Philip Greenspun’s Weblog

Suburban Living Science Report #1:  Bacon on the gas grill.

Our humble suburban Deck House (factory-built in Acton, Massachusetts for the last 50 years or so… until a couple of weeks ago when the company sent all of the workers home) contained a very functional electric range back in 1968.  At that time it was acceptable for a suburban family to drive around in a car and simmer a sauce by pressing the “simmer” setting on the stove.  Along with the SUV, however, the modern suburban family needs a Viking range.  In 2000, therefore, the kitchen was expanded and a 48″ wide Viking range installed.  Viking takes the word “burner” literally and the lowest setting on the burner is hot enough to boil a vat the size of what you’d see the witches stirring in a high school production of Macbeth.

With six burning burners, you need a massive range hood to pull the heat out of the house before it burns down.  Thus a 1200 CFM range hood was installed, which makes as much noise as a departing business jet.  The combination of a fully licensed and trained architect and fully licensed and trained contractor resulted in the 10″ duct carrying this 1200 CFM stream of air terminating in a roof cap that restricts the flow to a mere trickle.  Consequently, it is impossible to cook or grill anything without having all of the smoke bypass the hood and set off the smoke alarm.

Hosting a waffle brunch today for a bunch of friends, I grappled with the question of how to cook 4 lbs. of bacon from Costco (I deleted Whole Foods from the car’s GPS system when the Dow slid below 8000).  Not wanting to fill the house with bacon grease, I decided to use the outdoor gas grill.  My friend David was the first to arrive at the party.  When I explained what I was doing, he said “Do you want me to call the Fire Department now?”

It turns out that bacon on a standard outdoor gas grill comes out great if you’re patient.  The grease disappears magically into the burners.  There is no pan to clean up.  You can grill about 1 lb. of bacon at a time.  We experimented with different heat settings.  High heat results in a slightly unpleasant burned taste.  Medium-low heat for 20-30 minutes is what we found to be optimum.  If doing a large quantity, start an hour or two ahead of the party and microwave just before serving.

[Side report on waffle mix:  We had some waffles made from a nicely packaged organic mix from Whole Foods (purchased a week or two before the latest meltdown).  They were okay, but not as good as those from the Trader Joe’s mix, which was approximately 1/6th the price.  Frozen blueberries to go with the waffles were $12 at Whole Paycheck.  The exact same brand, size, and packaging was $7 at Costco.]

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I recently finished reading The Girl from Foreign on my Kindle (still loving the Kindle for travel when a book is 100 percent text; the Kindle is also good for use on treadmill; the Kindle is useless for books with illustrations due to its lack of pan and zoom).

About one third of the book talks about the remnants of India’s Jewish community, in the news right now because of the Muslim attacks on various gatherings of people in Mumbai, including taking hostages at a Jewish center.  The Girl from Foreign records that the Jews of India felt secure from Islamic violence because they were both minorities and the Muslims tended to fight Hindus.  Most of the young ones were emigrating to Israel, nonetheless.

A less upsetting reading recommendation: the profusely illustrated and therefore unsuitable-for-Kindle The Fires of Vesuvius: Pompeii Lost and Found (remarkably readable despite deep scholarship).

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Loosely related to my own economic recovery plan… From the October 30, 2008 BusinessWeek, Michael Porter writes “Why America Needs an Economic Strategy”.  Some excerpts:

“An inadequate rate of reinvestment in science and technology is hampering America’s feeder system for entrepreneurship. Research and development as a share of GDP has actually declined, while it has risen in many other countries.”

“America now ranks 12th in tertiary (college or higher) educational attainment for 25- to 34-year-olds. We have made no progress in this vital area over the past 30 years, unlike almost every other country. This is an ominous trend in an economy that must have the skills to justify its high wages” [philg: it would be more interesting to focus on how much people learn than how many degrees they collect]

“The job training system is ineffective and receives less and less funding each year.”

“Federal polices have hobbled America’s entrepreneurial strength by needlessly driving up the cost and complexity of doing business, especially for smaller companies. Cumbersome regulation of employment, the environment, and product liability needs to give way to better approaches involving less cost and litigation, yet special interests block reform. The U.S. has become a high-tax country not only in terms of rates but also administrative hassle.”

“Infrastructure bottlenecks, due to neglect and poorly directed spending, are driving up costs in an economy increasingly dependent on logistics.” [philg: this ties into my constant calls for congestion pricing on our roads]

“A final strategic failure is in many ways the most disconcerting. All Americans know that the public education system is a serious weakness. Fewer may realize that citizens retiring today are better educated than the young people entering the workforce. In the global economy, just being an American is no longer enough to guarantee a good job at a good wage.” [philg: though Obama has promised us that we will get paid a lot, no matter how dumb we are!]

“Unless we significantly improve the performance of our public schools, there is no scenario in which many Americans will escape continued pressure on their standard of living. And legal and illegal immigration of low-skilled workers cannot help but make the problem worse for less-skilled Americans. ”

“Democrats, meanwhile, keep talking as if they want to penalize investment and economic success. They defend unions obstructing change in areas like education, cling to cumbersome regulatory approaches, and resist ways to get litigation costs for business in line with other countries.”

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My take-aways from the article… (1) if we could improve education at all levels, from elementary school to job retraining for laid-off workers, we could survive all of the other handicaps that we’ve created for ourselves, (2) there is absolutely nothing in common between Porter’s suggestions and what our politicians are doing.

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When the economy gets a cold the aviation industry gets pneumonia.  Here are a couple of news stories…

Cirrus is slowing down production until January 2009, furloughing many production workers (story).  This follows layoffs of 205 people earlier this year.  After Cessna, Cirrus should be the strongest piston airplane manufacturer.  They make the world’s best selling piston-engine airplane, the SR22.  Following their acquisition in 2001 by First Islamic Investment Bank they’ve had ample access to capital from the Arab Gulf states.

Eclipse is demonstrating the worst that can happen when you buy an aircraft from a new company.  They have filed for Chapter 11 reorganization, but only plan to operate in Chapter 11 for a couple of months until all of their assets can be sold to an affiliated European/Russian company.  People who paid $1.5 million for jets that never quite worked now have no warranty.  If they want to get the planes certified for flight into known icing, they’ll have to pay for the work themselves.  Folks who put down deposits of $100,000 and more have lost everything.  (full story)  What about investors?  According to a February 18, 2008 article in the Albuquerque Journal, the company had raised more than $1 billion in capital.  The stockholders presumably have suffered a 100% loss.

2008 has not been kind to new airplane companies.  Adam Aircraft, founded in 1998, went bankrupt (Chapter 7 liquidation) in April.  They had a weird-looking piston twin featured in the movie Miami Vice and also a jet for which they had made a lot of claims.  (wikipedia)  Customers who were unfortunate enough to take delivery of the $1.25M piston twin are grounded due to lack of support (story).

I only hope that Icon Aircraft (WSJ story; company Web site requires somewhat destructive Flash upgrade) survives long enough that we can fly their little amphibian.

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Today we learned that the Federal Reserve is going to buy $800 billion of loans from banks (story).  Where is this money coming from?  The Fed is going to have to give banks $800 billion in cash in exchange for the right to collect whatever money gets paid over the years on car loans, student loans, and mortgages.  It sounds like taxpayer cash is going out the door right now, yet there was no corresponding story about Congress raising $800 billion in taxes.  There was no corresponding story about Congress authorizing $800 billion in spending.  We didn’t hear about the U.S. government selling $800 billion in new bonds.

So… where is this money coming from?  Are we printing it, borrowing it, taxing it, or “other”?

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I’ve been calling my programmer friends at work.  I call their desk number and get the company operator.  “We don’t have a Joe Foobar in the directory.”  Then I would try the guy at home.  “I was laid off in October,” is the typical response, “and nobody is hiring right now.”

By contrast, business is brisk at East Coast Aero Club.  Tech layoffs often give engineers the courage to pursue their long-suppressed dream of becoming a commercial pilot.  The 30 airplanes and helicopters in the ECAC fleet are up in the air more or less continuously, which puts pressure on the maintenance staff to keep up with 100-hour inspections and overhauls.  Just when I was convinced that there wasn’t a single new job being created in New England, Mark Holzwarth, the owner, emailed me:  “We are looking for a experienced general aviation A+P mechanic to help maintain the fleet.  Resumes should be sent to mark@ecas.com.”

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Citigroup took on a lot of risk earlier in this decade.  As with any high-risk strategy, one potential outcome is temporarily high returns.  That’s what happened with Citigroup and a large slate of managers congratulated themselves with salaries ranging from $5-50 million per year (data on 2005 executive compensation; article on current CEO’s $216 million in earnings over the last year).

Now the returns aren’t looking so good.  The executives have paid off mortgages on their Park Avenue townhouses and their Nantucket beach houses.  What about the average American taxpayer?  Under the government’s latest scheme, he or she is going to cough up $20 billion immediately and potentially be stuck with another $306 billion in losses on crummy loans and securities held by Citigroup (nytimes story).

It would be tough to come up with a better example of socializing loss after the management of Citigroup privatized and pocketed gains.

Perhaps it is time for a new approach.  Wall Street executives exposed taxpayers to more than one trillion dollars in losses in order to help themselves to salaries in the $20-100 million per year range.  It would have been a lot cheaper if we had a policy where the CEO of any sufficiently large investment bank was paid $100 million per year direct from the U.S. Treasury.  In return for this guaranteed payout, he or she would forgo any numbers-based compensation from the bank and therefore would have no incentives to take big risks whose consequences would ultimately fall on the taxpayers’ shoulders.

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I’ve noticed a huge increase in sleeping pill ads on nytimes.com and other general-interest Web sites.  The financial crisis is apparently keeping people awake all night.  Perhaps there is an investment opportunity here…

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Costco was packed today.  There is nothing like a good depression to boost sales at a wholesale store.  While enjoying my $1.50 hotdog and soda, I shared a table with a college girl.  “My student loan company went bankrupt,” she noted, “so I’m looking for other funding.”  What about a semester job?  “I’m working at a Dunkin Donuts near school,” she replied, “but business is slow.  We’ll probably have to close if things continue like this.”

Just a few months ago it would have been tough to imagine that the economy could slump enough to keep people away from their Boston Cream Donuts.  Perhaps finally Americans will slim down.

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A month ago the Dow was at 9500. I asked a friend who is in the money business “How much lower can it go?” He said “7500. People who need cash, for whatever reason, have no way to get it except by selling public equities.”

Yesterday the Dow sank to 7500, so I called my friend asking for his next prediction.

“6000. Still a liquidity crisis.”

The aggregate market capitalization of the S&P 500 was about $10 trillion in years past. Presumably it is falling towards $5 trillion. We may be getting to the point that the people from whom we’ve bought stuff lately, e.g., the Chinese, the Japanese, the oil-exporting countries, may be able to come over here and buy a 100 percent interest in the 500 largest U.S. companies. Why would they want them if the U.S. economy continues to suck wind? (And it probably will if you believe that my economic recovery plan is necessary and compare it to what politicians are actually doing.)  Most of those companies are multi-national and do a lot of business outside of the U.S.

Meantime, we can take heart that similar economic challenges were tackled back in 1945: important historical video.

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