October 30, 2008
A Psychologist Helps Repackage Democrats' Message By SHAILA DEWAN and ROBBIE BROWN
ATLANTA — Democrats up and down the ballot have been trying to reverse the Republican rhetorical dominance that made "liberal" an unsavory label, and many have found help in a slender document percolating through their party's hierarchy.
It is called the "Message Handbook for Progressives From Left to Center," and, along with a companion piece on health care, it was created by Drew Westen, a psychology professor at Emory University here who was virtually unknown in political circles before this election cycle. Several Democratic consultants say it is the first systematic, data-driven effort to mold the language of the left to fit the sensibilities of the center.
Dr. Westen's advice can be heard when Alisha Thomas Morgan, running for re-election to the Georgia House in a conservative suburb of Atlanta, uses the word "leadership" in place of "government" and speaks about the middle class instead of the poor.
Or when Andrew Gillum, a city commissioner in Tallahassee, Fla., who is fighting a ballot initiative against same-sex marriage, tells members of his predominantly black church of the human desire for dignity and respect instead of lecturing them on the evils of discrimination.
Democrats of higher office who have heard Dr. Westen have also shifted their rhetoric, as when Senator Mary L. Landrieu of Louisiana, fending off a Republican challenger, not only says that "health care is a right for every citizen" but pointedly adds, "Particularly citizens who are working hard every day."
Dr. Westen advises jettisoning wonkish 12-point plans in favor of direct emotional appeals that can compete with those evoked by Republicans using terms like "family values" and "the war on terror."
"We are a centrist nation," he said in an interview, "but people prefer center-left to center-right, even in conservative parts of the country, if they hear equally strong messages on both sides."
Liberal candidates, especially those running in not-so-liberal territory, have latched on to his approach.
"There's almost a rebirth, or a pride, that we can really talk about what we believe and not do so shamefully," Mr. Gillum said, adding that Dr. Westen's advice had given him the confidence to speak his mind even on conservative talk radio. "If we communicate it through our stories and our real-life examples, if they don't agree with you then they can at least understand where you come from."
Dr. Westen's ideas began to catch on when he was writing "The Political Brain," a scientific explanation of the central role of emotion in politics, published in 2007, that urged Democrats to stop cowering and fight back.
Among those with whom he has had audiences are Howard Dean, the Democratic national chairman, and Young Elected Officials, a national group of left-leaning city council members and state legislators. During the primaries, Senator Joseph R. Biden Jr., now Senator Barack Obama's running mate, recommended "The Political Brain" to his campaign staff. Bill Clinton is a fan.
Even Frank Luntz, the architect of many Republican rhetorical successes, says Dr. Westen is fostering a sea change.
"It's as though the Republicans have fallen back 15 years in their communication," Mr. Luntz said, "at the very moment when Democrats vaulted ahead 15 years."
Mr. Luntz said the Obama campaign often mirrored Dr. Westen's approach. Though Dr. Westen has not worked for the campaign in an official capacity, he has offered guidance, both directly and in his Huffington Post columns.
Instead of using euphemisms like "pro-choice" and "reproductive health," his handbook suggests, liberal candidates might insist that it is un-American for the government to tell men and women when to start a family or what religious beliefs to follow, arguments that test well in focus groups with conservatives and independents. On illegal immigration, he recommends, candidates who have said their plan would "allow" immigrants to become citizens should instead say they will "require" it.
"The idea," Dr. Westen said, "is to start to rebrand progressives using language that's as evocative as the language of the other side, and stop using phrases that just turn people off."
The handbook does not offer a script so much as a menu of options, each of which was poll-tested against conservative arguments. On economics, for example, one message begins with "I want to see the words 'Made in America' again." Another reads, "We need leaders who don't just talk about family values but actually value families."
Celinda Lake, a prominent Democratic strategist in Washington, said of the handbook: "I think people have been overjoyed to have it. I don't think we have rooted our message in the kind of systematic understanding of values and networks of values that Drew uses."
Dr. Westen is not the first to try to whip Democratic messaging into shape. But several political consultants said his scientific approach — based largely on recent advances in the study of how the brain reacts to political speech — and his advocacy of plain talk made him more effective.
Bill Jones, a moderate Democrat in a conservative, wealthy section of suburban Atlanta, said talking to Dr. Westen had helped him make the decision to run for Congress against the Republican incumbent, Representative Tom Price.
Among other recommendations, Dr. Westen encouraged Mr. Jones to make his background as an Air Force veteran a prominent part of his biography. "It wasn't a contrived approach like 'how can we create a persona?' " Mr. Jones recalled. "It's 'be the person you are.' "
In a candidates' forum at a church on a recent Saturday afternoon, Bobbie Smith, 77, listened while her husband, a veteran, exchanged war stories with Mr. Jones. Ms. Smith, who identified herself as a conservative-leaning independent, said she had seen Mr. Jones's television commercials, co-produced by Dr. Westen. "I liked the down-to-earth talk," she said. "Common words for common people."
Not everyone has jumped wholeheartedly onto the Westen bandwagon. Though praising Dr. Westen's work, Will Marshall, president of the Progressive Policy Institute, the research wing of the Democratic Leadership Council, said he worried that it focused too much on the message rather than substance.
But Paul Begala, a commentator and Democratic strategist who was an adviser to President Clinton, said that with candidates like Mr. Jones, Dr. Westen was helping to shape the future of the party.
"The fact that they're doing this in Georgia is really, really, really important," Mr. Begala said. "Great politicians often come out of enemy territory. Ronald Reagan came from Hollywood, and it made him tougher and smarter."
http://www.nytimes.com/2008/10/30/us/politics/30message.html?_r=1&sq=Repackage%20Democrat&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sig3
Thursday, October 30, 2008
Wednesday, October 29, 2008
Google Settles Suit Over Book-Scanning By MIGUEL HELFT and MOTOKO RICH
October 29, 2008
Google Settles Suit Over Book-Scanning By MIGUEL HELFT and MOTOKO RICH
SAN FRANCISCO — Settling a legal battle, Google reached an agreement with book publishers and authors that clears the way for both sides to more easily profit from digital versions of printed books.
The agreement, under which Google would pay $125 million to settle two copyright lawsuits over its book-scanning efforts, would allow it to make millions of out-of-print books available for reading and purchasing online.
It outlines the framework for a new system that will channel payments from book sales, advertising revenue and other fees to authors and publishers, with Google collecting a cut.
The deal goes some way toward drawing a road map for a possible digital future for publishers and authors, who worried that they were losing control over how their works were used online, as the music industry has.
The settlement, which was announced Tuesday and was subject to court approval, would have the greatest impact on the millions of books that were still protected by copyright but were no longer being printed.
Since 2004, Google has been working with university and research libraries to create digital scans of their collections. Of the approximately seven million books that Google has already scanned, four million to five million are out of print.
Google now makes the content of those books available in its book search service but shows only snippets of text, unless it has permission from the copyright holder to show more.
Under the agreement, Google will now show up to 20 percent of the text at no charge to users. It will also make the entire book available online for a fee. Universities, libraries and other organizations will be able to buy subscriptions that make entire collections of those books available to their visitors.
"This huge body of books that were effectively lost to the marketplace are being rescued," said James Gleick, the author of five books and a member of the board of the Authors Guild, one of the plaintiffs in the suit.
Google plans to take 37 percent of the revenue, leaving 63 percent for publishers and authors. If Google sells ads on pages where previews of scanned books appear, it will split the revenue on the same basis.
The settlement being paid by Google will go in part to establish a digital book registry that will administer the new system. The money will also be used to resolve existing claims by authors and publishers and cover legal fees. At least $45 million is being designated to compensate authors and publishers whose books were scanned by Google before the settlement.
"We as publishers are encouraging the widest possible digital discovery for books, while ensuring the best possible commercial prospects for those books across both print and electronic markets," said Richard Sarnoff, chairman of the Association of American Publishers, at a press conference Tuesday morning.
Sergey Brin, a Google co-founder and its president of technology, said in an interview that the broader book search service was "the kind of thing we built the company to do."
He added: "The thing that really made it come together is the shared vision of enabling people to get access to this information and enabling the rights holders to be compensated for it."
Google has long said that the scanning project was part of its mission to provide access to all the world's information.
Some authors and publishers hailed the agreement, saying it finally recognized their right to be compensated for their works and to control their distribution.
"It really says that individual authors can still survive in the Internet age and are not going to get dropped off the cliff," said Paul Dickson, author of 50 books and one of the named plaintiffs in the Authors Guild suit.
But some librarians and legal experts worried that the deal would give Google too much control over books and other materials that are the backbone of the nation's library system.
"On the one hand, one admires all of Google's inventions," said Rick Prelinger, board president of the Internet Archive, a nonprofit organization that has scanned and made available online one million public domain books. "But when you start to see a single point of access developing for world culture, by default, it is disturbing."
The settlement of the lawsuits, which were filed in 2005, did not resolve the question of whether Google's unauthorized scanning of copyrighted books was permissible under copyright law.
Still, publishers were claiming victory, noting that under the settlement, publishers and authors must give permission for snippets of their in-print books to be included in Google's search program. Google had argued that under the "fair use" doctrine of copyright law, it did not need such permission.
"I think that it is a stupendous victory for rights holders of the written word, because it has established that we should and must maintain control over the intellectual property that writers create and that we invest in," said Carolyn Reidy, chief executive of Simon & Schuster, one of the parties to the suit brought on behalf of the Association of American Publishers.
Ms. Reidy added that she did not view the settlement merely as a victory for publishers and authors, but also as an opportunity, enabled by Google. "Not only did we win our point, we also did so while enabling Google to move forward in creating opportunities for authors in the future," she said.
Google said its decision to no longer show snippets for in-print books without permission was made simply to secure the settlement.
"It is not a concession of our legal position," said David Drummond, Google's chief legal officer.
http://www.nytimes.com/2008/10/29/technology/internet/29google.html?sq=Rich%20Google%20Strikes%20Deal&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sjpw
Google Settles Suit Over Book-Scanning By MIGUEL HELFT and MOTOKO RICH
SAN FRANCISCO — Settling a legal battle, Google reached an agreement with book publishers and authors that clears the way for both sides to more easily profit from digital versions of printed books.
The agreement, under which Google would pay $125 million to settle two copyright lawsuits over its book-scanning efforts, would allow it to make millions of out-of-print books available for reading and purchasing online.
It outlines the framework for a new system that will channel payments from book sales, advertising revenue and other fees to authors and publishers, with Google collecting a cut.
The deal goes some way toward drawing a road map for a possible digital future for publishers and authors, who worried that they were losing control over how their works were used online, as the music industry has.
The settlement, which was announced Tuesday and was subject to court approval, would have the greatest impact on the millions of books that were still protected by copyright but were no longer being printed.
Since 2004, Google has been working with university and research libraries to create digital scans of their collections. Of the approximately seven million books that Google has already scanned, four million to five million are out of print.
Google now makes the content of those books available in its book search service but shows only snippets of text, unless it has permission from the copyright holder to show more.
Under the agreement, Google will now show up to 20 percent of the text at no charge to users. It will also make the entire book available online for a fee. Universities, libraries and other organizations will be able to buy subscriptions that make entire collections of those books available to their visitors.
"This huge body of books that were effectively lost to the marketplace are being rescued," said James Gleick, the author of five books and a member of the board of the Authors Guild, one of the plaintiffs in the suit.
Google plans to take 37 percent of the revenue, leaving 63 percent for publishers and authors. If Google sells ads on pages where previews of scanned books appear, it will split the revenue on the same basis.
The settlement being paid by Google will go in part to establish a digital book registry that will administer the new system. The money will also be used to resolve existing claims by authors and publishers and cover legal fees. At least $45 million is being designated to compensate authors and publishers whose books were scanned by Google before the settlement.
"We as publishers are encouraging the widest possible digital discovery for books, while ensuring the best possible commercial prospects for those books across both print and electronic markets," said Richard Sarnoff, chairman of the Association of American Publishers, at a press conference Tuesday morning.
Sergey Brin, a Google co-founder and its president of technology, said in an interview that the broader book search service was "the kind of thing we built the company to do."
He added: "The thing that really made it come together is the shared vision of enabling people to get access to this information and enabling the rights holders to be compensated for it."
Google has long said that the scanning project was part of its mission to provide access to all the world's information.
Some authors and publishers hailed the agreement, saying it finally recognized their right to be compensated for their works and to control their distribution.
"It really says that individual authors can still survive in the Internet age and are not going to get dropped off the cliff," said Paul Dickson, author of 50 books and one of the named plaintiffs in the Authors Guild suit.
But some librarians and legal experts worried that the deal would give Google too much control over books and other materials that are the backbone of the nation's library system.
"On the one hand, one admires all of Google's inventions," said Rick Prelinger, board president of the Internet Archive, a nonprofit organization that has scanned and made available online one million public domain books. "But when you start to see a single point of access developing for world culture, by default, it is disturbing."
The settlement of the lawsuits, which were filed in 2005, did not resolve the question of whether Google's unauthorized scanning of copyrighted books was permissible under copyright law.
Still, publishers were claiming victory, noting that under the settlement, publishers and authors must give permission for snippets of their in-print books to be included in Google's search program. Google had argued that under the "fair use" doctrine of copyright law, it did not need such permission.
"I think that it is a stupendous victory for rights holders of the written word, because it has established that we should and must maintain control over the intellectual property that writers create and that we invest in," said Carolyn Reidy, chief executive of Simon & Schuster, one of the parties to the suit brought on behalf of the Association of American Publishers.
Ms. Reidy added that she did not view the settlement merely as a victory for publishers and authors, but also as an opportunity, enabled by Google. "Not only did we win our point, we also did so while enabling Google to move forward in creating opportunities for authors in the future," she said.
Google said its decision to no longer show snippets for in-print books without permission was made simply to secure the settlement.
"It is not a concession of our legal position," said David Drummond, Google's chief legal officer.
http://www.nytimes.com/2008/10/29/technology/internet/29google.html?sq=Rich%20Google%20Strikes%20Deal&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sjpw
Mourning Old Media's Decline By DAVID CARR
October 29, 2008
The Media Equation
Mourning Old Media's Decline By DAVID CARR
The news that Google settled two longstanding suits with book authors and publishers over its plans to digitize the world's great libraries suggests that some level of détente could be reached between old media and new.
If true, it can't come soon enough for the news business.
It's been an especially rotten few days for people who type on deadline. On Tuesday, The Christian Science Monitor announced that, after a century, it would cease publishing a weekday paper. Time Inc., the Olympian home of Time magazine, Fortune, People and Sports Illustrated, announced that it was cutting 600 jobs and reorganizing its staff. And Gannett, the largest newspaper publisher in the country, compounded the grimness by announcing it was laying off 10 percent of its work force — up to 3,000 people.
Clearly, the sky is falling. The question now is how many people will be left to cover it.
It goes on. The day before, the Tribune Company had declared that it would reduce the newsroom of The Los Angeles Times by 75 more people, leaving it approximately half the size it was just seven years ago.
The Star-Ledger of Newark, the 15th-largest paper in the country, which was threatened with closing, will apparently survive, but only after it was announced that the editorial staff would be reduced by 40 percent.
And two weeks ago, TV Guide, one of the famous brand names in magazines, was sold for one dollar, less than the price of a single copy.
The paradox of all these announcements is that newspapers and magazines do not have an audience problem — newspaper Web sites are a vital source of news, and growing — but they do have a consumer problem.
Stop and think about where you are reading this column. If you are one of the million or so people who are reading it in a newspaper that landed on your doorstop or that you picked up at the corner, you are in the minority. This same information is available to many more millions on this paper's Web site, in RSS feeds, on hand-held devices, linked and summarized all over the Web.
Historically, people took an interest in the daily paper about the time they bought a home. Now they are checking their BlackBerrys for alerts about mortgage rates.
"The auto industry and the print industry have essentially the same problem," said Clay Shirky, the author of "Here Comes Everybody." "The older customers like the older products and the new customers like the new ones."
For readers, the drastic diminishment of print raises an obvious question: if more people are reading newspapers and magazines, why should we care whether they are printed on paper?
The answer is that paper is not just how news is delivered; it is how it is paid for.
More than 90 percent of the newspaper industry's revenue still derives from the print product, a legacy technology that attracts fewer consumers and advertisers every single day. A single newspaper ad might cost many thousands of dollars while an online ad might only bring in $20 for each 1,000 customers who see it.
The difference between print dollars and digital dimes — or sometimes pennies — is being taken out of the newsrooms that supply both. And while it is indeed tough all over in this economy, consider the consequences.
New Jersey, a petri dish of corruption, will have to make do with 40 percent fewer reporters at The Star-Ledger, one of the few remaining cops on the beat. The Los Angeles Times, which toils under Hollywood's nose, has one movie reviewer left on staff. And dozens of communities served by Gannett will have fewer reporters and editors overseeing the deeds and misdeeds of local government and businesses.
The authors and book publishers looking for royalties from the Google deal may be the lucky ones in the old media sweepstakes. Print publishers are madly cutting, in part because the fourth quarter, postfinancial crisis, is going to be a miserable one. Advertising from the car industry, retail business and financial services — for years, the three sturdy legs of a stool that print once rested comfortably on — are in steep decline.
So who can still afford to pay for the phone calls that reporters have to make? USA Today was made exempt from the current rounds of cuts at Gannett but even national papers, including The New York Times, have resorted to modest staff cuts over the last year. The blogosphere has had its share of news breaks, but absent a functioning mainstream media to annotate, it could be pretty darn quiet out there.
At the recent American Magazine Conference, one of the speakers worried that if the great brands of journalism — the trusted news sources readers have relied on — were to vanish, then the Web itself would quickly become a "cesspool" of useless information. That kind of hand-wringing is a staple of industry gatherings.
But in this case, it wasn't an old journalism hack lamenting his industry. It was Eric Schmidt, the chief executive of Google.
http://www.nytimes.com/2008/10/29/business/media/29carr.htm?%2339;s%20Decline=&sq=Mourning%20Old%20Media&st=Search&scp=1&pagewanted=print
http://snipurl.com/7sje7
The Media Equation
Mourning Old Media's Decline By DAVID CARR
The news that Google settled two longstanding suits with book authors and publishers over its plans to digitize the world's great libraries suggests that some level of détente could be reached between old media and new.
If true, it can't come soon enough for the news business.
It's been an especially rotten few days for people who type on deadline. On Tuesday, The Christian Science Monitor announced that, after a century, it would cease publishing a weekday paper. Time Inc., the Olympian home of Time magazine, Fortune, People and Sports Illustrated, announced that it was cutting 600 jobs and reorganizing its staff. And Gannett, the largest newspaper publisher in the country, compounded the grimness by announcing it was laying off 10 percent of its work force — up to 3,000 people.
Clearly, the sky is falling. The question now is how many people will be left to cover it.
It goes on. The day before, the Tribune Company had declared that it would reduce the newsroom of The Los Angeles Times by 75 more people, leaving it approximately half the size it was just seven years ago.
The Star-Ledger of Newark, the 15th-largest paper in the country, which was threatened with closing, will apparently survive, but only after it was announced that the editorial staff would be reduced by 40 percent.
And two weeks ago, TV Guide, one of the famous brand names in magazines, was sold for one dollar, less than the price of a single copy.
The paradox of all these announcements is that newspapers and magazines do not have an audience problem — newspaper Web sites are a vital source of news, and growing — but they do have a consumer problem.
Stop and think about where you are reading this column. If you are one of the million or so people who are reading it in a newspaper that landed on your doorstop or that you picked up at the corner, you are in the minority. This same information is available to many more millions on this paper's Web site, in RSS feeds, on hand-held devices, linked and summarized all over the Web.
Historically, people took an interest in the daily paper about the time they bought a home. Now they are checking their BlackBerrys for alerts about mortgage rates.
"The auto industry and the print industry have essentially the same problem," said Clay Shirky, the author of "Here Comes Everybody." "The older customers like the older products and the new customers like the new ones."
For readers, the drastic diminishment of print raises an obvious question: if more people are reading newspapers and magazines, why should we care whether they are printed on paper?
The answer is that paper is not just how news is delivered; it is how it is paid for.
More than 90 percent of the newspaper industry's revenue still derives from the print product, a legacy technology that attracts fewer consumers and advertisers every single day. A single newspaper ad might cost many thousands of dollars while an online ad might only bring in $20 for each 1,000 customers who see it.
The difference between print dollars and digital dimes — or sometimes pennies — is being taken out of the newsrooms that supply both. And while it is indeed tough all over in this economy, consider the consequences.
New Jersey, a petri dish of corruption, will have to make do with 40 percent fewer reporters at The Star-Ledger, one of the few remaining cops on the beat. The Los Angeles Times, which toils under Hollywood's nose, has one movie reviewer left on staff. And dozens of communities served by Gannett will have fewer reporters and editors overseeing the deeds and misdeeds of local government and businesses.
The authors and book publishers looking for royalties from the Google deal may be the lucky ones in the old media sweepstakes. Print publishers are madly cutting, in part because the fourth quarter, postfinancial crisis, is going to be a miserable one. Advertising from the car industry, retail business and financial services — for years, the three sturdy legs of a stool that print once rested comfortably on — are in steep decline.
So who can still afford to pay for the phone calls that reporters have to make? USA Today was made exempt from the current rounds of cuts at Gannett but even national papers, including The New York Times, have resorted to modest staff cuts over the last year. The blogosphere has had its share of news breaks, but absent a functioning mainstream media to annotate, it could be pretty darn quiet out there.
At the recent American Magazine Conference, one of the speakers worried that if the great brands of journalism — the trusted news sources readers have relied on — were to vanish, then the Web itself would quickly become a "cesspool" of useless information. That kind of hand-wringing is a staple of industry gatherings.
But in this case, it wasn't an old journalism hack lamenting his industry. It was Eric Schmidt, the chief executive of Google.
http://www.nytimes.com/2008/10/29/business/media/29carr.htm?%2339;s%20Decline=&sq=Mourning%20Old%20Media&st=Search&scp=1&pagewanted=print
http://snipurl.com/7sje7
Are Stocks the Bargain You Think? By DAVID LEONHARDT
October 29, 2008
Economic Scene
Are Stocks the Bargain You Think? By DAVID LEONHARDT
Some of the country's most famous investors, including Warren Buffett and John Bogle, have started to make the case that it's time to dive back into the stock market.
They are usually careful to add that they don't know what stocks will do in the short term. Yet their basic message is clear enough: stocks are now cheap, irrational fears have been driving the market down lately, and people who buy today will be glad that they did.
After a day like Tuesday, when the market rose 11 percent, it's easy to see the merits of the argument.
But there is another argument that deserves more attention than it has gotten so far. It's the bearish argument that is based neither on fears that the country may be sliding into another depression nor on gut-level worries about the unknown. It is based on numbers and history, and it has at least as much claim on reason as the bullish argument does.
It goes something like this: Stocks are truly cheap only relative to their values over the last 20 years, a period that will go down as one of the great bubbles in history. If you take a longer view, you see that the ratio of stock prices to corporate earnings is only slightly below its long-term average. And in past economic crises — during the 1930s and 1970s — stocks fell well below their long-run average before they turned around.
To make matters worse, corporate earnings have now started to plunge, too. Assuming that they keep dropping, stocks would also need to fall to keep the price-earnings ratio at its current level.
As stocks were soaring on Tuesday afternoon, I called James Melcher to hear a dose of fact-based bearishness. Mr. Melcher is president of Balestra Capital, a hedge fund in New York, who wrote an essay for his clients two years ago that predicted the broad outlines of the financial crisis (and then arranged Balestra's portfolio accordingly). Like the bulls, he said that no one could know what the market would do in the short term. "But to think stocks are cheap now," he added, "is not rational."
He went on: "In the last 20 years — and particularly in the last six or seven — you had the most massive creation of liquidity the world has ever known." Consumers went ever deeper into debt, thanks to loose lending standards, and a shadow banking system, made up of hedge funds and investment banks, allowed Wall Street to do the same. All that debt lifted economic growth and stock returns.
"It was a nice party," Mr. Melcher said. "The problem is that all the bills are coming due at the same time." He thinks stocks could easily fall an additional 20 percent and maybe 35 percent before hitting bottom.
So who's right — the bears or the bulls? The smartest people in both camps, like Mr. Melcher, Mr. Buffett and Mr. Bogle, have a healthy dose of humility about their own conclusions. And when you dig into their arguments, you find that they're not quite as different as they first sound. But they are different, and it's worth taking a minute to consider the numbers.
There are any number of ways to measure the valuation of the stock market. Some examine prices relative to earnings, others are based on cash flow, a company's underlying assets or the total value of the market. But they tell a pretty consistent story right now. Stocks, which were fabulously expensive for much of the 1990s and this decade, no longer are.
My favorite measure is the one recommended by Benjamin Graham and David L. Dodd, in their classic 1934 textbook, "Security Analysis." They urged investors to use a price-to-earnings ratio — stock prices divided by average annual corporate earnings — based on at least five years of earnings and, ideally, closer to 10. Corporate profits may rise or fall in any given year, but a share of stock is a claim on a company's long-term earnings and should be evaluated as such.
(Why not use a forecast of future earnings? Because they tend toward the fictional, as we're now seeing once again.)
The 10-year price-to-earnings ratio tells an incredibly consistent story over the last century. It has averaged about 16 over that time. There have been long periods when it stayed above 16 and even shot above 20, like the 1920s, 1960s and recent years. As recently as last October, when other measures suggested the market was reasonably valued, the Graham-Dodd version of the ratio was a disturbing 27. But periods in which the ratio has jumped above 20 have always been followed by steep declines and at least a decade of poor returns.
By 1932, the ratio had fallen to 6. In 1982, it was only 7. Then, of course, the market began to self-correct in the other direction, and stocks took off.
After Tuesday's big rally, the ratio was just a shade below 16, or almost equal to its long-run average. This is a little difficult to swallow, I realize. Stocks are down 40 percent since last October, and every experience from the last 25 years suggests they now have to bounce back.
But that's precisely the problem. Since the 1980s, stocks have always bounced back from a loss, usually reaching a high in relatively short order. As a result, the market became enormously overvalued.
As Robert Shiller, the economist who specializes in bubbles, points out, human beings tend to put too much weight on recent experiences. We think the market snapbacks of 1987 and the current decade are more meaningful and more predictive than the long slumps of the 1930s, 1940s and 1970s. Of course, anyone who made the same assumption in 1930 or 1975 — this just has to turn around soon — would have had to wait years and years until the investment paid off.
Now, Mr. Buffett, Mr. Bogle and their fellow bulls know all this history, and they're still bullish. (Though I'd be more bullish, too, if I could get the favorable terms that Mr. Buffett did. In exchange for his money and his good name, Goldman Sachs and General Electric each guaranteed him an annual return of at least 10 percent.)
So on Tuesday afternoon, I also called Mr. Bogle, the legendary founder of the Vanguard Group, the investment firm whose low-cost index funds have made a lot for a lot of people.
He, too, prefers the 10-year price-to-earnings ratio, he said, but he didn't think that it necessarily had to fall to the same bargain-basement levels it reached in the 1930s and 1970s.
You can certainly see why that would be the case. Investors are well aware that the market fell to irrationally low levels during past crises, and they may not allow it to become so cheap this time around.
Mr. Bogle also thinks that corporate profits will rebound nicely within a couple of years and likes the fact that interest rates are low. Low rates have often — though not always — accompanied bull markets.
But it was his last argument that I think is the main one for most investors to focus on. "I'm not looking for a great bull market," he said. There are some reasons to be optimistic about stocks, he said, "and I also look at the alternative."
And, really, how attractive are the alternatives? Savings accounts and money market funds will struggle to keep pace with inflation. Bonds may, as well.
Stocks, on the other hand, are paying an average dividend of about 3 percent, which is better than the interest on many savings accounts, and stocks are also almost certain to rise over the next couple of decades.
If that is your time frame — decades, rather than months or years — this will probably turn out to be a perfectly good buying opportunity. In the shorter term, though, it's a much tougher call, and it involves a lot more risk.
E-mail: Leonhardt@nytimes.com
http://www.nytimes.com/2008/10/29/business/economy/29leonhardt.html?sq=are%20stocks%20the%20bargain%20you%20think&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sjbd
Economic Scene
Are Stocks the Bargain You Think? By DAVID LEONHARDT
Some of the country's most famous investors, including Warren Buffett and John Bogle, have started to make the case that it's time to dive back into the stock market.
They are usually careful to add that they don't know what stocks will do in the short term. Yet their basic message is clear enough: stocks are now cheap, irrational fears have been driving the market down lately, and people who buy today will be glad that they did.
After a day like Tuesday, when the market rose 11 percent, it's easy to see the merits of the argument.
But there is another argument that deserves more attention than it has gotten so far. It's the bearish argument that is based neither on fears that the country may be sliding into another depression nor on gut-level worries about the unknown. It is based on numbers and history, and it has at least as much claim on reason as the bullish argument does.
It goes something like this: Stocks are truly cheap only relative to their values over the last 20 years, a period that will go down as one of the great bubbles in history. If you take a longer view, you see that the ratio of stock prices to corporate earnings is only slightly below its long-term average. And in past economic crises — during the 1930s and 1970s — stocks fell well below their long-run average before they turned around.
To make matters worse, corporate earnings have now started to plunge, too. Assuming that they keep dropping, stocks would also need to fall to keep the price-earnings ratio at its current level.
As stocks were soaring on Tuesday afternoon, I called James Melcher to hear a dose of fact-based bearishness. Mr. Melcher is president of Balestra Capital, a hedge fund in New York, who wrote an essay for his clients two years ago that predicted the broad outlines of the financial crisis (and then arranged Balestra's portfolio accordingly). Like the bulls, he said that no one could know what the market would do in the short term. "But to think stocks are cheap now," he added, "is not rational."
He went on: "In the last 20 years — and particularly in the last six or seven — you had the most massive creation of liquidity the world has ever known." Consumers went ever deeper into debt, thanks to loose lending standards, and a shadow banking system, made up of hedge funds and investment banks, allowed Wall Street to do the same. All that debt lifted economic growth and stock returns.
"It was a nice party," Mr. Melcher said. "The problem is that all the bills are coming due at the same time." He thinks stocks could easily fall an additional 20 percent and maybe 35 percent before hitting bottom.
So who's right — the bears or the bulls? The smartest people in both camps, like Mr. Melcher, Mr. Buffett and Mr. Bogle, have a healthy dose of humility about their own conclusions. And when you dig into their arguments, you find that they're not quite as different as they first sound. But they are different, and it's worth taking a minute to consider the numbers.
There are any number of ways to measure the valuation of the stock market. Some examine prices relative to earnings, others are based on cash flow, a company's underlying assets or the total value of the market. But they tell a pretty consistent story right now. Stocks, which were fabulously expensive for much of the 1990s and this decade, no longer are.
My favorite measure is the one recommended by Benjamin Graham and David L. Dodd, in their classic 1934 textbook, "Security Analysis." They urged investors to use a price-to-earnings ratio — stock prices divided by average annual corporate earnings — based on at least five years of earnings and, ideally, closer to 10. Corporate profits may rise or fall in any given year, but a share of stock is a claim on a company's long-term earnings and should be evaluated as such.
(Why not use a forecast of future earnings? Because they tend toward the fictional, as we're now seeing once again.)
The 10-year price-to-earnings ratio tells an incredibly consistent story over the last century. It has averaged about 16 over that time. There have been long periods when it stayed above 16 and even shot above 20, like the 1920s, 1960s and recent years. As recently as last October, when other measures suggested the market was reasonably valued, the Graham-Dodd version of the ratio was a disturbing 27. But periods in which the ratio has jumped above 20 have always been followed by steep declines and at least a decade of poor returns.
By 1932, the ratio had fallen to 6. In 1982, it was only 7. Then, of course, the market began to self-correct in the other direction, and stocks took off.
After Tuesday's big rally, the ratio was just a shade below 16, or almost equal to its long-run average. This is a little difficult to swallow, I realize. Stocks are down 40 percent since last October, and every experience from the last 25 years suggests they now have to bounce back.
But that's precisely the problem. Since the 1980s, stocks have always bounced back from a loss, usually reaching a high in relatively short order. As a result, the market became enormously overvalued.
As Robert Shiller, the economist who specializes in bubbles, points out, human beings tend to put too much weight on recent experiences. We think the market snapbacks of 1987 and the current decade are more meaningful and more predictive than the long slumps of the 1930s, 1940s and 1970s. Of course, anyone who made the same assumption in 1930 or 1975 — this just has to turn around soon — would have had to wait years and years until the investment paid off.
Now, Mr. Buffett, Mr. Bogle and their fellow bulls know all this history, and they're still bullish. (Though I'd be more bullish, too, if I could get the favorable terms that Mr. Buffett did. In exchange for his money and his good name, Goldman Sachs and General Electric each guaranteed him an annual return of at least 10 percent.)
So on Tuesday afternoon, I also called Mr. Bogle, the legendary founder of the Vanguard Group, the investment firm whose low-cost index funds have made a lot for a lot of people.
He, too, prefers the 10-year price-to-earnings ratio, he said, but he didn't think that it necessarily had to fall to the same bargain-basement levels it reached in the 1930s and 1970s.
You can certainly see why that would be the case. Investors are well aware that the market fell to irrationally low levels during past crises, and they may not allow it to become so cheap this time around.
Mr. Bogle also thinks that corporate profits will rebound nicely within a couple of years and likes the fact that interest rates are low. Low rates have often — though not always — accompanied bull markets.
But it was his last argument that I think is the main one for most investors to focus on. "I'm not looking for a great bull market," he said. There are some reasons to be optimistic about stocks, he said, "and I also look at the alternative."
And, really, how attractive are the alternatives? Savings accounts and money market funds will struggle to keep pace with inflation. Bonds may, as well.
Stocks, on the other hand, are paying an average dividend of about 3 percent, which is better than the interest on many savings accounts, and stocks are also almost certain to rise over the next couple of decades.
If that is your time frame — decades, rather than months or years — this will probably turn out to be a perfectly good buying opportunity. In the shorter term, though, it's a much tougher call, and it involves a lot more risk.
E-mail: Leonhardt@nytimes.com
http://www.nytimes.com/2008/10/29/business/economy/29leonhardt.html?sq=are%20stocks%20the%20bargain%20you%20think&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sjbd
Tuesday, October 28, 2008
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
October 29, 2008
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
The national "bank holiday" that ushered in the New Deal in 1933 locked up the public's cash for four days. The crisis that hit last month at the Reserve Fund, the nation's oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.
At least 400,000 people, and perhaps as many as a million, can't get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.
"Longer term, I just don't know how we'll deal with it," said John Oakes, a retired engineer in Austin, Tex., who can't tap $20,000 in a Reserve account to pay his mother's nursing home bill. "They say we may get some money this week, but we don't know if we'll get 100 percent, 90 percent or 30 percent."
Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets —invested in the Reserve US Government Fund.
"They even bragged that you could sleep at night if you invested in their funds," Mrs. Dews said. "In the past month and a half, we don't sleep at all."
Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.
The next day, its $62 billion Primary Fund and two small offshore funds "broke the buck," incurring losses that pushed their per-share price below a dollar.
Only one other money fund, a small bank fund, had ever broken the buck, and the announcement on Sept. 16 sent tremors from Wall Street to Washington. It ultimately played a role in persuading the Treasury to set up a temporary insurance program for money market funds.
And the Reserve Fund had seemed the least likely candidate for trouble, given its long and stable history — its founder, the legendary Henry B. R. Brown, had invented money market funds.
Initially, the company simply announced that it would delay redemptions from the Primary Fund for up to seven days, as allowed by law. Customers were somewhat reassured, but anyone trying to get additional information was met with busy phone lines and unanswered e-mail.
The news occasionally posted on the fund's Web site got steadily worse. On Sept. 18, investors in a host of other Reserve money funds learned that their money would be tied up for as long as a week; that delay later became open-ended. On Sept. 19, the fund delayed redemptions from both the Primary Fund and the US Government Fund indefinitely.
Since then, investors have been on a roller coaster of broken promises, with the company repeatedly blaming its record-keeping systems for delays.
Several requests for comment from management of the Reserve Fund have been declined. "I have no confidence at all in what it says," said Mrs. Dews.
Mrs. Dews and Mr. Oakes are among the plaintiffs in a lawsuit filed against the Primary Fund and the Reserve Fund management by Girard Gibbs, a law firm in San Francisco.
It is one of eight cases pending against the fund company, including one that accuses the fund management of tipping off big investors before the Primary Fund broke the buck so they could get out in time — an allegation the fund has denied.
Many Reserve investors say their issue has become the forgotten crisis. "The government is focused on the banks and the big problems," said Sherry Bryan, a retired industrial photographer in Atlanta. "But this is happening right now to real people."
Ms. Bryan, 58, said she thought of her Reserve Fund investment as "very safe — an 'old-granny' investment." She added, "We really never expected to lose money on this."
Ms. Bryan has tried to keep a sense of humor about having to "tighten my belt and tighten it again." Selling other nest-egg securities in a bad market to pay her bills was "like I'd gone out and bought a speedboat and a Mercedes and traveled all around Europe," she added. "It's cost me the same amount of money, but I didn't have any of the fun."
The Reserve has posted updates on its Web site, www.ther.com. In those reports, it has asked customers to be patient as it tries to cope with "these unprecedented events."
Regulators have had to be patient, too. Despite all their efforts to restore liquidity and confidence in all money funds, they don't have any good options in this case other than to monitor the liquidations carefully.
"The staff has been actively involved in the entire process, intervening to protect all shareholders," said John Heine, a spokesman for the Securities and Exchange Commission.
But it can intervene only so much. The Reserve has proprietary computer systems, so taking over the process at this point could delay the redemptions even further, current and former regulators said.
The largest fund, the Primary Fund, is not eligible for the ad hoc insurance program the Treasury set up for money funds last month. The big US Government Fund seems to meet the criteria and has applied for coverage, but no announcement of its acceptance has been made.
The biggest mystery is why redemptions from that government fund have not been handled more promptly, said James Cracchiolo, chief executive of Ameriprise Financial Services in Minneapolis.
Ameriprise is among those suing the Reserve Fund over the Primary Fund's losses — it is the company that contends management tipped off big investors . But that lawsuit does not name the US Government Fund, Mr. Cracchiolo said.
"This is good government paper — even the government itself could take it from this fund and not lose a penny," he said. "We are all very frustrated at the lack of responsiveness from that fund's trustees. For heaven's sake, if they can't find a white knight to take the paper, we'll take some of it."
Ameriprise alone has about 400,000 clients caught in the freeze, he said, and his rough calculations indicate that "as many as a million, a million-plus people" could be affected. Records from last year showed the Reserve had about 170,000 separate accounts, but many of those were large omnibus accounts that could serve tens of thousands of individuals, businesses and local governments.
Mr. Cracchiolo's firm, like some others, is temporarily offering customers very low-interest loans to help them cope while they wait for a resolution.
The mutual fund industry is equally frustrated, said Paul Schott Stevens, chief executive of the Investment Company Institute, a trade association. "I can't emphasize too strongly that this absolutely is not typical of money funds," he added.
He cited a large money fund at Putnam Investments, which was also hit with heavy redemption demands the week of Sept. 15. But it promptly froze the fund and sold it to Federated Investors with scarcely a glitch in customer's access to their money.
The Reserve Fund's prolonged crisis is particularly baffling to Michael Brunner, a research scientist in Columbus, N.J., who has been a customer since the fund first opened its doors in 1970. He knew the money fund was not insured, as bank deposits are. "But after 30 years, one doesn't think it will go bad," he said.
He can manage without his frozen assets, he added — but he is furious that he still has to, after so much time.
"People talk about this like it's something that happened," he said. "But this isn't something that 'happened.' This is still happening. I still don't have my money and I still don't know what's going to happen to it."
http://www.nytimes.com/2008/10/29/business/29fund.html?pagewanted=print
http://snipurl.com/7sjmh
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
The national "bank holiday" that ushered in the New Deal in 1933 locked up the public's cash for four days. The crisis that hit last month at the Reserve Fund, the nation's oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.
At least 400,000 people, and perhaps as many as a million, can't get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.
"Longer term, I just don't know how we'll deal with it," said John Oakes, a retired engineer in Austin, Tex., who can't tap $20,000 in a Reserve account to pay his mother's nursing home bill. "They say we may get some money this week, but we don't know if we'll get 100 percent, 90 percent or 30 percent."
Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets —invested in the Reserve US Government Fund.
"They even bragged that you could sleep at night if you invested in their funds," Mrs. Dews said. "In the past month and a half, we don't sleep at all."
Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.
The next day, its $62 billion Primary Fund and two small offshore funds "broke the buck," incurring losses that pushed their per-share price below a dollar.
Only one other money fund, a small bank fund, had ever broken the buck, and the announcement on Sept. 16 sent tremors from Wall Street to Washington. It ultimately played a role in persuading the Treasury to set up a temporary insurance program for money market funds.
And the Reserve Fund had seemed the least likely candidate for trouble, given its long and stable history — its founder, the legendary Henry B. R. Brown, had invented money market funds.
Initially, the company simply announced that it would delay redemptions from the Primary Fund for up to seven days, as allowed by law. Customers were somewhat reassured, but anyone trying to get additional information was met with busy phone lines and unanswered e-mail.
The news occasionally posted on the fund's Web site got steadily worse. On Sept. 18, investors in a host of other Reserve money funds learned that their money would be tied up for as long as a week; that delay later became open-ended. On Sept. 19, the fund delayed redemptions from both the Primary Fund and the US Government Fund indefinitely.
Since then, investors have been on a roller coaster of broken promises, with the company repeatedly blaming its record-keeping systems for delays.
Several requests for comment from management of the Reserve Fund have been declined. "I have no confidence at all in what it says," said Mrs. Dews.
Mrs. Dews and Mr. Oakes are among the plaintiffs in a lawsuit filed against the Primary Fund and the Reserve Fund management by Girard Gibbs, a law firm in San Francisco.
It is one of eight cases pending against the fund company, including one that accuses the fund management of tipping off big investors before the Primary Fund broke the buck so they could get out in time — an allegation the fund has denied.
Many Reserve investors say their issue has become the forgotten crisis. "The government is focused on the banks and the big problems," said Sherry Bryan, a retired industrial photographer in Atlanta. "But this is happening right now to real people."
Ms. Bryan, 58, said she thought of her Reserve Fund investment as "very safe — an 'old-granny' investment." She added, "We really never expected to lose money on this."
Ms. Bryan has tried to keep a sense of humor about having to "tighten my belt and tighten it again." Selling other nest-egg securities in a bad market to pay her bills was "like I'd gone out and bought a speedboat and a Mercedes and traveled all around Europe," she added. "It's cost me the same amount of money, but I didn't have any of the fun."
The Reserve has posted updates on its Web site, www.ther.com. In those reports, it has asked customers to be patient as it tries to cope with "these unprecedented events."
Regulators have had to be patient, too. Despite all their efforts to restore liquidity and confidence in all money funds, they don't have any good options in this case other than to monitor the liquidations carefully.
"The staff has been actively involved in the entire process, intervening to protect all shareholders," said John Heine, a spokesman for the Securities and Exchange Commission.
But it can intervene only so much. The Reserve has proprietary computer systems, so taking over the process at this point could delay the redemptions even further, current and former regulators said.
The largest fund, the Primary Fund, is not eligible for the ad hoc insurance program the Treasury set up for money funds last month. The big US Government Fund seems to meet the criteria and has applied for coverage, but no announcement of its acceptance has been made.
The biggest mystery is why redemptions from that government fund have not been handled more promptly, said James Cracchiolo, chief executive of Ameriprise Financial Services in Minneapolis.
Ameriprise is among those suing the Reserve Fund over the Primary Fund's losses — it is the company that contends management tipped off big investors . But that lawsuit does not name the US Government Fund, Mr. Cracchiolo said.
"This is good government paper — even the government itself could take it from this fund and not lose a penny," he said. "We are all very frustrated at the lack of responsiveness from that fund's trustees. For heaven's sake, if they can't find a white knight to take the paper, we'll take some of it."
Ameriprise alone has about 400,000 clients caught in the freeze, he said, and his rough calculations indicate that "as many as a million, a million-plus people" could be affected. Records from last year showed the Reserve had about 170,000 separate accounts, but many of those were large omnibus accounts that could serve tens of thousands of individuals, businesses and local governments.
Mr. Cracchiolo's firm, like some others, is temporarily offering customers very low-interest loans to help them cope while they wait for a resolution.
The mutual fund industry is equally frustrated, said Paul Schott Stevens, chief executive of the Investment Company Institute, a trade association. "I can't emphasize too strongly that this absolutely is not typical of money funds," he added.
He cited a large money fund at Putnam Investments, which was also hit with heavy redemption demands the week of Sept. 15. But it promptly froze the fund and sold it to Federated Investors with scarcely a glitch in customer's access to their money.
The Reserve Fund's prolonged crisis is particularly baffling to Michael Brunner, a research scientist in Columbus, N.J., who has been a customer since the fund first opened its doors in 1970. He knew the money fund was not insured, as bank deposits are. "But after 30 years, one doesn't think it will go bad," he said.
He can manage without his frozen assets, he added — but he is furious that he still has to, after so much time.
"People talk about this like it's something that happened," he said. "But this isn't something that 'happened.' This is still happening. I still don't have my money and I still don't know what's going to happen to it."
http://www.nytimes.com/2008/10/29/business/29fund.html?pagewanted=print
http://snipurl.com/7sjmh
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
October 29, 2008
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
The national "bank holiday" that ushered in the New Deal in 1933 locked up the public's cash for four days. The crisis that hit last month at the Reserve Fund, the nation's oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.
At least 400,000 people, and perhaps as many as a million, can't get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.
"Longer term, I just don't know how we'll deal with it," said John Oakes, a retired engineer in Austin, Tex., who can't tap $20,000 in a Reserve account to pay his mother's nursing home bill. "They say we may get some money this week, but we don't know if we'll get 100 percent, 90 percent or 30 percent."
Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets —invested in the Reserve US Government Fund.
"They even bragged that you could sleep at night if you invested in their funds," Mrs. Dews said. "In the past month and a half, we don't sleep at all."
Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.
The next day, its $62 billion Primary Fund and two small offshore funds "broke the buck," incurring losses that pushed their per-share price below a dollar.
Only one other money fund, a small bank fund, had ever broken the buck, and the announcement on Sept. 16 sent tremors from Wall Street to Washington. It ultimately played a role in persuading the Treasury to set up a temporary insurance program for money market funds.
And the Reserve Fund had seemed the least likely candidate for trouble, given its long and stable history — its founder, the legendary Henry B. R. Brown, had invented money market funds.
Initially, the company simply announced that it would delay redemptions from the Primary Fund for up to seven days, as allowed by law. Customers were somewhat reassured, but anyone trying to get additional information was met with busy phone lines and unanswered e-mail.
The news occasionally posted on the fund's Web site got steadily worse. On Sept. 18, investors in a host of other Reserve money funds learned that their money would be tied up for as long as a week; that delay later became open-ended. On Sept. 19, the fund delayed redemptions from both the Primary Fund and the US Government Fund indefinitely.
Since then, investors have been on a roller coaster of broken promises, with the company repeatedly blaming its record-keeping systems for delays.
Several requests for comment from management of the Reserve Fund have been declined. "I have no confidence at all in what it says," said Mrs. Dews.
Mrs. Dews and Mr. Oakes are among the plaintiffs in a lawsuit filed against the Primary Fund and the Reserve Fund management by Girard Gibbs, a law firm in San Francisco.
It is one of eight cases pending against the fund company, including one that accuses the fund management of tipping off big investors before the Primary Fund broke the buck so they could get out in time — an allegation the fund has denied.
Many Reserve investors say their issue has become the forgotten crisis. "The government is focused on the banks and the big problems," said Sherry Bryan, a retired industrial photographer in Atlanta. "But this is happening right now to real people."
Ms. Bryan, 58, said she thought of her Reserve Fund investment as "very safe — an 'old-granny' investment." She added, "We really never expected to lose money on this."
Ms. Bryan has tried to keep a sense of humor about having to "tighten my belt and tighten it again." Selling other nest-egg securities in a bad market to pay her bills was "like I'd gone out and bought a speedboat and a Mercedes and traveled all around Europe," she added. "It's cost me the same amount of money, but I didn't have any of the fun."
The Reserve has posted updates on its Web site, www.ther.com. In those reports, it has asked customers to be patient as it tries to cope with "these unprecedented events."
Regulators have had to be patient, too. Despite all their efforts to restore liquidity and confidence in all money funds, they don't have any good options in this case other than to monitor the liquidations carefully.
"The staff has been actively involved in the entire process, intervening to protect all shareholders," said John Heine, a spokesman for the Securities and Exchange Commission.
But it can intervene only so much. The Reserve has proprietary computer systems, so taking over the process at this point could delay the redemptions even further, current and former regulators said.
The largest fund, the Primary Fund, is not eligible for the ad hoc insurance program the Treasury set up for money funds last month. The big US Government Fund seems to meet the criteria and has applied for coverage, but no announcement of its acceptance has been made.
The biggest mystery is why redemptions from that government fund have not been handled more promptly, said James Cracchiolo, chief executive of Ameriprise Financial Services in Minneapolis.
Ameriprise is among those suing the Reserve Fund over the Primary Fund's losses — it is the company that contends management tipped off big investors . But that lawsuit does not name the US Government Fund, Mr. Cracchiolo said.
"This is good government paper — even the government itself could take it from this fund and not lose a penny," he said. "We are all very frustrated at the lack of responsiveness from that fund's trustees. For heaven's sake, if they can't find a white knight to take the paper, we'll take some of it."
Ameriprise alone has about 400,000 clients caught in the freeze, he said, and his rough calculations indicate that "as many as a million, a million-plus people" could be affected. Records from last year showed the Reserve had about 170,000 separate accounts, but many of those were large omnibus accounts that could serve tens of thousands of individuals, businesses and local governments.
Mr. Cracchiolo's firm, like some others, is temporarily offering customers very low-interest loans to help them cope while they wait for a resolution.
The mutual fund industry is equally frustrated, said Paul Schott Stevens, chief executive of the Investment Company Institute, a trade association. "I can't emphasize too strongly that this absolutely is not typical of money funds," he added.
He cited a large money fund at Putnam Investments, which was also hit with heavy redemption demands the week of Sept. 15. But it promptly froze the fund and sold it to Federated Investors with scarcely a glitch in customer's access to their money.
The Reserve Fund's prolonged crisis is particularly baffling to Michael Brunner, a research scientist in Columbus, N.J., who has been a customer since the fund first opened its doors in 1970. He knew the money fund was not insured, as bank deposits are. "But after 30 years, one doesn't think it will go bad," he said.
He can manage without his frozen assets, he added — but he is furious that he still has to, after so much time.
"People talk about this like it's something that happened," he said. "But this isn't something that 'happened.' This is still happening. I still don't have my money and I still don't know what's going to happen to it."
http://www.nytimes.com/2008/10/29/business/29fund.html?pagewanted=print
http://snipurl.com/7sjmh
Reserve Fund's Investors Still Await Their Cash By DIANA B. HENRIQUES
The national "bank holiday" that ushered in the New Deal in 1933 locked up the public's cash for four days. The crisis that hit last month at the Reserve Fund, the nation's oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.
At least 400,000 people, and perhaps as many as a million, can't get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.
"Longer term, I just don't know how we'll deal with it," said John Oakes, a retired engineer in Austin, Tex., who can't tap $20,000 in a Reserve account to pay his mother's nursing home bill. "They say we may get some money this week, but we don't know if we'll get 100 percent, 90 percent or 30 percent."
Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets —invested in the Reserve US Government Fund.
"They even bragged that you could sleep at night if you invested in their funds," Mrs. Dews said. "In the past month and a half, we don't sleep at all."
Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.
The next day, its $62 billion Primary Fund and two small offshore funds "broke the buck," incurring losses that pushed their per-share price below a dollar.
Only one other money fund, a small bank fund, had ever broken the buck, and the announcement on Sept. 16 sent tremors from Wall Street to Washington. It ultimately played a role in persuading the Treasury to set up a temporary insurance program for money market funds.
And the Reserve Fund had seemed the least likely candidate for trouble, given its long and stable history — its founder, the legendary Henry B. R. Brown, had invented money market funds.
Initially, the company simply announced that it would delay redemptions from the Primary Fund for up to seven days, as allowed by law. Customers were somewhat reassured, but anyone trying to get additional information was met with busy phone lines and unanswered e-mail.
The news occasionally posted on the fund's Web site got steadily worse. On Sept. 18, investors in a host of other Reserve money funds learned that their money would be tied up for as long as a week; that delay later became open-ended. On Sept. 19, the fund delayed redemptions from both the Primary Fund and the US Government Fund indefinitely.
Since then, investors have been on a roller coaster of broken promises, with the company repeatedly blaming its record-keeping systems for delays.
Several requests for comment from management of the Reserve Fund have been declined. "I have no confidence at all in what it says," said Mrs. Dews.
Mrs. Dews and Mr. Oakes are among the plaintiffs in a lawsuit filed against the Primary Fund and the Reserve Fund management by Girard Gibbs, a law firm in San Francisco.
It is one of eight cases pending against the fund company, including one that accuses the fund management of tipping off big investors before the Primary Fund broke the buck so they could get out in time — an allegation the fund has denied.
Many Reserve investors say their issue has become the forgotten crisis. "The government is focused on the banks and the big problems," said Sherry Bryan, a retired industrial photographer in Atlanta. "But this is happening right now to real people."
Ms. Bryan, 58, said she thought of her Reserve Fund investment as "very safe — an 'old-granny' investment." She added, "We really never expected to lose money on this."
Ms. Bryan has tried to keep a sense of humor about having to "tighten my belt and tighten it again." Selling other nest-egg securities in a bad market to pay her bills was "like I'd gone out and bought a speedboat and a Mercedes and traveled all around Europe," she added. "It's cost me the same amount of money, but I didn't have any of the fun."
The Reserve has posted updates on its Web site, www.ther.com. In those reports, it has asked customers to be patient as it tries to cope with "these unprecedented events."
Regulators have had to be patient, too. Despite all their efforts to restore liquidity and confidence in all money funds, they don't have any good options in this case other than to monitor the liquidations carefully.
"The staff has been actively involved in the entire process, intervening to protect all shareholders," said John Heine, a spokesman for the Securities and Exchange Commission.
But it can intervene only so much. The Reserve has proprietary computer systems, so taking over the process at this point could delay the redemptions even further, current and former regulators said.
The largest fund, the Primary Fund, is not eligible for the ad hoc insurance program the Treasury set up for money funds last month. The big US Government Fund seems to meet the criteria and has applied for coverage, but no announcement of its acceptance has been made.
The biggest mystery is why redemptions from that government fund have not been handled more promptly, said James Cracchiolo, chief executive of Ameriprise Financial Services in Minneapolis.
Ameriprise is among those suing the Reserve Fund over the Primary Fund's losses — it is the company that contends management tipped off big investors . But that lawsuit does not name the US Government Fund, Mr. Cracchiolo said.
"This is good government paper — even the government itself could take it from this fund and not lose a penny," he said. "We are all very frustrated at the lack of responsiveness from that fund's trustees. For heaven's sake, if they can't find a white knight to take the paper, we'll take some of it."
Ameriprise alone has about 400,000 clients caught in the freeze, he said, and his rough calculations indicate that "as many as a million, a million-plus people" could be affected. Records from last year showed the Reserve had about 170,000 separate accounts, but many of those were large omnibus accounts that could serve tens of thousands of individuals, businesses and local governments.
Mr. Cracchiolo's firm, like some others, is temporarily offering customers very low-interest loans to help them cope while they wait for a resolution.
The mutual fund industry is equally frustrated, said Paul Schott Stevens, chief executive of the Investment Company Institute, a trade association. "I can't emphasize too strongly that this absolutely is not typical of money funds," he added.
He cited a large money fund at Putnam Investments, which was also hit with heavy redemption demands the week of Sept. 15. But it promptly froze the fund and sold it to Federated Investors with scarcely a glitch in customer's access to their money.
The Reserve Fund's prolonged crisis is particularly baffling to Michael Brunner, a research scientist in Columbus, N.J., who has been a customer since the fund first opened its doors in 1970. He knew the money fund was not insured, as bank deposits are. "But after 30 years, one doesn't think it will go bad," he said.
He can manage without his frozen assets, he added — but he is furious that he still has to, after so much time.
"People talk about this like it's something that happened," he said. "But this isn't something that 'happened.' This is still happening. I still don't have my money and I still don't know what's going to happen to it."
http://www.nytimes.com/2008/10/29/business/29fund.html?pagewanted=print
http://snipurl.com/7sjmh
The Behavioral Revolution By DAVID BROOKS
October 28, 2008
Op-Ed Columnist
The Behavioral Revolution By DAVID BROOKS
Roughly speaking, there are four steps to every decision. First, you perceive a situation. Then you think of possible courses of action. Then you calculate which course is in your best interest. Then you take the action.
Over the past few centuries, public policy analysts have assumed that step three is the most important. Economic models and entire social science disciplines are premised on the assumption that people are mostly engaged in rationally calculating and maximizing their self-interest.
But during this financial crisis, that way of thinking has failed spectacularly. As Alan Greenspan noted in his Congressional testimony last week, he was "shocked" that markets did not work as anticipated. "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."
So perhaps this will be the moment when we alter our view of decision-making. Perhaps this will be the moment when we shift our focus from step three, rational calculation, to step one, perception.
Perceiving a situation seems, at first glimpse, like a remarkably simple operation. You just look and see what's around. But the operation that seems most simple is actually the most complex, it's just that most of the action takes place below the level of awareness. Looking at and perceiving the world is an active process of meaning-making that shapes and biases the rest of the decision-making chain.
Economists and psychologists have been exploring our perceptual biases for four decades now, with the work of Amos Tversky and Daniel Kahneman, and also with work by people like Richard Thaler, Robert Shiller, John Bargh and Dan Ariely.
My sense is that this financial crisis is going to amount to a coming-out party for behavioral economists and others who are bringing sophisticated psychology to the realm of public policy. At least these folks have plausible explanations for why so many people could have been so gigantically wrong about the risks they were taking.
Nassim Nicholas Taleb has been deeply influenced by this stream of research. Taleb not only has an explanation for what's happening, he saw it coming. His popular books "Fooled by Randomness" and "The Black Swan" were broadsides at the risk-management models used in the financial world and beyond.
In "The Black Swan," Taleb wrote, "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup." Globalization, he noted, "creates interlocking fragility." He warned that while the growth of giant banks gives the appearance of stability, in reality, it raises the risk of a systemic collapse — "when one fails, they all fail."
Taleb believes that our brains evolved to suit a world much simpler than the one we now face. His writing is idiosyncratic, but he does touch on many of the perceptual biases that distort our thinking: our tendency to see data that confirm our prejudices more vividly than data that contradict them; our tendency to overvalue recent events when anticipating future possibilities; our tendency to spin concurring facts into a single causal narrative; our tendency to applaud our own supposed skill in circumstances when we've actually benefited from dumb luck.
And looking at the financial crisis, it is easy to see dozens of errors of perception. Traders misperceived the possibility of rare events. They got caught in social contagions and reinforced each other's risk assessments. They failed to perceive how tightly linked global networks can transform small events into big disasters.
Taleb is characteristically vituperative about the quantitative risk models, which try to model something that defies modelization. He subscribes to what he calls the tragic vision of humankind, which "believes in the existence of inherent limitations and flaws in the way we think and act and requires an acknowledgement of this fact as a basis for any individual and collective action." If recent events don't underline this worldview, nothing will.
If you start thinking about our faulty perceptions, the first thing you realize is that markets are not perfectly efficient, people are not always good guardians of their own self-interest and there might be limited circumstances when government could usefully slant the decision-making architecture (see "Nudge" by Thaler and Cass Sunstein for proposals). But the second thing you realize is that government officials are probably going to be even worse perceivers of reality than private business types. Their information feedback mechanism is more limited, and, being deeply politicized, they're even more likely to filter inconvenient facts.
This meltdown is not just a financial event, but also a cultural one. It's a big, whopping reminder that the human mind is continually trying to perceive things that aren't true, and not perceiving them takes enormous effort.
http://www.nytimes.com/2008/10/28/opinion/28brooks.html?sq=Behavioral%20Revolution&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sioj
Op-Ed Columnist
The Behavioral Revolution By DAVID BROOKS
Roughly speaking, there are four steps to every decision. First, you perceive a situation. Then you think of possible courses of action. Then you calculate which course is in your best interest. Then you take the action.
Over the past few centuries, public policy analysts have assumed that step three is the most important. Economic models and entire social science disciplines are premised on the assumption that people are mostly engaged in rationally calculating and maximizing their self-interest.
But during this financial crisis, that way of thinking has failed spectacularly. As Alan Greenspan noted in his Congressional testimony last week, he was "shocked" that markets did not work as anticipated. "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."
So perhaps this will be the moment when we alter our view of decision-making. Perhaps this will be the moment when we shift our focus from step three, rational calculation, to step one, perception.
Perceiving a situation seems, at first glimpse, like a remarkably simple operation. You just look and see what's around. But the operation that seems most simple is actually the most complex, it's just that most of the action takes place below the level of awareness. Looking at and perceiving the world is an active process of meaning-making that shapes and biases the rest of the decision-making chain.
Economists and psychologists have been exploring our perceptual biases for four decades now, with the work of Amos Tversky and Daniel Kahneman, and also with work by people like Richard Thaler, Robert Shiller, John Bargh and Dan Ariely.
My sense is that this financial crisis is going to amount to a coming-out party for behavioral economists and others who are bringing sophisticated psychology to the realm of public policy. At least these folks have plausible explanations for why so many people could have been so gigantically wrong about the risks they were taking.
Nassim Nicholas Taleb has been deeply influenced by this stream of research. Taleb not only has an explanation for what's happening, he saw it coming. His popular books "Fooled by Randomness" and "The Black Swan" were broadsides at the risk-management models used in the financial world and beyond.
In "The Black Swan," Taleb wrote, "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup." Globalization, he noted, "creates interlocking fragility." He warned that while the growth of giant banks gives the appearance of stability, in reality, it raises the risk of a systemic collapse — "when one fails, they all fail."
Taleb believes that our brains evolved to suit a world much simpler than the one we now face. His writing is idiosyncratic, but he does touch on many of the perceptual biases that distort our thinking: our tendency to see data that confirm our prejudices more vividly than data that contradict them; our tendency to overvalue recent events when anticipating future possibilities; our tendency to spin concurring facts into a single causal narrative; our tendency to applaud our own supposed skill in circumstances when we've actually benefited from dumb luck.
And looking at the financial crisis, it is easy to see dozens of errors of perception. Traders misperceived the possibility of rare events. They got caught in social contagions and reinforced each other's risk assessments. They failed to perceive how tightly linked global networks can transform small events into big disasters.
Taleb is characteristically vituperative about the quantitative risk models, which try to model something that defies modelization. He subscribes to what he calls the tragic vision of humankind, which "believes in the existence of inherent limitations and flaws in the way we think and act and requires an acknowledgement of this fact as a basis for any individual and collective action." If recent events don't underline this worldview, nothing will.
If you start thinking about our faulty perceptions, the first thing you realize is that markets are not perfectly efficient, people are not always good guardians of their own self-interest and there might be limited circumstances when government could usefully slant the decision-making architecture (see "Nudge" by Thaler and Cass Sunstein for proposals). But the second thing you realize is that government officials are probably going to be even worse perceivers of reality than private business types. Their information feedback mechanism is more limited, and, being deeply politicized, they're even more likely to filter inconvenient facts.
This meltdown is not just a financial event, but also a cultural one. It's a big, whopping reminder that the human mind is continually trying to perceive things that aren't true, and not perceiving them takes enormous effort.
http://www.nytimes.com/2008/10/28/opinion/28brooks.html?sq=Behavioral%20Revolution&st=cse&scp=1&pagewanted=print
http://snipurl.com/7sioj
Your Brain’s Secret Ballot By SAM WANG and JOSHUA GOLD
October 28, 2008
Op-Ed Contributor
Your Brain’s Secret Ballot By SAM WANG and JOSHUA GOLD
AS we enter the final week of a seemingly endless election campaign, opinion polls continue to identify a substantial fraction of voters who consider themselves “undecided.” Although their numbers are dwindling, they could still determine the outcome of the race in some states. Comedians and other commentators have portrayed these people as fools, unable to choose even when confronted with the starkest of contrasts.
Recent research in neuroscience and psychology, however, suggests that most undecided voters may be smarter than you think. They’re not indifferent or unable to make clear comparisons between the candidates. They may be more willing than others to take their time — or else just unaware that they have essentially already made a choice.
Neuroscientists have begun to tease out the brain systems that make decisions. Even when it takes no more than a second, decision-making is thought to involve two parts, gathering evidence and committing to a choice. In tasks as simple as deciding whether a shifting pattern of dots is moving to the left or to the right, brain activity in the parietal cortex rises as evidence is gathered, eventually reaching a tipping point (though it’s not yet known which brain regions drive the final choice).
Inherent to this process is a trade-off between speed and accuracy. Commit early and you can get on with your life. Take more time and you might make a wiser or more accurate decision. Since a commitment to John McCain or Barack Obama is not required until Nov. 4, for the greatest accuracy, one should gather evidence until that date. So then why aren’t there even more undecided voters? In measurements of decision-related neural activity, after there is enough evidence to reach a person’s decision threshold, his brain can ignore further input even when it might improve accuracy. The brain goes ahead and decides, freeing up mental resources to deal with other problems.
This logic suggests that undecided voters might simply require a higher degree of confidence before they commit. Pollsters know this, and so push “uncommitted” voters to state a preference. Although this approach may seem heavy-handed, it gives a fairly accurate reading of a candidate’s support. In psychological studies, people who describe themselves as undecided often reveal a pronounced preference when they are forced to choose. When someone reports being only “moderately sure” of a decision like whether to accept a new job, his eventual choice is all but certain.
Still, the person may not be aware of that internal commitment. In one study, people were asked to play a gambling game in which they could choose cards from several decks, some of which were secretly stacked against them. After losing repeatedly, most subjects began to nervously avoid the less favorable decks but were unable to say why until after much further play. People with damage to the ventromedial prefrontal cortex lack this intuition, and so they take inordinate time to make decisions in general.
Of course, undecided voters aren’t suffering from brain damage, it’s just that their brains may require an especially long amount of time to develop confidence in or awareness of a choice. In these cases, hidden commitments can be queried in creative ways. In a recent study, 33 residents of an Italian town initially told interviewers that they were undecided about their attitude toward a controversial expansion of a nearby American military base. But researchers found that those people’s opinions could be predicted by measuring how quickly they made automatic associations between photographs of the military base with positive or negative words.
If decisions are lurking somewhere in the brains of undecided voters, could brain imaging methods reveal their inclinations? Not yet. Recent research has shown that when undecided voters looked at images of candidates, their brains’ emotional centers were often activated. But this reveals little information about the content of their thoughts. Such research serves mainly to demonstrate how hard it is for scientists to physically trace complex concepts like preference.
It is more effective to pose indirect questions. Pollsters can learn which way “undecided” voters lean by using questions they already ask that are likely to correlate with support for either candidate: Who do you think understands your problems better? Are you more concerned about the economy or terrorism? Which candidate has the better temperament? The answers of decided voters could be used to predict the final choice of undecideds.
No matter how deeply they delve into people’s thought processes, however, polls will never be perfect predictors of election results. Like the brain of an undecided voter, the electorate as a whole may lean toward one candidate or another, but until the ballots are cast on Nov. 4, it remains undecided.
Sam Wang is an associate professor of neuroscience at Princeton. Joshua Gold is an assistant professor of neuroscience at the University of Pennsylvania.
Op-Ed Contributor
Your Brain’s Secret Ballot By SAM WANG and JOSHUA GOLD
AS we enter the final week of a seemingly endless election campaign, opinion polls continue to identify a substantial fraction of voters who consider themselves “undecided.” Although their numbers are dwindling, they could still determine the outcome of the race in some states. Comedians and other commentators have portrayed these people as fools, unable to choose even when confronted with the starkest of contrasts.
Recent research in neuroscience and psychology, however, suggests that most undecided voters may be smarter than you think. They’re not indifferent or unable to make clear comparisons between the candidates. They may be more willing than others to take their time — or else just unaware that they have essentially already made a choice.
Neuroscientists have begun to tease out the brain systems that make decisions. Even when it takes no more than a second, decision-making is thought to involve two parts, gathering evidence and committing to a choice. In tasks as simple as deciding whether a shifting pattern of dots is moving to the left or to the right, brain activity in the parietal cortex rises as evidence is gathered, eventually reaching a tipping point (though it’s not yet known which brain regions drive the final choice).
Inherent to this process is a trade-off between speed and accuracy. Commit early and you can get on with your life. Take more time and you might make a wiser or more accurate decision. Since a commitment to John McCain or Barack Obama is not required until Nov. 4, for the greatest accuracy, one should gather evidence until that date. So then why aren’t there even more undecided voters? In measurements of decision-related neural activity, after there is enough evidence to reach a person’s decision threshold, his brain can ignore further input even when it might improve accuracy. The brain goes ahead and decides, freeing up mental resources to deal with other problems.
This logic suggests that undecided voters might simply require a higher degree of confidence before they commit. Pollsters know this, and so push “uncommitted” voters to state a preference. Although this approach may seem heavy-handed, it gives a fairly accurate reading of a candidate’s support. In psychological studies, people who describe themselves as undecided often reveal a pronounced preference when they are forced to choose. When someone reports being only “moderately sure” of a decision like whether to accept a new job, his eventual choice is all but certain.
Still, the person may not be aware of that internal commitment. In one study, people were asked to play a gambling game in which they could choose cards from several decks, some of which were secretly stacked against them. After losing repeatedly, most subjects began to nervously avoid the less favorable decks but were unable to say why until after much further play. People with damage to the ventromedial prefrontal cortex lack this intuition, and so they take inordinate time to make decisions in general.
Of course, undecided voters aren’t suffering from brain damage, it’s just that their brains may require an especially long amount of time to develop confidence in or awareness of a choice. In these cases, hidden commitments can be queried in creative ways. In a recent study, 33 residents of an Italian town initially told interviewers that they were undecided about their attitude toward a controversial expansion of a nearby American military base. But researchers found that those people’s opinions could be predicted by measuring how quickly they made automatic associations between photographs of the military base with positive or negative words.
If decisions are lurking somewhere in the brains of undecided voters, could brain imaging methods reveal their inclinations? Not yet. Recent research has shown that when undecided voters looked at images of candidates, their brains’ emotional centers were often activated. But this reveals little information about the content of their thoughts. Such research serves mainly to demonstrate how hard it is for scientists to physically trace complex concepts like preference.
It is more effective to pose indirect questions. Pollsters can learn which way “undecided” voters lean by using questions they already ask that are likely to correlate with support for either candidate: Who do you think understands your problems better? Are you more concerned about the economy or terrorism? Which candidate has the better temperament? The answers of decided voters could be used to predict the final choice of undecideds.
No matter how deeply they delve into people’s thought processes, however, polls will never be perfect predictors of election results. Like the brain of an undecided voter, the electorate as a whole may lean toward one candidate or another, but until the ballots are cast on Nov. 4, it remains undecided.
Sam Wang is an associate professor of neuroscience at Princeton. Joshua Gold is an assistant professor of neuroscience at the University of Pennsylvania.
Sunday, October 26, 2008
A Healthy Dose of Misery for Company By CHARLES ISHERWOOD
October 26, 2008
A Healthy Dose of Misery for Company By CHARLES ISHERWOOD
THE world is trembling with anxiety. Fingernails are being chewed across America as the presidential race enters its last innings, and the financial Tilt-a-Whirl of the past month has left everyone from Riga to Reykjavik to Rochester unsettled. I am surely not alone in averting my eyes when firing up a search engine for fear that my home page will feature a stock graph resembling a ski slope.
The time is ripe for some giddy escapism, with crowds stampeding multiplexes to see “Beverly Hills Chihuahua.” I too have seen “Beverly Hills Chihuahua.” It’s cute. Not once does a talking dog make gloomy reference to his 401(k).
I’ll also admit to fleeing the spinning wheel of doomsaying economists on the news networks for the most unedifying of alternatives. I have seen every episode of “The Rachel Zoe Project,” the Bravo series about a pampered stylist to the stars — kind of a Beverly Hills Chihuahua herself, in her fur shrugs and froggy glasses — whose greatest worries are whether her peevish pair of assistants will learn to get along, and where her next venti cappuccino is coming from.
Something tells me that Rachel Zoe has not allowed the global tumult to pull her focus from the pressing need to find Debra Messing the right gown for the Emmys. Oh, to be Rachel Zoe. Or one of her blithely bickering assistants. Or, for that matter, her venti cappuccino cup.
And what is the New York theater offering to lift the load of woe from our hearts? Well, there’s the usual fun to be had, in the form of standbys like “The Lion King” or last season’s somewhat exhausting farce “Boeing Boeing.” And the fleet-footed “Billy Elliot” is warming up at the barre.
But in a case of colossal bad timing, the most notable, the most accomplished — the most important — new productions of the fall theater season so far are as dark-hued as theater gets: Ian Rickson’s existential take on “The Seagull” on Broadway and the shattering Sarah Kane play “Blasted” at Soho Rep.
See them both in a single day and, well, you won’t be worrying about your retirement plan anymore. You will probably be sitting in a padded cell, staring into some inward abyss. Still, as an unabashed partisan of serious theater, I’m happy to make a case for embracing these undeniably harrowing evenings. Three cheers for misery, I say. It may hurt, but it can be healthy.
Of course it’s simplistic to say that good sad plays are moral or emotional tonics, like fiber cereal for the soul. But on some level it is fundamentally true. Escapist entertainment can offer fleeting rewards, but in the long run only art really nourishes. Sure, it’s sweet to daydream our way into the worlds inhabited by George Clooney and Angelina Jolie, but it’s more important for us all to know ourselves. Great theater, like much high art, tells us who we are, not who we would like to be.
You could make the argument — well, I could, anyway — that some of the havoc caused by the subprime mortgage crisis can be traced to a collective amnesia on the part of the powers that be about the essence of human nature. At one point Alan Greenspan argued that it was not the lack of regulation that caused the firestorm; it was an excess of greed on Wall Street. He didn’t see that coming?
This apparent ignorance of our baser nature among top-tier economists should be quickly cured, lest more problems be caused. I hereby recommend for them a crash course in what men and women are, and what they will do to survive and prosper when the restraints of civilization fall away. I prescribe an evening in the hair-raising company of “Blasted.”
As with an inoculation, a single visit will suffice. “Blasted” is not a play to be seen more than once; an experience this unsettling would not have the same impact if it were repeated. Fortunately for New Yorkers, the play has arrived in a superlative production, directed by Sarah Benson, that does full justice to the integrity of Ms. Kane’s singular vision. (It is only to be regretted that it took more than a dozen years after its London premiere for the play to be produced here at all.)
Theater watchers have probably heard a few hints about the grisly details of the plot. The play begins as a reunion between a jaded journalist and his younger former lover in a well-appointed hotel room. He is cynical, bitter, death-haunted and cruel; she is gentle, wary, intellectually handicapped. The evening ends unhappily, in fact brutishly. And then, the morning after, the play suddenly explodes into a savage allegory of survival amid the wreckage of a civilization riven by martial conflict.
Descriptions give little sense of the play’s impact in the theater, just as reading the script would provide only a sketchy impression of its potential to latch onto the viscera and squeeze tightly. I have seen much theater seasoned with outrageous acts of violence — like Tracy Letts’s gnarly noir comedy-dramas and Martin McDonagh’s blood-drenched tales of Irish backwaters. In almost all of them, violence onstage is trimmed with humor that disarms our instinct to recoil, or serves a story and a set of characters conveniently removed from the realm of the real.
Not so “Blasted.” Each moment of the play feels like a moment in real time, depicting actual experience, even when the play dissolves from naturalism into something closer to expressionism. The brutalizers are not villains but petty, unexceptional men. And Ms. Kane’s aim is not mere entertainment, or even provocation; it’s revelation — of how men and women revert to feeding their most basic hungers when their existence is threatened, or when exposure to brutality has corroded their humanity.
Without moralizing for an instant, Ms. Kane imbues her play with a deep moral vision; the clinical manner in which she presents the descent into bestiality condemns the cheapening of suffering that is in so many violence-riddled works. Life is so brutal, and people so potentially cruel, the play argues, that to sentimentalize or temporize is to settle for a soothing lie.
If “Blasted” all but flays your soul, Chekhov’s “Seagull” strums gently on the heartstrings, although its worldview is hardly more comforting. “Blasted” depicts man’s potential for savagery in extraordinary circumstances; “The Seagull” is a drama of ordinary sadness, everyday frustration, more attuned to our capacity to disappoint than to destroy. Chekhov was no less dry-eyed than Ms. Kane as he observed his characters’ self-absorption, and he was no less heart-sore, at bottom, that life should be this way.
Although Chekhov classified “The Seagull” as a comedy, and the actors — led by the ravishing Kristin Scott Thomas as the vain Arkadina — infuse their performances with a gentle awareness of their characters’ absurdities, the production strikes a consistently bleak note. Mr. Rickson and Christopher Hampton, who provided the supple new English translation, quietly but insistently trace the agony of hopes unrealized: the yearning for understanding that is denied, the aching, desperate sense that the possibility of happiness is decaying moment by moment.
The somber palette, the eerie, shuddering music and the echoing silences between speeches subtly underscore the play’s proto-existentialist underpinnings. Even the symbolist drama written by Konstantin, which is almost always played for comedy as the arch attitudinizing of an immature writer, radiates a dark fundamental truth here. The production honors the honest emotion behind Konstantin’s clumsy poetry, the ache for a “universal soul” that would unite the scattered hearts of humanity.
Tellingly, a single phrase — “If you only knew” — echoes like a musical refrain throughout Mr. Hampton’s text. “If you only knew how much I hated leaving you!” Nina confesses to the assembled company when she must leave the charmed circle on Sorin’s estate to return home. “If you only knew how much they upset me,” Polina complains when her husband causes an unnecessary kerfuffle. “If you only knew how unhappy I am,” Konstantin upbraids Nina, repeating the same phrase to his mother when he has lost Nina’s love. “If you only knew!” the distraught Nina cries to Konstantin in her last scene, unable to describe the suffering she’s endured.
The words cut to the heart of the mournful truth the play illuminates. Each of the characters looks desperately for understanding from another, while more often than not denying a similar understanding to someone else. It’s not that they are heartless; no production I’ve seen contains so many fully rounded portraits. But Chekhov seemed to sense that obstacles to true communion are built into the human condition. We are so absorbed in our own experience — the slights and aches, the romantic hopes and comforting illusions — that everyone else’s can be impossible to fathom, even if we believe ourselves to be compassionate people, highly sensitized to the suffering of others.
In flush times, ignorance of this natural tendency toward solipsism is lamentable; in dark times, as Ms. Kane’s play so gruesomely illustrates, it can be dangerous. Neither of these plays leaves you in the carefree frame of mind of your average lapdog from Beverly Hills. You are left instead with a tense awareness of the frailty of human happiness and social equilibrium, the potential for tragedy that shadows all existence, but also a grateful appreciation for art that speaks somber truth in a manner that is as honest as it is humane.
A Healthy Dose of Misery for Company By CHARLES ISHERWOOD
THE world is trembling with anxiety. Fingernails are being chewed across America as the presidential race enters its last innings, and the financial Tilt-a-Whirl of the past month has left everyone from Riga to Reykjavik to Rochester unsettled. I am surely not alone in averting my eyes when firing up a search engine for fear that my home page will feature a stock graph resembling a ski slope.
The time is ripe for some giddy escapism, with crowds stampeding multiplexes to see “Beverly Hills Chihuahua.” I too have seen “Beverly Hills Chihuahua.” It’s cute. Not once does a talking dog make gloomy reference to his 401(k).
I’ll also admit to fleeing the spinning wheel of doomsaying economists on the news networks for the most unedifying of alternatives. I have seen every episode of “The Rachel Zoe Project,” the Bravo series about a pampered stylist to the stars — kind of a Beverly Hills Chihuahua herself, in her fur shrugs and froggy glasses — whose greatest worries are whether her peevish pair of assistants will learn to get along, and where her next venti cappuccino is coming from.
Something tells me that Rachel Zoe has not allowed the global tumult to pull her focus from the pressing need to find Debra Messing the right gown for the Emmys. Oh, to be Rachel Zoe. Or one of her blithely bickering assistants. Or, for that matter, her venti cappuccino cup.
And what is the New York theater offering to lift the load of woe from our hearts? Well, there’s the usual fun to be had, in the form of standbys like “The Lion King” or last season’s somewhat exhausting farce “Boeing Boeing.” And the fleet-footed “Billy Elliot” is warming up at the barre.
But in a case of colossal bad timing, the most notable, the most accomplished — the most important — new productions of the fall theater season so far are as dark-hued as theater gets: Ian Rickson’s existential take on “The Seagull” on Broadway and the shattering Sarah Kane play “Blasted” at Soho Rep.
See them both in a single day and, well, you won’t be worrying about your retirement plan anymore. You will probably be sitting in a padded cell, staring into some inward abyss. Still, as an unabashed partisan of serious theater, I’m happy to make a case for embracing these undeniably harrowing evenings. Three cheers for misery, I say. It may hurt, but it can be healthy.
Of course it’s simplistic to say that good sad plays are moral or emotional tonics, like fiber cereal for the soul. But on some level it is fundamentally true. Escapist entertainment can offer fleeting rewards, but in the long run only art really nourishes. Sure, it’s sweet to daydream our way into the worlds inhabited by George Clooney and Angelina Jolie, but it’s more important for us all to know ourselves. Great theater, like much high art, tells us who we are, not who we would like to be.
You could make the argument — well, I could, anyway — that some of the havoc caused by the subprime mortgage crisis can be traced to a collective amnesia on the part of the powers that be about the essence of human nature. At one point Alan Greenspan argued that it was not the lack of regulation that caused the firestorm; it was an excess of greed on Wall Street. He didn’t see that coming?
This apparent ignorance of our baser nature among top-tier economists should be quickly cured, lest more problems be caused. I hereby recommend for them a crash course in what men and women are, and what they will do to survive and prosper when the restraints of civilization fall away. I prescribe an evening in the hair-raising company of “Blasted.”
As with an inoculation, a single visit will suffice. “Blasted” is not a play to be seen more than once; an experience this unsettling would not have the same impact if it were repeated. Fortunately for New Yorkers, the play has arrived in a superlative production, directed by Sarah Benson, that does full justice to the integrity of Ms. Kane’s singular vision. (It is only to be regretted that it took more than a dozen years after its London premiere for the play to be produced here at all.)
Theater watchers have probably heard a few hints about the grisly details of the plot. The play begins as a reunion between a jaded journalist and his younger former lover in a well-appointed hotel room. He is cynical, bitter, death-haunted and cruel; she is gentle, wary, intellectually handicapped. The evening ends unhappily, in fact brutishly. And then, the morning after, the play suddenly explodes into a savage allegory of survival amid the wreckage of a civilization riven by martial conflict.
Descriptions give little sense of the play’s impact in the theater, just as reading the script would provide only a sketchy impression of its potential to latch onto the viscera and squeeze tightly. I have seen much theater seasoned with outrageous acts of violence — like Tracy Letts’s gnarly noir comedy-dramas and Martin McDonagh’s blood-drenched tales of Irish backwaters. In almost all of them, violence onstage is trimmed with humor that disarms our instinct to recoil, or serves a story and a set of characters conveniently removed from the realm of the real.
Not so “Blasted.” Each moment of the play feels like a moment in real time, depicting actual experience, even when the play dissolves from naturalism into something closer to expressionism. The brutalizers are not villains but petty, unexceptional men. And Ms. Kane’s aim is not mere entertainment, or even provocation; it’s revelation — of how men and women revert to feeding their most basic hungers when their existence is threatened, or when exposure to brutality has corroded their humanity.
Without moralizing for an instant, Ms. Kane imbues her play with a deep moral vision; the clinical manner in which she presents the descent into bestiality condemns the cheapening of suffering that is in so many violence-riddled works. Life is so brutal, and people so potentially cruel, the play argues, that to sentimentalize or temporize is to settle for a soothing lie.
If “Blasted” all but flays your soul, Chekhov’s “Seagull” strums gently on the heartstrings, although its worldview is hardly more comforting. “Blasted” depicts man’s potential for savagery in extraordinary circumstances; “The Seagull” is a drama of ordinary sadness, everyday frustration, more attuned to our capacity to disappoint than to destroy. Chekhov was no less dry-eyed than Ms. Kane as he observed his characters’ self-absorption, and he was no less heart-sore, at bottom, that life should be this way.
Although Chekhov classified “The Seagull” as a comedy, and the actors — led by the ravishing Kristin Scott Thomas as the vain Arkadina — infuse their performances with a gentle awareness of their characters’ absurdities, the production strikes a consistently bleak note. Mr. Rickson and Christopher Hampton, who provided the supple new English translation, quietly but insistently trace the agony of hopes unrealized: the yearning for understanding that is denied, the aching, desperate sense that the possibility of happiness is decaying moment by moment.
The somber palette, the eerie, shuddering music and the echoing silences between speeches subtly underscore the play’s proto-existentialist underpinnings. Even the symbolist drama written by Konstantin, which is almost always played for comedy as the arch attitudinizing of an immature writer, radiates a dark fundamental truth here. The production honors the honest emotion behind Konstantin’s clumsy poetry, the ache for a “universal soul” that would unite the scattered hearts of humanity.
Tellingly, a single phrase — “If you only knew” — echoes like a musical refrain throughout Mr. Hampton’s text. “If you only knew how much I hated leaving you!” Nina confesses to the assembled company when she must leave the charmed circle on Sorin’s estate to return home. “If you only knew how much they upset me,” Polina complains when her husband causes an unnecessary kerfuffle. “If you only knew how unhappy I am,” Konstantin upbraids Nina, repeating the same phrase to his mother when he has lost Nina’s love. “If you only knew!” the distraught Nina cries to Konstantin in her last scene, unable to describe the suffering she’s endured.
The words cut to the heart of the mournful truth the play illuminates. Each of the characters looks desperately for understanding from another, while more often than not denying a similar understanding to someone else. It’s not that they are heartless; no production I’ve seen contains so many fully rounded portraits. But Chekhov seemed to sense that obstacles to true communion are built into the human condition. We are so absorbed in our own experience — the slights and aches, the romantic hopes and comforting illusions — that everyone else’s can be impossible to fathom, even if we believe ourselves to be compassionate people, highly sensitized to the suffering of others.
In flush times, ignorance of this natural tendency toward solipsism is lamentable; in dark times, as Ms. Kane’s play so gruesomely illustrates, it can be dangerous. Neither of these plays leaves you in the carefree frame of mind of your average lapdog from Beverly Hills. You are left instead with a tense awareness of the frailty of human happiness and social equilibrium, the potential for tragedy that shadows all existence, but also a grateful appreciation for art that speaks somber truth in a manner that is as honest as it is humane.
Saviors of the American Songbook By STEPHEN HOLDEN
October 26, 2008
Music
Saviors of the American Songbook
By STEPHEN HOLDEN
WHEN the 19th annual Cabaret Convention begins with the first of four concerts at Jazz at Lincoln Center on Wednesday evening, a genre that has struggled for years below the mass-media radar will lift its collective voice in an annual appeal for attention and respect.
“Please listen,” that voice politely implores. “I am in danger of dying of neglect, and I have valuable knowledge gleaned from the American songbook and from show business history about love, memory, art and time. The magic I can conjure in a romantic cubbyhole where the lights are low, the wine flows and loved ones are at hand is like no other kind.”
The Rose Theater, the modern auditorium inside Jazz at Lincoln Center where the convention — part entertainment gala, part trade show for nightclub bookers — takes place, isn’t a candlelit nook, but it must suffice. Each evening, starting at 6, roughly a dozen performers (the roster changes nightly) will sing two songs each. Karen Akers, Paula West, Marilyn Maye, Mary Cleere Haran, Julie Wilson, Barbara Carroll, K T Sullivan, Tommy Tune and Barb Jungr are among this year’s most eagerly anticipated guests.
Most of the genre’s important male stars — Michael Feinstein, Tom Wopat, Jack Jones, Steve Tyrell and Brian Stokes Mitchell, to name five — are absent from the roster. But one of its most promising young male performers, Tony DeSare, a Sinatra acolyte in his early 30s who sings Prince as well as Johnny Mercer, will appear on Friday.
Cabaret venerates maturity more fervently than any other form of entertainment. Ms. Maye, Ms. Wilson and Ms. Carroll are all in their 80s, as are three of the genre’s other godmothers, Barbara Cook, Eartha Kitt and Elaine Stritch, and its unofficial godfather, Tony Bennett. All might be described as sages who take the long view. All are old enough to remember and have participated in the golden age of live entertainment that faded with the incursions of rock ’n’ roll and television. From the late 1940s through the mid-’60s there were several tiers of live entertainment in New York: glamorous hotel supper clubs like the Persian Room at the Plaza Hotel and the Empire Room at the Waldorf-Astoria, high-end nightclubs like the Blue Angel, smaller hole-in-the-wall Midtown jazz clubs , and smaller boîtes and piano bars scattered through Manhattan where one could drop in for the price of a drink.
As the nightclub world has shrunk, that kind of informality is largely a thing of the past. The question also continually nags as to whether there is a young generation to carry on the tradition. The few younger stars, like Harry Connick Jr., Diana Krall and Michael Bublé, who have passed through cabaret and jazz clubs on their way to the national spotlight rarely look back.
Besides Mr. DeSare, the genre’s other most promising younger performers include the sultry Long Island pop-jazz singer Jane Monheit and Maude Maggart, a protégée of Andrea Marcovicci and Michael Feinstein. Ms. Maggart, who comes from a Hollywood show-business family (she is the older sister of Fiona Apple), sings Judy Collins and Joan Baez as well as Irving Berlin and Jerome Kern.
The Cabaret Convention is produced by Donald Smith, executive director of the Mabel Mercer Foundation, an organization named after the great British-born chanteuse who died in 1984. It reflects the refined taste of Mr. Smith,a die-hard champion of the urbane nightclub ethos in which the spirits of Porter, Coward, the Gershwin brothers, Ms. Mercer and Bobby Short hover over concerts that summon fantasies of a long-vanished cafe society.
For all the obstacles Mr. Smith faces, his attitude toward the tradition he nurtures is philosophical and surprisingly upbeat. He said recently that he was encouraged by an increase in the number of cabarets outside New York, which with its proximity to Broadway remains the genre’s unchallenged hub.
But while cabaret has high-profile champions in the media, the dwindling coverage of cabaret in New York’s local newspapers is a bad omen.
“We’ve never had any corporate sponsorship,” Mr. Smith lamented. “And we haven’t gotten a nickel from any government arts program.”
Mr. Smith’s concept of cabaret is only one of many in a genre that also shades into Broadway, traditional jazz, rock and even world music. Because a cabaret is the best place for a theatrically trained Broadway performer to step out of a role, it is a natural adjunct to the musical theater. Where else but in a nightclub could Betty Buckley put aside her signature theater hits and bring her probing Method-style interpretations to jazz, rock and country material?
When the convention vacated its original home at Town Hall for Jazz at Lincoln Center, a new series, the Broadway Cabaret Festival, jumped into the breach. Created by Scott Siegel, who also produces the New York Nightlife Awards (the nightclub world’s equivalent of the Tonys), the festival, which completed its fourth season on Oct. 19, has become a primary showcase for ambitious young Broadway stars to test their wings as soloists.
The long-running Lyrics and Lyricists series at the 92nd St. Y and Lincoln Center’s American Songbook series also dip heavily into the cabaret world.
Some stars, like Mr. Connick, Ms. Krall, John Pizzarelli and Dianne Reeves, blur the lines between cabaret and jazz until they are virtually the same. But most don’t. Performers in Manhattan supper clubs are expected to create conceptually unified shows that follow an arc and include witty patter. Jazz musicians merely have to play sets that can be made up on the spot; talking is not required. The overlap between Manhattan’s high-end jazz clubs and its three major hotel-associated supper clubs, the Café Carlyle, Feinstein’s at Loews Regency and the Oak Room at the Algonquin Hotel, is infrequent. And instrumental jazz has established almost no footing in cabaret, where a charismatic personality matters as much as musical talent.
Race has something to do with it. Even in multicultural New York, unspoken divisions persist to this day. Ashford and Simpson have triumphed at Feinstein’s at Loews Regency for three years running. But other African-American performers, like the great singing actress Lillias White, have fared disappointingly in the same club. At the Oak Room, Ms. West, an African-American pop-jazz singer, is the only performer of color to have established a loyal following.
The only truly multicultural venue in New York, Joe’s Pub at the Public Theater, has a high turnover of acts from every corner of music. It might more accurately be described as a hip musical clearinghouse than as a cabaret.
Many complain about the prices at Manhattan’s supper clubs, of which the Café Carlyle is the most expensive. There the cost for two tickets plus dinner for two (usually required) can run upwards of $500. Comparatively speaking, however, that is not much more than the price of dinner for two and good seats at a Broadway musical. Although hotel spokesmen, when pressed for details, are vague about the profitability of their cabarets, it is generally acknowledged that their profits are marginal at best.
The peak cabaret experience is a three-way relationship among singer, song (often a standard) and audience in which performers pour their life experiences in thematic shows using the American songbook as a platform; songs are stations in an autobiographical journey shared with the listener.
Cabaret connoisseurs know that a great nightclub show delivers a richer artistic experience than that offered by almost any Broadway musical, Stephen Sondheim’s excepted. A great example is Jessica Molaskey’s version of Billy Joel’s “Summer, Highland Falls.” Her rendition transforms lyrics that sounded peevish and awkwardly verbose on Mr. Joel’s 1976 album, “Turnstiles,” into an acute psychoanalytic dissection of a turbulent relationship that has reached an impasse.
Reinvented as a wistful bossa nova in which Ms. Molaskey’s husband, the scintillating jazz guitarist and crooner John Pizzarelli, inserts quotations from Antonio Carlos Jobím, “Summer, Highland Falls” makes you gasp at its truthfulness about the intractability of clashing personalities in a dissolving partnership. The Pizzarelli-Molasky duo, whose extended engagement at the Café Carlyle ends this Saturday, are as good as it gets in any entertainment medium.
Equally compelling is Ms. Jungr, a 54-year-old Briton with a gregarious music-hall personality and formidable acting skills whose interpretations of Jacques Brel, Nina Simone and Bob Dylan songs (her live version of “Just Like a Woman” can be seen on YouTube) make you hear them as though for the first time.
To coincide with the convention, Ms. Jungr, who is there on Saturday, and Ms. Maye, who appears on Wednesday, are playing return dates (Nov. 3 for Ms. Junger, Nov. 1 and 2 for Ms. Maye) at the Metropolitan Room, a small club in Chelsea where each recently enjoyed a sold-out engagement with cheering audiences.
The two-and-a-half-year-old Metropolitan Room — a former comedy club that seats 110, is reasonably priced and doesn’t serve dinner — has quickly ascended into New York’s leading showcase for talent ready to make the leap into uptown supper clubs or the stage. It is at New York’s lower-echelon clubs where professionalism gives way to vanity shows in which aspiring stars are expected to bring their friends to justify their booking.
But even the most acclaimed cabaret performers must wrestle with the hard economic realities of a field in which doing it for love is often the only reason to do it. After expenses, a midlevel performer who is paid $10,000 a week barely breaks even. The typical cabaret contract requires a performer to be exclusive to that club for at least six months.
For most performers, the usual avenues of publicity and promotion are closed. Morning television shows routinely turn down cabaret singers. If a performer comes from television there is a built-in audience, but with a caveat. Dixie Carter appeared regularly at the Café Carlyle, but when her television show “Designing Women” finished its run, her cabaret audience evaporated.
Most performers rely on reviews and word of mouth. Radio is of limited help. In New York City the disc jockey and author Jonathan Schwartz is the only influential champion of traditional popular music. Erudite and passionate, he has single-handedly boosted the careers of the Los Angeles pop-jazz singer Tierney Sutton, who appears regularly at Birdland, and kept alive the memory of Nancy LaMott, a gifted balladeer who died in 1995.
In the shouting, brawling world of mainstream pop, the essential qualities of a cabaret performance — intimacy, emotional vulnerability and interpretive subtlety — have little place. In many ways cabaret embodies artistic values that are the antithesis of those promoted by that monstrous star-making machine, “American Idol.” In Simon Cowell’s critical lexicon, the words “too cabaret” are a damning indictment.
“American Idol” treats singing as an Olympic-style competitive sport in which songs, edited into fragments, no longer tell stories. Their remains become heavily amplified exhibitions of stamina and ego by performers for whom youth, beauty and novelty matter as much as talent.
For the majority of Americans, live music is now an arena-ready event that exalts raw physical energy and the kind of prowess measurable in athletic terms. The typical concert is an orgiastic rite of communion between the public and celebrity. Demolished to make room for coliseums where blood sports rule, the romantic cubbyhole has become as anachronistic as the notion of privacy itself.
Music
Saviors of the American Songbook
By STEPHEN HOLDEN
WHEN the 19th annual Cabaret Convention begins with the first of four concerts at Jazz at Lincoln Center on Wednesday evening, a genre that has struggled for years below the mass-media radar will lift its collective voice in an annual appeal for attention and respect.
“Please listen,” that voice politely implores. “I am in danger of dying of neglect, and I have valuable knowledge gleaned from the American songbook and from show business history about love, memory, art and time. The magic I can conjure in a romantic cubbyhole where the lights are low, the wine flows and loved ones are at hand is like no other kind.”
The Rose Theater, the modern auditorium inside Jazz at Lincoln Center where the convention — part entertainment gala, part trade show for nightclub bookers — takes place, isn’t a candlelit nook, but it must suffice. Each evening, starting at 6, roughly a dozen performers (the roster changes nightly) will sing two songs each. Karen Akers, Paula West, Marilyn Maye, Mary Cleere Haran, Julie Wilson, Barbara Carroll, K T Sullivan, Tommy Tune and Barb Jungr are among this year’s most eagerly anticipated guests.
Most of the genre’s important male stars — Michael Feinstein, Tom Wopat, Jack Jones, Steve Tyrell and Brian Stokes Mitchell, to name five — are absent from the roster. But one of its most promising young male performers, Tony DeSare, a Sinatra acolyte in his early 30s who sings Prince as well as Johnny Mercer, will appear on Friday.
Cabaret venerates maturity more fervently than any other form of entertainment. Ms. Maye, Ms. Wilson and Ms. Carroll are all in their 80s, as are three of the genre’s other godmothers, Barbara Cook, Eartha Kitt and Elaine Stritch, and its unofficial godfather, Tony Bennett. All might be described as sages who take the long view. All are old enough to remember and have participated in the golden age of live entertainment that faded with the incursions of rock ’n’ roll and television. From the late 1940s through the mid-’60s there were several tiers of live entertainment in New York: glamorous hotel supper clubs like the Persian Room at the Plaza Hotel and the Empire Room at the Waldorf-Astoria, high-end nightclubs like the Blue Angel, smaller hole-in-the-wall Midtown jazz clubs , and smaller boîtes and piano bars scattered through Manhattan where one could drop in for the price of a drink.
As the nightclub world has shrunk, that kind of informality is largely a thing of the past. The question also continually nags as to whether there is a young generation to carry on the tradition. The few younger stars, like Harry Connick Jr., Diana Krall and Michael Bublé, who have passed through cabaret and jazz clubs on their way to the national spotlight rarely look back.
Besides Mr. DeSare, the genre’s other most promising younger performers include the sultry Long Island pop-jazz singer Jane Monheit and Maude Maggart, a protégée of Andrea Marcovicci and Michael Feinstein. Ms. Maggart, who comes from a Hollywood show-business family (she is the older sister of Fiona Apple), sings Judy Collins and Joan Baez as well as Irving Berlin and Jerome Kern.
The Cabaret Convention is produced by Donald Smith, executive director of the Mabel Mercer Foundation, an organization named after the great British-born chanteuse who died in 1984. It reflects the refined taste of Mr. Smith,a die-hard champion of the urbane nightclub ethos in which the spirits of Porter, Coward, the Gershwin brothers, Ms. Mercer and Bobby Short hover over concerts that summon fantasies of a long-vanished cafe society.
For all the obstacles Mr. Smith faces, his attitude toward the tradition he nurtures is philosophical and surprisingly upbeat. He said recently that he was encouraged by an increase in the number of cabarets outside New York, which with its proximity to Broadway remains the genre’s unchallenged hub.
But while cabaret has high-profile champions in the media, the dwindling coverage of cabaret in New York’s local newspapers is a bad omen.
“We’ve never had any corporate sponsorship,” Mr. Smith lamented. “And we haven’t gotten a nickel from any government arts program.”
Mr. Smith’s concept of cabaret is only one of many in a genre that also shades into Broadway, traditional jazz, rock and even world music. Because a cabaret is the best place for a theatrically trained Broadway performer to step out of a role, it is a natural adjunct to the musical theater. Where else but in a nightclub could Betty Buckley put aside her signature theater hits and bring her probing Method-style interpretations to jazz, rock and country material?
When the convention vacated its original home at Town Hall for Jazz at Lincoln Center, a new series, the Broadway Cabaret Festival, jumped into the breach. Created by Scott Siegel, who also produces the New York Nightlife Awards (the nightclub world’s equivalent of the Tonys), the festival, which completed its fourth season on Oct. 19, has become a primary showcase for ambitious young Broadway stars to test their wings as soloists.
The long-running Lyrics and Lyricists series at the 92nd St. Y and Lincoln Center’s American Songbook series also dip heavily into the cabaret world.
Some stars, like Mr. Connick, Ms. Krall, John Pizzarelli and Dianne Reeves, blur the lines between cabaret and jazz until they are virtually the same. But most don’t. Performers in Manhattan supper clubs are expected to create conceptually unified shows that follow an arc and include witty patter. Jazz musicians merely have to play sets that can be made up on the spot; talking is not required. The overlap between Manhattan’s high-end jazz clubs and its three major hotel-associated supper clubs, the Café Carlyle, Feinstein’s at Loews Regency and the Oak Room at the Algonquin Hotel, is infrequent. And instrumental jazz has established almost no footing in cabaret, where a charismatic personality matters as much as musical talent.
Race has something to do with it. Even in multicultural New York, unspoken divisions persist to this day. Ashford and Simpson have triumphed at Feinstein’s at Loews Regency for three years running. But other African-American performers, like the great singing actress Lillias White, have fared disappointingly in the same club. At the Oak Room, Ms. West, an African-American pop-jazz singer, is the only performer of color to have established a loyal following.
The only truly multicultural venue in New York, Joe’s Pub at the Public Theater, has a high turnover of acts from every corner of music. It might more accurately be described as a hip musical clearinghouse than as a cabaret.
Many complain about the prices at Manhattan’s supper clubs, of which the Café Carlyle is the most expensive. There the cost for two tickets plus dinner for two (usually required) can run upwards of $500. Comparatively speaking, however, that is not much more than the price of dinner for two and good seats at a Broadway musical. Although hotel spokesmen, when pressed for details, are vague about the profitability of their cabarets, it is generally acknowledged that their profits are marginal at best.
The peak cabaret experience is a three-way relationship among singer, song (often a standard) and audience in which performers pour their life experiences in thematic shows using the American songbook as a platform; songs are stations in an autobiographical journey shared with the listener.
Cabaret connoisseurs know that a great nightclub show delivers a richer artistic experience than that offered by almost any Broadway musical, Stephen Sondheim’s excepted. A great example is Jessica Molaskey’s version of Billy Joel’s “Summer, Highland Falls.” Her rendition transforms lyrics that sounded peevish and awkwardly verbose on Mr. Joel’s 1976 album, “Turnstiles,” into an acute psychoanalytic dissection of a turbulent relationship that has reached an impasse.
Reinvented as a wistful bossa nova in which Ms. Molaskey’s husband, the scintillating jazz guitarist and crooner John Pizzarelli, inserts quotations from Antonio Carlos Jobím, “Summer, Highland Falls” makes you gasp at its truthfulness about the intractability of clashing personalities in a dissolving partnership. The Pizzarelli-Molasky duo, whose extended engagement at the Café Carlyle ends this Saturday, are as good as it gets in any entertainment medium.
Equally compelling is Ms. Jungr, a 54-year-old Briton with a gregarious music-hall personality and formidable acting skills whose interpretations of Jacques Brel, Nina Simone and Bob Dylan songs (her live version of “Just Like a Woman” can be seen on YouTube) make you hear them as though for the first time.
To coincide with the convention, Ms. Jungr, who is there on Saturday, and Ms. Maye, who appears on Wednesday, are playing return dates (Nov. 3 for Ms. Junger, Nov. 1 and 2 for Ms. Maye) at the Metropolitan Room, a small club in Chelsea where each recently enjoyed a sold-out engagement with cheering audiences.
The two-and-a-half-year-old Metropolitan Room — a former comedy club that seats 110, is reasonably priced and doesn’t serve dinner — has quickly ascended into New York’s leading showcase for talent ready to make the leap into uptown supper clubs or the stage. It is at New York’s lower-echelon clubs where professionalism gives way to vanity shows in which aspiring stars are expected to bring their friends to justify their booking.
But even the most acclaimed cabaret performers must wrestle with the hard economic realities of a field in which doing it for love is often the only reason to do it. After expenses, a midlevel performer who is paid $10,000 a week barely breaks even. The typical cabaret contract requires a performer to be exclusive to that club for at least six months.
For most performers, the usual avenues of publicity and promotion are closed. Morning television shows routinely turn down cabaret singers. If a performer comes from television there is a built-in audience, but with a caveat. Dixie Carter appeared regularly at the Café Carlyle, but when her television show “Designing Women” finished its run, her cabaret audience evaporated.
Most performers rely on reviews and word of mouth. Radio is of limited help. In New York City the disc jockey and author Jonathan Schwartz is the only influential champion of traditional popular music. Erudite and passionate, he has single-handedly boosted the careers of the Los Angeles pop-jazz singer Tierney Sutton, who appears regularly at Birdland, and kept alive the memory of Nancy LaMott, a gifted balladeer who died in 1995.
In the shouting, brawling world of mainstream pop, the essential qualities of a cabaret performance — intimacy, emotional vulnerability and interpretive subtlety — have little place. In many ways cabaret embodies artistic values that are the antithesis of those promoted by that monstrous star-making machine, “American Idol.” In Simon Cowell’s critical lexicon, the words “too cabaret” are a damning indictment.
“American Idol” treats singing as an Olympic-style competitive sport in which songs, edited into fragments, no longer tell stories. Their remains become heavily amplified exhibitions of stamina and ego by performers for whom youth, beauty and novelty matter as much as talent.
For the majority of Americans, live music is now an arena-ready event that exalts raw physical energy and the kind of prowess measurable in athletic terms. The typical concert is an orgiastic rite of communion between the public and celebrity. Demolished to make room for coliseums where blood sports rule, the romantic cubbyhole has become as anachronistic as the notion of privacy itself.
Thursday, October 23, 2008
Garlic is the perfect backyard crop By JESSIE MILLIGAN
Garlic is the perfect backyard crop By JESSIE MILLIGAN
12:00 AM CDT on Thursday, October 23, 2008
By JESSIE MILLIGAN / Special Contributor to The Dallas Morning News
home@dallasnews.com Jessie Milligan is a Fort Worth freelance writer.
Bob Anderson lives a gardener's near-perfect escapist fantasy.
In 1993, he quit computer sales and consulting and left Dallas to live on his wife's family ranch in Bangs, southwest of Dallas. Now he makes his living growing exotic strains of garlic and selling them on the Web.
One of the beauties of garlic, beyond bruschetta or aioli at the table, is that it doesn't take much land to produce a bountiful crop. It's perfect for a back yard, where it can be tucked into flower beds and alongside roses.
Garlic in North Texas can be planted as late as January, although mail-order companies carrying specialty bulbs tend to sell out before that, Mr. Anderson says.
It can be grown from heads bought at supermarkets, if the garlic was organically grown, says Burton Mjolhus, manager at Covington's Nursery and Landscape Co. in Rowlett. If the garlic is not organic, however, it may have been sprayed with chemicals that retard its growth.
The best varieties for North Texas are the softneck garlics known as silverskin garlic, according to Texas A&M University's horticulture program. Common types in that family recommended by A&M are 'Creole', 'California Early White', 'California Late White', 'Mexican Pink' and 'Texas White'. Elephant garlic also is listed as a type that grows in Texas.
The artichoke type also can do well, Mr. Anderson says. Types include 'Inchelium Red', 'Transylvanian' – starts came from a vegetable market in that region of Europe in 1994 – and 'Kettle River'.
The porcelain type, so-called hardneck varieties, is preferred for northern climates.
TAMU planting tips
Plant garlic cloves, point up, in loose soil, 3 to 6 inches apart, in a location where they will receive six hours of sun daily. Cloves should be planted only 1 to 2 inches deep.
Soil should be watered to a depth of 2 feet and watering should be regular until harvest nears in the spring, when irrigation should taper off to prevent rot.
Bulbs are harvested when the tops dry and bend. Once dug, garlic should be left to completely dry in a covered area a week or more.
In Mr. Anderson's experience, garlic requires little fertilizing. Too much nitrogen in the soil will prevent bulbs from forming, he says.
Jessie Milligan is a Fort Worth freelance writer.
WHERE TO FIND ORGANIC GARLIC
Organic garlic for planting is easiest to find at supermarkets, although not all stores will describe which variety of garlic is in their bins.
North Haven Gardens, 7700 Northaven Road, sometimes sells garlic transplants in pots starting in November. Transplants are found among the herbs and typically sell for about $2 for a 4-inch pot.
Green Mama's Organic Garden Center, 5324 Davis Blvd. in North Richland Hills, has elephant garlic for 75 cents a head.
Feed or farm supply stores, including Marshall Grain, 2224 E. Lancaster in Fort Worth, often sell garlic cloves for planting. Marshall Grain carries organic 'California Early White' for 69 cents a head.
Shopping online is a good way to locate organic specialties that will do best in North Texas. Typically, online retailers sell planting garlic by the pound or half-pound. Expect to pay from $5 to $13 for a half-pound, which produces about 20 pounds of mature garlic. Remember that softneck varieties can be braided for display. Here are a few sites:
www.gourmetgarlicgardens.com. Mr. Anderson's garlic business offers a wide variety of organic garlic for planting. The garlic is grown on a ranch about 175 miles southwest of Dallas.
www.thegarlicstore.com. This Fort Collins, Colo., grower's Web site identifies varieties best for warm-weather climates.
www.seedsofchange.com and www.territorialseed.com. Seeds of Change, based in New Mexico, and Territorial Seed Co. in Oregon offer uncommon varieties. Both provide descriptions of each variety's distinct flavors.
http://www.dallasnews.com/sharedcontent/dws/fea/home/gardening/stories/DN-nhg_garlic_1023gd.ART.State.Edition1.4ab17bf.html
http://snipurl.com/7sj5g
12:00 AM CDT on Thursday, October 23, 2008
By JESSIE MILLIGAN / Special Contributor to The Dallas Morning News
home@dallasnews.com Jessie Milligan is a Fort Worth freelance writer.
Bob Anderson lives a gardener's near-perfect escapist fantasy.
In 1993, he quit computer sales and consulting and left Dallas to live on his wife's family ranch in Bangs, southwest of Dallas. Now he makes his living growing exotic strains of garlic and selling them on the Web.
One of the beauties of garlic, beyond bruschetta or aioli at the table, is that it doesn't take much land to produce a bountiful crop. It's perfect for a back yard, where it can be tucked into flower beds and alongside roses.
Garlic in North Texas can be planted as late as January, although mail-order companies carrying specialty bulbs tend to sell out before that, Mr. Anderson says.
It can be grown from heads bought at supermarkets, if the garlic was organically grown, says Burton Mjolhus, manager at Covington's Nursery and Landscape Co. in Rowlett. If the garlic is not organic, however, it may have been sprayed with chemicals that retard its growth.
The best varieties for North Texas are the softneck garlics known as silverskin garlic, according to Texas A&M University's horticulture program. Common types in that family recommended by A&M are 'Creole', 'California Early White', 'California Late White', 'Mexican Pink' and 'Texas White'. Elephant garlic also is listed as a type that grows in Texas.
The artichoke type also can do well, Mr. Anderson says. Types include 'Inchelium Red', 'Transylvanian' – starts came from a vegetable market in that region of Europe in 1994 – and 'Kettle River'.
The porcelain type, so-called hardneck varieties, is preferred for northern climates.
TAMU planting tips
Plant garlic cloves, point up, in loose soil, 3 to 6 inches apart, in a location where they will receive six hours of sun daily. Cloves should be planted only 1 to 2 inches deep.
Soil should be watered to a depth of 2 feet and watering should be regular until harvest nears in the spring, when irrigation should taper off to prevent rot.
Bulbs are harvested when the tops dry and bend. Once dug, garlic should be left to completely dry in a covered area a week or more.
In Mr. Anderson's experience, garlic requires little fertilizing. Too much nitrogen in the soil will prevent bulbs from forming, he says.
Jessie Milligan is a Fort Worth freelance writer.
WHERE TO FIND ORGANIC GARLIC
Organic garlic for planting is easiest to find at supermarkets, although not all stores will describe which variety of garlic is in their bins.
North Haven Gardens, 7700 Northaven Road, sometimes sells garlic transplants in pots starting in November. Transplants are found among the herbs and typically sell for about $2 for a 4-inch pot.
Green Mama's Organic Garden Center, 5324 Davis Blvd. in North Richland Hills, has elephant garlic for 75 cents a head.
Feed or farm supply stores, including Marshall Grain, 2224 E. Lancaster in Fort Worth, often sell garlic cloves for planting. Marshall Grain carries organic 'California Early White' for 69 cents a head.
Shopping online is a good way to locate organic specialties that will do best in North Texas. Typically, online retailers sell planting garlic by the pound or half-pound. Expect to pay from $5 to $13 for a half-pound, which produces about 20 pounds of mature garlic. Remember that softneck varieties can be braided for display. Here are a few sites:
www.gourmetgarlicgardens.com. Mr. Anderson's garlic business offers a wide variety of organic garlic for planting. The garlic is grown on a ranch about 175 miles southwest of Dallas.
www.thegarlicstore.com. This Fort Collins, Colo., grower's Web site identifies varieties best for warm-weather climates.
www.seedsofchange.com and www.territorialseed.com. Seeds of Change, based in New Mexico, and Territorial Seed Co. in Oregon offer uncommon varieties. Both provide descriptions of each variety's distinct flavors.
http://www.dallasnews.com/sharedcontent/dws/fea/home/gardening/stories/DN-nhg_garlic_1023gd.ART.State.Edition1.4ab17bf.html
http://snipurl.com/7sj5g
Workout Regimens You Can Live With By JOHN HANC
October 23, 2008
Fitness
Workout Regimens You Can Live With By JOHN HANC
SWIM, bike, run, rake leaves. Climb monkey bars if you’re a child, do water aerobics if you’re older. Do whatever you like. Just keep moving.
That, in essence, is the message of the physical activity guidelines announced this month by the federal Department of Health and Human Services. The basic recommendations — including the core guideline that Americans should get about 150 minutes of moderately intense activity per week — have not really changed from the ones announced in 1996 by the surgeon general’s office.
What is different is the emphasis on the variety of activities — including daily chores — that can reap the profound health benefits of exercise.
There is no “one size fits all.” Instead, the guidelines are broken into specific recommendations for adults, children, people over 65 and others. And while sustained aerobic activities are the foundation, there are other types of activities — muscle-building and flexibility-enhancing — that are also important.
Here are some ideas on filling your own exercise prescription.
For the Time-Crunched
Can’t find five days a week to exercise? Train three days instead, but pick up the pace. Richard Cotton, an exercise physiologist with the American College of Sports Medicine, recommends a Wednesday-Saturday-Sunday routine. That way, he said, “you’re only getting into one of your workdays, but you don’t have any more than two days off at a time.”
Training for 30 minutes three times a week may fall short of the 150-minute goal, but the guidelines allow for as little as 75 minutes of exercise a week, provided the activities are higher in intensity. Mr. Cotton called that high-return-on-investment activity, and suggested using interval training to achieve it. Here’s how:
After a five-minute warm-up (on a treadmill or stationary bike, in a pool or even walking or jogging around a park), pick up the pace for five minutes, then go a little easier for three minutes. Repeat that pattern for the rest of the 30 minutes, making sure to end with an easy-effort, three- to four-minute cool-down. On an intensity scale of 1 to 10 (with 1 being the easiest effort, and 10 being all-out), your hardest intervals should be at 7 to 8, and recoveries at 5 to 6.
The same is true with strength training. Work the major muscles groups during at least two sessions a week. Mr. Cotton said you can begin to meet that part of the guidelines through a 10-minute workout using just three bodyweight exercises — abdominal crunches, back extensions and push-ups. For details on the program, visit www.myexerciseplan.com/assessment. Look for the Basic Bodyweight Strength Plan under “Keep It Simple.”
The Older Set
Older adults should try to get in 150 minutes of moderately intense activity and at least two sessions of strength training a week. You can accumulate those minutes by walking or joining an exercise class for older adults. For strength training, work with resistance bands, do bodyweight exercises or just climb stairs.
One key change in these guidelines is the stipulation that older adults should do exercises to maintain or improve their balance and to help avoid falls. Walking backward or on your toes can do that. In her forthcoming book, “Fitness After 40” (Amacom), Dr. Vonda Wright of the University of Pittsburgh Medical Center recommends a body movement that she calls “the stork.” Stand with your feet slightly apart. Raise one knee, while keeping your arms to the sides or your hands on your hips. Hold for 30 seconds, then switch legs. Repeat. If you have trouble at first, place your fingertips on a hard surface until you can balance.
For Children
The guidelines stipulate at least 60 minutes a day of moderate or vigorous activity for children from the ages of 6 to 17. That may sound like a challenge for parents whose children seem to prefer Xbox to exercise. But Stephen J. Virgilio, chairman of the physical education department at Adelphi University in Garden City, N.Y., said that is an obstacle that can be overcome.
“Research shows that when kids are given the opportunity to be physically active, they will be,” Dr. Virgilio said. “It’s up to adults to create that opportunity.”
But don’t expect your children to work out the way you do. “Children are intermittent learners and intermittent exercisers,” said Dr. Virgilio, author of the book “Active Start for Healthy Kids” (Human Kinetics). “They tend to start and rest and then start up again.”
Children can accumulate exercise minutes in various ways over a typical day. A younger child could walk to school and back (20 minutes), kick a ball around after school (20 minutes), climb the monkey bars on the playground (10 minutes) and ride a bike with friends (10 minutes).
For an older child, the 60 minutes of daily aerobic and bone- and muscle-strengthening activities might be accumulated like this: walk the dog (10 minutes), shoot basketballs with friends (30 minutes) and stretch or do push-ups and sit-ups while watching TV (20 minutes).
Getting Started
The people who accrue the greatest health benefits from exercise go from doing nothing to doing something.
“A one-minute walk isn’t going to do much for your health, but it is a way to start,” said Dr. Steve Blair, an epidemiologist at the University of South Carolina whose research over the last 20 years formed much of the basis for the new federal guidelines. “Next week, can we do two minutes? Then the third week, three minutes. Eventually you’ll be up to 30 minutes.”
Even then, it doesn’t have to be 30 minutes at a time. “Ten minutes in the morning, 10 minutes when you come home. Weekends, try to get up to 30 minutes,” said Bill Haskell, an emeritus professor at the Stanford University School of Medicine.
Although the guidelines urge adults to “strongly consider walking” as a way to get aerobic activity, biking and swimming are excellent choices, too. You can also get in those minutes through day-to-day activities —“heavy” gardening (defined as continuous digging or hoeing), brisk raking of leaves, aggressive scrubbing or cleaning of floors. As public health officials have been saying for a decade, exercise can be engineered into daily routines: Taking the stairs instead of the elevator or parking at the far end of the lot.
As for resistance training, you don’t have to wait. “Some find that by doing some strengthening first, walking becomes easier,” Dr. Blair said.
For Those Who Can’t Do Enough
If you’re reading this on the elliptical machine while waiting for your personal trainer to arrive, and hoping that you’ll still have time to make your yoga class, chances are you’re already meeting the guidelines. In the past, you might have been cautioned against going much further. Not now. If you are reaching 150 minutes, “we see general health-risk reductions of 25 percent,” Dr. Haskell said. “If you go above that, from say 150 to 300 minutes, we’re seeing reductions of 40 percent.”
If you want to raise the duration or intensity of your regimen, consider these combinations:
¶Riding a stationary bicycle for 45 minutes two days a week; playing basketball for 60 minutes on two days; doing calisthenics on three days.
¶Running for 45 minutes three or four days a week; doing circuit weight training in the gym (without stopping from exercise to exercise and getting both an aerobic and strengthening workout) two or three days a week
¶Playing soccer for 90 minutes one day; walking briskly for 15 minutes, three days a week; lifting weights on two days.
And as you increase your exercise time beyond 150 minutes, remember the 10 percent rule: To reduce the risk of injury, increase your training by no more than 10 percent a week.
Fitness
Workout Regimens You Can Live With By JOHN HANC
SWIM, bike, run, rake leaves. Climb monkey bars if you’re a child, do water aerobics if you’re older. Do whatever you like. Just keep moving.
That, in essence, is the message of the physical activity guidelines announced this month by the federal Department of Health and Human Services. The basic recommendations — including the core guideline that Americans should get about 150 minutes of moderately intense activity per week — have not really changed from the ones announced in 1996 by the surgeon general’s office.
What is different is the emphasis on the variety of activities — including daily chores — that can reap the profound health benefits of exercise.
There is no “one size fits all.” Instead, the guidelines are broken into specific recommendations for adults, children, people over 65 and others. And while sustained aerobic activities are the foundation, there are other types of activities — muscle-building and flexibility-enhancing — that are also important.
Here are some ideas on filling your own exercise prescription.
For the Time-Crunched
Can’t find five days a week to exercise? Train three days instead, but pick up the pace. Richard Cotton, an exercise physiologist with the American College of Sports Medicine, recommends a Wednesday-Saturday-Sunday routine. That way, he said, “you’re only getting into one of your workdays, but you don’t have any more than two days off at a time.”
Training for 30 minutes three times a week may fall short of the 150-minute goal, but the guidelines allow for as little as 75 minutes of exercise a week, provided the activities are higher in intensity. Mr. Cotton called that high-return-on-investment activity, and suggested using interval training to achieve it. Here’s how:
After a five-minute warm-up (on a treadmill or stationary bike, in a pool or even walking or jogging around a park), pick up the pace for five minutes, then go a little easier for three minutes. Repeat that pattern for the rest of the 30 minutes, making sure to end with an easy-effort, three- to four-minute cool-down. On an intensity scale of 1 to 10 (with 1 being the easiest effort, and 10 being all-out), your hardest intervals should be at 7 to 8, and recoveries at 5 to 6.
The same is true with strength training. Work the major muscles groups during at least two sessions a week. Mr. Cotton said you can begin to meet that part of the guidelines through a 10-minute workout using just three bodyweight exercises — abdominal crunches, back extensions and push-ups. For details on the program, visit www.myexerciseplan.com/assessment. Look for the Basic Bodyweight Strength Plan under “Keep It Simple.”
The Older Set
Older adults should try to get in 150 minutes of moderately intense activity and at least two sessions of strength training a week. You can accumulate those minutes by walking or joining an exercise class for older adults. For strength training, work with resistance bands, do bodyweight exercises or just climb stairs.
One key change in these guidelines is the stipulation that older adults should do exercises to maintain or improve their balance and to help avoid falls. Walking backward or on your toes can do that. In her forthcoming book, “Fitness After 40” (Amacom), Dr. Vonda Wright of the University of Pittsburgh Medical Center recommends a body movement that she calls “the stork.” Stand with your feet slightly apart. Raise one knee, while keeping your arms to the sides or your hands on your hips. Hold for 30 seconds, then switch legs. Repeat. If you have trouble at first, place your fingertips on a hard surface until you can balance.
For Children
The guidelines stipulate at least 60 minutes a day of moderate or vigorous activity for children from the ages of 6 to 17. That may sound like a challenge for parents whose children seem to prefer Xbox to exercise. But Stephen J. Virgilio, chairman of the physical education department at Adelphi University in Garden City, N.Y., said that is an obstacle that can be overcome.
“Research shows that when kids are given the opportunity to be physically active, they will be,” Dr. Virgilio said. “It’s up to adults to create that opportunity.”
But don’t expect your children to work out the way you do. “Children are intermittent learners and intermittent exercisers,” said Dr. Virgilio, author of the book “Active Start for Healthy Kids” (Human Kinetics). “They tend to start and rest and then start up again.”
Children can accumulate exercise minutes in various ways over a typical day. A younger child could walk to school and back (20 minutes), kick a ball around after school (20 minutes), climb the monkey bars on the playground (10 minutes) and ride a bike with friends (10 minutes).
For an older child, the 60 minutes of daily aerobic and bone- and muscle-strengthening activities might be accumulated like this: walk the dog (10 minutes), shoot basketballs with friends (30 minutes) and stretch or do push-ups and sit-ups while watching TV (20 minutes).
Getting Started
The people who accrue the greatest health benefits from exercise go from doing nothing to doing something.
“A one-minute walk isn’t going to do much for your health, but it is a way to start,” said Dr. Steve Blair, an epidemiologist at the University of South Carolina whose research over the last 20 years formed much of the basis for the new federal guidelines. “Next week, can we do two minutes? Then the third week, three minutes. Eventually you’ll be up to 30 minutes.”
Even then, it doesn’t have to be 30 minutes at a time. “Ten minutes in the morning, 10 minutes when you come home. Weekends, try to get up to 30 minutes,” said Bill Haskell, an emeritus professor at the Stanford University School of Medicine.
Although the guidelines urge adults to “strongly consider walking” as a way to get aerobic activity, biking and swimming are excellent choices, too. You can also get in those minutes through day-to-day activities —“heavy” gardening (defined as continuous digging or hoeing), brisk raking of leaves, aggressive scrubbing or cleaning of floors. As public health officials have been saying for a decade, exercise can be engineered into daily routines: Taking the stairs instead of the elevator or parking at the far end of the lot.
As for resistance training, you don’t have to wait. “Some find that by doing some strengthening first, walking becomes easier,” Dr. Blair said.
For Those Who Can’t Do Enough
If you’re reading this on the elliptical machine while waiting for your personal trainer to arrive, and hoping that you’ll still have time to make your yoga class, chances are you’re already meeting the guidelines. In the past, you might have been cautioned against going much further. Not now. If you are reaching 150 minutes, “we see general health-risk reductions of 25 percent,” Dr. Haskell said. “If you go above that, from say 150 to 300 minutes, we’re seeing reductions of 40 percent.”
If you want to raise the duration or intensity of your regimen, consider these combinations:
¶Riding a stationary bicycle for 45 minutes two days a week; playing basketball for 60 minutes on two days; doing calisthenics on three days.
¶Running for 45 minutes three or four days a week; doing circuit weight training in the gym (without stopping from exercise to exercise and getting both an aerobic and strengthening workout) two or three days a week
¶Playing soccer for 90 minutes one day; walking briskly for 15 minutes, three days a week; lifting weights on two days.
And as you increase your exercise time beyond 150 minutes, remember the 10 percent rule: To reduce the risk of injury, increase your training by no more than 10 percent a week.
Wednesday, October 22, 2008
The Trouble With a Homeowner Bailout By DAVID LEONHARDT
October 22, 2008
Economic Scene
The Trouble With a Homeowner Bailout By DAVID LEONHARDT
In the government’s ever-morphing efforts to save the financial system, the moment when the nation’s homeowners get rescued seems, finally, to be getting near.
John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.
The idea of helping Main Street has an undeniable appeal. Housing is at the root of the financial crisis, and preventing foreclosures could bring a double-barreled benefit. It would allow families to remain in their homes and could also help keep the housing market from spiraling out of control. The more foreclosed homes that are dumped on the market, the more home prices will fall.
But before any of the various rescue plans reaches the point of inevitability — and these days, ideas can go from unlikely to inevitable in about 48 hours — I think it’s important to stop for a moment and consider how complicated any such plan would be. Every one of them, in fact, faces an inherent conflict: coming up with a large-scale homeowner bailout without also helping millions of people who don’t need help is almost impossible.
That’s a big reason that the various efforts to stem foreclosures so far, both from the Bush administration and Congressional Democrats, have been so modest. You just can’t solve the foreclosure problem without causing a lot of collateral damage — in the form of lavishing money on homeowners who can stay in their homes without assistance.
And it’s not at all clear why such people should be at the front of the line for government help. Why are they more deserving than, say, the growing number of unemployed, many of whom rent their homes?
Given all the other imperfect emergency measures that the federal government has taken in recent weeks, it can certainly do more to stem foreclosures than it has. The Treasury Department’s $700 billion bailout fund, as it’s now structured, may spend almost nothing on troubled mortgages. “It’s a question of weights,” Alan Blinder, a former Federal Reserve vice chairman who has been advocating more homeowner help for months, told me, “and I’m really worried that zero is going to be the weight for mortgages.”
Zero, or anything close to it, may well be wrong. But the right answer isn’t quite as obvious as it initially sounds.
•
There are two separate groups of people who are at risk of foreclosure, and they often get muddled in any discussion of the housing crisis.
The first group is made up of people who, for whatever reason, will not be able to make their monthly payments. Some took out mortgages with initial monthly payments that they couldn’t afford. Others took out adjustable-rate mortgages whose monthly payments have ballooned to an unaffordable level. Still others have lost their jobs.
At the start of this month, almost 1.5 million homeowners — out of about 75 million nationwide — were in this category. They were at least two months behind on their mortgage payments. Mark Zandi, the chief economist of Moody’s Economy.com, estimates that another five million or so will fall into the category over the life of their mortgage, as the economy worsens and more adjustable-rate loans reset.
The second group is quite different. It is made up of people who are at risk of foreclosure not because they won’t be able to keep up with their monthly payments — but because they may decide they don’t want to continue making them. These are the homeowners who are “under water,” which is to say their houses have lost so much value that they’re now worth less than the underlying mortgage.
Homeowners with an underwater mortgage face a choice. Many will stay put and keep making their monthly payments, because they see their house primarily as a home, rather than an investment. Maybe they love their neighborhood or their children’s school. Maybe they just don’t like the idea of reneging on a deal, as Brett Barry, a real estate agent near Phoenix, put it.
Others, though, are going to look at their home purely in economic terms and see an investment that may never pay off. Some of them will choose to walk away.
What matters, for the purposes of a bailout, is that the number of underwater homeowners is much larger than the number of people who will be unable to make their mortgage payments. Assuming that home prices still have a ways to fall, something like 19 million homeowners may be under water by 2010 (only a few million of whom will be struggling to make their payments).
Now, who should be rescued?
Let’s start by acknowledging that morality cannot be the main criteria, unfortunately.
The government has already passed the point of drawing fine moral distinctions and is now in the business of stabilizing the economy by whatever means necessary. Someone might argue, then, for rescuing everyone who might end up in foreclosure, regardless of the reason.
The problem with this approach — and it’s the heart of the problem with any big-time homeowner rescue — is probably obvious. As soon as the government announces that it will help everyone at risk of foreclosure, a lot of people are suddenly going to decide they’re at risk of foreclosure.
Homeowners who are under water will have an incentive to think of their homes in cold economic terms and threaten to walk away, while those who can just barely afford their monthly payments will have reason to slide into delinquency. Multiply 19 million mortgages by a couple of hundred thousand dollars, and the government could be left with $4 trillion in obligations.
The other day, I spoke with Sandi Lucia, a saleswoman in Northern California who had lost her job, has had to take a new one at lower pay and was now struggling to meet her monthly payments. Ms. Lucia seems committed to doing everything she can to keep paying her bills. But she also put her finger on the problem. “I want to keep paying my mortgage,” she said. “But if everyone is getting bailed out, what’s the point?”
In recent weeks, several intriguing ideas for helping homeowners have begun making the rounds. Mr. Blinder thinks the government should spend about half of the $700 billion bailout fund to buy and then refinance the mortgages of people who, based on their debt and income, appear to have little chance of making their payments. My colleague Joe Nocera has written about a plan that would allow homeowners to forfeit their deeds and rent their homes back from the bank. Ideas like these can be part of the solution.
But this financial crisis isn’t going to be solved by a magic bullet. It’s going to require a smorgasbord of programs — some aimed at homeowners in trouble, some aimed at the credit markets, some aimed at the job market — as well as a whole lot of time and patience.
The only way to stop the coming rise in foreclosures, at this point, would be a bailout of enormous proportions. And if we’re unlucky enough to get to the point when a $4 trillion program seems necessary to resolve the crisis, there would be a lot of ways to spend the money beyond devoting it all to underwater homeowners. They aren’t the only ones, after all, who live on Main Street.
E-mail: Leonhardt@nytimes.com
Economic Scene
The Trouble With a Homeowner Bailout By DAVID LEONHARDT
In the government’s ever-morphing efforts to save the financial system, the moment when the nation’s homeowners get rescued seems, finally, to be getting near.
John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.
The idea of helping Main Street has an undeniable appeal. Housing is at the root of the financial crisis, and preventing foreclosures could bring a double-barreled benefit. It would allow families to remain in their homes and could also help keep the housing market from spiraling out of control. The more foreclosed homes that are dumped on the market, the more home prices will fall.
But before any of the various rescue plans reaches the point of inevitability — and these days, ideas can go from unlikely to inevitable in about 48 hours — I think it’s important to stop for a moment and consider how complicated any such plan would be. Every one of them, in fact, faces an inherent conflict: coming up with a large-scale homeowner bailout without also helping millions of people who don’t need help is almost impossible.
That’s a big reason that the various efforts to stem foreclosures so far, both from the Bush administration and Congressional Democrats, have been so modest. You just can’t solve the foreclosure problem without causing a lot of collateral damage — in the form of lavishing money on homeowners who can stay in their homes without assistance.
And it’s not at all clear why such people should be at the front of the line for government help. Why are they more deserving than, say, the growing number of unemployed, many of whom rent their homes?
Given all the other imperfect emergency measures that the federal government has taken in recent weeks, it can certainly do more to stem foreclosures than it has. The Treasury Department’s $700 billion bailout fund, as it’s now structured, may spend almost nothing on troubled mortgages. “It’s a question of weights,” Alan Blinder, a former Federal Reserve vice chairman who has been advocating more homeowner help for months, told me, “and I’m really worried that zero is going to be the weight for mortgages.”
Zero, or anything close to it, may well be wrong. But the right answer isn’t quite as obvious as it initially sounds.
•
There are two separate groups of people who are at risk of foreclosure, and they often get muddled in any discussion of the housing crisis.
The first group is made up of people who, for whatever reason, will not be able to make their monthly payments. Some took out mortgages with initial monthly payments that they couldn’t afford. Others took out adjustable-rate mortgages whose monthly payments have ballooned to an unaffordable level. Still others have lost their jobs.
At the start of this month, almost 1.5 million homeowners — out of about 75 million nationwide — were in this category. They were at least two months behind on their mortgage payments. Mark Zandi, the chief economist of Moody’s Economy.com, estimates that another five million or so will fall into the category over the life of their mortgage, as the economy worsens and more adjustable-rate loans reset.
The second group is quite different. It is made up of people who are at risk of foreclosure not because they won’t be able to keep up with their monthly payments — but because they may decide they don’t want to continue making them. These are the homeowners who are “under water,” which is to say their houses have lost so much value that they’re now worth less than the underlying mortgage.
Homeowners with an underwater mortgage face a choice. Many will stay put and keep making their monthly payments, because they see their house primarily as a home, rather than an investment. Maybe they love their neighborhood or their children’s school. Maybe they just don’t like the idea of reneging on a deal, as Brett Barry, a real estate agent near Phoenix, put it.
Others, though, are going to look at their home purely in economic terms and see an investment that may never pay off. Some of them will choose to walk away.
What matters, for the purposes of a bailout, is that the number of underwater homeowners is much larger than the number of people who will be unable to make their mortgage payments. Assuming that home prices still have a ways to fall, something like 19 million homeowners may be under water by 2010 (only a few million of whom will be struggling to make their payments).
Now, who should be rescued?
Let’s start by acknowledging that morality cannot be the main criteria, unfortunately.
The government has already passed the point of drawing fine moral distinctions and is now in the business of stabilizing the economy by whatever means necessary. Someone might argue, then, for rescuing everyone who might end up in foreclosure, regardless of the reason.
The problem with this approach — and it’s the heart of the problem with any big-time homeowner rescue — is probably obvious. As soon as the government announces that it will help everyone at risk of foreclosure, a lot of people are suddenly going to decide they’re at risk of foreclosure.
Homeowners who are under water will have an incentive to think of their homes in cold economic terms and threaten to walk away, while those who can just barely afford their monthly payments will have reason to slide into delinquency. Multiply 19 million mortgages by a couple of hundred thousand dollars, and the government could be left with $4 trillion in obligations.
The other day, I spoke with Sandi Lucia, a saleswoman in Northern California who had lost her job, has had to take a new one at lower pay and was now struggling to meet her monthly payments. Ms. Lucia seems committed to doing everything she can to keep paying her bills. But she also put her finger on the problem. “I want to keep paying my mortgage,” she said. “But if everyone is getting bailed out, what’s the point?”
In recent weeks, several intriguing ideas for helping homeowners have begun making the rounds. Mr. Blinder thinks the government should spend about half of the $700 billion bailout fund to buy and then refinance the mortgages of people who, based on their debt and income, appear to have little chance of making their payments. My colleague Joe Nocera has written about a plan that would allow homeowners to forfeit their deeds and rent their homes back from the bank. Ideas like these can be part of the solution.
But this financial crisis isn’t going to be solved by a magic bullet. It’s going to require a smorgasbord of programs — some aimed at homeowners in trouble, some aimed at the credit markets, some aimed at the job market — as well as a whole lot of time and patience.
The only way to stop the coming rise in foreclosures, at this point, would be a bailout of enormous proportions. And if we’re unlucky enough to get to the point when a $4 trillion program seems necessary to resolve the crisis, there would be a lot of ways to spend the money beyond devoting it all to underwater homeowners. They aren’t the only ones, after all, who live on Main Street.
E-mail: Leonhardt@nytimes.com
Wednesday, October 08, 2008
Ignoring Reality Has a Price By DAVID LEONHARDT
October 8, 2008
Economic Scene
Ignoring Reality Has a Price By DAVID LEONHARDT
WASHINGTON
Thirty billion dollars to keep Bear Stearns from collapsing. Another $85 billion for A.I.G. Hundreds of billions, here and there, lent to banks.
All told, the Federal Reserve has pumped $800 billion into the financial system, Ben Bernanke, its chairman, estimated on Tuesday. That figure doesn’t include the untold sum that the Fed now plans to spend buying short-term debt so that companies can continue to pay for their daily operations. And it doesn’t include any of the money the Treasury Department is laying out, like the $700 billion bailout fund or the $200 billion that could be spent propping up Fannie Mae and Freddie Mac.
After 14 months of crisis, the federal government — meaning you and me — has put serious money on the line. As a point of comparison, the entire annual federal budget is about $3 trillion.
Just how are we going to pay for all this?
The short answer is that the budget problems the country seemed to have a year ago are now even worse. Next year’s deficit (relative to the economy’s size) will probably be the biggest since 1992, and maybe since 1983. Taxes will have to rise or government spending will have to fall, if not both. Trying to contain the mess created by a bubble no doubt costs serious money.
Yet this is also a case in which the short answer isn’t the full answer, or even the best answer.
As expensive as the damage control may be, it isn’t likely to cost near as much as the headline numbers suggest. More to the point, the alternative — not spending some serious money to deal with the crisis — would probably end up costing a lot more. As it is, the various bailouts are not the main reason next year’s deficit is growing. The deteriorating state of the economy is.
So if you want to conjure up some doomsday stories about the federal budget, I’m happy to play along (and will do so momentarily). But those stories aren’t mainly about the credit crisis. They’re about the dangers of ignoring economic realities — which, when you think about it, is how we ended up in this credit crisis in the first place.
•
The most newsworthy part of Mr. Bernanke’s lunchtime speech on Tuesday was his sober overview of the economy. He called the financial crisis “a problem of historic dimensions” and indicated that the Fed would soon cut its benchmark interest rate once again.
But the bulk of the speech was a catalog of the extraordinary steps that the Fed and Treasury had taken since August and the delicate line they had tried to walk along the way. They have lent enormous amounts of money to banks and trumpeted those efforts to try to restore some confidence to the credit markets. Fed officials have pointed out that they are nowhere close to being out of bullets either. They work for the central bank, after all. They can always print money.
But Mr. Bernanke and the Treasury secretary, Henry Paulson, have also emphasized that they’re not being too generous. They are mainly making loans and investments, and they expect to recoup much of the money they’re spreading around.
Outside the government, economists differ about whether Mr. Bernanke and Mr. Paulson have been too aggressive or not aggressive enough and whether they have been aggressive in the right ways. But there is not much concern that they are taking on additional debt — or even about the amount of it.
“The policy actions are not likely to have a large effect on the budget over the next five or 10 years,” Douglas Elmendorf, who has become a go-to Democratic economist during the crisis, told me. John Makin, of the conservative American Enterprise Institute, added: “The last thing I’m worried about right now is additional government indebtedness. There really isn’t an alternative.”
Mr. Makin pointed out that during Japan’s long malaise, the government passed a stimulus package almost every year that was equal to more than 2 percent of the country’s gross domestic product (equivalent to about $400 billion in this country today). But interest rates in Japan remained low, a sign that economic weakness, not deficits, was still the problem.
That being said, today’s ever-expanding bailouts do create some dangers. You’ve probably heard the term moral hazard, which is shorthand for the idea that government rescues may lead investors to take new, unwise risks — and ultimately require yet more rescues.
The Fed is also setting itself up for tough decisions about when to end its various emergency programs. If it waits too long, it could leave so much money sloshing around the economy that inflation will take off. Fed officials have suggested they understand that they made precisely this mistake after the 2001 recession, when they kept interest rates low and added to the mania in the housing market.
Finally, there is the net cost of the bailouts, which may well be bigger than Mr. Bernanke has acknowledged. Under the new program announced Tuesday, the Fed will own the commercial paper that serves as short-term loans for companies. If some of those companies go bankrupt, the Fed could suffer some losses.
The Treasury’s $700 billion bailout fund, meanwhile, is based on the premise that investors are collectively undervaluing assets and that the government can pay above current market prices without losing much money. “One has to be at least a bit skeptical,” the economist Greg Mankiw says, “about the idea that government policy makers gambling with other people’s money are better at judging the value of complex financial instruments than are private investors gambling with their own.”
After talking with budget analysts, I think it’s reasonable to assume that the bailouts will end up costing several hundred billion dollars, spread over several years. Perhaps $100 billion of that cost may come next year. Add in another $100 billion or so for the weakening economy — specifically the fall in tax revenue, increases in spending on social programs and the possibility of another stimulus package.
Even before the crisis, the Bush administration was set to bequeath a $550 billion deficit to its successor. Now, a better estimate appears to be $750 billion — or 5 percent of gross domestic product. The only years since the 1960s that the deficit has been nearly so large were the early 1990s (almost 4.5 percent of G.D.P.) and the mid-1980s (with a peak of 6 percent in 1983).
Obviously, next year’s deficit is a problem. And if you assume the credit crisis isn’t about to lift — which seems smart at this point — the ultimate cost of the bailouts could conceivably go higher. Whatever the final figure, it should still be put in some context.
Despite everything, the biggest fiscal problem remains, far and away, health care. Based on the rate that medical spending has been rising, the Congressional Budget Office forecasts that Medicare and Medicaid will take up 10 percent of G.D.P. within two decades, up from about 4 percent now. In today’s terms, that would be the equivalent of adding at least $900 billion to the deficit every single year, in perpetuity. It makes the cost of the bailouts look like a rounding error.
When it comes to health care, we have a situation that is blatantly unsustainable. With the right choices, we can prevent that. But so far, we instead seem to be hoping that the situation will magically resolve itself, which is a recipe for big problems and perhaps even a crisis.
Let’s see. That doesn’t sound familiar, does it?
Economic Scene
Ignoring Reality Has a Price By DAVID LEONHARDT
WASHINGTON
Thirty billion dollars to keep Bear Stearns from collapsing. Another $85 billion for A.I.G. Hundreds of billions, here and there, lent to banks.
All told, the Federal Reserve has pumped $800 billion into the financial system, Ben Bernanke, its chairman, estimated on Tuesday. That figure doesn’t include the untold sum that the Fed now plans to spend buying short-term debt so that companies can continue to pay for their daily operations. And it doesn’t include any of the money the Treasury Department is laying out, like the $700 billion bailout fund or the $200 billion that could be spent propping up Fannie Mae and Freddie Mac.
After 14 months of crisis, the federal government — meaning you and me — has put serious money on the line. As a point of comparison, the entire annual federal budget is about $3 trillion.
Just how are we going to pay for all this?
The short answer is that the budget problems the country seemed to have a year ago are now even worse. Next year’s deficit (relative to the economy’s size) will probably be the biggest since 1992, and maybe since 1983. Taxes will have to rise or government spending will have to fall, if not both. Trying to contain the mess created by a bubble no doubt costs serious money.
Yet this is also a case in which the short answer isn’t the full answer, or even the best answer.
As expensive as the damage control may be, it isn’t likely to cost near as much as the headline numbers suggest. More to the point, the alternative — not spending some serious money to deal with the crisis — would probably end up costing a lot more. As it is, the various bailouts are not the main reason next year’s deficit is growing. The deteriorating state of the economy is.
So if you want to conjure up some doomsday stories about the federal budget, I’m happy to play along (and will do so momentarily). But those stories aren’t mainly about the credit crisis. They’re about the dangers of ignoring economic realities — which, when you think about it, is how we ended up in this credit crisis in the first place.
•
The most newsworthy part of Mr. Bernanke’s lunchtime speech on Tuesday was his sober overview of the economy. He called the financial crisis “a problem of historic dimensions” and indicated that the Fed would soon cut its benchmark interest rate once again.
But the bulk of the speech was a catalog of the extraordinary steps that the Fed and Treasury had taken since August and the delicate line they had tried to walk along the way. They have lent enormous amounts of money to banks and trumpeted those efforts to try to restore some confidence to the credit markets. Fed officials have pointed out that they are nowhere close to being out of bullets either. They work for the central bank, after all. They can always print money.
But Mr. Bernanke and the Treasury secretary, Henry Paulson, have also emphasized that they’re not being too generous. They are mainly making loans and investments, and they expect to recoup much of the money they’re spreading around.
Outside the government, economists differ about whether Mr. Bernanke and Mr. Paulson have been too aggressive or not aggressive enough and whether they have been aggressive in the right ways. But there is not much concern that they are taking on additional debt — or even about the amount of it.
“The policy actions are not likely to have a large effect on the budget over the next five or 10 years,” Douglas Elmendorf, who has become a go-to Democratic economist during the crisis, told me. John Makin, of the conservative American Enterprise Institute, added: “The last thing I’m worried about right now is additional government indebtedness. There really isn’t an alternative.”
Mr. Makin pointed out that during Japan’s long malaise, the government passed a stimulus package almost every year that was equal to more than 2 percent of the country’s gross domestic product (equivalent to about $400 billion in this country today). But interest rates in Japan remained low, a sign that economic weakness, not deficits, was still the problem.
That being said, today’s ever-expanding bailouts do create some dangers. You’ve probably heard the term moral hazard, which is shorthand for the idea that government rescues may lead investors to take new, unwise risks — and ultimately require yet more rescues.
The Fed is also setting itself up for tough decisions about when to end its various emergency programs. If it waits too long, it could leave so much money sloshing around the economy that inflation will take off. Fed officials have suggested they understand that they made precisely this mistake after the 2001 recession, when they kept interest rates low and added to the mania in the housing market.
Finally, there is the net cost of the bailouts, which may well be bigger than Mr. Bernanke has acknowledged. Under the new program announced Tuesday, the Fed will own the commercial paper that serves as short-term loans for companies. If some of those companies go bankrupt, the Fed could suffer some losses.
The Treasury’s $700 billion bailout fund, meanwhile, is based on the premise that investors are collectively undervaluing assets and that the government can pay above current market prices without losing much money. “One has to be at least a bit skeptical,” the economist Greg Mankiw says, “about the idea that government policy makers gambling with other people’s money are better at judging the value of complex financial instruments than are private investors gambling with their own.”
After talking with budget analysts, I think it’s reasonable to assume that the bailouts will end up costing several hundred billion dollars, spread over several years. Perhaps $100 billion of that cost may come next year. Add in another $100 billion or so for the weakening economy — specifically the fall in tax revenue, increases in spending on social programs and the possibility of another stimulus package.
Even before the crisis, the Bush administration was set to bequeath a $550 billion deficit to its successor. Now, a better estimate appears to be $750 billion — or 5 percent of gross domestic product. The only years since the 1960s that the deficit has been nearly so large were the early 1990s (almost 4.5 percent of G.D.P.) and the mid-1980s (with a peak of 6 percent in 1983).
Obviously, next year’s deficit is a problem. And if you assume the credit crisis isn’t about to lift — which seems smart at this point — the ultimate cost of the bailouts could conceivably go higher. Whatever the final figure, it should still be put in some context.
Despite everything, the biggest fiscal problem remains, far and away, health care. Based on the rate that medical spending has been rising, the Congressional Budget Office forecasts that Medicare and Medicaid will take up 10 percent of G.D.P. within two decades, up from about 4 percent now. In today’s terms, that would be the equivalent of adding at least $900 billion to the deficit every single year, in perpetuity. It makes the cost of the bailouts look like a rounding error.
When it comes to health care, we have a situation that is blatantly unsustainable. With the right choices, we can prevent that. But so far, we instead seem to be hoping that the situation will magically resolve itself, which is a recipe for big problems and perhaps even a crisis.
Let’s see. That doesn’t sound familiar, does it?
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