It Be True

Brilliant video from the Black Eyed Peas’ front-man will.i.am, who did the brilliant Yes We Can video, one of the most effective bits of web campaigning I’ve ever seen.

It\’s A New Day

OUR connected world means more than wearing fashions knocked off from Italians, manufactured in China and sold to Australians in English chain stores.

It means ties so close we have to accept that a US shopper flapping shut their wallet can send ripples over the ocean that turn into waves on our shores.

The International Monetary Fund and now the Organisation for Economic Cooperation and Development (OECD) have predicted that the financial crisis has probably tipped the world’s developed countries beyond the point of denial. They are in recession and are likely to remain so through the first half of next year.

The think-tank forecasts that economic output would shrink 1.4% in this quarter and 0.3% in all of 2009. Australia is one of 30 democratic market economies they included in their calculations and part of what they call an “aggregate shrinkage” in their members, for the first time since oil shocks rocked the world in the 1970s.

Predictions are just that, imperfect. In June the Organisation forecast growth of 1.7 percent in 2009 because they believed the worst of the financial crisis might have passed. But the sprawling casualties of the credit crunch mean their new guesstimate is probably closer to reality.

The impending global recession has its trendsetter in Europe’s largest economy Germany, but here in the US it is becoming increasingly hard to avoid the 800-kilogram downturn in the room.

Indicators of all stripes point down. Electronics retailer Circuit City closed 155 stores before filing for bankruptcy and the world’s largest coffee chain Starbucks released results as distasteful as their product. Profit tumbled 21% during the second quarter as people close their wallets on discretionary spending.

Car sales have fallen off a cliff, or rather been pushed by a combination of tight credit, people’s fears about holding on to their job and a lack of confidence in the future of America’s three largest car-makers. Years of hubris and poor decision-making have left them making cars consumers didn’t want, or – with rampaging oil prices – couldn’t afford to drive.

The Bush Administration has already pledged $25 billion (US$37B) to help the industry get fuel-efficient. Now they want another $25B in short-term government loans to stay afloat. Without it, General Motors warned, it would run out of cash in the first half of next year.

The price tag could be up to $75 billion (US$50B) for the reward of saving millions of jobs, which would occur if a manufacturer collapsed. In October, GM’s sales were down an astonishing 45% on a year ago; the second biggest company Ford dropped 30% and Chrysler fell 35%. The annual break-even point for U.S. automakers of about 16.2 million vehicle sales per year – they’re currently at an annual rate of about 10.7 million units.

Prime Minister Kevin Rudd has rejected claims his Government’s $6 billion plan will end up funnelled into the pockets of the US industry, because the cash needs to be matched by companies to be accessed. But if the new US administration can’t fix the industry it’s anyone’s guess.

Into this mess wades President-elect Barack Obama, who does not have super powers, but who does have Super Friends.

His Transition Economic Advisory Board - member of which you can see above - threatens a serious outbreak of competence in US administration. A kind of financially-focussed Justice League of America, the combined heft of the former chairman of the Federal Reserve Paul Volcker, Google chief executive Eric Schmidt, Xerox chief executive Anne Mulcahy and Lawrence “former World Bank Chief Economist, US Treasury Secretary, President of Harvard University” Summers among others bodes well for solid solutions to the problems in the US and global economy.

You can imagine the meeting. “Hey, Omaha’s on the phone,” someone would say, as Berkshire Hathaway’s Warren Buffett, potentially the richest man in the world, chimes in with his thoughts.

The global financial community and the US economy need their help.

US unemployment figures have rocketed past the last recession’s top mark to 6.5%, their highest level in more than 14 years and the fastest rise in almost twice as long.

Manufacturing and construction took the biggest hit, but staff rolls were also slashed at retailers, hospitality providers and financial services firms.

Northeastern Illinois University professor of economics Edward Stuart said the figures got worse as you drilled into groups who attained only lower levels of education.“(And) the two worst industries you could be in right now are car manufacturing and house construction,” he said.

Only recently home builders could not keep up with demand and car makers toyed with converting their plants to only construct more profitable sports utility vehicles.

Now you can’t give either of them away.

An economy that needs to create 100,000 jobs every month to keep up with population growth, and where 70% of economic activity is consumption, has lost 1.2 million jobs in this year alone.

It’s scary stuff. The waves are already lapping at our shores, eroding away.

Good morning if you’ve come here from my article in The Age, Sydney Morning Herald, Brisbane Times or WA Today. I’m not here to freak you out any more than is already evident in the article, but there are tough times here. No easy, simple answers. No zippy structural changes which will bring the good times flying back.

But there are reasons for optimism - beyond just the fact that pessimism is the refuge of the weak.

* The US is about to elect a new leader: one who believes President George W. Bush has trashed the country’s international reputation - and understands why this is actually a problem. The presidency of Barack Obama is not going to be a sweeping broom or a magic wand, but after the ineptitude and ideologically-driven choices of the eight-year Bush administration, anything is an improvement.

* Stocks are cheap right now! The S&P 500 index just had its worst month since 1987, so there’s a lot of value in there which will tempt the last seven liquid investors in the world out of their caves.

Seriously, that’s about it. Every other sign is bad - things will get worse before they get better. But you knew that anyway. There’s no such thing as “this time it’s different”. The boom  we laughed through - and largely wasted as the roaring of excess drowned out voices urging frugality - has a corresponding bust and we are it.

The party I described was in a lavish hilltop mansion and celebrated the launch of Qantas’ hulking A380 and the the impending departure of chief executive Geoff Dixon. Here’s some of what I had to cut out for length.

Guests listened intently as John Travolta proposed a toast.

The Pulp Fiction star paid tribute to Qantas’ new A380 aircraft before moving to his main thread, praise for outgoing chief executive Geoff Dixon.

Since he was a child, Travolta had wondered what an airline boss would be like. “Somewhere between an artist and a businessman,” he said, “And I couldn’t get over (Dixon’s) boldness and risk-taking abilities”.  

At an astonishingly large Los Angeles hilltop mansion, 80 people stood and clinked their glasses in celebration.

Looking across the city, past the sixteenth-century masters in the lavish home of investment banker Alexander Cappello, you could feel numbingly insulated from the crises afflicting America: two wars, a stumbling economy and the destruction of domestic and global confidence in the country’s leadership.

But in the US you’re never far away from the edge, and in the valleys and plains of the expansive city, the fires that grew to burn bourses and economies around the world are still smouldering…

Dixon knows his boldness will be tested. This is not the most auspicious time to be launching a gleaming aircraft with 450 seats which Qantas expects people to pay “much more” for tickets. 

The Stateside debut of the hulking aircraft is part of Dixon’s farewell tour, before Jetstar’s Alan Joyce takes the post next month.

“There’s a good deal of talk around the world right now about trust and confidence and I think rightly so,” Dixon said. “These are challenging times and when I say challenging I mean very, very challenging indeed.”

Earlier, on the tarmac, he was more expansive.

“Obviously the current economic situation makes things a bit difficult for airlines,” he said, the steel-framed elephant in the room dominating the background. “I’ve never known a good time in the aviation industry to launch anything.”

The theatre befitted the enormity of the purchase, with Travolta striding from the plane in his Qantas pilot uniform, his Grease co-star Olivia Newton-John beside him as a flight attendant.

The new plane is huge – 20 have been ordered – and the crowd was similar. Tourism Australia chair and former chair of the Coles Group, Rick Allert, joined the airline’s “ambassadors” fashion designer Peter Morrissey, industrial designer Marc Newson and chef Neil Perry, former chief executive James Strong and long-time Qantas executive John Becquet and his wife Victoria Police chief commissioner Christine Nixon.

AN ASIDE: For the second time since I’ve been in the States I think my reporting has accidently started a small international incident.

Despite the splendour of the party, it was hard to avoid talk of increasing unemployment rates, frozen inter-bank lending markets and slowing consumer spending.

The problems stretch far beyond the housing the mansion overlooks.

“We have to react,” said Robert Wrigley, director of government relations with the plane’s manufacturer Airbus. “Before the crisis and the price of fuel went up so high … the best thing (we) could do was get new aircraft out quickly. Both we and (US competitor) Boeing were sold out.”

Now production is being slowed – even in an industry where delivery is measured in years. “We’ve slowed down the ramp-up,” he added, which would have seen production increased from 36 to 40 planes annually.

“That’s for down the pipe.”

What’s down the pipe for the rest of us remains unknown.

More importantly: how are you feeling? 

The conservative movement of “Evangelical” Christians so vital to Bush’s 2004 win never really backed McCain, who they saw as soft on their key issues of abortion and stem-cell research.

At a Washington DC summit, Family Research Council president Tony Perkins said the group would not be endorsing a presidential candidate. The Arizona senator had “On occasion (McCain) has been willing to – upon learning the facts – change his positions,” he told me.

In 2004 support of groups like the Council helped support Bush in 11 states proposing amendments banning gay marriage. All the bans were upheld and Bush won eight of the states.

But the faltering economy stole energy from groups seeking to pursue moral issues like abortion and gay marriage. A flowering of voices in the movement and a shift by younger members towards social justice issues also drained resources.

There’s a vote on election day in California for Proposition 8, which could cement marriage as between one man and one woman, ending their brief reign as the gay marriage capital. But Perkins the New York Times the gay marriage vote was “more important than the presidential election”.

Really? At a time of crippling economic uncertainty, with two interminable wars and around 50 million people lacking health insurance, the comment - and its interpretation - tends to underscore how the movement has marginalised itself.

TIMES are scary in America and nothing on the horizon suggests an outbreak of calm.

I had a very enlightening chat at a haunted house this week. It’s a fake, sadly, but scary enough. One of the operators, Jim Faro started out by doing up his house and running tours through it for people in the neighbourhood. Things became increasingly elaborate, and when he met another “Halloween Guy” in Jim Lorenzo, they joined forces. Blood Manor is the result - a floor in New York’s industrial district leased year-round… to operate for just 20 days in the lead-up to Halloween.

“Why do people even like to be scared, when they get enough of it day-to-day?” I had to ask. 

“For most people … it’s almost like a release,” he said. “They know it’s safe and nothing’s going to happen to them, but it’s a thrill.” Faro was sitting in his ticket booth - busy on two phones - and separated by just a wall from a room filled with foam pig carcasses and a blood-covered butcher roaming a cleaver. 

“These houses are scary, sure, and you’ll be scared as you walk through,” he added. “But then you go back out and the Dow’s down 800 points and the (bailout) is hundreds of billions of dollars? Now that’s fear.

The pumpkins, costumes and parties of Halloween make it one of the biggest festivals of the year, kicking off a holiday season that takes in Thanksgiving and Christmas. But this year, in the grave faces of the newly unemployed and commuters checking the Dow’s collapse on their iPhones, the mock terror is merging with how people really feel about an economic situation sounding worse with every new twist.

Alicia Harding is the venue director of Haunted House NYC a similar attraction on the Lower East Side of Manhattan. She agrees the everyday fear is complementing the festive fear her house sells.

“The world is a scary place and normally we try to not be in these situations. But there’s a rush that comes with being scared,” she said. “(Patrons) know that nothing’s really going to happen to them, they’re not going to get hurt.”

The slumping real economy has boosted sales. Entertainment never really suffers in downturns, she said, pointing to the glittering birth of Hollywood from the ashes of the Great Depression.

“It has had an effect, a positive effect. They want that constancy. They don’t know what’s around the corner (outside). We’re much busier than we usually are.”

Who can blame them. Has anyone else stopped looking at the Dow, because you just can’t feel shocked anymore?

Added to this is the seemingly haphazard nature of the bailout. It feels like they’re fighting a fire burning somewhere in the kitchen, by overflowing the sink.

Professor of economics and finance at the University of Pennsylvania’s Wharton School, Franklin Allen, said the government’s inability to push the merits of the bill – to Congress or the public – has been a “huge negative” in the ongoing situation. “If they’d been able to sell the bill better, the last couple of weeks wouldn’t have been so scary, in the bigger scheme of this crisis,” he said this week.

Days ago Paul Krugman won the Nobel Prize for economics and wrote “all signs point to an economic slump that will be nasty, brutish — and long”. On Facebook the NYU professor known as “Dr Doom” for his gloomy, correct predictions of this bust, changed his status to: “Nouriel Roubini worries that the world is at risk of a global systemic financial meltdown and a severe global depression.”

This is more than talk. The “beige book” survey released eight times a year by the US Federal Reserve collates evidence from 12 major regions, such as San Francisco and Boston.

New figures revealed business worsened in each district across the country, with falls in retail, financial services, housing, tourism and manufacturing activity. Retail sales fell 1.2% in September, almost double the seasonal forecast, at the same time as the US Labor Department reported that prices paid to local producers fell 0.4%, while core prices rose 0.4%. US companies can’t push their increased costs up the chain without losing business.”

Scream, anyone?

TELEVISION is universal but humour isn’t, so don’t expect the NBC adaptation of Australian comedy smash Kath & Kim to tickle you quite like the original did.
The show is very funny, and nowhere near as bad as US critics suggested in a recent Sunday Age article. But it is a much broader, simpler comedy centred on a fraught mother-daughter relationship – a step sideways from the suburbia-skewering original that debuted on the ABC in 2002 and drew massive ratings for Channel Seven last year.
The differences between the shows make this one feel like a poppy cover version of a favourite rock song. Built to appeal to a vast US audience it has had some of the harsh edges knocked off, but people sitting at home in Fountain Lakes you will still laugh – a lot – as the situations play out.
“My marriage is over!” Kim (Selma Blair) wails, as she returns to her mother’s home, spelling out its finality. “O.V.U.R.”

Image from NBC, of Selma Blair (left) as Kim, and Molly Shannon as Kath. The show premieres Thursday, Oct. 9, at 8:30 p.m.

Her mother Kath (Molly Shannon) is appalled, as her daughter intrudes on her life just as her relationship with sandwich shop owner Phil Knight (John Michael Higgins) is blossoming.
Saturday Night Live veteran Shannon and Higgins, perhaps best known as the homosexual dog walker in mockumentary Best In Show, are brilliant as the new couple, their warm affection nauseating the sullen Kim.
Hellboy star Blair is less successful portraying the self-centred daughter. The character’s simpering – “I didn’t sign up for cooking dinner or being interested in how someone’s day was … I’m a trophy wife” – is initially funny, but quickly wanes. Gina Riley’s Kim had spunk in the Australian version, battling her mother and estranged husband with sauce and fire. But Blair’s divorcee goes further than being simply unsympathetic, she’s almost pathetic in her childish petulance.

Jane Turner (left) as Kath and Gina Riley as Kim from the Australian version of Kath & Kim.

The jokes are good, but the repetitive set-up where a character thinks or says a serious thought before being distracted by something frivolous, takes away their punch.
There are good reasons to think the series will prosper and improve. Twelve episodes have reportedly been made, with Riley, Jane Turner and original producer Rick McKenna as executive producers.
Pushing relentlessly is the NBC network’s chief programmer Ben Silverman, who shared Australia’s love affair with the series from when he ran a production company that adapted foreign programs The Office and Ugly Betty into successful US shows.
This debut episode is merely a taste. Future shows will reveal more about the characters, the US and – almost certainly – us.

HOPING for the best and preparing for the worst is the mantra of hostage negotiators, high-altitude rescuers and, now, the US.

By grudgingly passing legislation that authorises the Treasury to snap up “toxic” mortgage-backed security assets weighing down stricken financial institutions, Congress has taken a step towards easing the historic credit crisis that has crippled markets from Milan to Melbourne.
But whether the plan will be adequate or even speedy enough to stave off a further global slowdown is unknown and basically unknowable.
No one seems to be cashing their equities to stockpile food, water and ammunition, but you could understand the sentiment when history is such a poor guide to this crisis. The world economy – certainly that of the US – is in foreign territory.
The complex debt-based transactions fuelling it are hidden across institutions of all sizes and wrapped in secrecy and myth. Their tentacles are around the throats of banks, that won’t lend to each other because they simply don’t trust the others in the current environment.
Secretary Henry Paulson’s plan will see the Treasury buy up these “toxic” portfolios to inject confidence into the credit market. But you could consult clairvoyants about what will happen next and get about the same level of certainty as if you spoke to bankers and economists.
The major stock indices barely blipped when the plan passed Congress.

Secretary Paulson now has 45 days to create a $900 billion (US$700B) asset management company – among the largest in the world – and have it specialise is buying up ailing mortgage products which few have been able to accurately value.

Sadly, GoodLuckWithThat.com is already registered.

“The fact that markets didn’t move means they’re questioning whether it’s enough,” said Robert E. Wright, financial historian at the NYU Stern School. “This just might be the beginning. It doesn’t bode well.”

Political will has been hard to find. No one wants to claim credit for the bill, which remains deeply unpopular in a country waiting to elect new members of Congress and a president in one month’s time.
Voting to support it, the candidate who on current polling will be President next month, Democratic Senator Barack Obama, said it was “a necessary but not sufficient step”. This will not solve our problems, he said.
President Bush signed it, deeming the action “clearly necessary” despite strong views on free enterprise and minimal government intervention. American taxpayers should expect to get much – “if not all” – of the money back when the economy recovers and the assets are sold, he added. Recent polls suggest just 22% of people approve of the job President Bush is doing, a record low. So when he says bailing out Wall Street is for the good of America, it feels about as instantly reassuring as a friend telling you “it will all grow back” after you’ve had your head clean shaved.
But something had to be done, because little signal flares are exposing the impact on the US population.
Around 60% of the 12 million illegal immigrants in the US are from Mexico, many making meagre existences in farming, hospitality and construction. The tightening economy increasingly means they aren’t coming, aren’t staying and are unable to send as much money home to support their families. The flow of legal migrants now outnumbering those without papers and the Bank of Mexico reported that remittances from expatriots living in the US fell 12% in August.
In Manhattan, 8.9% of offices are vacant, a near record low, up 0.7% from the most recent quarter. The shops on either side of jeweller Tiffany’s & Co. in Wall Street are dusty and empty. They may remain so, with property broker Studley predicting more one-in-five financial sector jobs will vanish before the crisis ends.
Up the dollar scale, the North American importer and distributor of Porsche sports cars revealed September sales had fallen by almost half, year-on-year.
The 45% decrease confirmed the belief that the economic situation is not temporary. “The sales landscape has changed for the foreseeable future,” said company president Detlev von Platen.
When the bill was thrown out a week ago US indices were pushed down a flight of stairs. The key Dow Jones Industrials Index fell 778-points, a 7% one-day drop which wiped more than $1.5 trillion (US$1.2T) in shareholder value. The Dow fell a further 157-points on Friday after the taxpayer-funded plan was passed, which didn’t surprise chief market strategist at Jefferies & Co, Art Hogan. It would be like “celebrating when the ambulance has arrived,” he said. The local ASX 200 index finished down 4.3% for the week at 4695.4 points, the same percentage it lost on Tuesday before bouncing erratically for the rest of the week.
Asian stock exchanges including Australia’s ASX have a head start on trading their way out of this globally-linked mess, but it is hard to find optimists at the moment.
Most people think “down”, even if they have nothing to go on but a bad feeling about where the financial world is heading.
Investors can hope for the best, prepare for the worst.

When the Monday bell rings on Wall Street the game is on.

MELBOURNE’S involvement in an expensive tourism promotion at a Disney park in Florida has certainly captured attention. Both The Age and the Herald Sun have been drawn into writing about a small panel in the mini-Melbourne which replicates the city’s famed graffiti-covered lanes.

The State Government is screaming because they want to promote Melbourne, but they spend massive amounts fighting graffiti every year. Also, the complicated and fluid distinction between street art and “tagging” makes it hard for advocates of Melbourne’s interesting inner-city areas to get their view out.

What I’d really like to get across is just how small the disputed area is.

Check it out!

Disclosure: Tourism Victoria paid for a return flight from New York and one night’s accommodation. And one beer.

The original article I wrote for The Age is available here.

Note the pink graffitied door which is the centre of the contentious spat between the Premier and Tourism Minister and State Government body Tourism Victoria.

The door in question, surrounded by picture frames.

To the left of the pink door is this panel. That is the extent of the graffiti display.

All photos are by Dean Ray. 

SO THIS is it, then. This is how it’s going to be.

No-one can quite believe the bill failed, even though there was so much public antipathy towards paying out the Wall Street titans whose greed and stupidity had endangered the global financial system. Sure, Congress members were receiving calls “10 to 1″ in their offices from constituents against the bill, and sure, they’re all up for election in just over a month. But it was going to get there, wasn’t it?

Ah, no. If you’re reading here from the Canberra Times, The Age or the Sydney Morning Herald, you can see from the coverage that this is not an ordinary moment in financial history. The US government needs to inject liquidity - or just certainty - into the system, but chose a damn unfortunate time to be asking. Whether Treasury Secretary Henry Paulson’s tactic of sitting down and demanding US$700B (A$836B) that day, no questions asked, man-I-really-really-need-it-now was strategically clever, I can’t say. 

So lets ask people who were there.

  Photo from AP

FOUR hours after trading closed, stock exchange floor trader Bobby Graff still could not believe it.

“We dropped 200 points in an hour,” he said, shaking his head. “An hour.”

The reality was worse. On a historically dark day for Wall Street finance, the key Dow Jones index went into freefall from 1.45PM yesterday as traders realised Congress was not going to back the $872 billion (US$700B) bailout proposed by Paulson.

In the frenzied half-hour as the votes dribbled in the index shed 356 points. At the end of trading, the Dow had fallen nearly 778 points, almost 7%, to 10,365.

Graff struggled to describe the tumultuous atmosphere inside the bourse as millions of dollars of stock value was destroyed. “Worried,” he offered, limply. The trader worked in the period after the terror attacks of September 11, 2001, “when we lost five (hundred points) and change” and believes this crisis will be deeper and longer for everyone concerned. The instability will cause average consumers to withdraw their funds, he said, further compounding the crisis in the credit markets.

“The middle income people, people who are shareholders and have 401(k) plans (superannuation) … They’re going to get scared,” he said.

People were also scared in Washington DC. With every seat in the House of Representatives up for election in 34 days, members did not want to be stuck supporting a bailout that is deeply unpopular in the wider community.

Protestors on Wall Street and in Times Square blamed government institutions and outrageous executive salaries for the global credit crunch, pleading for Washington to vote down the proposal. Whether politician’s self-interest or the groups “will bank for food” signs tipped the fight is unknown.

Another trader Ray, who did not give his surname because his company does not authorise him to speak to media, could barely contain himself after the vote had been lost.

“We’re getting wiped out here,” he said, waving his hands. “It’s terrible, terrible.”

Congress members voting against the bill had no idea of the consequences of their actions, he said. “We’ve got to let those people know what’s happening down here,” he added.

Behind Ray, a TV producer wrote “441 down” on a piece of paper and showed it to the correspondent in the middle of a live cross.

“Really?” said an elderly man, loud enough to be heard over in neighbouring states.

With the epic day over, traders fled to bars, subways and gyms to consider events. As Graff opened the door to lift some weights, he threw back that his money was tied up in 401(k)’s and recently nationalised insurance group AIG.

“I’m in this too, you know,” he said, as though his creased brow didn’t already say that.

And more: that we’re all in this.

This week I was lucky enough to sit down with Wall Street legend Irving Kahn.

The veteran broker was on the trading floor in 1929 after the crash and has a very good insight about the current instability. He’s fairly unaffected by it all, as you would expect of a 102-year-old who still goes to work every day.

I can only tell you that, historically, it’s like the theatre. You get the same plays but the people who appear as the cast are different – in the same parts.