Business Charlatans Not New
by Christopher “Kit” Menkin
From the start of our country, we have had our share of charlatans.
I write the e-mail signature with “This Day in American History,
stealing of ideas, credits, and money. The colonial times were tough,
as were the frontier, and the twentieth century.
In the later half of the 19th century, meat from the United States had so many health problems, Europeans put a ban on importing it from us, until we established standards and enforcements. But it only applied to meat shipped out of the United States. It was not until the next century that the same standards were required for meat sold in
the United States. And we still have our crooks and problems, even in
our modern supermarkets.
We have had “Tammany Hall” in New York, Chicago, and many of our
cities, including Kansas, Iowa, and especially Louisiana. And business
corruption is not new from the Teapot Dome Scandal to a US Vice-president
receiving bribes from when he was governor right in the White House.
Recently we had Ivan Boesky, who served only a 20-month sentence for insider
trading, and most likely lives with servants somewhere, buying his way back
into his local high society—maybe even at Rancho Santa Fe. Michael Miliken,
the junk bond king, he served only 22-months for his fraud.
Remember Charles Keating, the man who brought down the Savings and Loan
indusry, and had more extravagant parties than PennFund’s Faghella---Charles
Keating. He did serve five years before his conviction was overturned. Reportedly
he diverted money to his relatives, who take very good care of him today. After
all, it is his money.
Hopefully if you read the “Day in American History,” you remember some of the
early corruptions where leaders of the day from the Erie Railroad Wars where
stocks were inflated, phony, and corruptions ruled the day. Rockefeller formed
trusts and took over companies with proxy issues, minority interest, and often
getting the Pinkerton Agents to use their wielding clubs to get what he wanted.
While Keating and Fanghella and Kozolowski (perhaps he is a man of the “Gilded
Age” with his paintings, expensive apartments, and trappings) threw expensive parties, this was nothing new to thee "Gilded Age," every man was a potential Andrew Carnegie, and Americans who achieved wealth celebrated it as never before. In New York, the opera, the theatre, and lavish parties consumed the ruling class' leisure hours. Sherry's Restaurant hosted formal horseback dinners for the New York Riding Club. Mrs. Stuyvesant Fish once threw a dinner party to honor her dog who arrived sporting a $15,000 diamond collar.
While the rich wore diamonds, many during this period wore rags. In 1890, 11 million of the nation's 12 million families earned less than $1200 per year; of this group, the average annual income was $380, well below the poverty line. Rural Americans and new immigrants crowded into urban areas. Tenements spread across city landscapes, teeming with crime and filth. Americans had sewing machines, phonographs, skyscrapers, and even electric lights, yet most people labored in the shadow of poverty. Today they have television sets, computers, portable telephones, and at least two cars per family, and are much better educated).
To those who worked in Carnegie's mills and in the nation's factories and sweatshops, the lives of the millionaires seemed immodest indeed. An economist in 1879 noted "a widespread feeling of unrest and brooding revolution." Violent strikes and riots wracked the nation through the turn of the century. The middle class whispered fearfully of "carnivals of revenge."
For immediate relief, the urban poor often turned to political machines. During the first years of the Gilded Age, Boss Tweed's Tammany Hall provided more services to the poor than any city government before it, although far more money went into Tweed's own pocket. Corruption extended to the highest levels of government. During Ulysses S. Grant's presidency, the president and his cabinet were implicated in the Credit Mobilier, the Gold Conspiracy, the Whiskey Ring, and the notorious Salary Grab.
Europeans were aghast. America may have had money and factories, they felt, but it lacked sophistication. When French prime minister Georges Clemenceau visited, he said the nation had gone from a stage of barbarism to one of decadence -- without achieving any civilization between the two.
Corruptions even goes back to the Revolutionary War where business sold
rotten meat, spoiled flour, and supplies at the highest price they could get,
especially at Valley Forge. Washington refused to pay and the suppliers
refused to deliver more. The commerce along the Mississippi is full
of stories of supposed shipped merchandise, exaggerated, or not there,
or supposedly warehoused, but stolen. Believe it or not, times were
a lot tougher and a lot more out of control than this century.
Santa Clara Valley is still in a recession. Don’t let anyone kid you
about it. Unemployment is up to 8%, business vacancies are as
high as forty percent in several areas of this county, and the technology
industry has not recovered from the down turn that started two years
Restaurant, hotels, and other tourist related business is still “soft.”
Constant sales push retail business. The real estate business is
“slow,” but housing is still expensive, home prices have leveled off,
but not dropped. The home construction business is still very busy
as many have re-financed their homes at extremely low rates, re-modeling
kitchens, bathrooms, and building new rooms.
The 15-year fixed-rate mortgage averaged 6.10 percent, down from 6.18 percent last week. One year ago, it was at 6.67 percent.
The business furniture industry is in the dumps. We know because two to
three years ago this marketplace dominated our business as new businesses
were moving in, or up-grading, or starting out, and new workstations, telephone
systems, and everything that went into a new location was at a premium.
We are not as bad off as the real estate leasing firms who tell
us they fell like the Maytag repair man, no one ever calls them.
This may change soon, as business property leases are coming due, and landlords
are really aware of the market condition. Some companies downsizing are
taking advantage of the decline in business office and industrial leasing
by moving to newer quarters with air conditioning, modern amenities,
at prices they have been paying at their “worn out” location.
Many companies here in Silicon Valley are requiring
their employees to take this time off as vacation time or “no pay” time. Most likely it will mean July will be a slow business month. Normally it is August.
Following the last delicate six month cycle, it is easy to predict the third
quarter will not be any better. So again, we are like last year, hoping for
a very strong fourth quarter like many retailers who main business of
the year comes during this season.
The UCLA Anderson report the end of last year said the economy would
recover, most likely the middle of next year (by June,2002). The next forecast
said basically the same thing, but “after the first six months”: and called
the economy “wobbly” in the state. The June 19
Anderson Forecast, compared the current recession/recovery to the nine previous recession/recoveries since 1950. Picking up on a theme first introduced in the March report, Edward E. Leamer, director of the UCLA Anderson Forecast, asserted that the nation is in the midst of the first "business cycle." The previous nine cycles have been "consumer cycles" driven by downs and ups of consumer spending, particularly on housing and cars. The recession of 2001 was caused by reductions in business spending. Consumers, however, continue to spend on housing and cars. We in the leasing business knew this, as capital equipment spending was down, whether leased or purchased outright.
Consumers "are buying homes and cars and shirts and shoes with a religious intensity suited to a celebration of the genuine arrival of the Nirvana Economy," Leamer said. However, all on credit or refinanced homes.
In a special report titled "Health Care and The Economy: Train or Drain?," author Christopher Thornberg, senior economist with the UCLA Anderson Forecast, addressed whether the health-care industry has served as a "drain," weakening an already soft economic recovery or whether it is actually the next "train," leading the world in cutting-edge technological breakthroughs, making life both longer and more pleasant for Americans
In a report titled "California at Midyear: Recession Ending in North, Expansion Proceeding in South," Senior Economist Tom Lieser in fact sees an end to the recession in the Bay Area and a continuation of the economic expansion of Southern California — which never dipped into recession this time around — and thus an end to the statewide recession. Unfortunately this was before Nasdaq
hit a five year low and new unemployment figures are scaring everyone.
Increasingly, personal computers have become a replacement rather than a
growth market, and Silicon Valley collectively is still waiting for
the Next Big Thing.
"This has been the perfect storm," said David Readerman, a partner and
director of growth equity strategy at Thomas Weisel Partners, the San
Francisco-based investment firm. "We had Y2K, the Internet build-out
and the biggest of all" - overbuilding in telecommunications.
Growth, he said, is now seen from sectors of the economy that for more
than a decade Silicon Valley has thought of as passé. Military contracting
and domestic security are areas that might emerge as
To grasp the depth of the Valley's decline from its peak, it is only
necessary to review the fortunes of the Fast 50, an annual list of the
region's fastest- growing companies maintained by Joint Venture:
Silicon Valley, a coalition of government, corporate and civic groups.
Of the top 10 companies on the list in 2001, only one, eBay, was
profitable in the last quarter. Two companies, Excite@Home and Exodus
Communications, filed for bankruptcy protection and have since been acquired. Seven
others on the list had losses in each of the last four quarters, including
Commerce One, which reported a staggering $220 million loss in the first quarter
of this year. Finally, the stocks of four of the eight survivors in this
group are now trading for less than $1.
The world of wireless data is poised to create a proliferation of
hand-held gadgets that could be a powerful driver for Silicon Valley. But the
disarray in the telecommunications market has cast a pall over the idea that the
rollout will happen quickly.
This kind of pushing back of new markets that might have spurred a
rebound seems to be quickly becoming the norm around the Valley.
"We've been saying that it's really not until the fourth quarter of '03
that you return to earlier levels, and maybe even that's suspect, " Mr.
While everyone may have their “signs of the time,” mine have always been “for
rent” signs around small houses and apartments in Santa Clara. When times are
very good, you never see them. You can’t find any place to rent. When they
are tough, the signs are everywhere.
I have never seen so many “for rent” signs since I have been in Santa Clara, since
I have seen small building and other office space “for rent” signs in other
recessions, but never the amount driving down Washington or Lafayette or
Benton or Homestead. I even see “ Pets are Welcome.”
This summer we will see the continued trend of consumers staying close to
home for vacations.
If this comment about “staying close to home” instead of traveling longer
distance is not correct, please let me know.