Andy Kessler

Forbes.com - Thankfully, That's Not The Way It Was

http://www.forbes.com/2009/07/20/walter-cronkite-obituary-media-opinions-contributors-mediocrity.html

I've always had a problem with Walter Cronkite. He had this mind-meld grip on the brain of everyone, including me, who came of age in the 1960s and 1970s, with his subliminal promotion of mediocrity and complacency that kept an entire generation in the doldrums. And no, I'm not talking about his views on the Vietnam War and LBJ's line "If I've lost Cronkite, I've lost middle America." That was just noise.

Look, the guy could read the news okay. It's not rocket science. "Uncle Walter" had the anchor seat on the CBS Evening News from 1962 to 1981, back when people actually watched the news on television. How quaint. Seven o'clock, right after the local news. Like clockwork, finish dinner, put on Cronkite. And he was good--heck, he was the master. He taught himself to speak slowly, with a half regal, half Midwestern accent, so he could penetrate American minds, and infect them with his mystical powers of persuasion.

Am I talking about liberal media bias? No. C'mon, stay with me here. Every night, right after the news stories and vignettes on acid rain and student protests and Dan Rather in the jungles of Vietnam and crumbling cities and heroin epidemics and exposés on Watergate and fraud and corruption and burning slums, Walter Cronkite would turn to the camera, and with almost undisguised smugness, tell me, right to my face, "... And that's the way it is."

Liberal schmiberal. That was a cover. He was the voice of the establishment, The Man trying to keep us down. And there's nothing we could do about it because that's the way it is. And I believed him. We all did. A conspiracy by advertisers on his show? Who knows, but it took me a long time to break out of his trance.

The 70s were a smog-filled haze. Upward mobility was a pipedream. Stock markets stagnated and all the moon-walking Space Age dreams of the 60s were shattered with layoffs and plant closings and Rust Belts and urban unrest. You were told to do well in school and maybe you could get an entry level job at a big company and wear a white short-sleeved shirt and work your way up over twenty or so years, so you could buy that little house in the suburbs and squeeze out 2.3 kids and afford a station wagon and … well, that's the way it is.

Someone else has all the money and you don't. That's the way it is.

Unknown forces control your life. That's the way it is.

Governments are corrupt. That's the way it is.

Society is divided into classes, and you're stuck in yours. That's the way it is.

The American Dream is dead. Go back to work, you sorry little cretins.

Fortunately for me, for you, for everybody almost everywhere, Walter Cronkite was wrong. "Most trusted man in America"? No way. That wasn't "the way it is." Not even close.

In fact you couldn't rely on anyone else--no school, no company, no institution, no company, no industry, no media, nobody was going to raise you up. The trick was to destroy each and every one of these existing systems. Blow it all up. Invent the future by destroying the past.

Not blow it up literally. Abbie Hoffman was a bozo. The Black Panthers were terrorists. It wasn't civil unrest that created change. That was a sideshow. It wasn't hippies or free love or exotic drugs (too bad, all that was kinda fun). All these things destroyed lives and never built anything new. Same for every beneficent government program and professor's teaching. Worthless.

Instead, what it took was a few little microchips (Ted Hoff at Intel), and a couple of funky pieces of code (Bill Gates at Microsoft) and a few smart people (Steve Jobs at Apple and Larry Ellison at Oracle and thousands of others), who weren't content working for The Man. Each of them dislodged "the way it is" and got a few people asking "why is it this way?" and declaring "think different" and "eat my dust," and bang, the status quo crumbled. You could create your own future. Power shifted out of the hands of conglomerates like Gulf & Western and Engulf and Devour and away from centralized bureaucrats running faceless government operations. Instead, power ended up in your hands, my hands, all of our hands. To do what we wanted.

Computers escaped air-conditioned rooms and ended up on our desks. Banks gave way to mutual funds. The New York Stock Exchange gave way to Nasdaq. Brokers gave way to Web-based trading and on and on.

So what did we want? To change the world, for the better, increase the size of the pie, bring the rest of the world onto our wealth grid. And not by building huts in Costa Rica but by taking down those obstructing progress, those leeching off the rest of us, holding us back, milking the present for their own benefit rather than standing aside and letting wealth-creating innovation increase everyone's living standard. Those "that's the way it is" types needed to move over. But they didn't move on their own, so we either had to wait for them to die or just destroy them. Seek and Destroy. Music companies. Travel agents. Insurance brokers. And we're not done--the hard work has just started.

It took me a long time, well into my life, to get Cronkite's words out of my head and realize that not only is anything possible (thank you Kevin Garnett), but that I was the one that had to make it happen. There were no gifts, no trailblazers to follow. We all have to invent the future by destroying the past.

Sadly, the old mentality is back. Citibank is too big to fail. That's the way it is. The government needs to bail out the automakers. That's the way it is. Taxes are going up. That's the way it is. Carbon dioxide will boil the oceans so we need to live in cities and walk to work. That's the way it is. Elites like Robert Reich and Paul Krugman and Al Gore will tell you what you'll be paid, how much health care you'll get, how much risk you can take, what kind of car you can drive, how much water you can use to flush your toilet, because … That's The Way It Is. He may have passed away last week, but Walter Cronkite will never die.

WSJ: The Bernanke Market

http://online.wsj.com/article/SB124762005061042587.html

I remember once buying the stock of a small company and I couldn't believe my luck. Every time my fund bought more shares the stock would go up. So we bought even more and the stock kept climbing. When we finally built our full position and stopped buying the stock started dropping, ending up at a price below where we started buying it. We were the market.

Just about every policy move to right the U.S. economy after the subprime sinking of the banking system has been a bust. We saved Bear Stearns. We let Lehman Brothers go. We forced Merrill Lynch, Wachovia and Washington Mutual into the hands of others. We took control of Fannie and Freddie and AIG and even own a few car companies, pumping them with high-test transfusions. None of this really helped.

We have a zero interest-rate policy. We guaranteed bank debt. We set up the Troubled Asset Relief Program (TARP) to buy toxic mortgage assets off bank balance sheets. But when banks refused to sell at fire sale prices, we just gave them the money instead. Dumb move. So we set up the Public-Private Investment Program to get private investors to buy these same toxic assets with government leverage, and still there are few sellers. Meanwhile, the $1 trillion federal deficit is crowding out private investment and the porky $787 billion stimulus hasn't translated into growth.

At the end of the day, only one thing has worked -- flooding the market with dollars. By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.

The good news is that Mr. Bernanke got the major banks, except for Citigroup, recapitalized and with public money. June retail sales rose 0.6%. Housing starts jumped 17% month to month in May and will likely be flat for June. Second quarter GDP may be slightly up. And he was successful in spreading a "green shoots" psychology throughout the media. But the real question is, now what? Government interventions are only meant to light a fire under the real economy and unleash what John Maynard Keynes called our "animal spirits." But government dollars can't sustain growth.

The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.

Like it or not, the stock market is bigger than the Federal Reserve and the U.S. Treasury. The stock market anticipates only future profits and prosperity, not government-funded starter fluid. You can only fool it for so long. Unless there are real corporate profits from sustainable economic growth, the stock market is not going to play along. It's the ultimate Enforcer.

In mid-May, Mr. Bernanke's outlook seemed to change. Maybe he didn't approve of the sharp housing rebound -- like we need more houses! Maybe he saw inflation in commodity prices -- oil popping to $72 from $35. Or, more likely, he finally realized that he was the market and took his foot off the money accelerator, as evidenced in the contracting monetary base (see nearby chart). Sure enough, things rolled over -- the market dropped 7.5% from its peak, oil prices dropped almost 17%, and even gold has lost some of its luster. But in July, the Fed started buying again and the market rallied.

Can the U.S. economy stand on its own two feet without Mr. Bernanke's magic dollar dust? Eventually, but apparently not yet. Unemployment stubbornly hit 9.5% in June, according to the Bureau of Labor Statistics. Housing prices are still dropping, albeit at a slower pace, and foreclosures are still rampant.

But I think what really bothers the market is that the structural problems that got us into trouble in the first place still exist. We took the easy way out and, with the help of Treasury Secretary Tim Geithner's loose "stress tests," swept banking problems under the carpet. We waved off mark-to-market accounting and juiced bank stock prices to help them recapitalize, but all those toxic mortgage assets on bank balance sheets are still there as anchors on lending. All the pump priming and stock market flows didn't get rid of them.

Hats off to Mr. Bernanke for getting the worst behind us. He'll be pressured politically to keep pumping out dollars, but he should resist the urge. The stock market will ignore his dollars if it doesn't believe they'll turn into real profits. Green jobs and government health-care clerks do not make a productive, sustainable economy. That can only come from innovative companies with access to growth capital. The stock market won't turn bullish until it sees that type of economy.

Again, when it's clear that you are the market you have to stop buying and begin tackling the hard stuff. By not restructuring banks, by not getting bad loans off bank balance sheets, by not standing up to the massive increases in government debt crowding out private capital, the Fed and Treasury are holding back real economic growth.