There’s Still Hope When There’s Still Talent and Beauty, California
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I read an excellent piece in the Wall Street Journal this weekend, about a New York-born, Cal-Berkely trained demographer, a self-described “Truman Democrat” now teaching at admittedly center-right Chapman University in Orange, California. The piece, Exodus” href=”http://online.wsj.com/article/SB10001424052702304444604577340531861056966.html” target=”_blank”> Joel Kotkin: The Great California Exodus, has Mr. Kotkin bewailing the current state of California’s economic environment, and the effect it’s having on the middle class in that state.
I think it’s instructive, especially given the rhetoric we see being wheeled out about classical economic models of “capital investment + smart ideas = employment growth.” The left parties in the U.S. are again using the hoary phraseology “trickle down” to describe this time-tested capitalist model, while somehow trying to advance central planning as the “hot, new equitable” thing. But what have central planning, high taxes, and a large and intrusive government actually brought California?
Good schools? Not anymore.
Green jobs? Not enough to make up the ones lost in traditional energy, not mention other economic sectors.
A robust public sector economy? Well, yeah, for now at least…. (except for the pensions)…
Tax equity? Well, yes, if you mean that people making over $48,000 a year are paying almost the same in state taxes as Larry Ellison (9.3% and 10.3%, respectively)
Affordable Housing? Well, sure. As long as you are either indigent, or one of the Jobs kids, given that “free” and “it doesn’t matter” are the only options available to housing shoppers in the region.
Ironically, it seems California — once the 5th largest economy in the world on a stand-alone basis– has become our very own version of Europe. Unfortunately, today’s California resembles more a higher tech version of Medieval Europe than it does the more modern variety. You see, California is swiftly transforming into a place where only the extremely rich nobility, the Sheriff of Nottingham (& his henchmen) and some very contented peasants can bear to live in anymore. As Kotkin puts it in his piece:
A worker in Wichita might not consider those earning $250,000 a year middle class, but “if you’re a guy working for a Silicon Valley company and you’re married and you’re thinking about having your first kid, and your family makes 250-k a year, you can’t buy a closet in the Bay Area,” Mr. Kotkin says. “But for 250-k a year, you can live pretty damn well in Salt Lake City. And you might be able to send your kids to public schools and own a three-bedroom, four-bath house.”
According to Mr. Kotkin, these upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half-class society. On top are the “entrenched incumbents” who inherited their wealth or came to California early and made their money. Then there’s a shrunken middle class of public employees and, miles below, a permanent welfare class. As it stands today, about 40% of Californians don’t pay any income tax and a quarter are on Medicaid.
What’s worse is that such a system, if unamended, devolves into a vicious cycle of Exodus, especially given that this “European State” doesn’t border on neighbors requiring a passport for entry. The result is not so much a brain drain (California still commands its share of brains thanks to Silicon Valley and the defense industry) as a family drain, and a “middle class” drains:
Mr. Kotkin also notes that demographic changes are playing a role. As progressive policies drive out moderate and conservative members of the middle class, California’s politics become even more left-wing. It’s a classic case of natural selection, and increasingly the only ones fit to survive in California are the very rich and those who rely on government spending. In a nutshell, “the state is run for the very rich, the very poor, and the public employees.”
Again, I have to chuckle. In one of our bluest states, not only is the left driving out “the middle class” that the President is so often claiming support for, but they are pushing them to traditionally more conservative states like Texas and Utah, who have now become low-tax hubs for the same cutting edge technology that made California the economic engine of the 20th century.
Circumstances such as these that afflict California and my own native New York do not occur over night, but are rather the result of a series of choices taken over many years of feasting on economic prosperity, once gladly and now grudgingly shared. We must ask ourselves, are these once-great states merely the natural victims of their own success? Is the U.S. doomed to fall into the same gray spiral we see now afflicting the increasingly infantalized — and seemingly helpless — states of Europe?
Serious questions which must be taken seriously and soon. Are you game?
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I reached into my reserve stores today and bought 40% more SLW at$ 28.32, as reported in The PPT this afternoon. I am prepared to buy more, as I think we may even see silver touch $30, or slightly below once more, like it did back in September/October of 2011. Remember those painful times? That’s what has me salivating.
I am prepared to buy more. My best to you.
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the bluest state.
Watch that vid, Fly. That fucker can play.
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who the fuck wants to live in fly over country with a bunch of loser glenn becksters in a shit built cookie cutter? up yours tornado boy ….that’s why they’re all fat on greasy shit food ….they don’t move when a fucking F-1 rips up their ass.cheers!
Nice piece Jake. At this point, I just don’t get it. Most of my very well educated friends, who are retired like me either think I’m naive or just plain stupid. At this point, Mrs. 50 and I make a couple points and just change the subject. I guess we ended up among mostly west coast transplants. On the subject of miners, I’m prepared to buy more too.
Yes, well, Hawaii is not exactly known for its conservative politics.
It’s a limo liberal thing and a welfare state thing combined… not unlike Cali itself.
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Weather is nice though.
Seriously, I have to get the hell out. An entry level house that I consider to be barely adequate is $1M, and the economic divisions with respect to public education are laughable.
I wouldn’t live any other place. Only gets more expensive every year for a reason. To talk about California economically as a state comparatively is almost disingenuous. As by itself GDP ranks in the top 10 if were it’s own country.
California is as diverse politically as is the nation. You just have ridiculous political concentrations- the result of years of gerrymandering.
The middle class is not leaving California – the middle class is simply risen 1 sigma above the national average. Anyone not cutting it is moving to Oregon or the desert.
The ideological left social goals shifted 20 years ago – the Laffer curve was adopted as theory – promoting upward mobility for the “middle class” that can better afford to subsidize the social programs for those in poverty.
Ultimately the only way to capture enough revenue is to maximize the estate and probate streams by maximizing the net incomes of those most able to expand exponentially.
The same model the nation will adopt in time.
You’re well read g, but I disagree with your analysis (respectively).
In particular, most “middle income”, which, not unlike Mark Levine, is as ambiguous a phrase as classical liberal, I am aware of prefer the move with a free mortgage.
Moving to another state, e.g. Nevada, most pensioners can finance a new house purchase, almost, at the equivalent state income tax amount they would pay by remaining in California.
I’m not addressing the primary v. secondary occupation issues, but there are numerous problems in CA that aren’t garden variety labor related.
Maximizing the estate and probate streams? Does this mean taking as much money from people as possible after they die?
Yep. It means wealth confiscation.
What these idiots don’t realize is capital is mobile and soon “poof!” that money has migrated elsewhere.
Seriously, read some history people. Or you sure as heck will be doomed to repeat it.
For example… why do you think so many wealthy Brits repatriate to Spain? It’s not just for the weather.
for the hot beige booties!! Richard Attenborough scripted noble savage shit plus the cava rocks and they can play important white guy in a place that doesn’t know better…Spain is toast anyway..might as well let the wankers have at it..nobody else wants it.
What books do you recommend with regard to the confiscation of wealth and capital migration?
yer full of shit..if you like living in people’s republic of smog, you are an a-one passive aggressive jerk anyway -not that it matters -the nuclear shit from Japan just hit your shores so bu- bye blue skyboy….cheers!
I live here. Fuck though, that video blew my mind!
I’m a musician too, I play bass, guitar, drums, and fiddle; all I have to say is that dude crushed it.
That’s what I said. I think he did have a track behind him playing the chords, etc, but he STILL sounded like an orchestra unto himself!
Just magnificent. And here’s what’s odd… he’s working for Disneyland right now… you can go see him for the price of a day ticket.
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wow! I’ll hop on a plane pronto…
tim burton worked at disney too..completely screwed up his head for years..like being kidnapped by the moonies…
ever heard of django reinhardt? now those are chops…don’t youtube him ..listen to him on a system that doesn’t sound like mice on clopazine.
No exk for u?
I have so many square tonnes of EXK that I don’t have a place to put it, even in the extra bedroom.
Seriously, you buy highest quality first in these instances.
very nice player .. danke
Any opinion on the correlations between gold (and gold stocks), and SPX? It sure looks to me like they are increasingly moving together. That’s not what I signed up for.
Sometimes they correlate, especially on the miner side. Not something you should be concerned about, however.
Gold and silver are a hedge against monetary disaster, not stock market disaster.
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great vid, post. thks
Extremely talented, Thanks Jake
Nice post Jake.
It’s amazing that anyone could f’ up a state as great as Califonia. At some point, “new management” will straighten things out.
“Is the U.S. doomed to fall into the same gray spiral we see now afflicting the increasingly infantalized — and seemingly helpless — states of Europe?”
Sadly, yes.
I just read Fiat Money Inflation In France from 1896. That’s our playbook, unfortunately. Heads will roll before this is all over.
Stay on top gentleman.
Sutter’s Mill rerun: http://www.youtube.com/watch?v=oS9EEy4Hxc8
How has nobody mentioned ILLEGALS ARE BANKRUPTING THE STATE. Lax legal policy on immigration combined with liberal retread throwback trash like Gov. Brown gets you a microcosm of the entire U.S. in 10 years.
I think the illegals thing is a wash, all other things considered. Cali benefits greatly, especially on the ag side, from their presence.
Granted, there’s a lot of strain on the healthcare systems, but I don’t buy the welfare thing as much. The real problem in Cali is the disincentive to re-invest in the the state itself, despite the money made in it.
Continue on this course and one day it will be another Jamaica… a tourist trap that no one wants to do business in.
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Another point against the immigrant thing being the source of the problem … why does Texas not have the same problems, despite their similar immigration issues?
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I think it’s the opposite: California survives by exploiting cheap surplus hands. No clean pools, houses, kids or lawns without them – and without them, Cali parents would be paying a lot more, and spending a lot less on other things, like beaver waxing.
Agreed. That was my point. The cheap labor benefit balances out the social safety net strain.
What’s more, at least the illegals have a work ethic.
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Unfortunately, many of those Californians moving to Texas bring their old voting habits with them. They are not smart enough to realize that the policies/politicians they vote for are the the policies/politicians that ruined California in the first place.
True, but Texans are good at convincing people of their beneficial ways… like Bradbury’s departed Martians slowly “converted” the earthlings in The Martian Chronicles.
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California has so much wealth they can afford to live in idealistic utopian mindthink. They fuck over their underclasses, but think they are being kind. I love it there and will be going to SoCal next month for a visit.
SoCal should secede from NoCal. I have brothers in both provinces.
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Jake,
I read Kotkin’s piece this weekend, too, and sent it to a couple of fellow recent Cali ex-pats. Sad state of affairs, for sure. Not sure all of his conclusions are correct, however.
First, the deterioration of Cali schools should be studied, case studied, and used as a model for what not to do throughout the rest of the country. More than the harm caused by idiotic proposals such as Oakland’s well publicized attempt to make teaching ebonics some retard alternative to English, Prop 13 has helped to gut the traditional tax revenue that supported public education.
I’m sure it seemed like a good idea at the time, allowing our parents’ generation to pay property taxes tied to their home’s purchase price, rather than rise with the property values of their neighborhood. They thought this would, by default, strangle the growth of excessive government, too. Didn’t happen. While it might have helped Nana afford to stay in her house in Glendale, it also means that Gordon Getty’s residence in SF, bought by the family in the ’50s (I think) and put on the market in 2008 for $50+ million and recently marked down to the low, low price of $30+ million, paid about $7,000 in property taxes last year.
Underfunding over the years means you get more of the dregs rising to the top in public education policy making, like the ebonics a-holes in Oakland, and more of the educated classes sending their kids to private schools. In the end, everybody, or what we used to call “society,” pays more and gets less per dollar spent.
Also, while Kotkin paints California in shades of blue, once you get out of LA and its ‘burbs and the SF Bay Area, voters are pretty conservative. Darrel Issa isn’t really close to being the most conservative congressman out that way. Redistricting is going to make that more clear in the years ahead.
The crushing Europeanish (sic) pension obligations of the state were run up by politicians of both parties over many years as they sought endorsements by cops’, firefighters’ and teachers’ unions. The result is that you can now retire as an SF cop in your early fifties and receive almost the entire amount of your last working year’s salary for life. I want to take care of our cops, but that’s too much of a burden to put on the next generation-and-a-half.
My point is that you can’t point to liberal policies alone in the trashing of the great state of California. Prop 13 was right out of the Grover Norquist book of psalms. But simply cutting off tax revenue with the hope of shrinking government down to a size you can drown in a bathtub doesn’t take the place of actually governing. Governing means sitting down and figuring out what the priorities of the society are going to be and making realistic plans to fund those priorities. California state government has been a fucktard clown circus for many years with right- and left-wing extremists succeeding only in bringing together enough votes around their points of view to win reelection and “balance” against the fringe on the “other side” when what’s needed is some productive consensus that can actually move forward to solve some of the state’s problems.
So the national government has become just like California’s and the prospects for the middle class that has always defined America is about the same.
Jake, there is a video floating around the Web called “If I wanted America to fail…” that is a must see.
http://freemarketamerica.org
http://www.youtube.com/watch?v=CZ-4gnNz0vc
As the group writes: “The environmental agenda has been infected by extremism — it’s become an economic suicide pact. And we’re here to challenge it.”
Nice, thanks.
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“Good schools? Not anymore.”
The UC System is still top tier. Students like to gripe about rising tuition but they should take a look at tuition costs in other states. You get a lot of bang for your buck. If you mean high schools then yes, they are in disarray. But that is true of most of the nation.
“Circumstances such as these that afflict California and my own native New York do not occur over night, but are rather the result of a series of choices taken over many years of feasting on economic prosperity, once gladly and now grudgingly shared. We must ask ourselves, are these once-great states merely the natural victims of their own success? Is the U.S. doomed to fall into the same gray spiral we see now afflicting the increasingly infantalized — and seemingly helpless — states of Europe?”
You nailed it. I live in California and I am dismayed in what I see politically and economically. The unions have such an iron grip on politics that it is almost impossible to solve the states fiscal woes in an efficient manner. My boss already sold his muni bonds because in Stockton, which is filing for bankruptcy, it is the union pensions that were made whole and the bondholders to suffer. California truly is a victim of its own success. Tech is the only thing keeping this state from falling apart, and who knows how long that will last if other states keep drawing away talent.
However, one gripe I have is comparing different states and living conditions on expenses alone. Oftentimes different expense levels also bring different salaries. So the guy making 250,000 in California will not be making 250,000 in Salt Lake City. However, with lower taxes it most likely works out to more savings for the SLC worker (and much less hassle/red tape). But to say “the worker making 250,000 in Cali is middle class but the guy making 250,000 in SLC is rich!” is misleading.
Well, it’s not if they both are actually making 250k.
And it’s not like Utah doesn’t still have to compete for talent. So while they may not have to pay the “third tier” guy 250k, they probably still have to pay the second tier guy that much.
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Awesome music vid, Jake! Wow.
This is my favorite new group out of the UK.
http://www.youtube.com/watch?v=5AQanC1kn-s
Even live, they nail it every time.
http://www.youtube.com/watch?v=VmANQinNTvA
Listen to the vocal at the end of Sea Fog, incredible.
good, but not new
http://www.youtube.com/watch?v=6ina8bao0TU
Awesome! I hadn’t heard this one. Talk about goosebumps. They are kind of like Coldplay, but maybe even better? And I am a huge Coldplay fan.
Hey, are you making fun of me because they are in fact not that new out. I just realized that. Shit. I still really like them, and they are new to me.
Oof, chanci, you and my mom should get together and talk music.
As Barkley would say, “Turrible.”
LOL, #6. I’ll take that as a compliment.
But they are not turrible. They are awesome.
You know what, the more I think about it, how rude. Rude to tell someone their music sucks, and rude to say an artist is terrible.
You are a rude little shit. Typical banker.
If I had known Jake’s brothers lacked his class and would be posting their snide little comments on his blog, I never would have voted for him.
No wonder the number of views to comments ratio is so great here. You should go to James Althucher’s blog and see what his ratio is.
A blog is only has great as its comment section.
that was a joke right? altucher? get serious…
Don’t bother Chanci – she’s busy downloading Hasselhoff’s greatest hits.
time to develop thicker skin, chanci. especially if you’re going to be listening to that dreck.
hugs and kisses
This vid capture of Sea Fog is a lot cleaner.
http://www.youtube.com/watch?v=IHMkGYLI8Bo&feature=related
Oh I got it – you’re twelve and brain cell challenged ..cheers
Hey Jake, wondering what your thoughts on AEM are right now?
It looks like it’s long dark night of the soul may be over.
You can’t beat the dividend in the gold sector, either. Just crazy. That said, I’d wait for a break of $35 to go whole hog.
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How do you think about portfolio allocation? Have you written about this in the past? For instance, if you had 8% of your portfolio in SLW, would you consider this a high allocation and be not willing to add on dips?