Sunday with the Times

One vestigial sign of my religious upbringing has been my discomfort at not having some ritualized activity for Sunday mornings, other than sleeping in until 11:00. The sense of liberation brought by sleeping in has long since worn off, and probably due to my advancing age I am finding it harder and harder to stay in bed past 8:00 anyways. Reading the Sunday edition of the Minneapolis Star Tribune worked for awhile, until I came to the realization that the Star-Trib is a pretty crappy newspaper.

So until lately, and especially after my separation, I've contented myself with wolfing down scrambled eggs in front of the computer monitor as I catch up on the Saturday night blogging activity. But in-house rituals aren't very satisfying, so I've taken to a new ritual of reading the Sunday New York Times at the neighborhood coffee shop attached to the grocery store. Secular Nirvana at last!

The Times is widely regarded as the nation's preeminent newspaper by the politerati of both the Right and the Left. It's leftward slant is taken for granted by conservative pundits, but my own experience has demonstrated it to be far more balanced than those pundits make it out to be. And I've also found that the reporting , as opposed to the editorial page, is far more objective and informational than the wags of the "New Media" are ready to admit.

As an example from today's edition, this article from the Business section asks the question "What does Africa need most: technology or aid":

Opening the conference on June 4, Mr. Anderson described his purposes as frankly promotional. Too often, he said, the only images of Africa that Westerners see are of drought, famine, disease and civil war. By contrast, TED Global 2007 would present an Africa that was newly entrepreneurial, increasingly wealthy and tech savvy, and largely politically stable.

“It’s a story,” Mr. Anderson said, “that is unfolding across the continent, and it’s a story that’s not well known outside of Africa.”

...

At TED Global 2007, I witnessed one small skirmish in a larger ideological conflict between those who believe that Africa needs more and better international aid, and those who think entrepreneurialism and technology will lift the continent out of poverty and thus reduce its miseries.

Predictably, TED’s attendees and speakers were spellbound by technology and entrepreneurialism and, at the same time, distrustful of international aid.

“What man has ever become rich by holding out a begging bowl?” asked Andrew Mwenda, an Ugandan journalist and social worker, now a research fellow at Stanford in California.

Mr. Mwenda argued that $500 billion in international aid over 50 years had achieved nothing in Africa and that the persistence of African poverty could be explained, in part, by aid. Charity, he said, had “distorted the incentive structure” and had persuaded the brightest Africans to work for corrupt governments. He called upon African entrepreneurs to build African businesses and the American investors in TED’s audience to finance them.

Echoing Mr. Mwenda, Russell Southwood, the publisher of Balancing Act, a newsletter about technology in Africa, implored African entrepreneurs and Western business leaders to “invest in shortages.” Africa, he said, could “leapfrog” the industrial technologies that Westerners use and build truly 21st-century technology systems and networks.

Would any self respecting socialist editor allow such a quote from an African through the filter?

Speaking of the editorial page, right below a Frank Rich diatribe comparing the Bush administration to the Sopranos, Michael Goldfarb is given space to mourn the death of Antioch College at the hands of the radical Left:

THIS is an obituary for a great American institution whose death was announced this week. After 155 years, Antioch College is closing.

Established in 1852 in Yellow Springs, Ohio, by the kind of free-thinking Christian group found only in the United States, Antioch College was egalitarian in the best tradition of American liberalism. The college’s motto, not in Latin or Greek but plain English, was coined by Horace Mann, its first president: “Be ashamed to die until you have won some victory for humanity.”

Yet it was in the high tide of liberal activism that the college lost its way. I know this firsthand, because I entered Antioch in the fall of 1968, just when the tide was nearing its peak. So much of the history of 1968 reflects an America in crisis, but if you were young and idealistic it was a time of unparalleled excitement. The 2,000 students at Antioch, living in a picture-pretty American village, provided a laboratory for various social experiments of the time.

With a grant from the Rockefeller Foundation, the college increased African-American enrollment to 25 percent in 1968, from virtually nil in previous years. The new students were recruited from the inner city. At around the same time, Antioch created coeducational residence halls, with no adult supervision. Sex, drugs and rock ’n’ roll became the rule, as you might imagine, and there was enormous peer pressure to be involved in all of them. No member of the faculty or administration, and certainly none of the students, could guess what these sudden changes would mean. They were simply embraced in the spirit of the time.

I moved into this sociological petri dish from a well-to-do suburb. Within my first week I twice had guns drawn on me, once in fun and once in a state of drunken for real by a couple of ex-cons whom one of my classmates, in the interest of breaking down class barriers, had invited to live with her.

...

Each semester, the college seemed to create a new program. “We need to take education to the people” became a mantra, and so satellite campuses began to sprout around the country. Something called Antioch University was created, and every faculty member whose marriage was going bad or who simply couldn’t hack living in a village of 3,000 people and longed for the city came up with a proposal to start a new campus.

“It was liberalism gone mad,” a former professor, Hannah Goldberg, once told me, and she was right. The college seemed to forget the pragmatism that had been a key to its ethos, and tried blindly to extend its mission beyond education to social reform. But there were too many new programs and too little cash reserve to deal with the inevitable growing pains.

For the increasingly vocal radical members of the community, change wasn’t going far enough or fast enough. They wanted revolution, but out there in the middle of the cornfields the only “bourgeois” thing to fight was Antioch College itself. The let’s-try-anything, free-thinking society of 1968 evolved into a catastrophic blend of legitimate paranoia (Nixon did keep enemies lists, and the F.B.I. did infiltrate campuses) and postadolescent melodrama. In 1973, a strike trashed the campus and effectively destroyed Antioch’s spirit of community. The next year, student enrollment was down by half.

...

Antioch College became a rump where the most illiberal trends in education became entrenched. Since it is always easier to impose a conformist ethos on a small group than a large one, as the student body dwindled, free expression and freedom of thought were crushed under the weight of ultra-liberal orthodoxy. By the 1990s the breadth of challenging ideas a student might encounter at Antioch had narrowed, and the college became a place not for education, but for indoctrination. Everyone was on the same page, a little to the left of The Nation in worldview.

Much of this conformist thinking focused on gender politics, and it culminated in the notorious sexual offense prevention policy. Enacted in 1993, the policy dictated that a person needed express permission for each stage in seduction. (“May I touch your breast?” “May I remove your bra?” And so on.) In two decades students went from being practitioners of free love to prisoners of gender. Antioch became like one of those Essene communities in the Judean desert in the first century after Christ that, convinced of their own purity, died out while waiting for a golden age that never came.

Who let that guy in?

Another excellent report is this from Craig S Smith on the divided loyalties between the Palestinians of the West Bank and the Gaza Strip that provides some historical background on the different paths the two communities took after the UN mandate that created Israel in 1948:

They have always had distinct traits, culturally and geographically — the West Bank supporting a landlocked urban and agricultural society, Gaza facing the sea.

Those differences increased after the creation of Israel in 1948, when Gaza fell under the administration of Egypt and the West Bank was annexed by Jordan.

Egypt treated Gaza as a Palestinian enclave and encouraged a strong sense of Palestinian identity. Many Gazans who studied in Egypt during those years were influenced, in turn, by the Muslim Brotherhood, whose goal is to establish Islamic theocracies across the Arab world.

Back in Gaza, some of those men founded Hamas in 1987.

Jordan, on the other hand, suppressed Palestinian nationalism in favor of Jordanian identity and Palestinians in the West Bank were more influenced by the secular societies of Jordan, Syria and Lebanon, where many went to study. Others traveled even further abroad, bringing back a liberal view of the world.

Transcendence Lite

Megachurch flocks have learned to transcend their earthly concerns for something beyond themselves: a superstar pastor. What happens when their superstar falls in discrace, and they are left only with the Word of God fill that hole in their soul? It can be tough going:

Pastor Ted's influence was felt everywhere in New Life Church: in the videos shown at worship; in the New Life bookstore, which stocked books he recommended; and in the story of the church itself. He started New Life in his basement, building it into a 14,000-member nationally known megachurch. As the Rev. Ted Haggard's fortunes rose, so did the church's.

So when Haggard fell spectacularly from grace in a scandal involving drugs and allegations of gay sex, many wondered if New Life, so tied to his public persona, would crash with him.

The answer has significance far beyond the Haggard tragedy. As evangelical megachurches have sprung up around the country, concerns have grown over whether superstar pastors help or hurt faith communities.

"When you get to these top 25 or 50 of the largest or most influential churches, these pastors are clearly celebrities. They were the founders, they created much of the growth and they are, in some sense, a brand in and of themselves," said Scott Thumma, a professor at Hartford Seminary in Connecticut, who specializes in studying megachurches. "It's just like a business where the name of the founder is, in fact, a trademark."

America has always had big-name preachers — from Billy Sunday, the pro baseball player-turned-evangelist, to Billy Graham. But the two were not closely tied to a single church. Among today's best-known pastors, Rick Warren has Saddleback Church in Lake Forest, Calif., Joel Osteen has Lakewood Church in Houston and Bishop T.D. Jakes has The Potter's House in Dallas.

Graham and Sunday also worked in a vastly different media environment. Modern-day celebrity pastors have Web sites, where they promote their books, along with the DVDs, TV shows and films they produce, while preaching internationally. With such high profiles, word of any wrongdoing will spread quickly, intensifying the damage to them and their congregations.

...

With Haggard gone and the crisis he created easing, New Life members face a different challenge: They must decide whether they wish to belong to a church without the charismatic leader.

Nancy Ammerman, a Boston University sociologist who researches congregational life, said the megachurch might be saved by its extensive programs that create social groups within the church. New Life uses the small group model, where churchgoers meet regularly with just a few others, sometimes based on common interests outside of worship.

"That also gives them a forum within which to deal with what happened," Ammerman said.

But Randall Balmer, a Barnard College historian of American religion, said megachurches are so wrapped up with their pastor that New Life inevitably has hard times ahead. Without any creed or denominational identity for the church to cling to, attendance will eventually drop by half or more, he predicted.

"You have a kind of cult of personality that confuses the faith with a particular individual," said Balmer, author of "Thy Kingdom Come: How the Religious Right Distorts the Faith and Threatens America." "I just think it's very difficult to recover from this sort of thing."

What these churches need is an "American Idol" style talent search to find the next big superstar pastor. Each megachurch would get to pick a contestant based on an NFL style draft, where the megachurch with the losingest record (net attendance loss from previous year) getting the highest draft pick.

Once you conclude that religion is just another form of show business, the world becomes easier to understand.

Life During Wartime

(In a case of independent invention—you will have to trust me on this—Gaw and I were writing about roughly the same thing, and using the same vignette approach, at the same time. However, since my lag between conception and production is typically best measured using continental drift, this is coming in a very distant second. And not just in terms of the calendar.)

The last couple weeks have brought an avalanche of books and articles (scroll down a fair bit) about the collapse of first the Warsaw Pact, then the Soviet Union. Twenty-one years ago, the ugly, unshaven head of monolithic, hegemonic communism looked like going on forever, crushing souls every step of the way.

Twenty years ago, gone.

My children are 16 and 15. Despite the interval of a mere couple decades, that world, the one that had revolved around two diametrically opposed organizing principles, and under the ever present specter of nuclear war, is to them terra incognita, no more real, and perhaps more perplexing, than a badly plotted vampire novel. Indeed, for anyone on the sunny side of 45, that whole era scarcely registers.

---

For me, awareness started early, at age 5, in 1960. I was a preternatural reader. Some years afterwards, my dad told me of a time when we had gone to someone else's house for burger-burn. One of the moms there told my dad "Isn't he cute, he acts just like he is reading the newspaper." To which my dad said "Oh, but he is."

From nearly the outset, then, I didn't have the parental filter between me and the daily news. Even to an otherwise garden variety five year old, there was obviously something implacably awful about Communism.

Which put me one up on those who awarded the Pulitzer prize to Duranty, and a largish heap of liberal arts professors.

---

Throughout my tenure in grade school, we had air raid drills. The local civil defense alert siren would go off on the first Monday of the month at 10:00 am. We were to stop whatever we were doing, and crouch under our desks.

Having just read about the Cuban missile crisis, and nuclear weapons, I knew two things: it was going to happen and nothing, least of all those desks, was going to help.

Ten years later, I was alone at home when there was a sudden, earth splitting, ear shattering, roar. Knowing the war had started, I ran outside, looking in the direction of downtown LA for the mushroom cloud, knowing full well that death was only moments away.

Nothing. And no sign whatsoever of what had caused all that commotion.

Until the newspaper showed up the next day. For reasons I can't remember, some F-4 pilot did some flathatting, which included going right over my house at treetop level.

---

As an F-111 pilot, I played a walk-on part in the Cold War. It was a dangerous airplane, more inclined than any I have heard of to rip your head off and ram it down your throat. Handing that thing over to competitive young men in the throes of testosterone poisoning didn't help matters. With regularity that would now be appalling, but then routine, the machines and their crews got splattered across the landscape.

I am not proud to admit this, but their deaths accorded to the rest of us unearned glory.

But then, I suppose that is the fuel on which armies run.

---

My first tour in England started just after Maggie Thatcher became PM. England was then plagued by strikes and the likes of Tony Benn, Arthur Scargill, and Michael Foote, all determined to nationalize the means of production.

I don't recall that troika apologizing for having less of a clue than a five year old.

---

A couple times a year, the base went on a week long exercise. The scenario was always the same, and mirrored NATO planning: The USSR invented some pretext, which led to the Warsaw Pact coming through the Fulda Gap, and then the rest of the inner German border, in overwhelming force. In short order, NATO's inferiority in men and materiel proved progressively inadequate to holding off the red horde, and as the exercise reached its end, the only alternative to abject surrender was total war.

Whereupon we would stop flying and do a load-out: two very real nuclear weapons on each airplane, destined for pre-planned targets in the the northwestern USSR.

Some guys joked that they would fly to the Azores instead, and be in charge of the world's only remaining nuclear power.

Me, I figured to roll inverted and take it nose first into the Baltic at 1000 mph.

---

In 1983, President Reagan was intent on putting nuclear armed Pershing missiles in Europe to counter the USSR's deployment of SS-20 IRBMs. This aroused no small amount of opposition from the Campaign for Nuclear Disarmament, for whom no amount of moral equivalence was too much.

At one point, they decided they were going to ring RAF Upper Heyford with protestors. They chose carefully: one of the Queen's roads went right through the center of the base, which meant the perimeter they needed to surround was much smaller than other American bases.

Our wing commander had other ideas. We were to report on Sunday evening with enough stuff to get us through a week. The CND might be able to close off the base, but they weren't going to stop us flying.

Our flying orders changed, too. Ordinarily, it was something like free play: takeoff, do stuff, and bring it back in a couple hours in a re-usable condition, and without phone calls. Instead, we were to be gone for just long enough to fill the minimum amount of currency squares, the spend rest of the fuel beating up the pattern.

Good Lord there were a lot of planes; more, really, than approach control, tower and some pilots were prepared to handle. I was flying an instrument approach, and had just been handed off to tower when I heard "Gambler 12, base, gear down, touch and go", which meant some guy had just come off the "perch", and was making a steep descending 180 degree turn towards the runway.

In theory, I had the right of way, and he should have come off the perch so as to roll out on final with sufficient distance behind me.

No harm in looking, though. Whereupon I saw the bottom of a 'vark that was going to hit me if I didn't do something about it. In truth, cleaning up, stroking a little afterburner and taking it around would have sufficed. Somehow, though, merely sufficing just wasn't enough. After all, getting more spacing by altering course to the right and using every bit of afterburner Pratt & Whitney put in the engines could be plausibly explained as, umm, a prudent response to a near mid-air.

As to the low altitude high speed pass right over the Queen's highway, well, that just couldn't be helped. And I insist I was saluting the protestors as I went by.

The CND packed it in on Tuesday. Coincidence? I think not.

---

Behind the Irony Curtain

In the summer of 1988 I visited East Berlin, the first time I had come into direct contact with communism. So, in a very real sense, until then I had been employed to oppose something read about, but not seen: a phantasm.

Going through Checkpoint Charlie really was like passing through the looking glass, getting a day pass to mingle with the prisoners. Everything was gray and shabby, including the people. Some buildings still showed the spray of machine gun fire from WWII. There was a big department store that had thousands of great deals on items not in stock. I went to the Soviet WWII memorial, and saw about the war from their point of view in the theatre there. The screen looked like it had once been a bed sheet, only grayer. Almost all the seats were broken, and the film had been repaired many times, probably with scotch tape. It needed one more time during my viewing, when the projector jammed. Among many things my kids will never have any direct experience with—slide rules and dial phones being two examples—is what a movie looks like when it stops: a frozen frame, then a slow darkening, then a brown circle becoming a white hole as the film melts.

After the movie, I went to Alexander Platz (in more shameless ripping off, scroll down for the picture). The most prominent feature there is the television tower. The ball at the top is reflective.

When the sun is out, its reflection looks just like the Christian cross.

The most overwhelming impression from my visit, even more than the pervasive shabbiness, was the sinking feeling that the Cold War would go on for decades.

Fifteen months later, it was essentially game over.

What should have been, in retrospect, extremely obvious was that if the Germans couldn't make communism work, no one could.

---

In mid-1989, before the wall fell, there was a clear sign the gig was up. Shortly after takeoff from an airbase in Poland, a Soviet MiG-23 suffered a compressor stall. Being a single engine fighter, the pilot punched out.

Whereupon the engine recovered, and the now pilotless airplane, apparently freedom loving, headed west. NATO's air defense radars spotted the plane while it was still over East Germany, and scrambled a pair of F-15s to intercept while trying to find out through the Berlin Joint Air Control Center (where Russians and Americans worked in the same room) what the heck was going on.

The Soviets had no clue; they thought the thing had crashed into the Baltic.

The Eagles followed the Flogger until it reached France. Ultimately, it ran out of gas and plunged into a French farm house, killing an 18 year old Belgian.

Coincidentally, the following week we got an in-depth intelligence briefing about the Warsaw Pact air defense system that had been months in the making.

The briefing's conclusion? Their air defenses were rated "excellent".

---

Where I become an international man of mystery.

Our intel briefings were duly warning us about two new and very dangerous Soviet surface-to-air missile systems, the SA-10 and the SA-12. The briefings included artist conceptions, labeled Top Secret, of the missiles and their launchers, which were roughly as detailed as a five year old might manage with crayons.

Which also happened to be around when I visited Prague. It was a warm late spring day, and all the strolling got me thirsty. I stepped into a 7-11sky for a Coke, and noticed on the magazine rack a military enthusiast magazine. On the cover was an up close color picture of an SA-12 on its launcher; inside were photos of the SA-10. I snapped it up for 275 persuaders (about 38 US cents), and proudly gave it to the intel folks when I got home.

The intel briefing the following week still had the top secret crayola drawings.

---

Then in August 1991 I visited Moscow and Leningrad. The most awful places I have ever been. I had read Hedrick Smith's book The Russians. Words failed him; they will fail me even more thoroughly.

In Moscow, the hotel for foreigners was the Космос, cryllic for Cosmos. Pronouncing Космос the way it looks like it is spelled gets closer to reality. The lobby, the size of a football field, had dustballs the size of rich ladies' poodles, and more prostitutes per square foot than anyplace else on Earth, including even Congress during the State of the Union address. I changed $20 US for rubles; thank goodness I didn't swap more, as those rubles were no more spendable than broken shoelaces. I noticed all the cars, crappy as they were, had no windshield wipers: to avoid theft, because there were none to be had, they were kept in the gloveboxes unless it was actually raining.

The hotel food was execrable. I soon found that having hard currency was a passport through the looking glass. On one side the Soviet Union: dingy, decrepit, aggressively ugly. On the other, the West, in the form of an Irish Pub, or Pizza Hut. The largest McDonalds in the world at the time was in Moscow: the line to get in the place was 300 yards long.

I wasn't prepared for how beautiful young Russian women are, and appalled by how quickly the workers' paradise ground them down. The human body is not built for standing in endless lines. I saw women in their thirties with varicose veins and open sores on their lower legs.

The coup was the day after I left. Even now I wonder if it was something I said.

Somewhere in my pile of photos awaiting the scanner is one of the last photographs of Dzerzhinsky's statue in front of the Lubyanka.

---

Shortly after the collapse of the Warsaw Pact, a particularly good editorialist at the Times of London, whose name I wish I could remember, wrote a long piece, which I wish I could find, listing by name, twenty or so prominent intellectuals who were apologists for, and sympathizers with, the soul crushing awfulness of communism.

I don't think one of them apologized for having less sense than a five year old, either.

Pastor Kennedy's Deadly Hair

Dr. D. James Kennedy, founder of Coral Ridge Ministries, is funding a new multimedia program called Darwin's Deadly Legacy to delegitimize Darwinism by crediting it with all of the ills of the 19th and 20th centuries, including the Nazi holocaust, eugenics, abortion, atheism and bad hair. I normally don't troll the internet for anti-Darwinist drivel (okay, I really do), but I managed to catch the TV infomercial for Kennedy's slick oevure of lies while flipping channels this morning between the early Sunday basic cable fare of ESPN sports, local news "magazine" shows, evangelical preachers and paid promotional spots for get rich stock trading seminars and wonder mops (speaking of wonder mops, Kennedy's hair could probably absorb five gallons of spilt milk).

What first caught my eye about this disinfomercial was the creepy visage of Ann Coulter railing against the evil lies of Darwinism. I guess Coulter's slide to the bottom of the barrel is official. If you are going to position yourself on the far right wacko fringe, an alliance with someone like Dr. Kennedy will do the trick. Kennedy is arguably one of the most influential Christian voices on the rightwing fringe, that group of religious activist that truly represents Andrew Sullivan's overplayed accusation of "Christianist". The mission statement for Coral Ridge Ministries (CRM) states "Coral Ridge Ministries (CRM) is a television, radio, and print outreach that is touching the lives of millions -nationwide and overseas. CRM's three-fold mission is to evangelize, nurture Christian growth through biblical instruction, and act in obedience to the Cultural Mandate by applying the truth of Scripture to all of life, including civic affairs. He is closely aligned with the Reconstructionist/Dominionist movement, which seeks to impose Biblical law upon American citizens:

Kennedy is an active member of COR (Coalition on Revival), a Reconstructionist/Dominionist organization dedicated to a social gospel/activism agenda that proposes to impose Biblical standards (e.g., Old Testament law) on unbelieving peoples and institutions. Kennedy is also a Steering Committee member of COR, and was scheduled to be the moderator for the first phase of COR's 1994 Church Council on theology (held 7/25/94-7/30/94 at Campus Crusade's Arrowhead Springs Hotel in San Bernardino, California), which seeks to establish doctrine on 24 topics in nine major areas, one of which is "Unity of the Body of Christ in any city as non-optional." He was a signator to all of COR's founding documents. As an indication of what the people affiliated with COR believe, the following is from a recent brochure announcing the 12th Annual Northwest Conference for Christian Reconstruction. Does this not sound like a different gospel? (All emphases added):

"The Christian Reconstruction movement believes that the Bible contains not only a message of personal salvation through the blood of Christ shed on the cross, but also a comprehensive law structure which is alone able to provide a just basis for society. It is committed to the view that sovereignty and thus government belong to God, and that all delegated government, whether to family, church or state (civil government), is to be exercised in obedience to the law of God's covenant. Furthermore, salvation involves every aspect of man's life and thus also the relationships he sustains to the world around him. The exercise of dominion in accordance with the terms of God's covenant is therefore basic and vital to the Christian faith. To neglect this is to deprecate the extent of Christ's victory at Calvary."

One should note that the above accusations are from a Christian website, and not some secular site that is paranoid about impending theocracy (like this site). Among Kennedy's other heresies are his love for the "Roman Church" his belief in the "Gospel in the Stars", an occultic astrological theology, and Heaven forbid, Freudian psychology!

OK, enough about Kennedy and his unnatural hair. What about the charge against Darwin? Did Darwinism lead directly to eugenics and the Holocaust? This is a belief that is far more popular than the wacky, dangerous fantasies of a plasticized TV preacher from Florida. Even subterranean New Hampshire bloggers are known to fall for this fallacy.

Undoubtedly the principles of Darwinism were used to support the eugenics movement, but ideas about fit and unfit bloodlines and the segregation of society by racial characteristics predate Darwin, and indeed are supported by traditional religious sources, including the Bible:

The notion of segregating people considered unfit to reproduce dates back to antiquity. For example, the Old Testament describes the Amalekites – a supposedly depraved group that God condemned to death.

In the US the eugenics movement found strong support from some Christian organizations and was actively preached from the pulpit.
With the horrors of the Nazi Holocaust behind us, opponents of Darwinian evolution wish to rewrite history to absolve Christianity of any blame for the terrible legacy of eugenic philosophy. One trope that is commonly invoked is that eugenics is contrary to the Judeo-Christian notion that all people are born in the image of God and therefore of equal worth and dignity. But this seems to be a historically recent emphasis of Christian values, and not a permanent attribute. Christians in previous times have found ample support within their theological canon for the radically unequal valuing of human lives, whether in justification of the slave trade or the oppression of Jewish and non-Christian populations. Bad theology is hard enough on civilization. Lets not allow the religious fringe to inflict bad science on us as well.

This is What Anarchy Looks Like

Israel hits Hamas during Gaza fighting
By SARAH EL DEEB
Associated Press

GAZA CITY, Gaza Strip - Israeli warplanes pummeled Hamas targets Friday in a stepped-up campaign against militants firing rockets into southern Israel, while Palestinian factions battled with automatic weapons and grenades at a Gaza university.

Street battles between Fatah and Hamas remained less intense than the heavy fighting that terrorized Gaza City two days earlier, but a truce agreement late Thursday enjoyed no more success than previous cease-fires declared this week.

With the political leaders of the factions seemingly not in control of their gunmen, Hamas militiamen raised the internal strife to an ominous new level by widening their targets beyond armed rivals and seizing aides to two Fatah officials.
The infighting that began Sunday has killed more than 50 Palestinians and wounded dozens, while the death toll from Israeli attacks rose to 20 as airstrikes killed eight people Friday.

Israeli missiles came screeching down at least five times in retaliation for Hamas rocket attacks that have panicked people in southern Israel. At least 13 more militant rockets fell, wounding four Israelis in the battered town of Sderot.
Despite the escalating air campaign, a senior Israeli army officer said there were no immediate plans for a major ground offensive against rocket teams. [...]

One airstrike incinerated a minivan carrying Hamas militants and what the Israeli army described as "a large amount of weapons." Three fighters were killed and 12 people were wounded, Palestinian hospital officials said.
"We were sitting outside my grocery store when a huge explosion shook the area and a small minivan turned into a ball of fire," Jawad Dallou said. People in a nearby mourning tent also were wounded, he said.

An earlier airstrike east of Gaza City killed five Palestinians, including at least three Hamas militants, and wounded six. Israel's military said the target was a Hamas headquarters building. [...]
Hamas said the Israeli military had called the home of Ahmed Jaabari, head of Hamas' military wing, and warned his family the house would be hit. People gathered around the building to discourage an attack, he said. The Israeli military had no comment.

The fighting between Hamas and Fatah all but destroyed a power-sharing government formed two months ago in hopes of ending nearly a year of periodic clashes between the rival groups.
The latest bloodshed was touched off by Palestinian President Mahmoud Abbas of Fatah to deploy thousands of security officers in Gaza City last week to try to restore law and order. Hamas called that a provocation because it wasn't consulted and fighting broke out Sunday. [...]

Bullets and rocket-propelled grenades flew outside Islamic University, a Hamas stronghold, as Hamas fighters battled Fatah gunmen in the nearby Foreign Ministry building. Grenades hit the office of the school president, who appealed for an immediate halt to the violence. [...]

Although Israel said it wasn't taking sides, its airstrikes made it harder for Hamas gunmen to move around, and Hamas used that fact to argue that Fatah and Israel were in collusion.
Hamas TV named three Fatah security chiefs who it said were in secret contact with "foreign" security personnel. "They are deep into treason, and we will deal with them accordingly," the broadcast said.

The TV did not specify which foreigners, but Fatah forces affiliated with Abbas have received advice and training from the U.S., which lists Hamas as a terror group for killing more than 250 Israelis in attacks over the years.
Earlier in the week, some 500 Fatah security men trained in Egypt under a U.S.-brokered deal returned to Gaza, passing through the border with Israel's permission.

More by IBRAHIM BARZAK
Associated Press

GAZA CITY, Gaza Strip - Israeli airstrikes targeted Hamas for a fifth straight day Saturday, hitting a rocket squad and two workshops in Gaza, and the defense minister warned militants who attack Israel they should be "very afraid."
But Defense Minister Amir Peretz also said now is not the time for a major Israeli ground offensive in the Gaza Strip. [...]

Days of Israeli air attacks on Hamas targets have coincided with a surge in deadly infighting between Hamas gunmen and rivals from Palestinian President Mahmoud Abbas' Fatah faction. On Saturday, the two groups reached a new cease-fire deal, pledging to pull fighters off the streets and exchange hostages, officials from both sides said.

Previous truce agreements quickly collapsed in recent days, and it was not clear whether this one would hold. Failure to stanch the bloodshed would spell the end of the shaky power-sharing agreement Hamas and Fatah reached two months ago to end a previous round of internal strife. [...]

Israel launched its latest round of airstrikes on Tuesday to counter a stepped-up barrage of Hamas rockets on Israeli border towns. The militant group, which refuses to recognize Israel's right to exist, has fired nearly 120 rockets at southern Israel since Tuesday, the military said.

On Saturday, Israel missiles slammed into a rocket squad near the northern Gaza town of Beit Hanoun, the army said.
Earlier in the day, missile strikes demolished two suspected Hamas metal workshops.
Saturday's two deaths brought to 22 the number of Palestinians killed in airstrikes in the past week.

Peretz warned militants involved in rocket operations should be "very afraid," because "it is our intention to act against Hamas."
"We are mainly focusing on sensitive locations tied to Hamas," he told Israel Radio, adding that these locations included rocket workshops. [...]
At the same time, he said Israel would not embark on a major offensive in the Gaza Strip because it had other, unspecified tools in its arsenal to use against rocket-launchers. [...]

Four rockets hit the border area Saturday, causing damage, but no injury. A day earlier, four Israelis were hurt in rocket attacks. [...]
The Israeli airstrikes have driven Hamas fighters out of their bases, prompting accusations that Israel is helping Fatah.
Peretz insisted Israel is not interfering in the internal fighting. However, he also said that "we certainly would like the moderate forces to emerge with the upper hand," a reference to Fatah. [...]

Abbas and Haniyeh, the most senior Hamas politician in Gaza, have so far failed to calm the situation, indicating they have largely lost control to the gunmen and their political patrons.

Typical Reuters headline: Israel hits Hamas targets, Gaza militants fire back.
No, dummy, as always it's "Gaza militants hit random civilian targets, Israel fires back."

The Assassination of Character

When Christopher Hitchens and Dennis Prager are on the same side, it must be about something extroadinary. And indeed it is, for both have come out today in defense of Ayaan Hirsi Ali, the Somali born woman who defied the Islamic culture she was brought up in to live a free and independent life as chronicled in her bestselling book "Infidel". You wouldn't think that Ali would require defending from the Anglo-American media, but these are very strange and disturbing times we live in. Here is Hitchens in Slate:

Ali's best seller Infidel, which describes the escape of a young Somali woman from sexual chattelhood to a new life in Holland and then (after the slaying of her friend Theo van Gogh) to a fresh exile in the United States. Two of our leading intellectual commentators, Timothy Garton Ash (in the New York Review of Books) and Ian Buruma, described Hirsi Ali, or those who defend her, as "Enlightenment fundamentalist[s]." In Sunday's New York Times Book Review, Buruma made a further borrowing from the language of tyranny and intolerance and described her view as an "absolutist" one.

Now, I know both Garton Ash and Buruma, and I remember what fun they used to have, in the days of the Cold War, with people who proposed a spurious "moral equivalence" between the Soviet and American sides. Much of this critique involved attention to language. Buruma was very mordant about those German leftists who referred to the "consumer terrorism" of the federal republic. You can fill in your own preferred example here; the most egregious were (and, come to think of it, still are) those who would survey the U.S. prison system and compare it to the Gulag.

In her book, Ayaan Hirsi Ali says the following: "I left the world of faith, of genital cutting and forced marriage for the world of reason and sexual emancipation. After making this voyage I know that one of these two worlds is simply better than the other. Not for its gaudy gadgetry, but for its fundamental values." This is a fairly representative quotation. She has her criticisms of the West, but she prefers it to a society where women are subordinate, censorship is pervasive, and violence is officially preached against unbelievers. As an African victim of, and escapee from, this system, she feels she has acquired the right to say so. What is "fundamentalist" about that?

The Feb. 26 edition of Newsweek takes up where Garton Ash and Buruma leave off and says, in an article by Lorraine Ali, that, "It's ironic that this would-be 'infidel' often sounds as single-minded and reactionary as the zealots she's worked so hard to oppose." I would challenge the author to give her definition of irony and also to produce a single statement from Hirsi Ali that would come close to materializing that claim. Accompanying the article is a typically superficial Newsweek Q&A sidebar, which is almost unbelievably headed: "A Bombthrower's Life." The subject of this absurd headline is a woman who has been threatened with horrific violence, by Muslims varying from moderate to extreme, ever since she was a little girl. She has more recently had to see a Dutch friend butchered in the street, been told that she is next, and now has to live with bodyguards in Washington, D.C. She has never used or advocated violence. Yet to whom does Newsweek refer as the "Bombthrower"? It's always the same with these bogus equivalences: They start by pretending loftily to find no difference between aggressor and victim, and they end up by saying that it's the victim of violence who is "really" inciting it.

Garton Ash and Buruma would once have made short work of any apologist who accused the critics of the U.S.S.R. or the People's Republic of China of "heating up the Cold War" if they made any points about human rights. Why, then, do they grant an exception to Islam, which is simultaneously the ideology of insurgent violence and of certain inflexible dictatorships? Is it because Islam is a "faith"? Or is it because it is the faith—in Europe at least—of some ethnic minorities? In neither case would any special protection from criticism be justified. Faith makes huge claims, including huge claims to temporal authority over the citizen, which therefore cannot be exempt from scrutiny. And within these "minorities," there are other minorities who want to escape from the control of their ghetto leaders. (This was also the position of the Dutch Jews in the time of Spinoza.) This is a very complex question, which will require a lot of ingenuity in its handling. The pathetic oversimplification, which describes skepticism, agnosticism, and atheism as equally "fundamentalist," is of no help here. And notice what happens when Newsweek takes up the cry: The enemy of fundamentalism is defined as someone on the fringe while, before you have had time to notice the sleight of hand, the aggrieved, self-pitying Muslim has become the uncontested tenant of the middle ground.

And here's Prager at TownHall.com:

In 1932-33, New York Times reporter Walter Duranty reported from the Soviet Union that there was no Communist-induced famine in the Ukraine, indeed, that no one was dying of starvation there. In fact, between 4 and 7 million Ukrainians were starved to death by Stalin's regime. Though Duranty's name has since been synonymous with Westerners who hid the evil committed by enemies of the West and enemies of liberty, he received the Pulitzer Prize for his false reporting.

An unwillingness to identify evil and a desire to hurt those who do confront it were not confined to Western fellow travelers during the age of Communism.

Ayaan Hirsi Ali talks to The Associated Press in New York, Monday, Feb.5, 2007. Her latest book "The Infidel: The Story of My Enlightenment" is an autobiography which gives a graphic account of how she rejected her faith and the violence she says was inflicted on her in the name of Islam. Hirsi Ali is also a writer of the film "Submission," which criticized the treatment of women in traditional Islam, and led to the murder of her friend and colleague, filmmaker Theo van Gogh, on an Amsterdam street.

To cite one contemporary example, we have Newsweek senior writer Lorraine Ali. She recently reviewed Ayaan Hirsi Ali's autobiography, "Infidel," the story of Hirsi Ali's life as a Muslim girl and woman that led her to flee to the West, where she became a member of the Dutch Parliament and recently moved to America. Hirsi Ali is perhaps the most eloquent defender of Muslim women and gays living today. But to Newsweek's Lorraine Ali, the Islamists are not the problem, Ayaan Hirsi Ali is.
...
But for Newsweek's senior writer Lorraine Ali, Hirsi Ali is no protector of women and gays in Muslim societies. She is, rather, a "bombthrower," and the book is "single-minded and reactionary," written to appease "right-wingers."

To characterize Hirsi Ali -- rather than the people she is fighting in the Islamic world at the risk of her life -- as a "bombthrower" is almost beyond belief. But Newsweek may have hired an Islamist fellow traveler to cover these issues, just as in the Stalin era, Western media had some leftist fellow travelers on their staffs. That is almost certainly why Lorraine Ali wrote in her review, "In describing the 9/11 hijackers, [Hirsi Ali] comes up with an inflammatory conclusion tailor-made for her right-wing constituency: 'It was not a lunatic fringe who felt this way about America and the West. I knew that a vast majority of Muslims would see the attacks as justified retaliation against the infidel enemies of Islam.'"

Apparently Newsweek's senior writer is not aware or does not wish to acknowledge that, according to polls, a great many of those living in Muslim countries do indeed regard 9/11 as "justified retaliation against the infidel enemies of Islam" -- that is, if they even acknowledge that it was Muslims who perpetrated 9-11's terror.

Moreover, note the use of the words "right-wing" and "reactionary" to describe Hirsi Ali and her views. To Newsweek's Lorraine Ali, a woman who is a feminist, atheist, pro-gay and combats the greatest religious extremism of our time is "right-wing" and "reactionary."

Just as during the Cold War the Left was divided between those who fought Communism and those who fought anti-Communism, the Left today will have to decide whether it wants to fight Islamists or anti-Islamists. At least in this instance, Newsweek has decided to go with Lorraine Ali and fight those fighting Islamism, even when those fighting the Islamists are pro-gay, feminist atheists who only care about the greatest oppression of gays and women in the world at this time.

Hitchens and Prager have said everything that I would say, and better. It's time to stand with people of character like Ali against tyrants and their fellow travelers.

In the Land of the Gunless, the Knifeman is King

England continues to experience fatal violence despite its strict gun bans:

A teenager called out for his mother as he lay dying in the street after being chased and cornered and then stabbed in south London.

Shakilus Townsend, 16, of New Cross, was attacked off Beulah Crescent in Thornton Heath at 1.45pm on Thursday by three boys and a girl armed with knives and a baseball bat. He became the 18th teenager to die violently in the capital this year.

Known as Shaki to his family, Townsend was pronounced dead just after midnight yesterday. A woman who went to his aid said he told her: "I want my mum, I don't want to die."

Yesterday the Metropolitan police announced it was setting up a dedicated 75-strong taskforce to target gangs and knife crime.

Witnesses said Townsend was chased down a cul-de-sac by youths wearing scarves around their faces, who shouted "get him from the other side" before cornering him at a block of flats. Police said the youths appeared unfamiliar with the area, and were not treating the murder as gang-related at this stage. They described the group as black and in their mid-teens.

Dee Bamina lives in the block and came to Townsend's aid before the ambulance arrived. She said: "I was about to watch the tennis and I heard shouting and I looked out the window. I saw [them] running and they were shouting 'get him from the other side' because he had run round the building. They were wearing black-and-red scarves which were covering their faces, you could just see their eyes. The girl was talking on her mobile behind them.

"He was still alive when I got there, and I spoke to him - that's the saddest part of it. He said he didn't know them, and told me his name. I asked him twice if he knew them and he said no. I used a towel to compress and try and stop the bleeding but mainly I just comforted him.

"He said 'I want my mum, I don't want to die'. He looked terrified."

Fellow teenager Richard Higgins, 17, also came to help after he heard the commotion. He said he saw a large kitchen-type knife. "My neighbour went out to see people chasing one boy. I think it may have been something that set off with a girl.

"He tried to run back towards the flats. I think he thought he had lost them but when he came out they attacked him. They bludgeoned his head with a baseball bat, and used the knife to slash his side then stabbed him around the stomach.

"My neighbour shouted at them to stop it, and she came out. She ran outside to tell them not to kill him. I came out to see him laying in a pool of blood. He kept saying 'I want my mum' over and over and 'I don't want die'. He said his mum was called Nicole. He tried to get up a couple of times but he couldn't. I'm shocked. I'll never forget what I saw."

Police said they recovered two knives at the scene.

Detective Chief Inspector Cliff Lyons described the murder as "another senseless incident in which a young life has been taken away by a knife". He urged witnesses to come forward.

The attack came as three teenagers were charged with the murder of Ben Kinsella, the 16-year-old knifed outside a nightclub in north London on Sunday. Juress Kika, 18, Michael Alleyne, 18, and Jade Braithwaite, 19, were remanded into custody by Highbury Corner magistrates court yesterday.

The Met's deputy commissioner, Paul Stephenson, yesterday emphasised that tackling knife crime was the force's "No 1 priority".

Speaking at a Metropolitan Police Authority meeting, he said the gangs and knife crime taskforce would be deployed to the worst-affected of London's 32 boroughs "with immediate effect". Teams of officers have already been deployed to troublespots since the launch of Operation Blunt 2 in May.

Armed with wands and knife arches, the officers have been carrying out searches using powers under the Public Order Act, which allows them to act with the presumption of reasonable suspicion.

London's deputy mayor for policing, Kit Malthouse, said: "Yet another death on London's streets means we must redouble our efforts to protect young people and deter them from carrying knives. I am extremely pleased that the Metropolitan police are ramping up their already significant efforts on Operation Blunt 2.

Will the illogic of gun control ever sink in? In a land where guns are nonexistent, a man, or a boy, with a knife can rule the streets. If you think eradicating guns from a society was tough, how tough will it be to eradicate knives? Does any sane person think that these task forces can quell street violence by preemptively seizing knives?

When people are empowered to defend themselves, perpetrators of violence must always face the existential question posed by the famous street philosopher Dirty Harry: "am I feeling lucky?" It isn't their possession, or lack thereof, of deadly weaponry that makes a perp feel lucky. It is the prospect of possession, or lack thereof, of deadly weaponry of his would be victims, as well as the willingness to use them.

This doesn't help the matter, either:

The risk from violent crime is now so high that people should walk away if they see someone else in trouble - in case they end up losing their own life.

That was the depressing warning yesterday from the Mayor of London, Boris Johnson.

He said he would tell his own children to 'look after themselves first' rather than help a victim in distress.

The comments follow the knife murder of 16-year-old Ben Kinsella after he tried to break up an argument outside a North London bar at the weekend.

In another example of violent, broken Britain, a former soldier died yesterday after being attacked on a bus by thugs he had asked to stop swearing.

Father-of-three Stan Dixon, 60, politely asked them to stop using bad language in front of his partner.

To avoid trouble, the couple decided to get off early.

But as the bus doors opened, two men pushed Mr Dixon violently to the ground, leaving him with massive head injuries.

Mr Johnson's warning is a dramatic change from his stance last year - when he told citizens to 'take a risk' and tackle thugs, saying the chances of being stabbed were 'microscopic'.

Since then, there has been been a horrifying death toll of innocent people simply trying to stop violence.

One high-profile victim was Harry Potter actor Robert Knox, 18, stabbed to death outside a bar in Sidcup, South London, in May as he tried to protect his younger brother.

There are worse things than dying.

For M Ali

It was the summer of ’65. "Help Me Rhonda" was blasting from the speakers of newly minted Mustangs and T-Birds. Lyndon Johnson was in the White House and The New York World’s Fair was offering a hope-filled but commercialized glance into the future.

It was that very future that Fred DeLuca was concerned about. Having just graduated from high school, young DeLuca turned his thoughts toward achieving a higher education. An education would no doubt be the key to success; the type of success that not even Fred himself dared to dream about. At this moment in time, a college education seemed as far-flung as the prospect of a man walking on the moon.

It was a typically hot and humid summer day in Bridgeport, Conn., when the DeLuca family’s phone rang. Dr. Peter Buck, a family friend called to announce that he had changed jobs and was moving his family to Armonk, New York, only 40 miles away. It was time for celebration, indeed, for it had been almost a year since the Bucks and the DeLucas had parted company.

Plans were quickly made for a reunion. It was on that fateful Sunday afternoon in July, 1965, during a barbecue at the Buck’s new home, that a business relationship was forged between young Fred DeLuca and Dr. Buck that would forever change the landscape of the fast food industry.

During the summer of ’65, there wasn’t that much hope that the eldest DeLuca child would have enough money to pay for his college tuition. He was a hard-working, competent and dependable young man but the $1.25-per-hour minimum wage job that he had at the local hardware store wouldn’t begin to pay for an education. As they pulled into the Buck’s driveway, it occurred to Fred that perhaps he could ask Pete for some advice. He half expected Dr. Buck to offer to loan him the money. After all, they had known each other for years and when Pete would learn how badly Fred had wanted to go to college, to study to become a medical doctor, there might be a good chance that he would offer to help.

"I think you should open a submarine sandwich shop," said Buck.
"What? What an odd thing to say to a seventeen-year-old kid," thought Fred.
Before Fred could respond or express his surprise, he heard himself say, "How does it work?"

Pete explained the submarine sandwich business. He said that all one had to do was to rent a small store, build a counter, buy some food and open for business. Customers would come in, put money on the counter and Fred would have enough to pay for college. To Pete, it was just as simple as that, and if young Fred was willing to do it, Pete was willing to be his partner.

As the DeLuca’s were getting ready to leave, Dr. Buck pulled out his checkbook and wrote a check for $1,000. That was his investment in their new venture.

On the drive back home, little did Fred know that if he succeeded at opening a submarine sandwich shop, he would accomplish more than funding his education. Success would mean financial independence and everything that comes with it, not just for him, but for many other people around the world. Success would mean adventure and excitement on a non-stop roller coaster ride that would eventually be called SUBWAY® Restaurants.

The duo had worked hard over the years. In fact, they had a goal of opening 32 submarine sandwich shops within 10 years. By 1974 they owned and operated 16 units throughout the state of Connecticut. Although it seemed unlikely that they would double that number in two years, DeLuca concentrated on expanding SUBWAY® Restaurants.

On a Monday night in 1974, Buck and DeLuca met with their attorney. With him, they discussed the future of their business. As they evaluated their options, talk turned to franchising. Franchising, they had previously thought, was for the big companies and had dismissed the idea. Now, being behind schedule, they were willing to look into it. All there was to do was recruit people who would invest their money and use Pete and Fred’s management system to open and run SUBWAY® restaurants in their hometown.

Rather than hiring consultants, DeLuca figured that the fastest way to expand the business was to go out and find a franchisee. That’s when he spoke to his friend Brian Dixon. DeLuca made him an offer that he couldn’t refuse. He told him about their franchising plans and offered to loan him the money to buy their restaurant located in Wallingford, Conn. DeLuca even said that if he didn’t like the business, he could return it to them and owe them nothing.

Dixon refused. He was used to getting a paycheck every week and didn’t want to risk going into business. DeLuca devoted his time to managing their existing restaurants and decided to worry later about franchising.

One day, Brian Dixon changed his mind. When he reported to work that morning, he was shocked to discover a padlock on his boss’s office and a sheriff’s note that stated that the business was closed. It was bankrupt. Brian didn’t panic. Somewhere in that sheriff’s notice, he saw the word "opportunity" and decided to call DeLuca and take him up on his previous offer to become the very first SUBWAY® franchisee. From that day forward, not only did Dixon’s life change, so did the way that SUBWAY® did business.

In the year 2004, the SUBWAY® chain entered its 39th year of operation. The SUBWAY® name and its products have even appeared in numerous television and motion picture productions. Not bad for a seventeen-year-old kid from “the projects”!

###

Fred DeLuca described Subway’s tentative early days and dispensed advice for young professionals, speaking to about 40 students in the Dunster House Junior Common Room.

DeLuca said he co-founded the Subway franchise in 1965 in hopes of covering his college expenses. When DeLuca hit hard financial times early in Subway’s history, he faced a choice between shutting down the original location or trying another location, according to DeLuca, who attended University of Bridgeport, Connecticut. The founders took a risk and chose the latter, which proved to be successful.

“I was able to solve enough big problems along the way that the sheriff didn’t come along and put the ‘bankruptcy’ sign up,” he said.

As he faced early financial uncertainties, DeLuca had to juggle his Subway responsibilities with a romantic life, he said.

“Basically, my dating life was driving around from store to store,” DeLuca said, telling of personal sacrifices he and his then-girlfriend, now wife, made while operating Subway before it became a franchise.

###

Fred DeLuca was a recent high school grad looking for a way to pay for college when he founded a sandwich store in Bridgeport, Connecticut. He had $1,000 in his pocket. He didn’t sign a lease, in part because the $25 lawyer’s fee was too steep. Three decades and 25,818 stores later, DeLuca’s company, Subway, is one of the largest privately held businesses in the world and he is worth at least $1 billion. DeLuca shared his experiences with writer Tom Nawrocki.

Before they made their first submarine sandwich, Subway CEO Fred DeLuca and his partner, Pete Buck, toured other sandwich stores to see how their business operated, down to watching how they poured oil onto the meat. But until the morning of Aug. 28, 1965, they hadn't yet put theory into practice - the sandwich that Deluca made for his first customer was the first submarine sandwich that he'd ever made, he claims.

In 1965 Pete Buck, a friend of your family’s, gave you $1,000 and suggested you open a sandwich shop. Why sandwiches?
When Pete was a kid up in Portland, Maine, the big treat on Sunday was to go down to an Italian delicatessen. Then, where our families had met in upstate New York, there was a small chain called Mike’s. The day we talked, he pulled out a little newspaper clipping about Mike Davis, the guy behind Mike’s. He started with nothing, and after 10 years, he owned 32 stores.

How quickly were you able to open your first store?
I talked to Pete on Sunday. I borrowed my dad’s car on Monday and drove around a little bit and found a vacant store. Pete came over on Saturday, and we rented it, with no lease — you probably couldn’t do that today. Then, I built a counter and a partition, using eight-foot studs. I didn’t even carry it to the ceiling or put Sheetrock on the back.

I put ads in the newspaper saying something like, “Student needs refrigerator,” and I’d buy old household refrigerators for 10 bucks apiece. Never had plans drawn, never went to the city for building permits.

Really? You opened without official approval?
Somewhere in the middle of construction, somebody came by and said, “What are you doing here?” I said, “I’m building a sandwich store.” They said, “You know, you can’t just build a sandwich store without getting some approvals.” I walked to town hall and said, “I have to get some kind of license for the store I’m gonna open.” The lady behind the counter said, “We need some kind of plans for your store.” I said, “Well, I don’t have any plans.” She said, “If you could draw something out, that would be great.” So I drew a sketch, gave it to her, she stamped it, and that was it.

The city didn’t require anything else of you?
This was almost a backbreaker: We learned that we had to install a special sink that cost $550, so Pete had to give me a second thousand dollars.

And operating capital?
You’d sell the sandwiches for cash today, and you’d pay the employees and the food bill tomorrow. So we had the float.

How were your vendors?
Every Friday, my mother and I would pay a visit to the people who sold us meat, vegetables, bread, and paper. It was a little social call. We’d come with a check and they’d say, “How’s business?” and we’d say a little something. They knew we were always there to pay the bills, even though we never paid as much as we bought and balances always built up. If we didn’t drive around to deliver checks, which is a totally inefficient thing to do, I am positive that we would not have built the kind of relationship that allowed them to be as comfortable with us.

Subway had its struggles, but I know opening day was busy. What happened?
On the first day that we opened, I had to go to the university to take an English exam. I make the first sandwich to show my buddy how to make a sandwich, then I go to take the test. I come back, and there’s a line of customers out the door. And Pete is walking across the parking lot holding this paper bag. He said, “I had to go buy some knives.” I worked in a hardware store, so I knew that knives could be expensive or cheap, so I looked in the bag and said, “Oh, Jesus, there goes the budget.”

Was it hard being a 17-year-old who didn’t know anything about business?
I had a lot to learn. One time, my car broke down. This kid picked me up, we get to talking, and we passed by my store. He says to me, “That is a great place to eat. They make terrific sandwiches, and you get all the soda you want for free.” I said, “How does it work?” He said, “You order some sandwiches, and when the kid”—he was referring to me—“when the kid turns around to make them, you just take a case of soda out of the cooler and sneak it out to your car.” So, you see, the lessons I learned back then—they were so simple.

After that first day, your sales dropped pretty much continuously for a long time. How did you make it through that period?
Number one, I didn’t have big family expenses. Number two, I didn’t have high expectations. I was willing to try solutions that other people may not even have thought of -- I’m not saying they were all smart solutions, but I tried them. I didn’t know enough about business to realize how bad we were doing. And I didn’t have the concept that you should quit at something. I can think of so many reasons why we shouldn’t have made it. We were on the edge continuously.

What happened when you opened the second store?
The business in that second store was good from the day we opened it -- and the business in the first store picked up also.

Could the same kind of success happen today?
Today, it just doesn’t work like that. There is so much bureaucracy that it would have broken our backs. We would not have gotten it open.

On that first day, you spent part of the afternoon sitting in the back, chopping up vegetables with a three-dollar knife, using an old sheet of plywood for a cutting board. I don’t think that would pass muster with the health department today.
There’s nothing in that store that would pass muster today.

Since Davis had owned 32 stores, you and Pete Buck planned from the beginning to open 32 stores yourselves. How important – and realistic - was that goal?
It was an extremely serious goal in that it never changed. We never had a discussion about changing the goal, we always talked about the goal, we always kept it in mind. We thought it was achievable because the other guy had done it.

###

Doctor's Associates Inc. operates the Subway chain of sandwich shops, the second-largest quick service chain behind McDonald's. It boasts more than 26,500 franchised units in 86 countries as of November 21, 2006, with more US locations than the Golden Arches, and is the fastest growing franchise in the world. This rapidly growing chain added over 2,000 locations in 2005. McDonald's has more than 30,000 restaurants in 119 countries. Fred DeLuca says that he wants 30,000 outlets worldwide by 2010.

In comparison, the second-largest submarine sandwich shop chain in North America, Quiznos Sub, has an estimated 5,000 locations worldwide. (Although Quiznos' growth has been spectacular - as recently as 1996, they had only 100 locations. In 2000, they had a thousand locations; in 2003, two thousand; and by 2004 they had opened their three thousandth location).

Subway has been voted as #1 franchise in Entrepreneur magazine 15 times as of 2007. Virtually all Subway restaurants are franchised and offer such fare as hot and cold sub sandwiches, turkey wraps, and salads. Subways are located in freestanding buildings, as well as in airports, convenience stores, sports facilities, and other locations.

Doctor's Associates is a private corporation, owned by co-founders Fred DeLuca and Peter Buck, who opened the first Subway in 1965. Fred DeLuca still runs the company.

In 2005, revenues for the Subway chain were $ 9.05 billion.
In 2005, revenues for the publicly-traded McDonald's Corp. were $ 20.5 billion, and for the twelve months ending on Sep. 30th, 2006, revenues were $ 21.8 billion. As of Feb. 13th, 2007, McD had a market cap of $ 55.5 billion.

So, if Doctor's Assoc. Inc. were a publicly-traded company, it's reasonable to estimate that they'd have a market cap of somewhere around $ 30 billion, given their high growth rate. That would make them more valuable than Ford & GM combined, or American Airlines, Delta Airlines, Southwest Air, and United Airlines combined.

Or to use some examples from less troubled industries, they'd have a larger market cap than the combined value of North America's #2 & #3 burger chains, Burger King and Wendy's, plus KFC and Taco Bell, plus No. America's three largest pizza chains: Dominos, Papa John's, and Pizza Hut.

Their revenues and market cap are/would be about the same as Starbucks.

Sources: The Harvard Crimson; Hoovers; Inc.com; the Organic Consumers Association; Quiznos; Subway; Wikipedia, also here; Yahoo! Finance

Here's a Hint: Move

Which also applies to people who own homes in So. California, and was especially true in '05 & '06, before the market peaked there.

Hell is buying a house

By India Knight
From The Sunday Times
May 27, 2007

[All emphasis added]
I’ve never understood the point of giving, or leaving, one’s adult, able-bodied, intellectually capable children masses of money.

People in late middle age have hopefully earned their own living for several decades and don’t have the urgent need for an injection of cash that young people do.

My notion was that I would buy my children a small flat each when they became adults and that would be that - they could put their back-breakingly expensive education to use for the rest and be grateful.

This idea, always boldly optimistic given the chaotic state of my finances, now seems more hilariously improbable by the day: who on earth can afford to buy any kind of property in London? At the rate things are going, they’d be lucky to get a shed each - or, more realistically, their own shelf in a communal shed.

Last week Knight Frank, the chartered surveyor, said London house prices rose by more than 33% in the 12 months to the end of April - the fastest rate of growth since mid-1979. A house worth £100,000 in 1976 would now be worth more than £4.1m.

Data from Knight Frank also revealed that the supply of available property fell by more than 50% in the first quarter of this year, while the number of prospective new purchasers increased by 17%.

What with super-rich foreign buyers and City bonuses, the property market has gone mad, madder even than it was in the 1980s, so mad that there’s nothing anyone can do about it except throw up their hands in despair and wait for the crash that’s been predicted for a couple of years now but shows no sign of arriving, even though Jon Hunt, the founder and owner of the aggressive estate agency chain Foxtons, sold out last week for an estimated £390m.

The Organisation for Economic Cooperation and Development has warned that UK property prices are among the most stretched of any major world economy, and that the housing market in Britain is overvalued by up to 65%. Surely something’s got to give because how - and where - are people supposed to live?

You have [owners] on the one hand, beside themselves with joy to discover that their unexceptional house in an unexceptional area is now worth a monstrous sum.

But this doesn’t mean anything in real, rather than paper, terms, because property prices rise commensurately across the board, and the numbers are now so elevated that they become meaningless - like hedge-fund managers’ bonuses, we’re talking what for most people is unimaginable, joke money.

If your family house is now worth £1m and you want to move to a better area and have a bit more space, your £1m is going to get you nowhere: unbelievably, if you head for the “desirable”, more family-friendly parts of London, your £1m becomes risible.

You could just about go and buy a big house in Hackney, but that’s probably not quite what most people have in mind. Which means that once you’ve finished congratulating yourself on your acumen in buying your house for a fraction of the amount it’s now worth, you have to borrow punitive amounts in order to move “up the ladder”. Which wasn’t part of the plan...

I agree with the bit about giving your kids money while they're young-ish, and not waiting to leave it to them upon your death, for the reasons given - especially since there might not be very much left, if you have a long life and health problems.

But if you're lucky enough to have a home that's somehow become worth £1m, you have more choices than to stay in the home, or sell and try to buy another home in a vastly overvalued market, which is a rather zero-sum choice.

You could also sell, and emigrate.

As in the U.S., capital gains from the sale of a primary residence are apparently tax-free in the UK. If you've owned the home for a number of years, say 5 - 10, then after paying selling costs and the mortgage, you're likely to end up with something in the vicinity of £500,000, which at today's exchange rate, is around
US$ 990,000, or $ 1,070,000 Canadian.

Either way, roughly a million dollars will set you up for life in the U.S. or Canada, UNLESS you feel the need to live in the most-popular cities of either nation.

But having travelled extensively in both nations, I can attest that there are hundreds of lovely, sophisticated, urbane, and cheap cities and towns that happily exist in "flyover country".

So you'd have basically ended your need to work for a living, and could instead devote your time to doing whatever it is that really sets your heart on fire, which is true wealth in my book.

It's a little trickier for Californians, since although they could end up being several hundred thousand dollars richer, it's far more probable that they'd need to continue to work. But still, unless your career can only be done in Cali., if you've owned for at least five years, you could sell in SoCal, and move to the Southeastern U.S., or to the Midwest. Then you could buy a comparable home free and clear with the profits, and live with the luxury of no rent or mortgage payment.

And if you're willing to live in a less-developed nation, well, then the sky's the limit. I've read that if you don't have to depend on the local economy for a living, then Argentina, India, Mexico, Panama, and Nicaragua are really cheap, and offer first-world living in the major cities. My youngest brother lived in southern Brazil for a couple of years, and he says that it's the same there: A very low cost of living by American standards, and all services available.

You could live like Royalty with what would be a middle-class income by G7 standards, and never touch your capital.

Hit 'Em Where it Hurts

Israelis ‘blew apart Syrian nuclear cache’
Secret raid on Korean shipment

Uzi Mahnaimi in Tel Aviv, Sarah Baxter in Washington and Michael Sheridan
September 16, 2007
From The Sunday Times

IT was just after midnight when the 69th Squadron of Israeli F15Is crossed the Syrian coast-line. On the ground, Syria’s formidable air defences went dead. An audacious raid on a Syrian target 50 miles from the Iraqi border was under way.

At a rendezvous point on the ground, a Shaldag air force commando team was waiting to direct their laser beams at the target for the approaching jets. The team had arrived a day earlier, taking up position near a large underground depot. Soon the bunkers were in flames.

Ten days after the jets reached home, their mission was the focus of intense speculation this weekend amid claims that Israel believed it had destroyed a cache of nuclear materials from North Korea.

The Israeli government was not saying. [...] The Syrians were also keeping mum. “I cannot reveal the details,” said Farouk al-Sharaa, the vice-president. “All I can say is [that we are as incompetent as we are belligerent.]” The official story that the target comprised weapons destined for Hezbollah, the Iranian-backed Lebanese Shi’ite group, appeared to be crumbling in the face of widespread scepticism.

Andrew Semmel, a senior US State Department official, said Syria might have obtained nuclear equipment from “secret suppliers”, and added that there were a “number of foreign technicians” in the country.

Asked if they could be North Korean, he replied: “There are North Korean people there. There’s no question about that.” He said a network run by AQ Khan, the disgraced creator of Pakistan’s nuclear weapons, could be involved.

But why would nuclear material be in Syria? Known to have chemical weapons, was it seeking to bolster its arsenal with something even more deadly?

Alternatively, could it be hiding equipment for North Korea, enabling Kim Jong-il to pretend to be giving up his nuclear programme in exchange for economic aid? Or was the material bound for Iran, as some authorities in America suggest?

According to Israeli sources, preparations for the attack had been going on since late spring, when Meir Dagan, the head of Mossad, presented Olmert with evidence that Syria was seeking to buy a nuclear device from North Korea.

The Israeli spy chief apparently feared such a device could eventually be installed on North-Korean-made Scud-C missiles.

“This was supposed to be a devastating Syrian surprise for Israel,” said an Israeli source. [...]

An expert on the Middle East, who has spoken to Israeli participants in the raid, told yesterday’s Washington Post that the timing of the raid on September 6 appeared to be linked to the arrival three days earlier of a ship carrying North Korean material labelled as cement but suspected of concealing nuclear equipment.

The target was identified as a northern Syrian facility that purported to be an agricultural research centre on the Euphrates river. Israel had been monitoring it for some time, concerned that it was being used to extract uranium from phosphates.

According to an Israeli air force source, the Israeli satellite Ofek 7, launched in June, was diverted from Iran to Syria. It sent out high-quality images of a northeastern area every 90 minutes, making it easy for air force specialists to spot the facility. [...]

According to Israeli sources, American air force codes were given to the Israeli air force attaché in Washington to ensure Israel’s F15Is would not mistakenly attack their US counterparts. [...]

Washington was rife with speculation last week about the precise nature of the operation. One source said the air strikes were a diversion for a daring Israeli commando raid, in which nuclear materials were intercepted en route to Iran and hauled to Israel. Others claimed they were destroyed in the attack.

There is no doubt, however, that North Korea is accused of nuclear cooperation with Syria, helped by AQ Khan’s network. John Bolton, who was undersecretary for arms control at the State Department, told the United Nations in 2004 the Pakistani nuclear scientist had “several other” customers besides Iran, Libya and North Korea.

Some of his evidence came from the CIA, which had reported to Congress that it viewed “Syrian nuclear intentions with growing concern”. [...]

On August 14, Rim Kyong Man, the North Korean foreign trade minister, was in Syria to sign a protocol on “cooperation in trade and science and technology”. No details were released, but it caught Israel’s attention.

Syria possesses between 60 and 120 Scud-C missiles, which it has bought from North Korea over the past 15 years. Diplomats believe North Korean engineers have been working on extending their 300-mile range. [...]

As a bonus, the Israelis proved they could penetrate the Syrian air defence system, which is stronger than the one protecting Iranian nuclear sites...
[Emphasis added]

As China Weeps...

I've been busy these past ten weeks in the mysterious and wonderful world of "off-line", preparing my family for the 2007 - 2008 recession, since most of our income comes from transporting freight by truck, and naturally less consumer demand = fewer goods to be moved = ouch for us.
We've moved to a less-expensive living situation, and I've decided to re-enter the full-time workforce. (Que world's smallest violin).

Anyway, I'm taking a week off from that, before going "dark" for another six weeks or so, hoping to be completely transitioned to the new paradigm by the beginning of Feb. '07.

One thing that leaps out at me, when catching up on the archives, is that this blog has some major intellectual firepower. No person here is always right, but golly can you guys write, and the positions taken and cases made are usually high-level & top-notch. Like the way the 9/11 conspiracy nut had all of the underpinnings of his vapid argument knocked out from under him in something like four posts. (Not that he noticed).

The following are a few essays of the sort that convinced me that the U.S. economy will continue to slow into recession in '07, and I'm also convinced that the recession will last longer then the past two shallow and swift ones, which were far shorter than the typical post-WW II recession. If this one lasts a more "normal" eighteen months, then it'll stretch into '08 - a boost for Hillary, methinks, or whomever it is that's the eventual Dem nominee. The Clinton luck holds. (Possibly).

To add a personal anecdote in support of the conclusions of these pieces: The trucking business normally picks up considerably from Oct. to the end of the year, as Christmas retail goods make their way from port or factory to warehouse and store. Often we're booked for weeks ahead, and drivers get paid bonuses to delay taking normal time off, to stay on the road for a few more runs - to "work weekends", so to speak.

This year: Zilch. It was busier this summer than it is now.

[Except for the one sub-heading, all emphasis is added].

The Recession of 2007

by John Mauldin
December 1, 2006

[W]hile the economic data is not a total disaster, it has not been good this week. Yet the response of investors everywhere is defiance, or at the very least serious nonchalance.

Recession possibilities? "What recession? I spit on your talk of recession." They continue to assume that things will turn out much better than merely OK. All manner of investments are priced for perfection, perfection being defined as growth slowing enough to take out inflation risk yet not enough to hurt the ever upward rise of corporate profits. Goldilocks is the name of the game.

[...] This week we had the housing data for October. Permits and actual starts were down 28% and 27.4% (respectively) from one year ago. New home sales fell for the first time in three months, down 3.2% from the previous month.

[...] We are seeing inventories of homes for sale rise. And it could get worse, as foreclosures in sub-prime loans are rising. The mortgage bond market is showing some signs of strain. About 3.3% of sub-prime mortgages made THIS YEAR are now delinquent by more then two months. Think about that for a second. Borrowers or lenders could not see (or did not care about) problems coming even a few months in advance.

While traditional mortgage defaults are not a problem as yet, delinquencies in ARMs (adjustable rate mortgages) are becoming an issue. [...]
Late payments are accelerating, after lenders began to require less documentation for loans and financed more homes without down payments, New York-based Bear Stearns & Co. analyst Gyan Sinha said in a Nov. 14 report.

About 38% of the most common sub-prime mortgages this year were for the full value of the home, up from 31% in 2005 and 21 percent in 2004, according to Bear Stearns. Sinha said 45.5% of the loans this year required "low documentation" of borrower income and net worth, up from 44.5% in 2005 and 40.1% in 2004. The data reflect "common methods of allowing first-time homebuyers to borrow more than they can afford," Sinha said.

[...] Look at the rise in total homes for sale. The trend is not good. Paul Kasriel of Northern Trust tells us that "Total construction outlays fell 1.0% in October, after a downwardly revised 0.8% drop in the prior month. The 1.9% drop in residential construction spending in October is the seventh consecutive monthly decline. The main message is that the housing market recession's bottom is not here yet."

When residential fixed investment drops 10%, we have had a recession in the US. [...] RFI is [now] down by more than 10%.

Housing market recessions generally take years to work out, not months. This one is going to get worse before it gets better, with a bottom probably not coming until the middle of 2007. And as housing construction slows down, the 15% of the growth in the US economy that has been related to housing is going to disappear. While many market commentators, looking for good news a few months ago, cited nonresidential construction as performing well and adding to growth, we have seen that sector drop for the last two consecutive months by over 1%. Things will not grind to a halt, but they are going to slow down even more.

[...] This week we were also told that the third quarter was not as bad as the first GDP data released last month suggested. GDP was revised upwards to 2.2% from 1.6%. This was mainly due to inventory buildup and rising imports being revised higher. But higher inventories mean that manufacturers will slow production in the future.

[...] Wal-Mart sales were down by 1%, with the company downgrading forecasts for December. Tiffany sales and profits were up 23%. Barry Ritholtz [of Big Picture Blog] did a 30-store survey of discounting and sales and found that sales prices and promotions are quite high. He tells us, "The most recent review of price cutting is that they are both deep and broad. Our quick survey of both brick and mortar coupons and online savings codes shows that discounting is ramping up dramatically."

[...] This week, while staying at the Helmsley in New York [...], I walked into the bar on Sunday night to get a drink before going to bed. Looking around, I noted there were 34 mostly middle-aged ladies in the bar and no men. Thinking this was somewhat odd, I asked one of them if there was some sort of convention. The pleasant accent that came back was from Ireland. It turns out that much of the hotel was occupied by ladies from Great Britain and Ireland on a shopping holiday.

They were positively giddy about the prices. "Everything is half what we would pay in London or Dublin." They were hiring limos to go shopping so they would have enough room for their packages on the way back. [...] The pound is back to where it was when George Soros famously decided to break the Bank of England back in 1992. It is almost to $2. [...]

The Inverted Yield Curve Gets Steeper

The yield on the 10-year bond dropped to 4.43% as of the close of the markets today. [...] The bond market is clearly expecting a slowdown, and the yield curve is signaling an increasing chance of a recession. [...] 3-month T-bills are 23 basis points lower than the Fed fund rate.

[...] An inverted yield curve is the best indicator of a recession coming within at least four quarters. When we saw the yield curve invert in September of 2000, we had a recession about 7 months later. [...] If we had the same timing [now], that would suggest a recession beginning in the second quarter of 2007. If the data is all that bad, I can hear you asking, why will it take so long?

Because it takes time for things to slow down enough to actually put the US economy into a recession. For instance, new home construction is slowing, but builders must finish what they started. Real estate construction employment is down but is nowhere near the bottom.

As I think this is a housing-led recession, we should realize that homeowners are initially reluctant to drop prices. That takes some time. Further, it will take some time for lower home prices to really register on consumers and thus on consumer spending. [...] Consumer spending takes a while to actually slow.

But that is why I think the recession will be relatively shallow, as much of the economy is now in services, which are more resilient than manufacturing or housing...

When Will the Housing Market Bottom?

by John Mauldin
December 8, 2006

"When," I am asked frequently, "will we see a bottom in the housing market?" This week we look back at what past housing recessions have looked like to see if we can find a bottom anywhere soon. And could things be different this time? (Maybe.) We look at the government statistic on the number of houses for sale and find that it doesn't count all homes that are for sale. (I know it will shock most readers that government statistics might not be 100% accurate.)

[...] Lennar, the #3 homebuilding firm, said the cancellation rates for home sales were running about 30% last quarter. KB Homes said the number was 43%. A lot of anecdotal stories suggest the numbers could get worse. So that would add homes back into the Homes for Sale statistics that the Commerce Department (Census Bureau) tracks, wouldn't it?

The simple answer is no. The Census Bureau surveys home builders and specific housing starts. If a home is built and at some point put under contract for sale, it is then considered sold. The Census Bureau does not go back a few months later and ask, "Did you really sell that house?"

Because of the way they do the survey, they do not double count if the home sells at some later point to another person. One house, one vote. In the long run, cancellations do not cause the system to either overestimate or underestimate the number of houses sold.

But in the short run? As their web site explains: "As a result of our methodology, if conditions are worsening in the marketplace and cancellations are high, sales would be temporarily overestimated."

So the recent data that shows new home sales as possibly, maybe, getting to a bottom of the cycle? With north of 30% cancellations, the number of actual sales is certainly less than the data is showing.

[...] Lately, after every bit of data on the housing market, there is at least one analyst who will proclaim the end of the housing recession. How long, I wondered, did it take for past housing market recessions to bottom, and how severe were they?

Thus I was delighted to get a recent letter from Hugh Moore of Guerite Advisors in South Carolina full of the answers to my questions. I always appreciate it when someone else does my homework for me. (A guerite, by the way, is a type of sentry box projecting out from a castle or fortress).

First of all, what we are really asking when we wonder about a housing bottom is, when is housing construction likely to turn back up? [...] The construction industry has lost 53,000 jobs in just the last two months. That suggests it is not likely to bottom this year.

[...] Hugh tells us that "In the previous seven cycles since 1959, housing starts (seasonally adjusted) have fallen, on average, 50.7% from peak-to-trough. Each time housing starts have fallen more than 25% from their most recent peak, a recession has followed (except during the 'credit crunch' of 1966-67 that ended in an economic contraction, but not an 'official' recession)." [...] Housing starts have dropped 34% so far since their peak in January of 2006. Just to get to the average drop we have another 20% or so drop in starts to go.

[...] "In the seven cycles since 1959, both Housing Starts and the [ratio of residential fixed construction to GDP, a measure of how much housing construction is contributing to GDP] have taken roughly 27 months, on average, to fall from peak-to-trough. As of November 2006, both indicators are 11 months (or so) past their most recent peaks...or roughly halfway to bottom." [writes Hugh].

I asked Hugh to give me an estimate for this quarter for the RFI/GDP ratio. He thinks it will fall to 13.5 or so and then fall by 27% from its peak in the fourth quarter of next year. He expects residential fixed investment to drop by 20% (at least) from its peak last year, and to bottom sometime in the fourth quarter of 2007.

But Hugh may be an optimist. [Professor Robert Shiller of Yale has constructed an index that] tracks housing prices, adjusted for inflation, since 1890. This is on existing houses and not new construction. It is easy to see that the recent boom is a bubble. Since 1997, the index has risen 83%. Shiller talks about housing regressing to the mean over time. That could mean a lot more than a 20% drop in housing prices and another 12 months to the bottom. A drop to the mean could be over 40%.

[...] Housing sales and prices are the weakest on the coasts, where they went up the most. I got a letter from a rather well-off reader who has invested in rental real estate for some time and has a number of properties doing well, both from appreciation and cash flow. It is the two homes he is currently building in Florida that are giving him some problems. He has one coming to completion in a month, and he has $240,000 in it. His realtor told him there are 100 homes in the local area like his, and they are listed for $220,000. He has another one that will be finished in 6 months.

He has the option of renting and dealing with the negative cash flow. Not a fun thing; but for him it is an option, and that market should come back at some point, as more and more boomers will find Florida a great place to retire.

But what about all the weak hands in that market who can't deal with negative cash flow for a few months, let alone a few years? 28% of new homes started within the last year were for investment purposes. Those homes are now coming on the market. You can bet a few (at least) of those 100 homes in his neighborhood are going to be foreclosed. That means they are going to sell for less than the $220,000 they are listed for today.

David Leonhardt, writing in the New York Times this week, highlights an auction for homes in Naples, Florida. On average, the homes sold for 25% less than their value in 2005. Leonhardt listed several homes that sold in 2005 and now are down 28-35% when sold at the auction. (Thanks to Barry Ritholtz for sending this to me.)

Yet the official numbers tell us that housing prices are only off by 3.1% nationwide. This just goes to show that all real estate is local. There will be areas where home prices rise next year and a lot of regions where home prices will fall very little. The national average will not reflect the real problems of areas like Naples.

"The truth is," Leonhardt writes, "that the official numbers on house prices -the last refuge of soothing information about the real estate market on the coasts -are deeply misleading. Depending on which set you look at, you'll see that prices have either continued to rise, albeit modestly, or have fallen slightly over the last year. But the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold. The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.

"In reality, homes across much of Florida, California and the Northeast are worth a lot less than they were a year ago. The auction in Naples may have exaggerated the downturn in the market there, but not by much. Tom Doyle, a Naples real estate agent, estimated that a typical house there, sold in the normal way, would go for about 20 percent less than it did the previous fall. Right now, all these [OFHEO statistical] flaws seem to be making house values look much stronger than they really are. According to the latest index, for example, the average house in Miami would have sold for 22 percent more this summer than a year earlier. You won't find many house sellers in Miami who would agree that's true."

[...] Now, let me make the argument that it may not be as bad as in past housing recessions. When you look at the periods of serious housing declines, they are usually accompanied by serious unemployment or high interest rates. While unemployment will rise next year if we have a recession, as I think we will, we must remember that 80% of the US economy is in the service sector. It is not as in the past when the unemployment rate shot up because of lay-offs in manufacturing...

Well. One thing that didn't get mentioned above is that employment statistics are a lagging indicator. Almost always there will continue to be slow job growth into the beginning of a recession, and unemployment will continue to expand even after economic growth resumes. This is because companies can't know for sure whether slowing or growing demand will last, until the trend continues for awhile, and so they either hang onto their trained workers for a time at the start of a recession, or ask their workers to put in some overtime at the beginning of the recovery, delaying new hiring.

Some good places to get more information are at Calculated Risk - simple, straightforward, and excellent, and the comments are equally smart; www.globaleconomicanalysis.blogspot.com - the most entertaining, and there's a lot of good stuff in the comments there too, but ignore the doomsday posters who think that the Great Depression will seem like a day at Disneyland compared to what they think is coming; and Nouriel Roubini's Global Economics Blog - very information-dense, but perhaps a little dry.