Uneasy in NYC
I live only a two hour drive from New York City, but it is a world apart from my daily existence. I've visited the Big Apple probably a dozen times in my life, but never for longer than two or three days. I have a soft spot in my heart for NYC because it is where I proposed to my wife on a bitterly cold December evening in a horse drawn carriage ride in Central Park, twenty five years ago. But, I can honestly say that I never feel comfortable in the city.
Last week we had an opportunity to get away for a long weekend. My wife had gotten tickets to the Jimmy Fallon Show for Thursday afternoon and we decided to get a hotel room for one night and then drive directly down to Wildwood for the remainder of the weekend. My mother-in-law agreed to watch the kids, so we had ourselves a mini-vacation. I anticipated a more laid back trip than our visit to Occupy Wall Street a few years ago, that led to one of my most read articles.
A couple years ago I was shocked to receive an email from David Stockman, complimenting me on a particular article I had written. When a former Reagan budget director, founding partner of the Blackstone Group, and world renowned financial mind takes notice of something you've written it really boosts your morale. We have had a periodic email dialogue ever since. When he created his own website earlier this year, he asked me to be a contributor. He also told me that if I ever make it to NYC, let him know and we would meet for a drink.
I was reluctant to bother such a busy man, but during a recent email exchange I mentioned I'd be in New York. He suggested we meet after the Jimmy Fallon Show for a drink. I told him to pick a place convenient for him. He emailed back, the morning we were leaving, to meet him and his wife at the Carlyle Hotel bar at 5:00 pm. I immediately googled the hotel and realized I should pack some nicer clothes. This was no Shamrock bar in Wildwood. It was on Seventy Sixth & Park Avenue. My uneasiness had begun.
Our agenda was set. We left at 9:30 am on Thursday for our 24 our whirlwind adventure in the Big Apple. The drive to NYC is straightforward - PA Turnpike east to the NJ Turnpike north and then through the 1.5 mile Lincoln Tunnel, under the Hudson River, into mid-town Manhattan. We were in the tunnel in two hours flat, after seeing and smelling the lovely sights of NJ - refineries, more refineries, retail warehouses filled with Chinese produced crap, more refineries, the IKEA Elizabeth store where I had spent many days (my wife and I worked the opening week at the store in 1991), and the Newark Airport.
Once you drive through the tunnel, you enter a world of gridlock, anger, obscenities, honking horns, iGadget distracted pedestrians, fearless bikers, crazy vagrants, and one way streets. Driving into NYC increased my uneasiness.
We were staying at the Hudson Hotel. My bargain hunting wife had snagged a deal at $205 with our AAA discount card. We knew it was on Fifty-Eighth Street, but not sure where. There was scaffolding everywhere. No names were visible on buildings. My itsy bitsy Honda Insight was like a speck among the thousands of cars and trucks in this crazily congested metropolis. The hotel supposedly had valet service, but that meant some dude took your car and parked it in one of the three Central Parking facilities on the block for $35 per day.
As expected, we accidentally passed the hotel and had to circle the block to reach our destination. Sounds simple, right? Not in NYC. The next street was one way leading to Columbus Circle. I had to inch along in the gridlock to Broadway and make a right. Then I had to maneuver for two more blocks before I could make another right turn. There are trucks double parked making deliveries, trash trucks picking up the tons of garbage littering the sidewalks, and dozens of cabs picking up and dropping off riders. It took 15 minutes of hell to circle the block and get back to the Hudson Hotel. But we finally made it. The valet took the car and we headed for the lobby to see if we could check-in early.
The hotel was nicer than I expected and the guy at the front desk got us a room three hours before the normal check-in time. Life was good. We headed up to the sixteenth floor and opened the door to our room. It was nice, clean, and the size of a postage stamp. It was so small you had to go out into the hallway to change your mind. The bed took up 60% of the space in the room. The bathroom was designed for midgets. I could shave, shit and shower while in the same spot in the bathroom. For some unknown reason there was a glass window separating the bathroom from the rest of the room, with only a sheer curtain across the window. I hate being ogled while showering.
After changing into duds that would be acceptable to enter the Carlyle Hotel, we headed out to get some lunch. The hotel is on the edge of "Hell's Kitchen", home to dozens of hip restaurants, Irish pubs, and classic New York delis. We immediately found an Irish Pub and got some burgers and beers. Then it was off to Rockefeller Center to see the Jimmy Fallon Show. I haven't watched a late night comedy show in years. I'm sound asleep by 10:30 pm every night.
We hurried up to wait, then waited some more, and waited some more. We had tickets to the pre-show where Jimmy tries out 30 jokes to see which 12 will make the live show. All of his comedy writers sit with the audience and listen to the laughs. He explained that his only goal is to make people smile after having to deal with the terrible news we are inundated with every day. That's a noble goal in my book. He was funny and humble. His joke about Eric Holder resigning was the first I had heard of it. Watching the news isn't a priority when you are in NYC. We were out by 4:00 pm and now headed uptown to our rendezvous with David Stockman.
Meeting With a Famous Person
I have to admit that we were both nervous and uneasy. It's not every day that you meet a legendary financial mind. And there is nothing like a NYC cab ride to calm you down. It's hard enough to even get a cab to pull over, but now they quiz you before deciding whether to accept you as a passenger. I swear our taxi driver said, "Are you talking to me?", when we told him where we were going.
You don't have to exaggerate the craziness of a thirty block cab ride in NYC. There was speeding, honking, cutting off other drivers, turns from the middle lane, some cursing, prayers (me), backseat invisible brake punching (also me), and all for the low low price of $12. Everything you expect in a 30 block cab ride in NYC.
The moment of truth had arrived. We were really uneasy as we entered Bemelmans Bar, with its 24-karat gold leaf-covered ceiling and clearly upper-crust clientele. It is named after the creator of the Madeline children's books and has scenes from the books on the walls. We were there first, so I sauntered up to the bar and ordered two Amstel Lights at $9 a shot. And those weren't going to be the most expensive beers of the evening.
I realized that David Stockman had no idea what I looked like, but I knew what he looked like. About five minutes later David and his lovely wife Jennifer walked into the bar. I walked up to him and introduced myself and my wife. They were extremely gracious as we sat down at a table for four near the piano player. We were chatting with the most famous people we had ever met, and I felt fairly comfortable because David and his wife treated us like good friends.
We had such similar days. We went to the Jimmy Fallon Show and David had been the guest host on Bloomberg TV that morning interviewing Jeremy Siegel from Wharton. I told him that I've bumped into Jeremy in the men's room at Wharton. He got a chuckle out of that. We talked about Jeremy being a perma-bull and that bulls will be right 80% of the time, but that other 20% usually wipes out most of the bull market gains. He described how three years of Russell 2000 gains were wiped out in 11 days during the 2008/2009 collapse.
It was like we had a mind-meld as we discussed the markets, the Fed, and the enormous debt load that will eventually destroy our economic system. We just naturally moved from subject to subject, while our wives listened or talked about other things. I never have the opportunity to talk with someone who is as interested in financial markets and economics as me. And here I was discussing these issues with one of the greatest financial minds of our generation. I told him his book The Great Deformation should be a required textbook for high school and college economics courses. We talked about Teddy Roosevelt, Franklin Roosevelt, the failure of the New Deal to end the Great Depression, the failure of Keynesian solutions to end our Greater Depression, and the foolishness of trying to solve a debt problem with more debt.
Our viewpoints are almost perfectly in sync. He is a proponent of the Austrian School of economics and his position on our foreign interventionism is identical to Ron Paul's. We talked about the idiocy of our Middle East wars of choice and how we armed ISIS to fight our enemy Assad and now are fighting both at the same time. We agreed that all the war mongering and terrorists created out of thin air is nothing but a cover for controlling "our" Middle East oil. We share a deep seated anger at the people running the Federal Reserve and how they have enriched the bankers at the expense of middle class. I described the impact of ZIRP on my senior citizen mother and he concurred that benefiting debtors at the expense of savers is the exact wrong thing to do. He admitted that he doesn't know when the next financial crisis will hit, but he is sure it will be even worse than the 2008/2009 debacle.
David and his wife were interested in my background. Jennifer was particularly curious as to why I did this, since I had a full-time job and I certainly wasn't doing it for the money. I had to think about it for a second, but I responded that I was pissed off about what was happening in the country and was spurred to write after seeing Ron Paul so mistreated during the 2008 Republican primaries. I told them I lost faith in the system and our leaders after the 2003 invasion of Iraq proved to be under false pretenses. I also laid my IKEA saga on them. It was amazing to me that they were interested in my story and my viewpoint. We had a long discussion about the bleak future of retail, the amount of square feet that will go dark, the bankruptcy of developers and the losses to be incurred by banks. He even told me he was a fan of my 30 Blocks of Squalor series, as he laughed and wondered if my employer had any problem with them.
They had dinner reservations elsewhere at 6:30 and we talked until exactly 6:30. The ninety minutes flew by. I forgot to mention that Jennifer is also the President of the Guggenheim Museum, and she offered to give us a private tour the next time we are in NYC. It was a thoroughly enjoyable experience and they seemed amused when I told them they were the most famous people we had ever met. I guess I'm not good at playing it cool. So we parted ways and we headed back to midtown to find a restaurant for dinner.
Teetering Edifice Built on a Mountain of Debt
I was mentally drained and ready for some relaxation and booze. No cabs this time. We like walking in NYC. I get the chance to do what I like best - observe people and the surroundings. As we walked down Park Ave. my general observation was this was where the really rich people live and shop. This is where the ruling elite, oligarchs, Wall Street bankers, and jet set spend their time and vast wealth. But, even this ritzy area had a number of vacant store fronts and retail space available signs. The number of vacant storefronts increased as we approached mid-town. Vacancy isn't just for suburban strip malls anymore.
It is clear that NYC, on the surface, is a thriving metropolis, with a tremendous amount of frantic commercial activity. But it is all built on a foundation of sand, which will be washed away during the coming storms. If the inhabitants of NYC thought Hurricane Sandy was bad, wait until the great debt tsunami come crashing down on their little paradise of crony capitalism and excessive materialism. The appearance of a healthy thriving city masks the cancer growing within.
The entire teetering edifice of greed, avarice, excessiveness, and consumerism is dependent upon a gluttonous, corrupt, amoral financial industry, led by sociopathic billionaire bankers and their hordes of wealth driven Ivy League MBAs. What you notice, if you choose to, is that NYC produces absolutely nothing. Wall Street is nothing more than a giant siphon, using fraudulent financial derivatives and their control of the nation's monetary system to drain the remaining wealth from the bank accounts of the once thriving middle class. These highly educated wizards of finance add no value to the country and are responsible for the regular financial crises that destroy the lives of honest hard working Americans.
There are approximately 300,000 workers in the financial services industry, down from 345,000 in 2008. They collect half of the wages paid in NYC, despite holding less than one sixth of the jobs in Manhattan. The entire state of New York is dependent upon the taxes collected from Wall Street's excessive profits. The Comptroller tracks the bonus payouts quarterly to assess the "health" of their budgets. Government bureaucrats and union bosses are thrilled when they see that Wall Street doled out $26.7 billion in bonuses in 2013 for a pillaging well done. While real median household income lingers at 1994 levels, Wall Street bonuses should surpass their all-time high in 2014. This is called winning in our warped, corrupt, debased culture of debt based wealth. Regulators, politicians, and government prosecutors will never hold Wall Street accountable for their crimes because they would be killing the golden calf that sustains their opulent lifestyles.
The taxes generated by the Too Big To Trust Wall Street banks supports the bloated government union infrastructure that accounts for the majority of jobs in New York City and the surrounding boroughs. After Wall Street, NYC is the biggest employer in NYC. The top five employers in NYC are:
City Hall - 150,000
Department of Education - 119,000
U.S. Federal Government - 89,000
NY State Government - 69,000
Metropolitan Transit Agency - 67,000
The rest of the New York City economy is dependent upon tourism, restaurants, entertainment, retail and healthcare for the masses. It is entirely propped up by the ill-gotten profits of Wall Street that exceed $200 billion per year, with 80% of those profits generated by just nine banks. When the latest and greatest epic Federal Reserve/Wall Street financial bubble bursts, the immense level of pain will ripple through NYC revealing those who have been swimming naked and crushing the hopes and dreams of millions. Mike Krieger recently provided some anecdotes that reveal the level of excessiveness and wealth inequality which will end in tears:
"A new development, 42 Crosby Street, is pushing the limits of New York City real estate to new heights with 10 underground parking spots that will cost more per square foot than the apartments being sold upstairs. The million-dollar parking spots will be offered on a first-come-first-served basis to buyers at the 10-unit luxury apartment building being developed by Atlas Capital Group at Broome and Crosby Streets, itself the former site of a parking lot. At $250,000 a tire, the parking spaces in the underground garage cost more than four times the national median sales price for a home, which is $217,800, according to Zillow."
"The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year."
As you walk the streets of NYC from uptown to midtown the canyon like gap between the haves and have nots is plainly evident to anyone with their eyes open. The average financial industry worker makes $267,000 per year, while the average service industry worker is making $25,000 per year. How someone living in the New York area can survive on $25,000 per year is beyond my comprehension, but 37% of all workers in NYC make less than $15 per hour. You can almost sense the desperation, as panhandlers, tour bus solicitors, carriage drivers, and bike ride entrepreneurs hound you on every street corner. As we were walking back towards our hotel it was getting dark, but then out of the darkness rose the mecca of iMorons across the globe. The world renowned Apple Store, where the iGeneration camps out for days to get a marginally better piece of overpriced, over-hyped, Chinese slave labor produced iCrap, loomed above us. I had to have my picture taken with the iMoron hoards.
I should have pulled out my six year old LG flip phone to witness their disgust and revulsion.
Escape From New York
The hectic portion of our one day escape to NYC was over. The plan was now to find a place to eat dinner, visit a rooftop bar that my wife had stumbled across during her last visit to NYC with her friend, and wander the streets observing the inhabitants of this melting pot that never sleeps. We ended up at the Delta Grill at Forty-Eighth and Ninth for some New Orleans cuisine and a couple Hurricanes. After some Jambalaya and Gumbo, we were off to the Press Lounge rooftop bar in the Ink48 building at Forty-Eighth and Eleventh. The neighborhood seemed a little deserted and dicey to me, but my wife said the views were spectacular and worth the risk of getting mugged. And she was right. It is considered one of the top rooftop bars in the world. We took the elevator to the Sixteenth floor and walked out onto the roof. It had couches, lounge chairs, fire pits, a lighted reflecting pool, and breathtaking views of Manhattan and the river.
It also had $11 bottles of beer. My cheapskate mind was appalled, as I knew I could buy an entire case of beer for what I just paid for two bottles of beer. We didn't stay long. We had noticed a bar advertising $5 margaritas on our way to the Delta Grill, so that's where we headed. It was called Mickey Spillane's, named after the famous crime novelist. It had the Giants-Redskins game on multiple big screen TVs and it was fairly crowded. We grabbed two seats at the end of the bar, ordered our margaritas, and began our favorite pastime of people watching.
After about ten minutes we started noticing that 90% of the people in the bar were men. There was just a smattering of women. There was only one other married couple in the whole place. A sports bar with mostly men probably isn't that unusual, but none of the men were watching the football game. And all of the men were extremely well groomed and dressed fashionably. The final clue was the hugging and kissing. We had stumbled into a gay sports bar. Not that there is anything wrong with that. We found it amusing, but I was a little uneasy. It was time to go. We headed back to our hotel and had one last drink in their hip bar for young people, where we also didn't fit in.
We had to checkout of our room by noon on Friday. The weather was perfect - 70 degrees and sunny. I don't think I've ever been served a bad breakfast in NYC, and we weren't disappointed again. We walked into the Route 66 open air café and had an excellent breakfast while watching the hustle and bustle on the street outside.
After checking out and putting our bags in storage, we stopped at a fashionable store with actual cheap prices so my wife could pick up some clothes for work. I just stood around, uneasy and impatient. I did notice the retail stores were swarming with Asian and South American shoppers. The Chinese have taken over where the Japanese left off in 1990. After completing the shopping portion of our day we headed for my favorite place in NYC - Central Park. It's an oasis of solitude and nature in the middle of craziness and consumption. All of my unease dissipates whenever I enter this small sanctuary of green surrounded by miles of concrete jungle. Every time we walk into Central Park we discover something new. We turned down a path and came across a beautiful waterfall cascading into a pond, where ducks were swimming. Even I couldn't screw up that picture.
As you stroll through Central Park and around NYC in general, you do notice that residents of NYC are generally thinner than the overall population. The obese land whale tourists with their size 52 jeans, extra cushioned white sneakers, and ketchup stained XXXL sized I Love NY t-shirts are easily identifiable as they waddle along the streets of NYC seeking a fast food joint. I would attribute New Yorkers' relative thinness to a few factors. If you live in NYC you must walk to get around. It's too expensive to operate a car. I would estimate the average New Yorker must walk a couple miles per day.
They probably eat and drink as much as non-New Yorkers, but the city does not have many big box purveyors of toxic, prepackaged, carbohydrate time bombs disguised as food that sustain the obese masses in the rest of the country. They buy much of their food at local delis or cooked at one of the thousands of local restaurants. The city is primarily segmented between young poor people and older rich people. The corpulent middle aged couples with their plump progeny can't afford to live in NYC, so they don't.
We strolled for a while, sat on a bench taking in the delightful sights and sounds and then reluctantly left to start our three hour journey down the Garden State Parkway to Wildwood. As I maneuvered my car towards the Lincoln Tunnel, the gridlocked traffic where four lanes merge into two lanes at Forty-Second Street reminded me of how precarious getting out of the city would be during a crisis. I was watching various 9/11 documentaries a few weeks ago and you saw how vulnerable the city became without public transportation. The 2003 Northeast blackout brought NYC to its knees within minutes. People were trapped in high rise elevators, the financial system of the U.S. was shutdown, traffic lights didn't function - creating mass gridlock, and the subway and rail system stopped dead in its tracks. The only way off the island was to walk. A natural disaster, terrorist attack, EMP, electrical grid failure, or solar flare could wreak havoc on this fragile bastion of crony capitalism without warning. Chaos and panic would ensue. As I exited the Lincoln Tunnel back onto the NJ Turnpike, I exhaled and my unease rapidly dissipated.
Fragility and Delusions
NYC is the preeminent symbol of the American empire. It appears to be prosperous, thriving, growing, and alive, home to free market capitalism, and inhabited by the affluent captains of industry. But, in reality, NYC is a fragile ecosystem built upon a weak foundation of debt, corruption, and easy money that will be wiped out during the coming financial storm of the century. NYC and the empire it represents are like a 225 year old majestic oak tree in Central Park that appears healthy and strong to the naked eye, but in reality it is diseased and rotting within. It will only take a predictable storm to bring it crashing down to earth.
Financial engineering, pandering to government unions, issuance of debt, luxury retail, and conspicuous consumption, wrapped in a surveillance police state is not a sustainable economic model. Only the hubristic, arrogant, wealthy aristocrats believe they can sustain such a freak show. They are delusional and blinded by pride and belief in their own infallibility. They, along with the millions of unsuspecting New Yorkers, should really be uneasy. Their paradise of materialism will not survive the hurricane of consequences headed their way.
As I sat on a barstool in the Shamrock on Friday evening, drinking a beer, listening to Billy Jack play some tunes, and chatting with a monster truck driver and his girlfriend from the Poconos we had met last year at the Shamrock, I was completely at ease. The contrast to chatting with a world renowned financial icon at the Carlyle Hotel 24 hours prior was amusing to ponder. It had been a crazy 36 hours that made me realize where I feel most comfortable. And it's not New York City.