Soap Oprah

I found out last week that the world was ending. Although the media outlets made me believe that the Armageddon was already in process, mercifully I discovered that I will be able to continue living my life until September of 2011. What happens in September 2011? Is it a far-off asteroid threatening to turn our planet into dust? Did a virus just mutate into the death spore of the 21st century? No, worse! Oprah Winfrey will go off the air.......and then immediately come back on the air.

Hold on a second, why is the world's rotation going to come to a halt again? Are you telling me that my life will never be the same because Oprah is finally getting off her couch? I am supposed to feel 2 years of sorrow and foreboding because a talk show is switching from network TV to cable TV? I am at a loss for words on this one. Not only am I confident that my life will continue unphased by this non-event in human history, but also I am mildly hopeful that the rest of humanity will survive as well.

Although tragic that people with basic cable will have to buy all new cable packages, I must ask this most basic of questions: Why is this news? I am sure some people will tell me that the Oprah Winfrey show is an iconic piece of America. Although sad to admit, this is in some way true. Others will say that Oprah has done so much for communities around the world that whatever she does is news. I agree with the first part of that statement. However, I would argue that a change in TV programming, even the Oprah Winfrey show, should not receive national news coverage for a week. Oprah is not retiring. Oprah did not die. Oprah simply wants you to pay her more money to watch 24 hours of re-runs. Although Oprah will no doubt spend some of that money on philanthropy, I again will state that this is not national news.

This whole thing is indicative of a larger, more troubling dynamic. The problem is that the news has been transformed from a source of unbiased information into a glorified marketing machine. Originally commercials were the vehicle for marketing messages, but now people can skip right over those. In order to make up the ground that commercials lost the programs have become the commercials. I am not simply talking about product placement or celebrity endorsements (which are everywhere). I am talking about the "experts" who cover everything from finances to marriages. I am talking about the stories covered and the people interviewed. Everyone is trying to sell you something.

Think about it for one minute. Our national economy has been converted from one of manufacturing to one of consumption. The government doesn't want you to spend money, it needs you to spend money. America is built on you spending money. When you don't, we have a financial meltdown (i.e. like now). Therefore, it makes perfect sense that all forms of media slowly have been turned into one big commercial.

Unfortunately, the one place that should fall outside the advertising blitzkrieg, the news, has succumb to the same woes. We now have news channels that advance political agendas, sell memoirs, hawk beauty products, and stoke our feeling of entitlement. This truly is a sad day indeed. I am waiting for the day when I can sit down and watch the news without feeling as though I need my wallet and a voting ballot next to me. I may be waiting a for a very long time.

Fee'd Up Already

There have been several media stories lately about the financial services industry. Nothing new there. Newspapers have been running the typical mix of stories: corporate greed, regulatory oversight, industry losses, etc. However, recently there has been a lot of coverage dedicated to the realm of fees, and specifically, how bank/credit card fees are at the center of all that is evil in the world.

Consumer "Watchdog" groups are now lobbying Capitol Hill to introduce legislation that is meant to slash banks' abilities to levy unfair fees against consumers, and as a result everyone will live in complete economic harmony. First, let me say that some of this legislation is good. The way banks have been changing interest rates on prior transactions is simply unfair, and modification of this practice is a good thing. However, attempting to curtail fees that banks collect will make banking more expensive for everybody. This is a fact. If people could take an emotional step back they would see that this is the only possible outcome.

Let us for a moment consider just one of the fees that is receiving attention: Overdraft fees. I will pause here to give a cursory explanation of the product. Overdraft protection was created to protect people from having their charges, checks, or debit purchases rejected for insufficient funds. In other words, banks allow people to spend money they do not have so they won't have to be embarrassed when their payment gets rejected because they have no money.

Overdraft protection is a product that people lobbied banks for years to have, and millions of people currently depend on it. Logically, the bank charges you a fee to use it. Why? Because this program is expensive to run. Banks make money in two very simple ways: Fees and interest. These accounts typically do not collect any interest, so that leaves fees.

Let me be incredibly clear at this point: without fees there will be no overdraft protection. Now you may ask why are the fees "ridiculously" high. There is a simple reason for that as well. Hundreds of thousands of people who overdraft their account (people who borrowed money interest free) never pay back what they borrowed. Banks lose money on every single one of these people. Somewhere between 5 and 10% of customers walk out on their bills right now, and that number is rising. That means a lot of fees need to be collected to keep this service viable. Want to get mad? Stop blaming banks, go kick your neighbor in the shin for being a dirt-bag, and tell him to pay his bills.

Now we know why fees are charged and why those fees are so high. However, there are a few more points commonly made in the media that should be discussed. First, there is a lot of grumbling over how transactions are processed. The claim often made is that banks process payments in a way that maximizes the fees it can charge clients. One such way is that banks process larger dollar payments first, and therefore can charge fees on a bunch of smaller transactions if the large dollar payment drains the account. The process is technically correct, but the rationale is completely flawed. When overdraft accounts were first created payments were processed more or less chronologically. Consumers were the ones who demanded this process change since their $3 milk purchase trumped their $1000 mortgage payment. The banks switched, and now are chastised for doing so. The bottom line is if people want to bounce payments on items that can repossessed, the banks will do it. Only please don't complain when a payment for something important gets rejected. You have your milk, do drink it.

Another popular argument is that people don't know about these fees until they are charged. This is simply ludicrous at this point in the digital age. The first thing people ask when they open an account with a financial institution is, "What are the fees?" When you buy anything you ask this question. To prove my point, if you go to any major bank website and type "Fees" into the search bar you will get a list of them. In case you are too lazy to check, I typed "Overdraft Fee" into the Bank of America search engine and got this: click me. This link takes you to a page where you can choose to see more details on a product and it has a huge button that says "Rates & Fees". These are not hidden fees. There is no small print. Forget for a second that the news has run story after story on bank fees, consumer awareness, predatory lending and so on for the past couple of years. The real issue is that people want to blame someone else for the fact that they do not want to spend 2 seconds to read about what they are buying. Stop complaining and start reading.

The last thing major point being made in the news is that overdraft protection is an opt-out type of product. This means that everyone gets it unless they specifically state that they do not want it. For some banks this is true, and for others it is not. This is a no-win argument for banks. If this was an opt-in product, clients who did not have overdraft protection would call the bank (and thousands do every day) to complain that the bank did not clear their purchase. You are all familiar with sentences that start. "I have been a loyal customer for over XX years...." or "I have over XXXX dollars in my other account why would you not cover a check for XXX...." or "I get paid every XX days and I would have paid you back....". Have you ever made a call like that? I bet some of you have. If you haven't you would if you bounced a check for $40 when you simply forgot to transfer funds from another account to cover the payment. Overdraft protection is primarily an opt-out product for this exact reason. It does benefit people when they really need it, and you only really realize when you need it until after you use it.

I don't like paying fees just as much as you don't. In fact, I would be happy to never pay another fee in my life. However, does that mean that I believe Congress should pass national legislation over what a bank can charge for a service it provides? No. If overdraft fees are restricted or capped this lost revenue will be will be subsidized by people who are responsible with their money in the form of other fees.

If I had a dollar for every time I heard someone say, "Where is my bailout" I could have retired 50 times over. The answer to that is, "In your neighbor's pocket." Those bailout funds go towards paying for every person who does not pay their bills. In turn, banks can keep their doors open to you. How does that help you? That allows you to avoid living in a place where you need to buy everything with cash that you keep under your matress (including houses, cars, etc). That allows you to collect interest on your money (when the government actually raises interest rates). That allows you to not bury money in your backyard to keep from worrying about robbers. In other words, you can continue to live a civilized life. There is your bailout. Don't like it, thank your neighbor and give 'em a kick in the shin for me.

National Media Still Full of Hot Air

Investigative journalism is a profession long dead in America. Once the cornerstone of all news outlets, it is now something reserved for British periodicals and newspapers with deteriorating circulation. Why has investigative journalism died? The plain and simple truth is that real journalism requires three things that mainstream America does not want:



1) It requires time to fully understand the story (i.e. does not fit into a convenient sound byte)
2) It typically involves some level of higher reasoning on the part of the reader
3) It is educational vs. sensational

This last point is certainly the most salient one. The proof of this came last week when the national media was mobilized to report on a boy from Colorado who was allegedly stuck in a home-made balloon and lifted thousands of feet in the air. After the balloon crashed and the wreckage was searched, the was boy found over 50 miles away in an attic. Ever since, media outlets have flooded the airwaves with slanderous stories about the family who tricked us all into believing that their baby was huffing atmosphere.

This story clearly demonstrates how journalism is indeed dead. First, the story obviously does not fit any of the three journalistic conditions listed above, and hence automatically qualifies for today's news. Second, instead of recanting the story on the basis of being farcical the media chose to provide additional coverage to the story. Third, why is the media still talking about this when the whole thing is a monumental waste of time? Why? Because the media does not want to look foolish for spending a ton of money tracking an empty tin foil balloon during prime time.

What I am really curious to know is whether this story would have been weeded out prior to national coverage had a real journalist worked the story? I don't know about you, but before I retrain my national satellite grid on a helium-filled flying piece of Reynold's Wrap, I actually would want to think about the feasibility of the story first. If investigative journalism was practiced in this case, here are some things that would have come to light within the first five minutes:

1) There was no gondola/basket on the balloon, so how could the boy be inside?
2) The balloon was sealed (presumably to keep the helium inside), so how could the boy be inside?
3) If the balloon was sealed and the boy was inside, the boy would be dead since the balloon was filled with helium
4) The balloon was too small to provide enough lift. The balloon would have had to be over 900 cubic feet in size (a 12 foot diameter sphere) to be able to lift the weight of an average 6 year old boy (about 56 pounds) --- This was actually a simple calculation based on very publicly available information on the properties of helium
5) The balloon was paper thin and if a boy was trapped inside we all would have been able to see him moving around - do you see him moving here...click here?
6) The kid's parents are clearly crazy and thus are not a highly credible news source

These six things came to my mind almost instantly, so why were these questions not asked? If they were asked, why did this story make headlines? What disappoints me most is that the media is missing the real story here. The real story is that the news has become a virtual extension of the reality TV culture that has taken hold of America. Media outlets could have used this event as a platform to reform their fact checking, lead verifying, and question asking standards. They could have changed the way things were done. Instead, they simply reworked the same old repugnant story from a different angle and put a new stamp on it.

What is inevitable is that as people begin to more clearly see the link between news and entertainment, the more of these stories we can expect. This should be the real takeaway. Instead, the news is choosing to sensationalize the already sensational. We will have weeks worth of morning talk shows, legal experts, court proceedings, child services visits, etc. We will get to know this family inside and out. We will be given every little piece of familial information that can possibly be found. Meanwhile there will be a person hundreds of miles away trying to figure out what he can do to shift the spotlight on himself. News today does not happen, it is made. As a result, there is no need for investigative questions. There is no need for research. There is no need for rational thought. In the end we will be left with a future of nothing but empty headlines and no sight of real journalism.

Going, Going, Rogue

Going Rogue. The title of Sarah Palin’s new book conjures up images of an individual that has thrown off the shackles of an ungrateful institution, and against all odds has taken the dark and dangerous path into the shadows towards an unknown destination. There is a real strength and beauty to the title, and then you see the picture on the cover and the whole thing dissolves into something incredibly painful and mind-numbing......reality.

There are three things that really stagger me about a book that could just as easily be named The Chronicles of an Inept Alaskan Governor and Socially Divisive Conservative Beauty Queen. In actuality, there are more than three things that bother me, but in the essence of time we will stick to the truncated list of concerns.

First and foremost, how does this book wind up on the New York Times Best Seller list? Not only does it top the list, but it tops the list before it is even in stores. What am I missing? What could possibly be the allure of this book? Is there some incredibly interesting back-story to the Presidential campaign that was not covered in sickening detail during the 14-months of non-stop political coverage during election season? Are we going to be told about the thousands of hours that were spent by Palin’s staff trying to cover up for her lack of social, geographical, economic, and political knowledge? Could there possibly be a 250-page account of how she is so roguish (and mavericky) that she is neither ultra conservative nor Republican, but still somehow manages to pull the conservative Republican party line at all times? Of course, this all begs the question: How can one be a rogue when someone else dictates your agenda? Something tells me that the liberal media will be blamed for that.

The liberal media can also be blamed (according to Palin) for another thing: her departure from office. Now that is truly rogue behavior. This is the second thing that gets to me. Why am I supporting a person who doesn’t support her voting base? Is the media giving you a hard time? No problem. Take your office and use it against the very people who you want to hurt most….Alaskans. Nothing shows more true grit than leaving your constituency in the lurch, your state finances in shambles, and your local government in a power vacuum. Rogues don’t play by the rules. Rogues don’t do interviews. Rogues don’t put up with media BS. Rogues face their problems head on; they quit. The only thing more roguish is to quit, then write a book about it.

Being rogue is hard work. No one likes a maverick, especially that liberal media. However, the liberal media label is a little confusing. Palin cited the media and its intrusion into her personal life as one of the primary reasons for her leaving office. Forget for a moment that she was in public office, or that there is no doubt that she will run for another public office. What I could never figure out is why she was surprised that she received so much media attention. She was the one who brought the media into her home to show the country how American she and Todd were. She was the one who literally paraded her pregnant daughter around the Republican National Convention to make a political statement on family values. She was the one who wanted the world to know about her kids’ hockey practices, learning disabilities, wardrobes, travel plans, etc. Is there any surprise that the media gave her what she wanted? Now, just to keep from stoking the fire too much, she publishes a book further intruding on her own privacy. Damn that media.

The point that this article is trying to make is that this book is as much of a political stunt as anything Sarah Palin has done in the past. The bottom line is that she is using this book, and all the media attention that goes with it, as a platform to run for an office that she is unqualified to hold. You can make all the arguments you want about other politicians who hold offices with equally little experience (political or otherwise). Those people are just as bad. Sarah Palin is good at one thing, and that is making people believe that she is some independent force in the political universe, unencumbered by the political morass that is Washington. Nothing could be further from the truth. She is a creation of the GOP and will always function in line with its goals. Therefore, the title of her book is oddly fitting. A rogue is not just a person who acts outside of the normal standard. A rogue also is typically defined as an unprincipled, deceitful, and unreliable person. Great, just what American politics needs.

Terrorists Go Into Hiding....Under New Noun

The world can breathe a sigh of relief. Terrorists have infiltrated a new proper noun, Freedom Fighter. Two of the worlds forerunners of human rights Hugo Chavez and Moammar Gadhafi have redefined terrorism so that the world is now a safer place. Last week the two leaders came together to issue a statement that Venezuela and Libya, "reject intentions to link the legitimate struggle of the people for liberty and self-determination" with terrorism, but also adds that they "reiterate the importance of countering terrorism in all its forms." Under the new terrorism guidelines people will no longer be considered terrorists as long as they kill innocent bystanders under the veil of religious freedom or political insurrection.

This is especially good news for the former Libyan leader. Luckily for Gadhafi his 40 years as a terrorist and state sponsor of terrorism are now considered past the statute of limitations under the new definition. The timing of the announcement has been questioned by some internal factions as incredibly self-serving, but most of the protestors were liquidated well before the new mandate was put in place.

Hugo Chavez knows first hand how to define legitimate struggles for liberty and self-determination. When asked how to make the distinction between terrorism and the pursuit of freedom Chavez smiled and reponded, "That is easy." When probed a little further he elaborated by saying, "It is easy in the sense that I make the rules." That is in fact true in Venezuela where Chavez used money he siphoned off from expropriated Western companies, the national treasury, and oil contracts with Russia to buy votes within Venezuela for the purpose of passing an amendment to the Venezuelan constitution to remain in power forever while simultaneously killing, exiling, or imprisoning all of his political opponents. When questioned as to whether he was one of the world's biggest hyppocrites Chavez laughed and said, "Under me Venezuela is free, and anyone who does not agree with that is obviously a terrorist."

Gadhafi echoed those sentiments days later in a dynomite factory outside of Tripoli. "I for one am simply trying to rid the world of people who do not share my beliefs. There is nothing wrong with that. It is the people who want to keep you from blowing up buildings and civilians that are the real terrorists. Who are they to prevent anyone from pursuing their goals? What happened to freedom?"

Some people do not share Mr. Gadhafi's unique perspective. In a recent BBC poll, 99.9% of responders, excluding residents of Libya and Venezuela, agreed that nothing Mr. Chavez or Mr. Gadhafi says carries any credibility. The remaining .1% abstained. Only time will tell how terrorism will react to its new name. At least for now, according to two ruthless world leaders, the world is a safer place.

Not So Well Endowed

Read this article, then read below:

Reuters: 9/10/09

In case you did not read the article that I just told you to read, here is a summary:

"Harvard and Yale, America's two richest universities, said on Thursday their endowments lost roughly 30 percent of their value last year, showing how severely the financial crisis battered even the world's best managers."

Does anything seem wrong with this statement? Let me assist. There is no way an endowment fund should lose 30% of its portfolio in any given year. Let me say this again, an endowment fund (think similar thoughts for pension funds, retirement funds, college trusts, or any other fiduciary account) should never lose 30% in any given year. If this does happen, the people managing the fund should be fired and they should be investigated for dereliction of fiduciary duties. What is a fiduciary relationship? According to the legal definition, a fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on ithe fiduciary to exercise his discretion or expertise in acting for the client. In this case the university, and ultimately the students, are the clients. Why should this matter? Because what I am indirectly saying is that they are gambling your money. Sound familiar?

Not convinced that they were gambling college funds?

"In recent years Harvard and Yale invested heavily in hedge funds, private equity funds and timber, relying on these alternative asset classes to add billions to their endowments."

or

"Additionally, Harvard is reducing its exposure to real assets, such as real estate, timber and commodities, and is investing its future commitments in private equity funds and other investment funds. Harvard will also have a bigger cash buffer, keeping roughly 2 percent of the portfolio, instead of having it fully invested."

Think about the fact that none of the endowment fund was being held in cash or ultra short-term securities. Also, consider the sheer size of the investments held in private equities, real estate, and other illiquid assets. These kinds of investments can not be bought and sold on short notice, nor is there a daily market price. Essentially what those "smart people" at Harvard and Yale were doing were acting like they were Wall St. investment bankers rather than professionals hired to safeguard university assets. There is no other way to put it; they were in breach of their fiduciary responsibilities. That is criminal, literally.

What is most disturbing about reading an article like this is that the article is completely missing the point. In fact, the article actually gives some support to the fund managers' behavior by citing how the funds' performance have historically been above market average. These funds should never have above market average returns since that implies that they are riskier than the markets themselves. These funds should be boring in their approach to investments and should focus on preservation of principal.

The role of journalism is to ask why things are the way they are and not to roll over and say, "Those smart guys lost money, so I don't feel so bad about losing mine." Does anyone perhaps think that we as a country should start actually taking a step back from our most basic assumptions and think, "Wait a second, are these people really that smart after all?" Probably, the more pertinent question is how do my incentives align with the incentives of the people managing my money? This is especially relevant here, since in reality these people were criminally negligent, but were rewarded for taking huge risks. The scary thing is that the same can be said about virtually every pension fund in America, government or otherwise.

The bottom line is that the only thing that should be shocking about this article is that nothing is being done to prevent this exact behavior in the future. When this does happen again, please just read this article again.

Texas' Least Favorite Class: Social Studies

Last week most Texas schools decided that they would not allow President Obama's speech to be aired in their schools. Why not? The most predominant answer out of Texas: I don't want my child brainwashed by a Socialist. Of course, there were other excuses. Personally, my favorite was, "I don't want my child wasting class time." Now we all know that the first day of school is a universal waste of time, but a valid point could have been made if these same parents didn't elect to keep their children at home in order to evade the President's speech.

In my opinion this is a new low point in our society, and especially for Texas. Forget that the President of the United States is the President of the United States for a minute. Politics is clouding the bigger issue here. Instead, consider the fact that the lesson being taught here is: If you do not agree with someone's opinion, don't listen to anything that they have to say.

So, let me address the main Texan argument (since I listened to what they said).............Socialism. Of course, we all know that Socialism is the root of all evil and as un-American as South America, or is it? I hate lowering myself to defining things as a way to make an argument, but here it goes.

Socialism: a system or condition of society in which the means of production are owned and controlled by the state.

In other words, the state (i.e. the government) controls the entire show from A to Z. We all know that there is a backlash right now against a national healthcare system. Why? Because allegedly that would be a socialist idea. This is not exactly true since what is being proposed would neither eliminate private health care companies, nor would it centralize medicine in the US. If people think a national healthcare option is a socialist idea, why then is there a national requirement that part of every paycheck in America goes towards Medicare and Medicaid? How has this flown under the radar? These programs already exist, and certainly are closer to the definition of socialism.

Other government programs could also be compared to the definition of socialism. Social security is an obvious one. After all, the program has "social" in the name. Here are some others:

Oil Subsidies
Energy Pricing Controls
Farm Subsidies
INS / Border Patrol
Military
Public Schools

Since this whole article started with schools in mind, let's come full circle on this whole socialism thing. Do any of us remember the crown jewel of domestic programs by our former Texan Republican President? No Child Left Behind. Under this program public schools have their federal funding cut if they fail to meet state mandated standards. Just to review our handy definition of socialism:

A system or condition of society (No Child Left Behind) in which the means of production (federal funding) are owned and controlled by the state (state test standards).

This program is socialist in concept at its very core. Therefore, if it was logical to keep your child home from school in order to avoid the President's socialist brainwashing speech, why would you ever send them back to socialist boot camp for the next 12 years? I guess we can all look forward to a generation of non-socialist dropouts. What a relief! Take that France. What are you looking at Canada? Any questions Britain?

I think it would be naive of me to think that I will be spared from more inaccurate and inflammatory rhetoric in the coming weeks and months. What I do sincerely hope is that people will take the fingers out of their ears and listen. If they don't you can count on a new national program: All People Left Behind.