Nostradoofus

Americans surprised at their global unpopularity might consider how we are performing against this partial list of the most obvious, basic rules of civilized behavior.

1. Justice, not revenge.
2. Lead by example.
3. Treat enemies with decorum.
4. Speak precisely and succinctly.
5. Admit and apologize for mistakes.
6. Avoid condescension.
7. Don’t flaunt prosperity.

(By coincidence, this list has significant overlap with a more complete, more general and more revered list of seven things not to do.)

Each time you read a public statement from our President or his staff, check it against this list, and ask yourself how we are doing.

When our representative on the world stage calls a head of state a “midget,” or a “sawed-off runt,” are we treating enemies with basic decorum and avoiding condescension? Is his dogged mispronunciation of “nucular” precise and clear?

Don’t rush to judgment either way on this. Just memorize the list, and compare it to what you hear America saying in the papers.

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The U.S. Constitution explicitly forbids cruel and unusual punishment. What is cruel? One way to nail it down is to compare alternatives. Here is an instructive thought experiment.

Imagine our judicial system was required to provide nonviolent convicts a choice between two types of sentence. One would be a normal prison term. The other would be an “equivalent” amount of caning (a form of extremely painful whipping currently employed in Singapore, which in turn adopted it from the old British colonial justice system).

For example, say you are convicted of felony drug possession, and sentenced to 6 months in jail. Under this imaginary system, the judge would be required to offer you the option (but not the requirement) to receive, let’s say, 20 lashes instead of prison time.

For those who don’t know, caning is horrifically painful. Brutal. Barbaric.

And yet, which would you choose? Obviously the caning. Why? Less dangerous than jail. No beatings, rape, race riots, corruption, extortion, or threats. Millions of Americans face these things — things nearly anyone would do nearly anything to avoid — in prison every day.

Thus, while we can’t say the prison system is cruel in an absolute sense, we can say that any reasonable person considers it more cruel than a brutal whipping. To me, that sounds pretty cruel.

Now for the irony:

1. Behavioral psychologists will tell you caning deters crime better than prison.
2. Judges will tell you the appeals court logjam would vanish if convicts had an option to accept corporal punishment. The entire justice system would be, faster, fairer and more effective.
3. The prison population would fall by more than half, releasing billions of dollars into the productive economy, helping to balance government budgets, etc.

In short, corporal punishment by choice (not by obligation) is cheaper, more effective, and preferable to both the justice system and to the convicted. The very idea is repugnant, and yet any of us would choose it over our existing prison system. Very strange situation.

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I generally don’t sell stocks short, due to unlimited downside and exposure to speculative bubbles. You can be right in the long run, yet get killed by a margin call in the short run.

That said, if I were to sell something short now, it would be the entire state of Florida.

Regional real estate wipeouts all tend to repeat a certain trajectory:

1. Buyers vanish, but sellers are unwilling to drop prices.
2. Consequently, the number of sales collapses.
3. A year or two goes by.
4. Sellers start giving up and reduce asking prices.
5. Buyers see prices falling, and decide to wait it out.
6. Sellers are forced to reduce prices further.
7. If seller’s equity falls below zero, they stop paying mortgages.
8. Bad loans proliferate.
9. Banks with geographically concentrated loan portfolios start going broke.

This has happened several times in regional markets in the U.S. — Houston is the most flamboyant example of the last 30 years.

In Florida, we have arrived at Step 2 (see above) with the recent report that the number of sales in Broward County in south Florida has fallen 34% from last year. Median price fell less than 1% — we’re now waiting to complete Step 3.

This problem may extend to other states as well. But Florida looks particularly bad, because:

• The state’s economy is unusually dependent upon real estate.
• There exist many vacation communities with little or no underlying economy.
• Rampant speculation, including the infamous CondoFlip.com.
• Prices rise at 30% per annum from 2000 to 2005.
• Insurers flee the state on fears giant hurricanes will be common.
• Even Bush’s EPA puts south Florida under water in 100 years.
• South Florida will suddenly run out of water within 20 years, as seawater invades the aquifer supplying most of its drinking water.

Now, it’s possible Miami will become a charming, windblown Venice, connected to the mainland by a 100-mile, hurricane-proof causeway, giant desalination plants humming 24/7. Then again, I wouldn’t bet my own money on that.

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