Relevant and even prescient commentary on news, politics and the economy.

The Real State of the Union. Mr. President, I suggest for you: Flowers.

By: Daniel Becker

Well, it’s that time of year again. The State of the Union. And the state of my business. So far, from what I’m reading regarding the expected content of the address by President Obama, I think I’ll just practice my playing as I usually do on Tuesday nights. Really? What’s the use in listening? We have a person  who heads a company that is noted for pushing the off shoring concept of growing America via their prior celeb CEO, Jack Welch as Obama’s pick to head up the committee that is going to figure out how to boost job creation? And we wonder why this country can’t regain the glory days of accomplishment and prosperity. Actually, I don’t wonder. I know.

Though, I see Welch has had a change of heart? At least as it relates what a business should prioritize.

“On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy…your main constituencies are your employees, your customers and your products.”

Oh sure, after he got his.

Let’s get to it.


2010 started off looking hopeful for Fontana’s Flowers. We were up 1.5% for the first quarter, then April came. Off 17% even with Easter. By the end of June we were back up again 1.5%. So, I figured we had at least hit the bottom. WRONG! July came, off 21%. August came, off 20%. Every month since June as been off. It produced the following picture.

I guess we are hitting the bottom finally. It’s only been 5 years.

Now, before I start hearing about how flowers are a luxury, what does it say about a nation’s economy such as ours when a simple luxury that has the power to :

When women were given flowers, they always responded with a ‘real’ duchenne smile, and reported more positive moods three days later.

When men or women were given a flower, they responded with a duchenne smile and engaged in more prosocial activities (compared to control conditions of being given a pen or nothing).

Flowers given to elderly people resulted in more positive mood and improved episodic memory!

The researchers also reported other “unusual emotional displays that they were unprepared to measure,” (4, p122), including:

Hugs and kisses.
Invitations to participants’ homes for refreshments.
‘Thank you’ cards and letters – some with photographic evidence of the continuing beauty of the bouquet.

As they sum up – “In many years of studying emotions, we have never received hugs and kisses, thank you notes or photographs, not even for candy, doghnuts, hats, gift certificates, or direct monetary payment; flowers are different.”

…is not affordable to the masses? It says we are an elitist nation in the ugliest meaning of the word elite. I think considering the nation’s psyche, these pictures sum up the proper scientific based response to such ugliness.

Again, what does it say about our nation’s priorities when the masses can no longer afford such a simple luxury which has so many benefits that frankly, we need to experience desperately.

Back to business. There was a reason in part for our second half results. It was the stimulus programs of “shovel ready” projects. Seems many were not really shovel ready. Instead of having proper engineering and surveying performed, they went for quick and simple. This left me with 3 months of traffic issue powerful enough that even the big box stores were hampered. However, my “small business” is left with the following:

What you are viewing is a new, never existed prior, 6 ft wide concrete side walk that is 2.5” above my pavement and within 9 ft of my foundation. This might not be a problem if it were not for the fact that this new sidewalk leaves my foundation only 1/2” above the side walk. Can you say “gutter”. I am told, and I’ve tried, that I have to live with this. I also have to live with the curbing being 5” high, which means instead of having an easy in/out parking lot that was cut short when they originally widened the road, I have one that acts like a one way street. And, to add insult to injury, they stuck a “Tow Zone, Snow Route” sign exactly right where one backs up as they attempt to leave the left end of the parking lot.

Have I given enough to this “recovery” yet?

Back to the Real state of the Union. Here is the all telling picture.


As you can see, account sales are still trending down. Cash sales are leveling off, but the all telling credit card sales is rising. Are people using plastic as they become more digital with their money handling or are they spending on credit? Is it real money, or are they trying to buy a little happiness today for a headache tomorrow?
Personally, and I’m speaking to you President Obama, I still need customers, with money so that I can partake in your job growing desires. Mr. President, considering all the problems you want to solve, and what the science suggests, I would think you would want my business to have all the customers it could handle. To steal a phrase: A vase of flowers on every table. It speaks prosperity, it speaks peace, it speaks harmony, it speaks re-election. When people are able to buy flowers again, Mr. President, you will know that you and congress have set this nation on a real foundation of life, liberty and the pursuit of happiness. Or, you can talk all flowery about job creation to me while I look at your new head of the “President’s Council on Jobs and Competitiveness” CEO who heads the company that lead outsourcing and the shift from making money via manufacturing to making money from money.

For you President Obama. 


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When You Don’t Spend Any, the Velocity of Money becomes Zero

Edmoney is tracking the allocation and spending of education-related stimulus grants. The map is here. Some states have gotten the funds into circulation better than others. Selected states below (GA was highlighted by them):

  1. California, 78%
  2. New Jersey, 63%
  3. Georgia, 62%
  4. Indiana, 60%
  5. Oklahoma, 50%
  6. Mississippi, 42%
  7. Massachusetts, 41%
  8. Michigan, 41%
  9. Kentucky, 39%
  10. Pennsylvania, 35%
  11. Ohio, 29%
  12. New York, 25% (but NYC 60%)
  13. Texas, 25%

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The Gift that Keeps on Giving

During the discussions about the Fannie Mae project I still regret having turned down, one of the topics was which security would be better for a portfolio (assuming their risk-adjusted prices provided the same value): a four-year-old MBS or a seven-year-old MBS?

I noted that the four-year-old MBS provided more potential upside but came gradually to agree that the seven-year-old security was preferable: an MBS that is that “seasoned” is effectively a generic amortizing bond. There shouldn’t be any surprises—in either direction—so a portfolio manager would prefer it.

As usual, The Old Firm manges to prove that what should be correct for an MBS isn’t necessarily so for a CMBS:

Standard & Poor’s Ratings Services today lowered its ratings on
three classes of commercial mortgage pass-through certificates from Bear
Stearns Commercial Mortgage Securities Trust 2002-TOP6, a U.S. commercial
mortgage-backed securities (CMBS) transaction….

The downgrade of class M to ‘D’ follows a principal loss sustained by the
class, which was detailed in the August 2010 remittance report….

The principal loss and corresponding credit support erosion resulted from the
liquidation of an asset….The Nortel Networks asset is a 281,758-sq.-ft. office
property in Richardson, Texas. The asset had a total exposure of $28.6
million. The asset was transferred to the special servicer in September 2009
and became real estate owned (REO) in March 2010. The trust incurred a $12.0
million realized loss when the asset was liquidated during the August
reporting period…[T]he loss severity for this asset was 44.2%

As corporations are increasingly using “jingle mail,” the prospect for the future of CMBSes—even those that went through several good years. Or for the concept of an “ongoing concern,” or a strong recovery. (That latter concept seems to fade with each passing day.)

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