Monday, January 26, 2009

Institutional Racism

A functioning police state needs no police.
-- William S. Burroughs

There is some speculation about the meaning of a recent report that Town Supervisor Linda Kabot and Board member Nancy Graboski will take over the control of Code Enforcement in the Town of Southampton. A meeting is scheduled on that issue on Tuesday. Of course, almost anything is possible in the land of a real estate driven economy where cash literally used to fall from the spec house cedar shakes. Now that the grim reality of reduced transfer fees for the Preservation Fund, slimmer taxes flowing from an impoverished class of landlords and property owners, and a budget that predicts disaster for currently overstuffed Town bureaucrats – something needs to change. Six figure salaries for any police officers are absurd in this economy, unless they have a gun to your head, literally.

This potential change in how “City Hall” is operated may reflect the growing awareness that the racists who have operated this badly trained Police force (Code Enforcement) have done nothing to improve the Town. The sub Rosa instructions to this paramilitary group which has been used to target political enemies and conduct a terror campaign against immigrants and the landlords who dare to rent to them, is the real point of their mission. The major drivers of this band of incompetents have been Cheryl Kraft, Steve Frano, Donald Kauth and David Betts (Town Investigator). Together, with their flunkies, they have pressured judges to sign search warrants to check for smoke detectors and gotten Town Attorneys like Joe Lombardo to deprive landlords of their property – instead of conducting a sane policy of educating property owners. Housing safety was never their concern. Most of these characters, incidentally, have been named in Federal lawsuits for unconstitutional behavior.
It has always been true that if housing safety in the Hamptons was the point, ALL homeowners would be invited to take part in a Town-wide campaign of education – and, not in the Stalinist sense of the word.

Perhaps, the raid against Kabot’s aunt during Heaney’s primary challenge was a key ingredient in a coming shift? Heaney ran on a platform of destroying immigrants and those who harbored them in their homes and schools. And, now he works for Levy, someone accused of a deeply racist agenda. Every politician from D.A. Spota to Representative Bishop participates in this little charade in varying degrees.
Perhaps, the numerous Federal lawsuits that are costing the Town huge legal fees for the unconstitutional behavior of a few local malcontents whose racist agenda are embarrassing – has some bearing upon this?
And, perhaps, with the complicity of the Town Attorney’s office in prosecuting landlords -- exemplifying a pattern of Institutional Racism under a new Justice Department -- may not seem so wise after all. The new Federal view of these antics may not play well in Washington.

Time will tell.

Monday, January 12, 2009

Historic Shifts

It's a recession when your neighbor loses his job; it's a depression when you lose yours.
--Harry S Truman (1884 - 1972)

One of the problems with the blame game affecting the views of our contracting economy is that we fail to recognize the seismic shifts that occur among populations ranging from aging baby-boomers to new births – as well as flows of capital, business cycles and markets. The ebb and flow of capital and degrees of risk and risk-avoidance – as well as major financial cycles -- are outside of our control. Some of these sometimes generational factors are completely independent of toxic financial vehicles likes SIV’s and CDO’s and whether Bear Sterns or Lehman Brothers have taken the pipe. The shell games going on in corporate America are as much a result of the cyclical forces as they may be the cause of current pain. Even the Madoff fiasco is a symptom, not a cause. In short, nothing that the Federal government or we can do will alter what is about to happen.

We are entering a deep Recession that will become a Depression by 2011. During that segment in our history there will be a stock market rally lasting for perhaps several months, a very brief improvement in lower end real estate numbers and a resurgence of inflation – but will shortly be followed by an even more calamitous collapse.

Knowing this may or may not prevent the S.E.C. or D.A.’s office from trying to blame individuals for what is about to happen. But, it’s important to know that there is no correlation between specific events and the macro cycle we now face. The events we are about to witness are cyclical and inevitable. Those macro events currently affect the evaporation of capital, the downsizing of business and the deflation (and inflation) about to ravage the economy. The inflation, which will occur within the next year or two, will be short-lived and prepare us for the precipitous drop shortly thereafter.
Credible predictions for the local economy in Manhattan and the Hamptons see the loss of 4 to 5 million jobs, a reduction in the number of retail companies and stores through closure or bankruptcy, and a further deflation in the value of real estate. In the Hamptons, home prices will have fallen by 50% by the end of 2010. According Harry Dent author of The Great Depression Ahead, in order to arrive at values consistent with long term trends, real estate must drop between 40 and 60 percent from 2007 values in order to attain balance.

In Manhattan, where prices have just started to drop – meaning, that brokers have finally admitted that it is happening – the slide has just begun. Projects have stopped in some locations and commercial real estate will deflate at an alarming rate – which will cause bankruptcies and rents to drop precipitously. Harry Macklowe’s tribulations are a symptom of what will happen to many major developers and landlords.
Manhattan apartment rentals have already started to drop and we are only at the beginning of what will become a full-blown Depression by the end of 2010 to 2011. The reduction in services in Manhattan will be difficult to believe and the quality of life stemming from the relentless fines and fees that Bloomberg resorts to will sour any positive feelings towards his Savior image. A respite to this scenario may not occur until 2013 to 2016.

In the Hamptons, an economy that is entirely built and paid for on the backs of New Yorkers who buy summer homes and investment property, the only question is whether a Chapter 11 is in their future. In recent months, one broker described his business succinctly, “the phone doesn’t even ring.”
A broker in East Quogue reported that even the houses in the $300,000 to $500,000 range are not selling. Many McMansions have already dropped by 50% in value (if not price) – and have further to go on the downside.
There will be a modest upsurge in Hamptons real estate activity as people try to rent a summer house and pool their money to share it – as the Code Enforcement police (who will be getting pink slips along with many more of the Town of Southampton’s employees this year) try to fine and criminalize this last and only form of income.
Regardless of how Southampton Town or East Hampton Town treats this brief shot in the arm for the summer season, after the Spring “selling season” is over the slide in that economy will start in earnest. The deflation in real estate will be the new long-term trend – along with the tax base that once propped up the local economy. The brief resurgence of $200/barrel oil (which will collapse again to $30) will exacerbate local conditions that are made worse by with a corrupt political bureaucracy. The
flow of easy money
in the Hamptons is gone and this will end decades of political incompetence.
Look for oppressive attempts by the local governments to squeeze money out of tourists and property owners who will abandon properties in growing numbers.

While the towns in the Hamptons might seek a political solution by reaching out to New Yorkers in order to solve the impending disaster by working together, that will not happen. Lip service was once given about hiring a Public Advocate to bring New Yorkers – who pay for the economy – into the local political process but until the vote is garnered that would not happen.

Sell all real estate if you can and buy 30-year Treasury Bonds. It will be a long and difficult ride. Even buying food (which will escalate in cost) will become an issue for many families.

Sunday, January 04, 2009

A New Year in the Hamptons

Nobody outside of a baby carriage or a judge's chamber believes in an unprejudiced point of view.
--Lillian Hellman

A recent break-in involving several hundred thousand dollars of restaurant decor, fixtures and equipment was carted
away this weekend after an alarm went off in Westhampton Beach. The perpetrators produced a phony set of court papers to the local police officer (called twice on the matter). The police officer just waved on the workers who disappeared with three trucks full of merchandise. On the spot, the officer apparently had ruled that it had to be a civil matter while the alarm blared and the wires were being illegally ripped out. Seems like a little training might be in order.

In Quogue, the Motz case still hangs in limbo since the Christmas Verdict ploy apparently didn’t work. It appears that the stock swindle case will now be heard this month (instead of December) despite attempts to lessen the severity of the matter at hand. A new date is not yet set but is expected to go to trial this month.
Since the Federal judge is in his eighties, the plan to seek succor based upon age may not work. Motz is just a kid as far as he is concerned.
Federal prosecutors have a different level of credibility than local D.A.’s.
While indigenous D.A.’s, like Spota, are known to employ bag men for cooperating attorneys to obtain beneficial results for their clients, use corrupt cops for investigations and informers, and utilize docile jurors who are often half asleep – in order to obtain indictments -- the Feds are usually awake and have a point to make. Political targeting is big in the Hamptons.

Don’t expect too many different results in the Hamptons this New Year.