Wilder Than Wildlife

It’s Friday, January 16, and I’m with my staff and two visitors.

We’re gathered in a meeting room that overlooks the lake behind our office building in Jupiter, Florida.

Outside our window, wildlife is everywhere — ospreys, eagles, turtles, and Wally, our five-foot alligator who’s faithfully observing it all from his favorite sunny spot on the left bank.

Inside, we are brainstorming: What’s going on in the market and the economy right now? Will the presidential election drive events? Where is our country headed?

THE NEW TECH BUBBLE

Tony, a tech industry expert and father of four, is visiting from Texas. He’s a staunch supporter of his former governor now in the White House. But he’s concerned about a few things, especially the market.

“I was just at basketball practice with Kenji last week,” Tony says. “I was watching the kids playing when I overheard a couple of dads next to me raving about their great tech stocks. One dad bragged that he’d thrown his entire IRA into a hot satellite stock.

“So, the other dad asked: ‘Isn’t that a bit risky?’

“The first dad responded: ‘Heck no! Last time around I bought all my stocks on margin.’”

Everyone around the table laughs. But we know that it’s not a laughing matter. The man Tony has told us about is risking his retirement and probably his children’s education on one shaky, overvalued company that could be gone tomorrow.

Of even graver concern is the fact that the man’s one of many. “Back during the bubble days in the late 1990s,” Tony continues soberly, “a lot of my friends used to ask me about the stock market all the time. They knew I was in the financial industry. So they’d always be pumping me for my opinion about this or that Internet start-up, this or that telecom marvel. I tried to blow them off. I told ‘em to cool it. But they kept on coming back for more.

“Then, in 2001 and 2002, they suddenly stopped bothering me for stock tips. I finally got some peace and quiet for a change. Now, though, it has started again. The bug has bitten them again. They’ve caught the same old fever, and they don’t even recognize it’s a relapse.

“But you want to know what I find truly ironic?” Tony asks. “It’s the fact that they’re getting lured in by the same old fruit as last time, and it’s still just as full of worms as it ever was.

“The average stock in the Nasdaq Composite Index is selling for 140 times trailing earnings. These are stocks you’d have to hold for over a century before they could earn back their share price with current earnings.

“When will this new bubble bust? It’s impossible to say. But it’s equally impossible to imagine a scenario without a big bust. When investors lose their minds, anything can happen. But this is nothing like the 1990s boom. In the 1990s, you had major innovations. This time, it’s practically all based on little doo-dads: Cell phones that take pictures. Laptops that play movies. Flash-in-the-pan products that go nowhere. So don’t count on election-year politics sustaining this.”

THE BUBBLE ECONOMY

The room falls silent for a moment. I squint out at the sunshine, trying to spot Wally. But he’s gone fishing — had enough sunbathing for a while, I guess.

Meanwhile, Clayton, who’s visiting from North Carolina, is expanding on Tony’s argument. His main point: The tech stock bubble is just a metaphor for a much broader bubble in the economy.

“Do you read the Robb Report?” he asks, referring to a lifestyle magazine for the rich and famous. “The other day, I saw an item in the Robb Report that was selling for $250,000. Anyone care to guess what that item was?”

He pauses, but no one responds. “If you’re thinking it’s a middle-class home in the suburbs, you’re way off. And no, it’s not a fancy, imported sports car either.”

“What is it then?” someone asks.

“It’s a damn pencil sharpener! Can you believe that? Two hundred and fifty grand for a friggin’ pencil sharpener! Of course, it’s powered by a Bugati engine. But it just goes to show you how people with money are going berserk these days. That’s why luxury goods — like $75,000 purses, $100,000 Hummers — are selling like wildfire.”

Marie, who helps me with “Martin on Monday,” is sitting immediately to my right. “And don’t forget the Wal-Mart syndrome,” she remarks with a smile.

I know exactly what’s she’s referring to. Here we are in the midst of this economic recovery, but big discount retailers like Wal-Mart are hurting. And if you think their sales are bad, consider the toy chains! FAO Schwartz filed for bankruptcy for a second time last month. KB Toys just filed last week. Toys R Us got slapped down with double-digit sales declines over the holidays.

What’s wrong with this picture? Simple: This is still largely a jobless recovery, and people without jobs — or fearing unemployment — don’t have the money to spend like they did in the past, regardless of big discounts.

Everyone is hoping the massive tax cuts and 45-year-low interest rates will buy us prosperity. Instead, nearly all we’re getting is a cheap thrill. And to make matters worse, we’re saddling our children and grandchildren with the bill. They’re the ones who are going to get stuck with the trillions in extra debt. They’re the ones who are going to have to pay the interest.

This has nothing to do with Democrats vs. Republicans, challengers vs. incumbents. If the Democrats controlled the White House, it would be no different. Both have a history of fiscal irresponsibility. Both have a bad habit of sacrificing the future for the present.

FAMILY

Julie, who has one child and is pregnant with her second, is speaking. “We spend hours talking about the economy,” she says softly. “But there’s a lot more to this that we’re NOT talking about.

“I was born in a small town in West Virginia. I always remembered it as a place where life was normal, where people grew up, got married and had children. But that’s not how it is any more.

“I was back there for the holidays,” she continues. “The daughter of my mom’s neighbor has been married three times and has three children, one with each husband. Another has plowed through four husbands, leaving her with four kids. Years ago, people like that would have kept the gossip mills of the town running overtime. Not now! Now, it’s people like me, married for 16 years, who are the exception. I’m the one who’s ‘abnormal.’ ”

She shakes her head slowly in disapproval and concern. “Everything’s coming unglued. But it’s not happening slowly, as you might expect with such changes. It’s happening FAST — in a generation or even less. And that’s what’s so frightening. If things keep sliding at this pace, where is it going to take us? What’s it going to be like to grow up in America a few years from now?”

Julie’s boss, Mary Ellen, is sitting immediately to my left. She has two children in elementary school, and I notice she’s nodding with a short up-and-down motion, her way of saying she agrees and wants the floor without delay.

“You don’t have to wait for the answer to your question,” she says. “I can tell you right now what it’s like. I live in a quiet neighborhood in Boca Raton. But do you think I’d let my kids bike around on their own? No way! Adam Walsh was abducted only a few miles from where I live.”

She’s referring to the son of John Walsh, host of “America’s Most Wanted.” Twenty-three years ago, six-year-old Adam disappeared from a shopping mall across from a police station. Two weeks later, his severed head was found in a canal 120 miles away. The boy’s body was never recovered.

“Some people say the stats on child abuse and abduction are better today,” Mary Ellen continues. “I doubt it. But even if it’s true, it’s not reassuring. Why? Because there’s not much they can do about many of the child molesters. They can’t find a cure. And they can’t lock them up forever, either. Sooner or later, they have to let them out. I won’t expose my kids to that risk. If that means my kids can’t explore on their own like we used to when we were their age, so be it. I know it’s very sad. But I still can’t let them.”

SKIN-DEEP PROSPERITY

I glance outside and notice a white ibis soaring above the lake.

Someone asks: “Aren’t we getting off topic?”

But Julie and Mary Ellen shake their heads, and I fully understand their reasoning:

FIRST, the glittering economic prosperity of recent years was skin deep. Below the surface, something very ugly has been going on — something hard to define and quantify — but ugly nonetheless.

SECOND, for many Americans, the family as a social norm is collapsing, and the collapse is accelerating. That decline, in turn, is linked, directly or indirectly, to child abuse, child molestation, child abduction, and child murder.

THIRD, the decline of the family also has vast economic consequences — such as a bigger financial burden on governments for education, health care, elder care, and more.

FOURTH, trying to buy quick prosperity with big government injections of money and debt right now doesn’t seem like it will do much good. It could even make things worse.

FIFTH, even in the best case scenario, we’re still piling up unpayable debts that SOMEONE is going to have to pay for. Maybe it will be retired folks whose Social Security and Medicare gets cut. Maybe it will be the broad middle class that gets stuck with huge tax hikes. Probably both.

NATIONAL DISASTERS

It’s two days later, Sunday morning, January 18. I’m home alone, sitting in front of my computer. A big storm rages outside.

Tomorrow at this time, I figure you’ll be reading these words and you’ll want more than just anecdotal evidence to substantiate my views.

So I’m researching some facts for you. Thank goodness I’ve got some training in this field — my doctorate from Columbia University is in cultural anthropology, a field dedicated to explaining the connections among economics, politics, and family.

What I’m finding confirms what Julie and Mary Ellen were talking about on Friday: We face a series of national disasters of broad dimensions …

National Disaster #1
RAMPANT DIVORCE

The divorce rate in America is the HIGHEST of any nation in the world — 4.95 per 1,000 people each year. That’s THIRTY-THREE times worse than the divorce rate in Sri Lanka and FIFTEEN times worse than the divorce rate in Mexico. (Data source: Divorcereform.com).

I don’t know Sri Lanka. But I do know Mexico. Years ago, Elisabeth and I traveled by land from Ciudad Juarez, across the border from El Paso … all the way down to Tapachula, near the border with Guatemala. We’ve been back there many times. We can even speak Spanish with a sort of central Mexican accent.

The reason is that we often visit our friend, Gilberto, who lives in the DF, the Federal District. He’s divorced himself, and often talks about it.

“Divorce is now rampant in Mexico,” he said the last time we saw him.

I retorted: “But did you know the divorce rate is fifteen times higher north of the border? Even if the statistics aren’t directly comparable, that’s a wild number: Fifteen times!”

His jaw fell, and for a moment, he just stared at me incredulously. “That’s beyond my ability to comprehend,” he commented. “You have a great country. Most people in Mexico would love to exchange places with you. My son, who lives in Texas, is doing tremendously well. Yet I can’t even imagine a society holding together for long with that many divorces.”

Another important statistic: For every 100 marriages in America, there are 49 divorces. That’s not the highest in the world — mainly because Americans remarry more than in some other countries. But it’s still higher than the divorce rate of nearly all other modern nations.

In Denmark, for example, a country suffering its own social ills, there are 35 divorces per 100 marriages. In Portugal, there are only 21. In Spain there are just 17.

My sister’s former mother-in-law, Paula, is Spanish. Her husband died many years ago and she now lives with a family member in Andalusia. She personally thinks the divorce situation in Spain is totally out of control. Like Gilberto, she’d probably be horrified if I told her the ratio of divorces to marriages is nearly three times greater in America.

What would truly terrify her, though, would be the thought of living alone, a common fate of widows, widowers, and divorcees in the United States. Indeed, among 22 major industrial nations, the United States has THE highest percentage of one-person households — 26%. That’s about double the level of Germany, Switzerland, Netherlands, Austria, France and the UK … and over SIX times that of Portugal and Spain.

Of course, many Americans live alone by choice and because they can afford to. But many more have no other choice.

National Disaster #2
TEENAGE MOMS

Among every 1,000 teenage girls in America age 15 through 19, there are over 52 births each year, by far the most in the world. The United Kingdom is next, but its number is a distant second to ours — under 31 births per 1,000. (Data source: UNICEF).

But to gain a clearer vision of how drastic this situation is in America, you should visit South Korea or Japan.

We did. Back in 1980, Elisabeth and I lived in Japan with a host family — a widow, Mrs. Kondo, and her teenage daughter, Yaeko.

A few years ago, we went back to visit. Yaeko is now happily married to a doctor, with one son. But, unfortunately, many in the new generation of teenage girls will not share her happiness.

“Lots of cute, middle-class high-school girls have lost their way,” she said, as we ate vegetable and fish shabu-shabu. “They feel they have to wear expensive ‘in’ fashions. So they sell their bodies to earn money. They even hire special secretarial agencies to fool their parents that they’re at after-school jobs. These services are paid to lie for them, saying they’re ‘safely at work but too busy to talk.’ In reality, they’re probably in bed with a customer.”

“That’s unbelievable,” Elisabeth exclaimed. “When we used to live here, there was nothing like that going on — not even close.”

Then I threw out this shocking statistic: “But did you know that the number of births among teenage moms is more than TEN TIMES HIGHER in the United States?” (52.1 per 1,000 in the United States compared to 4.6 in Japan).

“And believe me,” I continued, “the fewer births in Japan are definitely NOT because of more abortions. Quite to the contrary, there are many more abortions per 1000 in the United States. (4.3 in the U.S. vs. 2.7 in Japan. Data source: also UNICEF).

I hastened to add that the United States was still a great place to live, and they nodded in agreement. They had visited us in Florida when Anthony was just a baby; and Ihoko, the older sister, has been living here for many years.

But that only added to the mystery. How in the world, they wondered, could such a great, prosperous country like the United States have ten times more births among teenage moms than Japan!?

Can we write it off simply as ‘fact stranger than fiction’? Not quite. Every social phenomenon has a reason; and every social crisis, serious economic consequences.

National Disaster #3
AMERICA’S PRISON POPULATION

For every 100,000 American residents, we have 641 behind bars, the largest percentage in the world. (Data source: United Nations).

That’s even more than in the Soviet Union, still suffering from the legacy of the Stalinist era and its aftermath.

And it’s SIX times more than Australia’s prison population (111 inmates per 100,000 people), Canada’s (110) and the United Kingdom’s (109).

Meanwhile, in Japan, the number behind bars is only 48 per 100,000, less than one-THIRTEENTH the ratio here in the United States.

Is this because we’re doing a better job of catching criminals and locking them up? Is it because we have more bad guys behind bars, while most other countries have more bad guys roaming loose?

Hardly! With the possible exception of the Yakuza (the Japanese Mafia), a criminal’s odds of getting away with a crime in Japan are a small fraction of what they are in the United States. Ditto for many of the other countries I cited above.

The sad truth: The United States has many more dangerous people on the streets than there are in jail.

Consider rape, for example, a crime akin to the child abduction and murder that Mary Ellen was talking about on Friday.

No, the United States is not the worst in this category — South Africa is. But unfortunately, our country IS among the worst ten, with about TRIPLE the number of rapes per thousand than those reported in Mexico, Costa Rica, Norway, Venezuela, Finland, Netherlands, Denmark, Germany, or Chile.

Naturally, in some countries, the manner in which crimes are reported — or NOT reported — can have a big impact on the crime statistics. But still. Triple the number of rapes in those countries? Not a number to be proud of.

Am I singling out rape? Not at all. If you add up ALL reported crimes, the United States is still in the worst ten among 60 different nations surveyed by the U.N.

The dire facts: For every 1,000 people, 84.39 crimes are reported in America each year.

In Italy, it’s only 38; in Spain, 23.

Japan, meanwhile, scores the best among major industrial nations with only 19, less than one-FOURTH the overall crime rate in the U.S. That’s despite the fact Japanese citizens tend to report — and the Japanese police generally tabulate — a HIGHER percentage of the actual crimes than their counterparts in the U.S.

WHY I LIVE IN AMERICA

I live here by choice — because I recognize the trade-offs. I know the freedoms and opportunities we enjoy in the United States don’t come without a cost. I also know that if you choose the right place to build your home, you can find your own paradise in any of the 50 states — all without venturing abroad.

But that still leaves many questions unanswered: What will happen to our quality of life if we continue to squander our precious resources on growth purely for growth’s sake? Worse, what will happen if the bubbles burst and even the growth itself fails to materialize as expected?

I will share my own answers — and solutions — in future e-mails.

In the meantime, stay safe. Change nothing in the strategies I have outlined in my Safe Money Report. Don’t fall for Wall Street’s hype. And take the promises of presidential candidates — from any party — with a grain of salt.

Good luck and God bless!

Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc.
martinonmonday@weissinc.com

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