Rate Watch #773 The Fed Chairman's Press Conference

April 29, 2011
by Dick Lepre
[email protected]
www.loanmine.com

Analysis

I want to start with a personal note. This is something which comes from so long ago that it feels like a previous incarnation. This weekend I will be inducted into the Las Vegas Rock & Roll Hall of Fame for my promotion of concerts there in in 1969. See this article and this from the Las Vegas Rock Reunion web site.

This week's GDP data for 1stQ2011 was dismal. Obfuscating the fact that the economy sucks serves no purpose. The economy is not crashing but merely stagnating. We are now faced with the difficult tasks of addressing 1) the cyclic deficit 2) the structural deficits created by Social Security, Medicare and Medicaid and 3) the ugly combination of lower GDP growth and increased inflation. The most recent time we saw the economy this ill was in the mid-1970's - early 1980's. At that time we did not have the massive structural deficits from entitlements. If politicians do not work to solve the problem with entitlements than little else matters. Politicians appear to me to have staked out positions geared to the 2012 elections rather than the economic interests on the nation. Simpson-Bowles should be the politically neutral starting point.

Part of the problem is that monetary policy is so expansionary that it is inflationary. Commodities are priced in US $. Increased monetary supply weakens the dollar and drives commodity prices higher. If folks spend more on food and gasoline there is less discretionary spending.

More than half of 1stQ GDP growth was from inventory buildup which, with consumer spending not keeping pace may well fall back.

The fact is that this GDP report indicates that average GDP growth for the past 5 quarters was 2.57%. That is not a sign of recovery. Consumer Spending was up nominally but BLS reported that CPI-U was +2.7% so real (inflation adjusted) spending was down. If this is correct than the recovery is but a mirage.

An analysis of the GDP report and how it relates to his data is available from Rick Davis of Consumer Metrics Institute on this page. Read the commentary which starts with "April 28, 2011 - The BEA's Advance Estimate of First Quarter 2011 GDP." I also want to credit Rick for constructing the table below.

GDP Components Table

	Total GDP		C		I		G		(X-M)
Annualized Current $ (trillions)	$15.0		$10.7		$1.9		$3.0		$-0.6
% of GDP	100.0%		71.2%		12.4%		20.2%		-3.8%
Contribution to GDP Growth %	1.75%		1.91%		1.01%		-1.09%		-0.08%

That Press Conference

The fact that the Fed Chairman decided to face the press indicates to me that 1) he feels that there is significant fear, uncertainty and doubt among investors and wished to to try to alleviate that and 2) he felt that with other heavies in the Fed who have views differing from his regularly giving speeches, it may be a good time to give an official perspective.

I did not like Bernanke's explanation that commodity prices are not affected by the monetary policies of the Fed. Commodities are prices in dollars. More money supply drives the dollar value lower and consequently drives commodity prices higher. None of the reporters beat that point home.

He clearly indicated that QEII would end as planned and gave no indications that there would be further quantitative easing but clearly said that it was the Fed's intent to reinvest maturing MBS and Treasury debt in its portfolio rather than let money supply decrease. In that sense he gave no timeline or solution regarding the fact that the Fed must, at an appropriate time, draw down money supply.

Bernanke also lowered expectation for GDP growth. He lowered the forecast for 2011 GDP growth to 3.1% to 3.3% from 3.4% to 3.9%. He also indicated that unemployment would be higher than the desired 5.5-5.9% at least through the end of 2013.

One of the big downers with GDP remains the housing market. With Housing Starts depressed, unemployment remains high and GDP growth remains stunted.

He indicated that we need a long-term and real solution to the fiscal situation and made it clear that the recent spending cuts were inadequate. This is where Bernanke had to contain himself. He may have been thinking "How the bleep do to expect to solve our ills with monetary policy when we are running $1.5 trillion deficits?"

Is monetary policy perfect? Of course not. As long as we are on a discretionary monetary policy rather than one linked to a gold standard of the possession of foreign currencies that discretion will make it easier for the Fed to correct mistakes but also to cause them.

The hope is that not increasing money supply will keep inflation in check.

History may decide that selling QEII based on concern that the alternative was deflation was a serious mistake.

Is There Hope?

I do not believe that the present situation is hopeless. There is so much money in excess banking reserves that we need only the confidence of consumers, bankers and business to get GDP pumping again. We need to turn those reserves into transactions which pump GDP. Those in D.C. should recognize that all they must do is get serious about the structural deficits.

---

Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
NMLS Individual ID 302379
California Department of Real Estate - real estate broker license #01201643
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax

 

Rate Watch #772 Basel Accords. Time to Dump Them?

Rate Watch #772 Basel Accords. Time to Dump Them?

April 22, 2011
by Dick Lepre
[email protected]
www.loanmine.com

Analysis

There is much talk regarding higher commodity prices. Commodities are more expensive because they are priced in dollars and the dollar keeps weakening. In fact, the increase in equity prices may be regarded as a change in the exchange rate between the Apple, the Intel and the Google v. the dollar. The dollar is weakening because the Fed has been increasing monetary base per QE II. As Milton Friedman said, "Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output." Yesterday the Department of Justice decided to investigate why gasoline prices are so high. I trust that they told Bernanke to not leave town.

The Fed's standard answer is that core inflation is what is important not overall. Agricultural prices go up and down because of weather caused supply abatements followed by bumper crops. Oil prices go up because of the enormous political uncertainty and insecurity in a part of the world which produces oil. The present situation is different. It is the Fed's increase in monetary base which is causing the dollar to lose value and commodities to become more expensive. The notion that we need to fear deflation was lame when it was first made as an excuse for QEII and it remains lame.

If the Fed were a regular old bank (which it is not) it would be leveraged 51-1. Its assets are $2.67 trillion and its capital is $52.58 billion. The concern is that interest rates are going to rise just as the Fed trims monetary base to restrain inflation. The Fed reduces monetary base by selling Treasuries and it may well be selling them at a loss. Cognizant of this, the Fed changed its own accounting rules back in January making any losses a liability to Treasury rather than a decrease in capital. If that happens and the Fed is disguising losses the Fed will have less support from Congress as Congress has another one of those "You did what?" hearings.

 

Basel and Regulations

As a consequence of the mortgage mess/great recession we had Dodd-Frank which has created a great deal of additional banking regulation. I have no idea what the long-term consequences of these regulations will be on banking, the mortgage business and the economy. Regulations are made by people who usually do not have enough awareness of the consequences.

On an international scale we have the Basel accords which regulate international banking. The Basel accords are essentially an international standard for any bank which wants to do business outside the borders of its native country. They appear to be a system for making sure that everyone is playing by the same rules regarding, for example, how assets are risk-weighted. Before Basel each nation had its own definition of how to calculate bank capital and what constituted adequate capitalization. There is a Basel I, a Basel II and a soon to be in effect Basel III. In the rest of this piece I am referring to Basel II when I say "Basel.". My criticism of Basel II also pertains to Basel III. The entity which manages the Basel accords is called the Bank for International Settlements more commonly known as BIS.

Basel II requires all well-capitalized banks which operate internationally to hold capital greater than of equal to 8% of their risk weighted assets. Different assets classes have different risk weights: commercial loans are 100% risk, whole mortgages are 50% risk, GSE mortgage backed securities are 20% risk and government debt is zero risk.

The country which was most affected by the original Basel accords was Japan. Japan was having a real estate bubble just before Basel took effect. The real estate bubble in Japan was much better disguised that it was here. Japanese banks simply made new loans to replace non-performing loans disguising the size of the non-performing portfolio. The fact that the Basel accords kicked in when they did may be part of what Japan has has a stagnant economy for 20 years.

The issue really is this: are we better off with one set of banking regulations for all countries or would economies be better off if each nation decides its own standard for risk weighting of asset classes and capital requirements.

Basel has some standards which make little sense to me. Commercial loans are, per Basel, 100% risk. I see a couple of things with that. Not all commercial loans have the same real risk. Worse yet, if Basel makes no distinction between risk for good or bad commercial loans then a bank might choose to lend money to a company with worse credit because it would get a higher interest. Also having commercial loans at 100% risk is a possible way to create an extended recession if banks stop lending money to businesses.

To me, the problem with Basel is that it is static. It does not recognize that mortgage debt is riskier when there is a real estate bubble. It does not allow a change in risk weight for commercial lending when that lending might be expansionary and per se risk abating. Worse yet, Basel was partially responsible for the mortgage mess because it incorrectly assumed that MBS were less risky than whole mortgages. Banks sold whole loans which they had made according to their own standards because Basel allowed them to hold MBS with 60% less capital. In effect, Basel more than doubled their losses because it did not allow that those MBS were crap. Banks were making PLMBS (Private Label Mortgage Backed Securities) and selling them to FNMA because FNMA could not generate as many bad loans as HUD demanded. Basel made the enormously incorrect assumption that the risk of MBS was static. Instead of mitigating risk, Basel encouraged it.

What happened with the mortgage mess was that despite the good intentions of Basel and the good intentions of HUD no one saw the possibility that the result of their well-intended regulation not only failed to prevent a problem but actually helped cause it.

The notion that mortgage securitization minimizes risk makes perfect sense from a theoretical point of view. The failure was that Basel made no accommodation for the disasters created by government mandated downgrading of the quality of GSE debt or Wall Street and the debt rating firms downgrading the quality other MBS. Basel makes the incorrect assumptions that risk is static. It is not. Basel is, in a sense, a set of regulations for regulators and it failed to recognize that regulators can be just as wrong as bankers. Both bankers and regulators made cognitive errors. The story being constantly told is that the mortgage mess was due entirely to greedy bankers. While some bank losses were greed induced most of them were due to ignorance rather than greed. Some bank losses resulted from cognitive errors made as banks and regulators made incorrect assumptions about MBS. Failure to realize that the problem is not just greedy bankers or dishonest loan agents minimizes the complexity of the problem. It is imperative that if we want to prevent another such mess we understand what happened.

Basel now has an additional incorrect assumption. Basel treats sovereign debt as zero risk. That may have been plausible before the Eurozone debt crisis. With Greece, Portugal, Italy and Spain all having debt issues requiring intervention, the zero risk rate assigned to sovereign debt per Basel is absurd. It sways banks to lend money to badly governed nations instead of lending it to companies and individuals who could use those loans to create economic activity. The fact that S&P could have questions the rating of U.S. Treasury debt this week shows just how bad the overall sovereign debt situation is. It is, to me, indefensible at present to suggest that all sovereign debt has no risk. Nations are rather dissimilar. Greece (the first to fall) is a nation with a history of political corruption.

In summary, Basel is built on a set of incorrect assumptions and we may be better off if we scrap the accords and have each nation let its central bank, the banks themselves and the legislated regulators work out what they believe is best for their nation. A competitive set of risks and rewards may be a lot better than the "one size fits none" mandate which result from Basel.

 

---

 

Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
NMLS Individual ID 302379
California Department of Real Estate - real estate broker license #01201643
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax

 

Rate Watch #771 Simpson-Bowles

April 15, 2011
by Dick Lepre
[email protected]
www.loanmine.com

Analysis

Economic fundamentals give little indication about where the economy is going. For me, the underlying fact is that inept fiscal policy is the most serious risk to the economy. In brief, who cares if QEII is zero or $600 billion if the deficit in 2.5 times that size? The President addressed fiscal policy earlier this week. To the extent that the discussion is framed more as a political left-right thing that a real discussion the probability is that the problem will not be addressed and disaster will ensue in about 2 years. If those in Congress are more interested in getting reelected and fighting about power than they are interested in fiscal sustainability then disaster is going to ensue.

Fortunately, a comprehensive plan is out there despite the best efforts of politicians to ignore it. The real problem is the same as it has long been: a real solution to out fiscal problems exists but is incompatible with reelection. If you want a solution to the fiscal crisis then you should regard Simpson-Bowles as the starting point. If you really, really enjoy inane partisan bickering than feel free to support either Obama or Ryan.

Simpson-Bowles

It took four months but the President has finally, albeit in a seriously limited manner, gotten behind part on the Simpson-Bowles deficit reduction plan. Obama's version missed many of the important points of Simpson-Bowles. The core of Simpson-Bowles is to drastically reduce deductions and lower tax rates. Obama missed the part about lower tax rates. That is understandable from a political point of view but not an economic one. Obama missed the crux of Simpson-Bowles on Medicare and did not even dwell on Social Security. By failing to present anything of substance the President leaves Simpson-Bowles as the standard.

Simpson-Bowles should be the starting point for achieving fiscal sustainability. It addressed all federal spending including Medicare, Medicaid and Social Security as well as the items which are responsible for the cyclical deficits.

The political courage to back Simpson-Bowles is simply lacking because Simpson-Bowles is not a plan for getting reelected but merely for saving the country from fiscal doom.

The Simpson-Bowles plan has six components:

Discretionary Spending Cuts
Tax Reform
Health Policies
Other Mandatory Policies
Social Security
Process Reform

The following is a synopsis of each component.

Discretionary Spending Cuts

Cap discretionary spending through 2020. Hold spending in 2012 equal to or lower than spending in 2011, and return spending to pre-crisis 2008 levels in real terms in 2013. Limit future spending growth to half the projected inflation rate through 2020. The details are on page 22 of the report. The report is not vague but describes, in detail, the mechanisms for achieving this cap in discretionary spending. If you are interested please read the details. These are too extensive to deal with here.

Tax Reform

This is where Simpson-Bowles points out that the class-warfare discussion about tax rates misses the point that the issue is not tax rates but the tax code itself or, in plainer English, deductions.

I will repeat here the language from Simpson-Bowles describing this: "America’s tax code is broken and must be reformed. In the quarter century since the last comprehensive tax reform, Washington has riddled the system with countless tax expenditures, which are simply spending by another name. These tax earmarks – amounting to $1.1 trillion a year of spending in the tax code – not only increase the deficit, but cause tax rates to be too high. Instead of promoting economic growth and competitiveness, our current code drives up health care costs and provides special treatment to special interests. The code presents individuals and businesses with perverse economic incentives instead of a level playing field."

Simpson-Bowles makes the semantic point that the IRS tax code is a spending plan as it provides tax deductions which are, in effect, givebacks of money which would be receipts to Treasury absent all the tax breaks.

The following table is a description of the tax reform part of Simpson-Bowles.

 

	Current Law	Proposal
Tax rates for Individuals	six brackets: 10%,15%,25%, 28%,33%,35%.	Three brackets: 12%,22%,28%
Alternative Minimum Tax	Scheduled to hit middle-income individuals but “patched” annually	Permanently repealed
PEP and Pease (see note)	Repealed for 2010, resumes in 2011	Permanently repealed
EITC and Child Tax Credit	Partially refundable child tax credit of $1000 per child. Refundable EITC of between $457 and $5,666	Maintain current law or an equivalent alternative
Standard Deduction and Exemptions	Standard deduction of $5,700 ($11,400 for couple) for non-itemizers; personal and dependent exemptions of $3,650	Itemized deductions eliminated, so all individuals take standard deductions
Capital Gains and Dividends	In 2010, top rate of 15% for capital gains and dividends. In 2011, top rate of 20% for capital gains, and dividends taxed as ordinary income	All capital gains and dividends taxed at ordinary income rates
Mortgage Interest	Deductible for itemizers; Mortgage capped at $1 million for principal and second residences, plus an additional $100,000 for home equity	12% non-refundable tax credit available to all taxpayers; Mortgage capped at $500,000; No credit for interest from second residence and equity
Employer Provided Health Care Insurance	Excluded from income. 40% excise tax on high cost plans (generally $27,500 for families) begins in 2018; threshold indexed to inflation	Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax reduced to 12%
Charitable Giving	Deductible for itemizers	12% nonrefundable tax credit available to all taxpayers; available above 2% of Adjusted Gross Income (AGI) floor
State and Municipal Bonds	Interest exempt from income	Interest taxable as income for newly-issued bonds
Retirement	Multiple retirement account options with different contribution limits; saver’s credit of up to $1,000	Consolidate retirement accounts; cap tax-preferred contributions to lower of $20,000 or 20% of income, expand saver’s credit
Other Tax Expenses	Over 150 additional tax expenditures	Nearly all other income tax expenditures are eliminated

PEP is an acronym for "personal exemption phase-out", which rescinds the benefit of the personal exemption from taxpayers who earn over a certain amount. Pease is the phase out of almost all deductions. "Pease" was the last name of the Congressman who suggested this in 1990.

Simpson-Bowles states that corporate tax rate are too high (they are in fact much higher than almost all other developed nations.) High corporate tax rate create a competitive disadvantage for U.S. corporations consequently lowering tax receipts and discouraging domestic jobs.

Health Policies

I find it impossible to reduce what Simpson-Bowles says about health care reform to a few simple paragraphs. The report states "Federal health care spending represents our single largest fiscal challenge over the long-run." If you want the details please read the report. It is also important to understand that the CBO's analysis of "Obamacare" is based on a scheduled 23% cut in Medicare physician payments that Simpson-Bowles believes will never occur. The "official" words from CBO and the trustees of the Medicare Fund are, according to the Simpson-Bowles document, bogus.

Other Mandatory Policies

Slightly less than one-fifth of the federal budget is dedicated to other mandatory programs. These include civilian and military retirement, income support programs, veterans’ benefits, agricultural subsidies, student loans, and others. Some points here are: privatization of some present public sector jobs, bringing military and civilian pensions in line with private sector pensions, reducing agricultural subsidies, and giving the USPS the power to make the changes necessary to survive (this is largely about closing post offices.)

Social Security

To save Social Security for the long haul, all of us must do our part. The most fortunate will have to contribute the most, by taking lower benefits than scheduled and paying more in payroll taxes. Middle-income earners who are able to work will need to do so a little longer. At the same time, Social Security must do more to reduce poverty among the very poor and very old who need help the most. The problem with Social Security are partly demographic. When SS started average life expectancy was 64 and the earliest retirement age was 65. Presently, average life expectancy is 14 years greater. In 1950 there were 15 workers per beneficiary. In 1960 there were 5 workers per beneficiary. At present there are 3 workers per beneficiary. To paraphrase Shakespeare "The fault, dear Brutus, in not in our hearts but in the math."

Process Reform

This part is an attempt to keep the budget balanced in the event that it ever actually gets balanced.

The Commission recommends adopting the “chain-weighted” Consumer Price Index for Urban Consumers (C-CPI-U) for all federal programs and tax provisions that currently rely on the CPI-U and CPI-W.

The Commission recommends an enforcement mechanism to ensure the budget achieves primary balance by 2015 and the debt is stabilized thereafter. The Commission’s proposal would require action by the President and Congress on budget stabilization legislation if the budget (excluding interest costs) is projected to have a deficit in 2015, or if the debt held by the public has not stabilized thereafter. The debt stabilization process would include fast-track procedures to facilitate changes in law necessary to protect the fiscal health of the federal budget.

I am not making the case that Simpson-Bowles is perfect. I am certain that it is many times better than the plans suggested by politicians and their media lackeys.

 

 

---

 

Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
NMLS Individual ID 302379
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax

California Department of Real Estate - real estate broker license #01201643

Rate Watch #770 At Least They Are Talking About It

April 8, 2011
by Dick Lepre
[email protected]
www.loanmine.com

Analysis

A federal government shutdown! Why didn't someone think of this sooner? Can we keep it shutdown until the end of the year? I think that we can get enough high school students to do this (run the government) for free as volunteers. They will be out of school in less than 2 months so the timing is right. Then all the statements about acting like 9th graders will have more meaning.

To be a bit more serious, what is absurd is 1) the small difference between the cuts each party wants and 2) the fact that the numbers they are talking about are completely and utterly insignificant compared to the size of the deficit.

If there is a shutdown will it affect the mortgage business? It would appear that the "monkey wrench" is the processing of IRS form 4606-T which is used to verify your income. Without that, loans might not fund. Stay tuned.

Talking About It

As those of you who have been reading these newsletter for years already know, I have been campaigning for over five years for fiscal sustainability. My "agenda" is neither left nor right. I am not going to tell anyone what tax rates should be. I am not going to tell anyone which government programs should be cut. I simply believe that the attitude of those is D.C. (and I by no means those currently there but everyone in power for decades) has never taken a serious look at fiscal sustainability. We cannot continue to spend $1.5 trillion more than we are taking in. In the past we have had prolonged periods of recession and deficits. The difference now is that entitlement spending (social security, Medicare, Medicaid) is much lager relative to the tax basis. This is a consequence of 1) demographics and 2) years of avoiding the problem.

The best starting point should be Simpson-Bowles. What Congressman Ryan suggested this week also gets the discussion moving. We must not address only items in the budget but also social security and Medicare. Social Security is a relatively easy fix. Medicare is not an easy fix and the failure of last year's Obamacare was that it did not address the core issue which is reducing the cost of medical care.

My belief, roughly, is that Federal spending needs to be decreased and tax revenue need to be increased. Almost nothing should be spared. There are entire departments which should vanish and the military budget should be cut. Again, Simpson-Bowles should be the starting point both regarding spending and taxes.

The government must start to admit that the social security and Medicare Trust Funds have been spent and that without substantial changes the future obligations of these two (Medicare especially) dwarf everything else.

Higher taxes and lower spending will take bites out of GDP but if we do not do both of these we are fiscally domed.

Surveys show, more or less, that most people want this but they they also want nothing that they like to get cut. That is not going to work. Someone needs to tell all of the citizens and other residents of the U.S. that government spending must be cut and taxes must be increased and that this is going to hurt and that everyone is going to lose something that they want from the government. Politicians and the media must start letting the public know how serious the fiscal problem is and the the solutions will be painful.

Ryan is correct in stating that the size of the gap is enormous compared to that which was discussed the previous week. If the two parties could not agree about $60 billion in spending cuts it seems unlikely that they can address the real problem which is around 15 times that size.

A comprehensive path toward fiscal sustainability is likely to hurt all of us in the short run. Not doing this ASAP will only make the problem worse. It must be emphasized that the biggest items are Medicare and Social Security. Any "fix" to the budget which does not make SS and Medicare self-sustaining is merely a hallucination.

If we do not address fiscal sustainability in the next 2 years we are likely to see a sharp increase in Treasury yields which will make the future cost of servicing the national debt much higher than present. Both fiscal and monetary policy are serving to erode the value of the U.S. dollar.

We need to decide what we want and we need to pay for it. Running the nation on one massive negative amortization adjustable rate loan is simply not going work.

 

 

---

 

Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
NMLS Individual ID 302379
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax

California Department of Real Estate - real estate broker license #01201643

Rate Watch #769 Baseball

April 1, 2011
by Dick Lepre
[email protected]
www.loanmine.com

Baseball - A Universe Parallel to Life

I am a big baseball fan. I was born in The Bronx and was a kid at a time when the Yankees won 5 World Series in succession. They had excellent teams until I went off to college. (Not that I am suggesting any causal connection.)

When I was a kid, baseball was, essentially, the only sport that folks paid attention to. Baseball now shares a much larger stage with football, basketball, hockey and (despite it being well-disguised here in Northern California) NASCAR.

Why Baseball?

For me, baseball offers one compelling force. More so than any other sport, baseball resembles life.

1) The majority of the time nothing is happening and when things happen they happen too quickly.

2) small changes in what happens result in disproportionately large results in the outcome. A guy drops a routine fly ball and his team is eliminated from the playoffs. An umpire calls a marginal 2-1 pitch a ball and the situation is monumentally different with a 3-1 count than it is with a 2-2 count. In this manner, both baseball and life are unfair.

3) it has developed a "melting pot" aspect. This is a game played by whites, blacks, Latinos and Asians.

4) Basketball players seem to average 6' 9". Football players weigh 280 pounds. Lineman weigh 340 pounds. Baseball players, for the most part, look like human beings. The only football players who look like the rest of us are defensive backs.

5) It mirrors some of the social problems in the rest of life. Drugs for example. Little is said about the following: this past season (2003) saw baseball introduce steroid testing. For the first time since 1993 no player hit 50 home runs. In fact, there were as many 50 home run seasons after the 1994-1995 strike as there were before 1993. The other statement that sounded almost comical came from TV announcers all season long. "Yeah, so-and-so really decided to lose weight in the off-season."

Baseball culture is more affected than other sports by the use of steroids because records are so much a part of baseball. It is impractical to divide records into "on steroids" and "not on steroids."

6) Baseball has its winners. The fact that the Yankees win so often may be distressing to the a fan of other teams but it makes the game much more interesting. In football there are no teams like the Yankees.

Every time that I go to an A's game when they play the Yankees or the Red Sox there are a large, vocal number of fans there rooting for the visitors and it makes the game a heck of a lot more fun. In fact the Oakland Coliseum hosts the A's for baseball and the Raiders for football. The attitude which A's fans have related to the fans of the other teams is relatively cordial. The attitude which Raider fans have to those rooting for the opposition is something approaching felonious.

7) Baseball has its lovable losers. With the Red Sox, White Sox and Giants have won the World Series in recent years the Chicago Cubs have the baton. As much as I might intellectually know that there is no such thing as a curse it was hard to watch the 1986 World Series (Mets-Red Sox, Bill Buckner) and not believe that paranormal forces were involved.

8) Size matters. Like much of the rest of life - money talks. The Yankees have a massive cash-flow from media, spend the money wisely and win. Money may be a necessary condition but it is not a sufficient condition.

9) Everybody has an opinion. Baseball is a wonderful sport for after-the-fact second guessing. Why was Pedro Martinez left in to blow game 7 of the LCS. Why was Marino Rivera in the bullpen rather than on the mound in game 4 of the World Series? Why did we invade Iraq?

10) Baseball is for the middle-class. The tickets for other sports are so expensive.

11) Baseball allows for dreaming and hoping. The faces of the fans say it all. Baseball unfolds at a pace to allow for hope, dreams, joy and anguish. Hockey, for example, happens so quickly that if you are at the game, half of the time you can't see who scored.

12) Baseball is about frustration. The best hitters fail 70% of the time. No one is a born baseball player. Basketball, yes. Baseball, no. Ask Michael Jordan. It requires and enormous number of hours of practice to become a professional baseball player. Annoyingly, life is often like that.

13) When baseball moves off the field and into other aspects of life it can still reveal the true nature of human greed and stupidity. On October 7, 2001, right here in San Francisco, Barry Bonds hit a baseball into the stands at Pac Bell Park breaking the single season home run record. The ball hit the mitt of Alex Popov but Patrick Hayashi wound up with it - for the time being. Rather than sell it and split the proceeds they decided to sue each other. It went to trial. The judge ordered the ball sold at auction and the proceeds split 50/50. The ball sold for $450,000. Alex got $225,000. His legal bill was $473,530.32.

That drama could never have transpired over a hockey puck, a basketball or a football.

14) Exogenous forces can greatly affect the outcome. A Chicago Cubs fan reaches for a foul ball coming right at him and becomes responsible for the continuation of the Cubs' history.

"Baseball is a ballet without music. Drama without words. A carnival without Kewpie dolls. Baseball is continuity. Pitch to pitch. Inning to inning. Season to season."
-- Ernie Harwell (Harwell was a longtime play-by-play announcer for the Detroit Tigers who died in 2010.)

 

If you have something to add to this discussion please post a comment on the blog.

 

---

 

Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
NMLS Individual ID 302379
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax

California Department of Real Estate - real estate broker license #01201643