stretch, and one completely out of left field:

• Sheriff Tom Dart would be a very safe bet and a very good mayor. He is an effective sheriff with a knack for making headlines. Suburbanites and independents like the guy. Though, from what I hear (and I don’t hear all that much), he is not, despite his 19th ward roots and his family’s history in the 19th, sufficiently cozy with the powers that be in my old ward to make outsiders nervous. But Dart is still from the 19th and his father was something of a power broker in the ward before him, and people are more comfortable with easy labels than subtle nuances. So his being a 19th warder will help, given the ward’s political muscle, but could still hurt with independents and from regulars outside the 19th ward. The 11th (John Daley), the 13th (Mike Madigan), and the 19th (Matt O’Shea, but, really, the Sheehans and Jerry Joyce) may have been allied for many years, but even Messrs. Madigan and Daley can’t be pleased at the 19th accumulating as much power as it would if Dart were to become mayor. And the northwest side? “Another southwest side guy? Another 19th warder? To hell you say!” Dart won’t play well up there. Still, to the extent that “Daley’s guys,” whoever they are, have something to say in the next election (and, believe me, they will), Dart is an obvious choice. And Chicago police officers and fire fighters, a major source of Daley opposition, might be comfortable with a sitting sheriff, unless he is seen to Daley’s guy.

• A stretch is Illinois Senator James Meeks. He is a powerhouse in the black community with a knack for publicity, and good press, similar to that of Tom Dart. He’s a great speaker who knows how to make coalitions, as in his alliance with Republicans and ethnic Democrats in the voucher fight in Springfield. Therein lies his big negative: the teachers’ unions, and perhaps the unions in general, are going to fight this guy tooth and nail.

• Way out of left field comes Alderman George Cardenas, 12th, a hard worker and a very sharp guy who is closely allied with the Mayor. Note that Alderman Cardenas was elected in 2003 with the support of the Hispanic Democratic Organization, then Daley’s primary political arm. Note also that the incumbent in that election, Ray Frias, suddenly withdrew from the runoff Cardenas had forced. Hmm….Wonder what happened there? Further, Cardenas sits on the Finance, Budget, Aviation, and Education Committees, among others. These are not the kind of assignments that go to people whom the Mayor doesn’t like. If “Daley’s guys,” whomever they are, have something to say in the next election AND they are mindful of the ethnic demographics of Chicago and interested in having a guy in office whose ear they will have for years to come, Alderman Cardenas is a far more obvious choice than anyone (but yours truly) currently thinks.

--Let me throw out one more name, which may require more than even my usual degree of cynicism: Richard M. Daley after an effective draft initiated by the business leaders of this city. Just a thought.

MARK QUINN APPEARING AT NORTH CENTRAL COLLEGE ON WEDNESDAY, SEPTEMBER 29

9/7/10

I will be appearing at North Central College on Wednesday, September 29 to discuss Chicago politics, past and present (which suddenly has become even more interesting, if such a thing is possible), and my book The Chairman, A Novel of Big City Politics and, hopefully, by that time, its sequel, The Chairman’s Challenge, A Continuing Novel of Big City Politics. While the presentation is being put on primarily for the benefit of North Central students, it is open to the general public and promises to be lively, entertaining, and informative. There will, of course, be a question and answer session following my lecture that promises to make the evening even more interesting.

The particulars are as follows:

Day and date: Wednesday, September 29
Time: 7:30 PM to 9:30 PM
Location: North Central College
Old Main-Smith Hall
30 N. Brainard
Naperville, IL 60540

I look forward to this event and hope that many of you can join me for what will prove to be an evening to remember.

“I’M ALFRED E. NEUMAN, AND I’M VOTING FOR SCOTT LEE COHEN”

9/5/10

The Chicago Tribune’s Sunday, 9/5/10 edition reported on its poll that showed Bill Brady and Pat Quinn (no relation) running statistically neck and neck in the Illinois gubernatorial race. Such polls are mildly interesting but very fickle and hence get more play than they deserve. A genuinely interesting portion of the poll, however, dealt with neither Mr. Brady nor Mr. Quinn (no relation). It dealt, rather, with Scott Lee Cohen, the businessman (Mr. Cohen is in the business of pawn brokering. During the primary campaign, Mr. Cohen’s opponents, and the media, spoke derisively of his profession as if that were the flaw on which voters should be focused. Such treatment of Mr. Cohen’s trade is indicative of the media’s hostility toward business and, combined with its inability to turn up the real dirt on Mr. Cohen until after the election, laziness. This slovenliness is especially salient when one considers how much the media like dirt of the type that turned up on Mr. Cohen. But I digress.) who won the Democratic primary for lieutenant governor and then resigned from the ticket when it was discovered that he displayed proclivities toward physically abusing his “massage therapist” girlfriend and a complete absence of proclivities toward paying child support to his ex-wife for the benefit of his own children while spending millions on his campaign of self-aggrandizement that we call modern elections. This story was, as one might guess, all over the news.

The Tribune poll showed that 42% of respondents have never heard of Scott Lee Cohen. Think about that. Perhaps the biggest, and certainly the most titillating (and we know how much the American people love titillation), story to come out of the primary that took place only six months ago was Scott Lee Cohen’s nefarious escapades and his subsequent dropping out of the race for lieutenant governor, only to come back to launch an independent and quixotic race for governor. And yet 42% of the poll respondents have never heard of him! Another 34% have no opinion of Mr. Cohen. That might be almost as surprising until one considers that 40% of the respondents have no opinion of GOP candidate Senator Bill Brady and 30% have no opinion of sitting Governor Pat (no relation) Quinn.

What can we conclude from 42% of the registered voters never having heard of Scott Lee Cohen and 34%, 40%, and 30% having no opinion of Messrs. Cohen, Brady, and Quinn (no relation) respectively?

--As I tell my kids, whenever one says “I’ve never heard of (insert just about anything or anyone),” one is saying a lot more about one’s self than about the object of one’s ignorance.

--A substantial portion of our state’s (And probably our nation’s; Illinois is unique in many ways, but this isn’t one of them.) potential voters are, to put it nicely, inattentive and have no grasp of the concept of self-government and the duties involved therewith. Apparently, there are too many other urgent priorities, like Jersey Shore, Lady Gaga, and Kate Gosselin, for people to bother to keep up with what the politicians are doing to them. Frighteningly, these people all get to vote. And they will inevitably continue to complain about the “culture of corruption,” or whatever the latest catch phrase is, in our state while placing none of the blame on themselves.

--Note that Mr. Cohen consulted with Illinois House Speaker and Democratic State Chairman Mike Madigan before both dropping out of the lieutenant governor’s race and tossing his hat into the governor’s race as an independent. One of the voters in this state who is decidedly NOT an idiot is Mike Madigan. Perhaps his estimate of the attention span of the typical voter is similar to mine. He realizes that people will be looking for an alternative to Pat (no relation) Quinn in this election. If Madigan and his minions can make enough noise, and broadcast enough distortions, about Bill Brady’s conservative social views, and enough voters are sufficiently obtuse to have never heard of Cohen’s character flaws, perhaps Cohen can siphon enough of those “anybody but Quinn” votes away from Brady to give Quinn another term.

One thing is reasonably certain: If we see a round, or several rounds, of anti-Cohen ads as the general election comes closer, they won’t be financed by the Democrats.

“SONNY LIKED MY DEAL, DIDN’T HE?”

9/3/10

New thoughts have arisen in my febrile mind, thanks to my brother, involving Walmart’s finally successful efforts to build stores in the city of Chicago over the objections of a city council that apparently sees its role as doing the bidding of organized labor. I theorized in my 6/25/10 piece “BROTHER, BROTHER, WE DON’T NEED TO ESCALATE…” that some kind of deal had been cut. Clearly, it wasn’t the extra 50 cents an hour and the promise of more construction jobs that got Chicago Federation of Labor President Dennis Gannon and Ed Burke, labor’s main man in the Council, to agree to Walmart’s plans. But the story may have been more complex than I thought.

My brother and I were discussing this issue, among others, this evening. He was complaining about Mayor Daley’s objecting to Walmart building in the city when it is quite clear that building a slew of Walmart’s would be highly beneficial for the city at large and especially for the underserved communities in which most of the stores will be built. I objected, saying that Daley was all for Walmart’s plan, that it was the city council, and especially Alderman Burke, that was in opposition. As soon as those words had left my mouth, even before my brother countered, I realized that I might have made one of the most naïve statements of my entire life, but my brother went ahead with his counter-argument anyway. He pointed out that Daley can get the city council to do anything he wants; he even got them to go along with the parking meter fiasco. So if the Mayor really wanted Walmart’s deal, the city council would have presented no hurdle. My brother concluded that Daley’s show of favoring Walmart’s full scale entrance into the city was just that, a show.

My brother had a good point and made me realize how naïve I was being in taking Daley’s stance on Walmart at face value. But, after pondering it awhile, I think the situation is more complicated. If Daley controls the city council as tightly as most people think, and he wanted Walmart to expand beyond its existing store in the city as badly as he indicated, the first few new stores would have been built by now, unless:

--Daley didn’t really want Walmart in the city. This is possible; Daley is beholden to labor, more than he lets on, so he may have been trying to play both sides of the fence, feigning reasonableness to the business community while satisfying the people who really count in his world. So, yes, possible, but not probable; Daley’s relationship with labor has been deteriorating for years. He feels more comfortable consorting with big business and commercial types. One even gets the impression he somehow harbors a secret wish to belong to the Winnetka Country Club, if such a place exists. Further, Daley is a smart man and can see the obvious economic benefit of a large Walmart presence in Chicago. It seems clear he’s always wanted a large Walmart presence here.

--Daley doesn’t control the city council. This is laughable. The man is in charge and the only questions from the city council when Daley barks his orders are something on the order of “How high, Mr. Mayor?”. One might legitimately argue that most of what Daley asks for, and gets, from his rubber stamp council have been items that labor supports or at least doesn’t object to very strenuously. But Walmart was different; this was something to which labor objected vociferously. So perhaps the council isn’t controlled by Daley but, rather, is controlled by labor and only appears to be controlled by Daley because he, in turn, is controlled by labor. This is somewhat implausible, however, for reasons outlined in the last bullet point.

--Daley always wanted Walmart to build heavily in Chicago but wanted a better deal for workers, communities, the city, or maybe even for his cabal of cronies who have benefited so mightily from his tenure as mayor. He disingenuously set up the ruse of council objection to Walmart, or at least didn’t object when the council exercised its natural obeisance to labor, in order to extract concessions from Walmart. Then, either the as yet undetected and never to be disclosed deal was cut (See, again, my 6/25/10 post “BROTHER, BROTHER, WE DON’T NEED TO ESCALATE…”) or Walmart told Daley that its last offer was on the table and he had better take the deal or it would go about building dozens of stores located, as is the Evergreen Park store, a block or two from the city border. Either way, suddenly city council objections vanished and the go-ahead was given for Walmart to first build the West Pullman and Chatham stores and then about as many more Chicago stores as the people in Bentonville who run Walmart want.

It’s easy to believe this last theory, especially when one loves a good conspiratorial tale as much as does the author of The Chairman, A Novel of Big City Politics and its (still) soon to be released sequel, The Chairman’s Challenge, A Continuing Novel of Big City Politics. If one really wants to have some fun, one could further speculate about the possibility of Messrs. Gannon, Burke, and the local labor movement being in on Daley’s disingenuous machinations. The only question seems to be whether Daley cut a good deal for one or several of his constituencies or whether Walmart outmaneuvered him. Either way, the dogs were called off and Walmart got its way. But did Daley get his?

YOU PROBABLY DIDN’T HAVE TO BE TOLD THIS AFTER THE LAST FEW YEARS, BUT…

9/3/10

Despite the oft-repeated assurances to the contrary by financial “experts,” maybe stocks aren’t a sure thing, just can’t miss as long as you are “in it for the long run (whatever that means)” investment.

It seems that the entire personal financial advisory business (Okay, maybe not the entire business, but, rather, that portion of the financial advisory business composed of knaves and charlatans…a substantial portion, to be sure.) is given to endlessly and mindlessly repeating the canard that “the stock market returns 11% per year over the long run, delivering returns far superior to those available in bonds, cash, or other alternative investments.” When asked where they got this figure, its brighter advocates cite an old Ibbotson study that tracked returns on the S&P 500 from 1927 to, depending on whom you talk to, 2007. The less alert among those pushing this story merely shrug their shoulders, or reply that “Everyone knows…” (Any time your opponent in any kind of debate starts with “Everyone knows…”, relax; you have won the debate. But I digress.) The Ibbotson numbers are doubtless true, but the financial profession’s tendency to take these numbers and run with them to the degree it has is silly and irresponsible. History is history and distant history is distant history. No one invests in the past; everyone invests in the future. If one listens closely enough to, or reads deeply enough into, pitches based on that magic 11% number, one will hear such caveats, but only quickly and quietly.

Leave aside the mountebanks for a moment; even very smart and otherwise perspicacious investment gurus have fallen for this “stocks for the long run” baloney. Case in point is Dave Ramsey (XM 165, M-F, 11:00 AM to 2:00 PM central time and on local stations throughout the country at the same time), a man for whom I have the utmost respect and with whom I agree on just about everything, financial and otherwise. Dave is given to glibly advising callers to put most, or all, of their money, beyond an emergency fund, in “good growth mutual funds” and then enticing them with future values of said nest eggs using a compound interest rate of 12%, a return he assumes for stocks “for the long run.” While Dave, smarter than the average bear, cautions that there is some risk in stocks, he quickly brushes aside such caveats and goes back to his 12% return assumption. Bruce Williams, another financial guy on the radio for whom I have boundless respect (See my 8/19/10 post “LET’S SPEND IT, LEND IT, SEND IT ROLLING ALONG!” PART II.), makes a similar “stocks can’t miss in the long run” argument. Bruce even tells people to always keep a mortgage outstanding so that they can arbitrage mortgage rates and “historical” 10% + returns on stocks. (Point of clarification: Dave Ramsey would NEVER agree to such a strategy, just in case this comes up.)

Needless to say, anyone who has invested his nest egg exclusively, or even moderately heavily, in stocks has come to rue any type of reliance on the anodyne assurances that stocks are the place to be “for the long run.” But I wanted to quantify, at least to a limited extent, the emptiness of the “Put it all in stocks and wait for the long run” argument. So I looked at stock returns for the Dow, S&P, and NASDAQ for each rolling ten year period (When “advisors” speak of “the long run,” they generally speak of ten year periods; for a lot of people, the “long run” is far shorter than that, especially when the excrement hits the air motivation device.) ending in month’s ends from March 2006 until August 2010; i.e., those rolling ten monthly year periods starting March 1996 through August 2000. I looked at the compound annual growth rates (“CAGR”s) of the indices’ levels (I did not include dividends; more on this flaw later.) over that period. Here are some numbers I derived.

Observations: 55
Dow S&P NASDAQ
Average CAGR 2.80% 1.60% 1.20%
High CAGR 7.40% 7.20% 7.80%
Low CAGR -2.70% -5.10% -7.10%
% negative CAGRs 36.40% 41.80% 41.80%

(Okay, the blog mechanism does not allow for decent reproduction of tables. If you read carefully, there are three columns, Dow, S&P, and NASDAQ. The numbers follow in that order. The highlights are in the next paragraph.)

Think about this. For the observed periods, the Dow, S&P, and NASDAQ delivered negative returns before dividends in 36%, 42%, and 42% of the ten year periods considered, respectively. In none of those ten year periods did any of the indices even approach, before dividends, the 11% returns cited ad nauseam by brokers and other stock enthusiasts. Some of the negative returns were downright frightening; if you invested in the NASDAQ, for example, for the ten years ending 2/28/10, you lost 52% of your money. But I’m sure there are many financial “experts” who will assure you that everything will work out if only you stay in “for the long run.”

Are there flaws in my “study”? Sure. The most obvious is excluding dividends. But assume a 3% dividend rate for any of these indices, or assume a 4% or a 5% dividend rate, if one wants to make such an outlandish assumption for ten years, and one still did not approach even a 10% annual return on average, experienced very few such returns over any ten year period, and still experienced at least a few negative ten year returns for the S&P and NASDAQ. Even assuming a generous dividend, a holder of money market funds or short term treasuries would have outperformed stocks in many, probably most, cases, not even adjusting for risk.

Another flaw is the short time period; I didn’t look at 70 years, but only 14 years. But they are the most recent ten year periods and, in almost all statistical work, the most recent experience should be given more weight than distant experience. Further, some might argue, these were some very troubled years. But the “experts” tell us that in the long run stocks even weather things like the Great Depression or the (and I hate this cutesy-pie term) Great Recession from which we are emerging. So what, then, if these were tough years? Can these notables assure us that the next ten years will not be similarly tough? They might trot out the “reversion to the mean” argument, a good statistical device but not much comfort in people’s actual experience. And there are two more minor flaws in the data; I had to “fudge” the ending date for the ten year periods ending 9/30/97 (I used 10/1/97) and 1/31/08 (I used 2/5/08) due to ready availability of data. I don’t know how much using the proper ending points would have affected the outcome; I assume not much.

So there were flaws in the “study,” which could have been corrected had I found doing so passed any meaningful cost/benefit analysis. But the outcomes would not have differed much, if at all.

So why are we being told to put all, or most, of our money in stocks “for the long run” based on one study? One can conjure up two theories. First is that there is more money for everyone involved in managing stocks than there is in managing bonds or cash. And, aside from that handful of honest, sharp advisors (several of whom I know personally and/or deal with much to everyone’s satisfaction), most people in the “financial advisory profession” are motivated primarily, if not exclusively, by self-interest. There’s nothing wrong with self-interest, but there is something wrong with exclusive self-interest, especially if not disclosed.

Second, most “financial advisors” (again, aside from those handful who still dignify their profession by their conduct and diligence, several of whom are friends and/or business associates of yours truly) are either not all that bright or, if they are bright, that brightness manifests itself in sales, rather than financial, skills. Thus, they simply repeat back what is spoon fed to them by their higher-ups, the people who supposedly know what they are doing. Hmm….

I’m not saying that some of your money, and some of just about everyone’s money, should not be in stocks. Stocks have historically (as long as history is long enough) provided attractive returns and certainly hold potential for outsized positive returns. But don’t let anyone talk you into putting everything, or nearly everything, into stocks and waiting for the long run to transpire.

But if you’ve been in stocks for the last few years, you already know that.