patrick.net

MediaNews Group Inc., which previously asked workers at 50 California newspapers including the San Jose Mercury News to take one-week unpaid leaves, is now putting employees on furlough at its papers in at least five more states.

Unpaid leaves announced or agreed to Friday apply to newspapers in Texas, New Mexico, Minnesota, Massachusetts and New Hampshire. In most cases, the furloughs are to be taken by the end of March.

"There's been a deeper recession than what we've ever seen," said Andrew Mick, president of New England Newspapers Inc., a MediaNews unit that ordered unpaid leaves Friday. "We found it necessary to do something in the short term to go through our toughest months of the year, which are January through March."

Silicon Valley Community Foundation lays off 14 percent of its workforce
By Sandra Gonzales, Mercury News

Hit by the economic crisis, Silicon Valley Community Foundation is laying off 14 percent of its workforce and closing its San Jose office.

"This was an extremely difficult decision, necessitated by the unprecedented economic environment," said Emmett D. Carson, chief executive officer of the foundation. "At the same time, we regret the impact this action will have on our colleagues and their families."

A statement on the foundation's website said the cuts were necessary due to a 22 percent drop in its total assets from $1.9 billion to $1.5 billion in the past 12 months, a decline triggered by the stock market plunge. In addition, although the foundation raised $190 million in donations, that represented a 36 percent drop from the previous year.

The foundation, which has 100 employees, will keep an office in San Mateo and remained headquartered in Mountain View.

The announcement comes two years after the merger of the Community Foundation Silicon Valley and the Peninsula Community Foundation.

Despite the cuts, Carson said the foundation plans to issue $8 million in grants from its endowments this year, in addition to the grants provided by the donors. In 2007, the foundation issued $174 million through donor advised funds and $8 million from its endowments

The statement noted that the foundation already had tried to soften the economic blow by freezing salaries and new hires, slashing retirement benefits in half, and asking staff to pay higher medical insurance costs.

This tax credit is being compared to the 1975 tax credit for homebuyers. However in 1975 the tax credit was for new homes only, and was intended to reduce the inventory of new homes, and help put residential construction workers back to work.
…
In this case the tax credit is for both existing and new homes. This is more of an incentive to get people to move as opposed to putting people back to work. Whereas there were few excess units in 1975 (except excess new home inventory), there are far too many excess units today.

The sponsors and supporters of this tax credit believe this will support house prices - a mistake because this will mostly just shuffle homeowners between homes, and not reduce the excess supply.
…
The key problem for housing is prices are too high. How does this tax credit help reduce prices? Why are we trying to artificially increase the turnover rate? And why are we targeting a tax credit at higher income individuals?

This tax credit seems ill-conceived, and probably should be removed from the stimulus package. No one has adequately explained how this helps “fix housing first”.

PermaRenter,

Monte Vista is Monte VIsta.
A 850K townhome in San Jose is 850K townhome in San Jose.

If you wanna buy your kids' way into MonteVista, you can do that by securing a rental in the "zone". If the "zone" is rezoned, then you can just move into a different rental.

If instead to have a place to reside you wanna lockin a 850K townhome in the municipality of San Jose, with all the immobility and financial risk,
go for it.

Or if you wanna speculate its a good opportunity for capital preservation or even asset appreciation, even with the HOA fees and property taxes, go for it.

But if you're gonna worry all the time about the zones this, zones that, well it's not the only way to buy your way into that high school.

Probably Monte Vista is a Basic Aid jurisdiction, meaning that they'll be more on their own than other jurisdictions as state funding is reduced. That means school boards will have to look carefully at the enrollments and will probably exercise wide discretion about how to maintain their programs. School boards are elected by voters (citizens); you might want to get very involved in local politics.

Target-date retirement funds were supposed to be the greatest thing since sliced bread

When are people going to wake up? Amazing how so many otherwise intelligent people are so eager to put their savings into financial instruments whose primary purpose is to generate fees, loads, and sales related charges to enrich the seller. Why can't people see that if you give X per month for two years, and the balance after that two years is less than 24X, they have lost money? Or if the CD rates for 24 months average 5% APR while you instead put $10k in someone's "fund," you need to have a balance of at least net $11k at the end of two years to beat the insured CD? (Actually, slightly more, but I'm keeping the math simple).

People must think that telling the babe at the cocktail party that you have an "IRA at Vanguard," rather than "I have my IRA in laddered CD's at various Credit Unions," gives a guy a better chance of getting his glans in the crevice. It certainly ain't the math.

Deflation: When low prices buy high anxiety
In a weak economy, prices may drop, but so do wages and job security.
By David Pierson, February 8, 2009

Wedding photographer Pogos Kuregyan has lowered his prices.

FedEx aircraft inspector Dan Wallace is dealing with a salary cut and a retirement fund that's lost half its value.

Though prices are down for food, housing, energy and clothing, they can't buy much, because they're living on less.

After years of worrying about inflation, some economists fear the opposite could soon happen: deflation, an extended period of falling prices that indicates the economy is in a backward spiral.

Millions of Americans have less money coming in than before the recession, and their net worth has also shrunk. That means less to spend on food, clothes, gasoline, cars and shelter. And despite discounts at the store and the car dealership, a lowering of rents and a near-historic drop in the price of houses, people just aren't buying much.

For Kuregyan, owner of Unique Digital Media, a photography studio in Glendale, the trouble started when he noticed rivals advertising online packages hundreds of dollars cheaper than his.

His business began to slow. At first, Kuregyan did what many business owners have done in this economy: He offered discounts and extra services instead of formally lowering his prices.

But that didn't work.

Then he realized that he would need to borrow money from friends to make his December rent payment. Desperate for customers, Kuregyan caved and reduced the cost of his packages by $200 to bring him more in line with his competitors.

"It's extremely dangerous," the 24-year-old proprietor said. "If I start dropping prices and they do it too, then I do it again, then it all becomes fruitless."

The pain of Kuregyan's diminishing income is spreading to other businesses in the community.

It hurts the neighboring restaurants on Brand Boulevard where he often took his girlfriend out to dinner but can no longer afford to.

It means a sale lost for the electronics store where Kuregyan was going to buy a flat-screen television to display his photographs in his storefront window.

And it results in shelved plans to spend thousands of dollars to advertise with local TV stations and in the Pacific Theatres at the nearby Americana mall.

Deflation debate

This is the kind of downward spiral that worries policymakers.

Trying to get credit flowing more freely, the Federal Reserve has dropped interest rates to historic lows. President Obama has been emphasizing the urgency of a massive stimulus package to get consumers and businesses spending again.

But economists and politicians alike are divided about what to do. Taken as a whole, prices in the U.S. economy increased last year, but only a tiny bit. Inflation registered only 0.1% in 2008, the smallest increase in prices since 1954.

Consumer spending declined in December for a record sixth straight month and rose 3.6% for the year, its lowest annual gain since 1961. The economy lost 3.6 million jobs since the recession started in December 2007.

Yet experts debate whether all this indicates that the economy will slide into full-blown deflation, defined as a prolonged period of falling prices.

Skeptics say the federal government will inject enough money into the economy to prevent it. They say deflation has largely been relegated to apparel and energy prices. Therefore it's not wides- pread enough to raise great concern.

"It's a serious situation but we're a long way from that," said Christopher Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York. "Seeing reduction in wages is good anecdotal evidence, but everyone would have to experience reduction in wages before we're in deflation."

But others argue that today's declines could spread -- and stay with us.

"Deflation will become more pervasive as we make our way through the year," said Mark Zandi, chief economist at Moody's Economy.com. "The downturn is intensifying, and businesses are under increasing pressure to cut prices to maintain some sales."

The fear about this recession rests on the severity of the real estate crash and credit crunch, which translates into pain for any homeowner who sank savings into a house only to see property values plummet. Those people are facing a cash crunch of their own.

There may even be signs that -- as they did during and after the Great Depression of the 1930s -- consumers will change the way they manage money, saving more and spending considerably less. Although few would argue that this is not a more conservative and ultimately safer way for American families to live, it could push deflationary trends in the economy even further.

Similar conditions contributed to Japan's deflationary period in the 1990s, known as the Lost Decade.

Initially, lower prices might seem like a boon to consumers. But price reductions can lead to layoffs, leaving more people without money to spend.

Scared to spend

Newlyweds Evan and Beth Lewis were surprised recently to see so many sales at the Grove shopping center in the Fairfax District. The two headed into Sur la Table, where there were items up to 75% off, and picked out pots and pans for their new apartment.

But they're not going all out in furnishing the place, just the bare essentials until they can save enough to buy more.

The pair work at box offices in separate theaters -- jobs they worry could be eliminated as customers continue to reduce discretionary spending. In a roundabout way, they said, their security won't improve until they see prices rebound.

"It's bad to see so many sales after Christmas because it means the economy is very poor," Evan said. "You know it's not a long-term solution."

Dan Wallace has a job, but his pay was slashed as his employer cut costs.

"After 23 years of sweat on the job, I moved up and got to that point where I thought I could have a comfortable pension, and then it all turned south," said Wallace, an aircraft inspector for FedEx Corp. The company cut wages 5% for 36,000 salaried employees in December, Wallace among them.

Future's less bright

Wallace, 51, said the pay cut, coupled with the loss of yearly bonuses handed out when the company made sizable profits, took about $8,000 out of his annual income. His wife, an executive with Bank of America Corp., fears her job is in jeopardy. If she were laid off, Wallace said, the Santa Clarita couple could not make their mortgage payments.

They expect to have less to spend in retirement as well. Thanks to the stock market crash, the value of Wallace's 401(k) has decreased by half. His wife has seen hers drop 40%. Instead of retiring with a $1-million nest egg, the pair now expect their savings to be worth $400,000.

As the Wallaces learn to live with fewer resources, they, like so many others, will have to cut back. They'll be spending less on necessities such as food and home repairs, as well as discretionary items such as vacations and dinners out.

That means less money coming into the businesses they usually patronize, which will in turn have to rethink their budgets.

For Kuregyan, the photographer, even a coffee at Starbucks has become a luxury.

He treats himself to an espresso only about once a week. He'll often wait until he collects enough coins from customers paying with cash as a self-imposed saving method.

"I'm hoping to last as long as I can," Kuregyan said. "But it feels more like a hobby than a job because I'm not making enough money.

"The economy is just too tough."

"In the long run, we are all dead," John Maynard Keynes once quipped. An influential British economist, Keynes used the line to dodge the problematic long-term implications of his policy proposals. His analysis of the Great Depression redefined economics in the 1930s and asserted that increased government spending during a downturn could revive the economy.

President Barack Obama and congressional Democrats (very few of whom likely have read Keynes's 1936 book "The General Theory of Employment, Interest and Money") have dug up the dead economist's convenient justification for deficit spending in defense of their bloated stimulus legislation. But none ask the most important question: Was Keynes right?

Permarenter,

Of course Keynes is right we're all dead in the long run.

But he never had any kids (or grandkids) to worry over the futures of (nor to figure how to buy-in-to Monta Vista).

Madoff victim in Cupertino

DAGNY BORGLUM TRUSTEE FOR THE G DONALD & DAGNY BORGLUM SURVIVORS TRUST UAD 5/6/87 23500 CRISTO REY DR APT 115D CUPERTINO, CA 95014

LORRAINE JOHNSON 11650 UPLAND WAY CUPERTINO, CA 95014 05152

For a list of Madoff victims visit www.coloradoan.com/madofflist

You Try to Live on 500K in This Town
http://www.nytimes.com/2009/02/08/fashion/08halfmill.html?_r=2&ref=business

Did anyone read about John Robbins, the Baskin-Robbins heir in Santa Cruz are who lost 90% of his net worth on Madoff? He wrote an appeal that was published in the local papers for donations. Now this is a guy who owns 18 acres in Soquel for his house/organic farm. One wonders if he's ever done actual work?

Santa Cruz Victims:

CLIFFORD A BERNIE TRUSTEE OF THE CLIFFORD A BERNIE IRREVOCABLE TST DTD 12/9/2002 205 SHERMAN STREET SANTA CRUZ, CA 95060

MICHAEL JACOBS 413 WESTERN DRIVE #2 SANTA CRUZ, CA 95060 03080

MICHAEL M JACOBS 413 WESTERN DRIVE #2 SANTA CRUZ, CA 95060

MITCHELL GOLDSTEIN AND CARROLL LAFLEUR TSTEES UNIVERSAL TST DTD 1/04/01 250 DUFOUR STREET SANTA CRUZ, CA 95060

Apparently John Robbins wrote a pretty good book called the food revolution.

I have not read it, but if I like it, I may donate.

http://www.rediff.com/money/2009/feb/06senators-seek-h-1b-hiring-ban.htm

Too bad they do not know that the TARP bangers have recruited Indian Bodyshops who have unlimited supply of L1 (forget H1) and their wives can work without any approval as well on L2. Who needs H1 - go ahead ban it. The Indian bodyshops will still load L1 and L2 holders in there, which is a piece of cake.

Perhaps Robbins wrote a good book, so maybe he's smart enough. If I were about to hand off $1M+ to a broker with a "special" investment scheme, I just might:
1. Look beyond the sales pitch and wonder why their investment promises higher than average returns.
2. Get third party's advice from somebody who is a good independent expert.
or...
3. Simply buy into the hype and throw my money at them.

I guess this is why I don't have much sympathy for the Madoff "victims". They're frickin' adults, so they should have done their work. I forget the guy's name, but he started warning the SEC on Madoff a decade ago. When he looked at Madoff's scheme, he said it took him all of 5 minutes to determine it was bogus. But nobody listened to this guy--why?

I am not generally sympathetic towards Madoff victims. If I donate because I like someone's book or movie or something, I am just sympathetic towards his specific circumstances because his words touched me. Other than that, I think most Madoff victims are just not careful, I won't say that they deserve it because nobody deserves a scumbag, but shit happens.

I see Patrick has posted a news link today which discusses "hungover country". Does that mean the US is now divided between hungover country and flyover country? ;)

Does that mean the US is now divided between hungover country and flyover country?

I guess so. At least the "flyover" country gets a good laugh. People in bubblicious areas are getting real headache.

Phx is both flyover and hungover

PHX has direct international flights to LHR. Is it really flyover? :)

But nobody listened to this guy–why?

I'm actually somewhat sympathetic to the SEC's position; which is that they don't regulate hedge funds much because they feel that would legitimize them.

What everyone (especially the stupid rich) seems to have forgotten is that hedge funds have the potential to be very, very risky. As in total losses risky. Ergo, its a case of caveat emptor.

A friend that works for a big financial services company in NYC told me that his organization refused to allow clients to invest with Madoff. Too many red flags. So I'm doubly-unsympathetic as apparently everyone knew he was up to no good.

Personally; given his status as a market-maker; I think many were fooled into thinking he was front-running and wanted in on it. Unfortunately they were right it was a con; but wrong about which one!

Loved this article:

http://www.bloomberg.com/apps/news?pid=20601088&sid=a8mdg7z0u7Dw

...but can anyone spot the error in this paragraph?

"By the time the crash ends, Talbott predicts, homeowners will have lost as much as $10 trillion, with investors and banks worldwide losing almost $2 trillion. And just as the U.S. starts getting over a prolonged recession, the first big wave of baby boomers will retire, depriving the economy of their productivity (and high consumption), he says."

Amazon.com CEO Jeff Bezos announced a new version of the Kindle e-book reader Monday. Is the Kindle 2 just the beginning of Amazon’s plans to be a player in consumer electronics?

The Kindle was designed by an Amazon subsidiary called Lab126, located in Cupertino, Calif., just a few blocks away from Apple. Lab126 has more than a dozen job openings listed on its Web site, leading some analysts to speculate the ecommerce company has visions of launching its own music player or other device.

http://www.lab126.com/careers.html

Smartpen maker Livescribe Inc. said it raised more than $10 million in new funding.

The Oakland company -- which was named the Mobile Technology winner in the Silicon Valley/San Jose Business Journal's Emerging Tech awards in December -- makes a combination pen, digital audio recorder and handheld computer.

The 1.3-ounce gadget has been turning traditional note-taking into what the pen’s inventor, Jim Marggraff, likes to call “paper-based computing.”

The round was led by U.K.-based Lionhart Investments and Vantage Point Partners, which has an office in San Bruno.

The company has now raised more than $40 million.

The deeper we get into this recession, the more I'm convinced that we will experience something similar to Japan's lost decade rather than a GD 2.0.

Is there anyone here who has some first hand experience with 90s Japan who would like to share?

Geithner proved today that he is a mole for Henry Paulson and W. Bush.

I guess I've become a bit of a SV cynic, but one problem I see with all these consumer widgets is the potential user base is widely exaggerated for a product that doesn't go anywhere new. The pitch was made, and they got their seed money...but I wonder if they will ever break even?

Kindle is yet another hand-held electronic device promising a new digital medium to consumers. But unless you're a tech junkie, I see little tangible benefit over a printed book that is already portable/less complicated to use. There is potential for digital books, but not in a Palm retread. Think more like as a hybrid of Youtube/Flickr/blogging rolled into a book. Here the core problem is with publishing and their traditional view of media, who view the digital medium as subordinate to their core product (print). The answer should be a new product, not an old one repackaged as "innovation". Just my take here from working in publishing for years.

Smartpen seems nice -- except it is sort of still based on paper. Maybe if one could use it on a simple erasable tablet.

I was in Japan in 1990, 1992 and travel there quite frequently in the thick of their depression I tell you this is NO Japan.

Japanese had savings, load of them in their stock market crash. Japanese were not very much into stock market, most of their savings were in CASH. Not sophisticated in any sense, so very few having a situation of 401K getting halved into 201K. But a large of their savings were also in the form of corporate pension. Their favorite personal investment product was time deposit. That was why online traders like Schwab had to close their Japanese operation after a major attempt, because Japanese individuals were far less attached to the stock market than we are.

The Japanese had a serious debt problem, but only on the corporate level. Personal lending is less institutionalized, lots of intra-lending among the family members.

I stayed in Japan for 3 months in 1992 on an internship, honestly I didn't feel consumption was going off the cliff. Price came down for sure, but the streets were still very busy with lots of customers. Not the same thing that you feel in today's America, completely different. We cannot afford a lost decade, a lost decade needs savings to last, we will have a crash landing for sure.

OO,

How did the japan stock market index (Nikkei 225) climb to ~38k (and now fall to ~8k) without serious domestic demand for stock? Was it all driven by foreign investment?

Lots of foreign money (particularly the US), and domestic corporate funds. Individuals were not very much into stock market gambling, they have a better vehicle - pachinko, something like a slot machine that are ubiquitous all over Japan.

So Japan was bankrupt on a corporate level back then, not bankrupt on a personal level. We are bankrupt on a personal level, but not necessarily on a corporate level. There are lots of American corporates with a strong cash balance.

Japan in the lost decade was very much like GD1 America, positive foreign trade balance, manufacturing powerhouse of the world, and lots of excess manufacturing capacity at home.

Today, the excess manufacturing capacity of the US lies in China, we are retreating from an unsustainable excess demand.

Interesting to see who is on the board of the NY Fed:

http://seekingalpha.com/article/119744-geithner-channels-his-inner-paulson-unfortunately?source=headline1

Not that any of this is a secret, but it is not so widely publicized either.

Names: Jamie Dimon, Jeff Immelt, etc

http://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Interesting to see that only 3 of 9 seats are supposed to represent the public, and those seats are elected by the board of governors. Very semi-circular and non-democratic election arrangement, to say the least.

No wonder Geithner is doing Wall Street's bidding.

I don't have to pay extra to borrow books from the library. Yes, in California hours will be reduced, but then lotsa folks will also have MORE TIME to use the libraries.

And I can buy used books at about 25cents per inch at the used bookstores, and about a dollar per inch plus shipping from web sellers.

Betcha theres a whole lot more folks like me than there are folks who will pay for a kindle.

justme,

be thankful. Before Geithner's appointment, the front running candidate was Jamie Dimon.

So Japan was bankrupt on a corporate level

I believe we too are bankrupt at the corporate level. The banks were most problematic for Japan and appear to be for us now. I believe you're correct regarding Japanese consumers back then.

But who took out all those loans in Japan that couldn't be paid back and caused the real estate market to plummet and their banks to become insolvent? Was it mostly just corporate loans? Many consumers must have been in trouble too.

frank,

most of the real estate gambles were made by the japanese corporates and businesses. To be exact, they were NOT really speculating on the real estate (aka, not flipping). Flipping on a residential and commercial level never reached the height of what we saw in the last 5 years. Liar loans, IO, Ninja never existed in Japan and was unheard of.

What in particular happened was, companies in Japan expanded their businesses very aggressively at the height of the realty bubble by mortgaging their own real estate holdings for funding needs. That was how the Japanese banks got screwed: corporate collateral decreased in value dramatically. Unlike the US banking system, the Japanese banks were more rigid in lending, and their public market size was way smaller. The most frequently used collateral for corporates and businesses in Japan was their real estate holdings, the idea of goodwill, IP and other creative financial assets as collateral was not adopted.

The consumers got into trouble because of the corporate debt, which caused many businesses to scale down drastically. The biggest blow in the late 90s to Japanese consumers was the collapse of corporate pension funds, because that was where a substantial share of individual retirement savings sat. There were 100-yr residential mortgage loans at the height of the Tokyo residential bubble, but that was not the norm. Japanese consumers were very cautious and savings-oriented.

But in terms of damage to consumers, we are way ahead. The collapse of our consumer spending caused our corporates to get into trouble, not the other way around. Aside from the banks, there are plenty of corporates with very strong balance sheets and cash flow stream like MSFT, AAPL or GOOG, which are very viable entities themselves.

We cannot afford a lost decade, a lost decade needs savings to last, we will have a crash landing for sure.

The Japanese had a big problem we do not.

They honor their debts. Its a cultural thing.

Americans have no problem walking away from ten trillion dollars worth of debt obligations if its in their best interests.

In a way; I think this will be our salvation.

OO,

It is very heartening to know that USA may have a real crash and econmic and social engineering will not be able to fix it. I think similar argument was made at mises.org as well.

I am really rooting for business cycle after watching Alan Greenspan's econoterrorism for a decade.

Lets hope that deflation runs it's due course ... god bless free market!

If there was such a thing as Groundhog Month, and if there was a movie by the same name (as discussed in this item last week), a bailout plan and plunging stock prices would probably be a recurring event for Phil Conners - they seem to happen about once a month. Since restoring the banking industry's health seems to be such a problem, maybe they should start thinking about euthanasia.

When historians look back at the financial crisis and ensuing economic upheaval of the last half of the first decade of the 21st century, what will be the storyline?

I submit it will be that, while the public was focused on the tax rebate program, then on the $700 billion TARP, and finally on the $100 trillion economic stimulus package, a much larger drama was unfolding below the surface.

While the public was distracted and focused on these high profile activities and events, other programs and activities some five times larger than those debated and discussed in open forums were being enacted by a select few unelected federal regulators who were making commitments of trillions of dollars backed by tax payer guarantees and loans