Whoa! What a party!
We’re not talking about the surge on Wall Street at the end of last week. We’re talking about a real party, right here in Charm City.
The interesting thing about the stock market was that it seemed to have its head screwed on right. The Bureau of Labor Statistics said unemployment fell to 7% in November. And this time, they weren’t fooling. Even the ‘labor participation rate’ went up. They weren’t just taking people out of the labor pool to get a lower unemployment number. That was good news.
Lately, investors have been interpreting anything that sounds like good news as bad news. Economic improvement is thought to be a foreboding of ‘tapering off’ by the Federal Reserve. Investors worry that if the Fed stops its QE – at $ 1 trillion per year…the largest stock and bond buyback program in history – asset prices should fall. ‘Good news’ gives the Fed a reason to back off. So, it is taken as bad news by investors.
Hey…we didn’t design this system. We’re just reporting.
So why didn’t stocks fall on Friday? How come investors suddenly seemed to screw their heads on right? C’mon, dear reader. Everyone knows that even a little cutback in the Fed’s buyback program should mean falling stock and bond prices.
A trillion dollars a year is a lot of money – in fact, it’s 7% of GDP. Imagine a corporation with annual revenue of $100 billion. Imagine that it buys back its own shares at the rate of $7 billion a year. Then, try to imagine what would happen to the share price when the largest single buyer drops out.
It doesn’t take a genius to figure it out. Even Fed economists can see it. That’s why they won’t taper off. And everybody knows it. That’s why now…bad news is good news. Good news is good news.
And that’s why US stock prices are so high (more about that tomorrow).
Back to the real party…
At the appointed hour, the strings of blue lights turned on…and then the bombs began bursting in air. White, blue, green, red…ka-boom! It was a warm, foggy night. The lights and smoke seemed to blend together with the fog, creating a fantasy-land of colour and sound…a Technicolour battlefield with no casualties.
Yes, dear reader, something is happening in Baltimore. We hadn’t fully noticed it until the big party last week. Thousands of young, hip, well-educated people came to the annual celebration – the lighting of the George Washington memorial in downtown Baltimore. They crowed onto Mount Vernon Place…cheered the band…oohhed and aahhed at the fireworks…and then went on to dozens of other private parties in the area.
This was an area made famous by the popular TV show, The Wire. It used to be a ‘no go’ zone…at least at night. Now, there are people all over the place…including young women walking alone. They’re buying up the old mansions…and the derelict storefronts. They’re turning them into houses, coffee shops and loft apartments.
In the morning, we go into a local coffee shop. At 10am there are 20 people sitting at tables, talking…or alone, with their laptop computers open. Where do they come from? What are they doing?
What’s going on?
We put the question to a young reveller.
‘Well, I’d say the mentality has changed. People of my generation are not interested in getting in a car and driving. We grew up with that. We’ve had enough of the suburbs and commuting. Suburban houses are boring. Driving is boring. The lifestyle is boring.
‘So, we come to the city. We admire the wonderful old architecture in Baltimore. And we imagine that we can live better here. We walk to shops. We bicycle to work. At least, I do. The houses are still relatively cheap. I come from LA, and to me they seem very cheap. And there are a lot of people like us here…so there is a sense of community…of people doing exciting things. You don’t get that in a suburban life.‘
‘But what are you going to do when you have children,‘ we asked, thinking he must be aware of Baltimore’s notoriously awful public schools.
‘We’ll worry about that when it happens. Maybe we’ll set up a little school in the area…a cooperative. I don’t know…but we’re not worried about it now.‘
One group that doesn’t have to worry about schools are the retirees. They’re past that problem. And now, if the crowd in Doobies coffee shop is any indication, they too are coming back to town.
You see them with their laptops…or talking on their cell phones. In their ’50s and ’60s. Not exactly retired, but not working 9 to 5 either. Maybe they are among the millions who have been taken out of the labour force by BLS statisticians. Maybe they are self-employed. Maybe they are consultants or writers. Or maybe they are just having a cup of coffee.
‘I wasted years of my life driving back and forth to work,‘ we confessed to our young interlocutor. ‘It was awful. It took me an hour of driving every morning to get to the office. I left the house at 7am to try to get a jump on the traffic. But by then, the Washington beltway was already slowing down, so dense were the cars and trucks.
‘What was worse was that I would get so wound up by competitive driving that I was already exhausted before I got to work.
‘That’s no way to live. One of the best moves I ever made was moving into the city just a block from where I work. I save two hours per day…I don’t have to stop to buy gas…and the whole experience is much more agreeable.‘
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