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On November 20, we got stood up by Andrea Tevlin, the independent budget analyst who reports to the council. She had agreed to do an interview at 2:00 p.m., but she called beforehand to tell us she was busy. Her alibi reminded us of that old song, “Makin’ Whoopee.” The wife is sitting at home and suspects her husband is cheating on her. Goes the song, “He says he’s busy. But she says, ‘Is he?’ ” That’s how we feel. It’s not that Tevlin was too busy to talk with us. It’s that she knew the economic situation had changed drastically; things were far worse than anybody but City Attorney Mike Aguirre and the Reader were admitting.

Tevlin’s bosses, the councilmembers, were looking the other way, with the exception of Donna Frye. Mayor Jerry Sanders and chief operating officer Jay Goldstone were sticking their heads in the sand, as usual. So was David Wescoe, chief executive of the pension system. We suspect that Tevlin, who has been around government for decades, knew that city hall was in denial. There was no way she could answer our questions. So she was “busy.”

But was she? Let’s take a look at some numbers. On November 12, Joe Esuchanko, the City’s consulting actuary, revealed that on October 31, the unfunded liability of the pension fund was $2.8 billion. The system was about 58 percent funded at that time. Realistically, the City would have to plunk $85 million more into the pension fund for the current fiscal year than the $162 million it plans to ante up.

On October 31, the Standard & Poor’s 500, the best index of U.S. stocks, had closed at 968.75. Reminder: that date was when the unfunded liability was $2.8 billion and the fund was 58 percent funded. But on November 20, the supposed day of our interview, the S&P 500 ended up at 752.44 — more than 200 points lower and the lowest closing since 1997.

So on November 20, the pension unfunded liability was almost certainly above $3 billion, and the San Diego City Employees’ Retirement System was probably only 55 percent funded, if that. Stocks, both domestic and foreign, make up more than 50 percent of the fund’s portfolio.

The long and the short of it is that on November 20, the City was thoroughly broke. Busted.

We suspect that Tevlin knew it and had no idea what she would say to us. On the day before our scheduled interview, the Dow Jones Industrial Average had plunged below 8000. It had been above 14,000 last year. It closed at 7552 on the day of our scheduled interview. On October 31, it had closed at 9325.

The market rallied after November 20, but we don’t know anybody who believes it will come roaring out of this bear market. The City remains busted.

Only the day before our scheduled meeting, Wescoe had assured the city council in mellifluous tones that there was no reason to panic, even though by definition the market this fall has been in a full-fledged panic. Then, in rasping voice, Wescoe had complained that Aguirre, who is alarmed at the market’s tanking, was just using scare tactics. Councilmember/simpletons, such as Jim Madaffer, had used the same soothing words only a week earlier to explain that there are ups and downs and we are in a down period. Madaffer apparently doesn’t know that the consensus of economists is now that the recession will be deep and last at least a year; stock market analysts say historically extreme volatility will continue and the bear will be around for a long time.

Sanders has said that the current budget deficit is a mere $43 million. He proposes to close it by taking such baby steps as closing seven libraries and nine recreation centers, cutting down the number of recruits going to police and fire academies, and giving the pink slip to about 100 employees. The public is howling about the libraries and rec centers, and councilmembers — along with Tevlin — are sympathetic to their plaints. Tevlin has proposed some minor moves, such as furloughs for employees. Sanders, playing the macho cop, says she is procrastinating. Actually, Sanders and Goldstone are procrastinating: they are grossly underestimating the City’s short-term deficit — and probably the shortfall out to 2014.

So that’s exactly what we planned to ask you, Ms. Tevlin: Given the stock market realities, aren’t you, the mayor, and the mayor’s acolytes whistling past the graveyard? Instead of closing libraries and furloughing employees, shouldn’t you be thinking of taking major actions, such as entirely shutting down the Centre City Development Corporation and the Southeastern Economic Development Corporation? And not because they produce so many juicy scandals but because their usefulness has come to an end. And if we can’t shut down Centre City, can we at least ask it to pay the City the $100 million it owes?

With downtown condos empty, residential development foundering, and commercial building showing signs of weakness, can’t there be more cuts in the Development Services Department? We realize that the general fund provides only a part of that department’s support, but can’t it still be cut more? And that chopping of only 100 heads: shouldn’t the guillotine be much busier? Can’t retirees take over many City jobs on a volunteer, no-pay basis? Can we squeeze more money out of parking and franchise fees? Isn’t it time for aggressive outsourcing of City jobs? Don’t San Diegans have to face facts: is it time to think of higher taxes?

Would it be possible to sell Petco Park? Simply defaulting on the bonds and letting the bondholders take it over would present complications should the City try to go back into the bond market. On the other hand, going bankrupt — a practical solution that Aguirre says should be considered — would upset creditors too. We planned to ask you, Andrea, if a Chapter 9 bankruptcy reorganization is in the City’s future. Sanders says it is out of the question. The head of General Motors says he won’t take his company in either, but he may have no choice.

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JustWondering Dec. 3, 2008 @ 1:48 p.m.

Don, I was just wondering if you'll tell us where the markets will close on June 30, 2009? What's that, you can't! You don't know?

But isn't this really the only date that matters according to the SDCERS sponsoring documents and Municipal Code? For it is the Fund's valuation on that date that the actuary sets the amount of payment necessary to meet the City's contractual obligations.

Now don't take me the wrong way, the financial system is a mess and I believe most agree there were many cooks stirring this stew. But on January 20, 2009, a new day begins to rise on our nations and "Change" has been promised. Historically we know most new administration get a honeymoon period. Chances are President OBAMA will get one too.

You and I know SDCERS have 20, 30, 40 year time horizons and there will be dramatic ups and downs. The early 80s, 1987, the early 90s come to mind. We are in one of those downs right now... and it's a bad one, there's no doubt there. But others see this as a buying opportunity. Real estate has dropped 30%. Mortgage rates are trending downward too. More people, ones with "real" jobs have real opportunity to OWN a home and actually pay for it. Equities are beaten down, P/E are realistic bargains BUT volatile.

I believe we'll work our way out this... with CHANGE. And everyone of the interested parties, those attending this dance need to participate in finding solutions, one way or another.

Does the snapshot of 2009 that you presented look pretty bleak? YES it sure does. But, to use a football analogy, it's only the first of four quarters played in this fiscal year and a new quarterback is coming into the game. Don't you think we should see what his team can accomplish before we capitulate?


Ponzi Dec. 3, 2008 @ 3:16 p.m.

I want the fire rings back! Seriously, what's next with this cheap city?


JulieParrots Dec. 3, 2008 @ 3:55 p.m.

Next the city will take out all public restrooms at the beaches, parks, and bays too.


Don Bauder Dec. 3, 2008 @ 6:05 p.m.

Response to post #1: The fact that SDCERS uses income-smoothing dating techniques does not draw a good picture. The fact that the mid-2009 snapshot is used for setting the City's obligations is troubling to me. SDCERS should tell its members where its portfolio stands on a daily or at least weekly basis; it knows. The city council should get the same information. Yes, there are ups and downs in markets as we have learned all too poignantly in 2008; still, SDCERS, Scott Peters and others are being Pollyannish. The portfolio should be more conservative -- well under half equities. It went to more than half equities in the mid-1990s. It was a wrong move, although one that many funds did at the time. Look at CalPERS. There is one that really went crazy. Best, Don Bauder


Don Bauder Dec. 3, 2008 @ 6:06 p.m.

Response to post #2: What's next? Bankruptcy? Probably not next, but very possibly down the line. Best, Don Bauder


Don Bauder Dec. 3, 2008 @ 6:08 p.m.

Response to post #3: Shhh! Sanders may hear you and take action -- anything but meaningful moves such as closing CCDC and chopping heads so severely that the muni unions come to the table for voluntary cuts. Best, Don Bauder


JustWondering Dec. 3, 2008 @ 6:48 p.m.


Remember the City is the one of three plan sponsors. If we look at the the other two, one was more than 100% by either accounting method. The City, in its plan documents also set the date for valuation, not SDCERS. SDCERS merely administers the benefits with a fiduciary duty, which sometimes I believe is conflicted, to its members. In the October 2008 Board of Administration meeting the SDCERS Fiduciary council clearly told the the Board of their duty...to the "system" and to members benefits.

You say SDCERS uses "income-smoothing dating techniques" are these accepted actuarial standards for measuring "long" term investments for pension plans?

SDCERS' historical track record is clear. It has performed substantially better then hundreds of other public pension systems. And while agree, past performance is not an indicator of future performance, the fact is the fund has out performed the market year, after year, after year. True, this will not be case this year, unless you consider the fund's losses will be less than other indexes it's measured against.

With the benefit of 20/20 hindsight should SDCERS have altered its funding ratios? Sure... All of us who were holding equities in August 08 wish we had that crystal ball!

Should the system publish valuations more often? Maybe. But what's the point? Again the time horizon on many of its investment strategies, as I mention, is literally decades down the road. Should the fund hold less volatile investment? Maybe I just read the is a proposal for 100 year US Treasury note with a 3% yield deferred for 30 years. Safe? Who the hell knows what going to going a 100 years from now. That's a tough one especially when considering one of the two fiduciary duties of the Board, i.e. the one that states maximize member benefits. But SDCERS does not grant benefits it merely manages and administers them. So I guess this means maximize "returns" for the member's benefit.

A monthly, quarterly system valuation means nothing other than measuring the performance of professional money managers hired by the fund. Does the average citizen really care...I think not. Does the reconstituted Board care? Of course they do. But I believe monthly or quarterly public statement would only lead to political pressure and attempted interference in the investment strategies by politicians. And, I think, no I pray, you'd NEVER want that... most of our local elected leaders wouldn't know the difference between a ledger and P/L statement.

Is Scott Peters attempting paint us a pretty picture...well duh! The guy doesn't want to known as the first Council President who led the City into the abyss. In fact NO ONE, not even your favorite, Donna Frye, wants any part of the responsibility for this mess. Same with Sanders. And NO ONE on this planet could have accurately predicted the extent of the WORLD financial mess we're in today, a year or two ago.


Visduh Dec. 3, 2008 @ 8:34 p.m.

In some way that most of us can only imagine, this city staggers from crisis to crisis. For decades its government has been deaf to the citizens, taking their tax dollars and then delivering a third-world level of services, and constantly charging fees for use of basic amenities, like parks, rec centers, and ballfields.

In the fall of 2003, the fire department was AWOL when the Cedar fire blew into Scripps Ranch, with many of its units out of the county assisting with other fires. Then last year we found out how weak the fire coverage was in Rancho Bernardo, when hundreds of homes went up in flames.

Where was the outrage? When did the voters turn out the bums who had left them so unprotected? While these financial shortfalls and shenanigans may seem removed from most of the voters, they are just another set of indications of how far the city has fallen.

So, don't expect any sort of sea change in the city of San Diego. Too many voters are brain dead to the reality of a city government that cannot and will not protect them or even provide basic services.


Don Bauder Dec. 3, 2008 @ 10:31 p.m.

Response to post #7: Other pension systems use income-smoothing techniques. I didn't mean to say it was illegal or unethical. I am simply saying that people do not have an accurate picture from day to day or week to week. It should publish its portfolio status daily or weekly. It needs maximum transparency. Yes, the fund should hold less volatile investments. Incidentally, there were some who were warning of this financial mess long before it occurred. Trouble is, they had been warning about it so long that their credibility had been eroded. Example: me. I have been wailing about excessive consumer, corporate, government and financial debt since I arrived at the San Diego Union in 1973. I was laughed at during the 1990s bull markets in stocks and real estate. I did not get the timing right this time -- that is, I didn't say in August that everything would collapse in September. For more than three decades less than 30 percent of my portfolio has been in stocks. Best, Don Bauder


Fred Williams Dec. 4, 2008 @ 5:49 a.m.

We need more transparency all around.

Who does Andrea work for? Sanders or San Diego?

We're getting the involuntary ostrich treatment...having our heads shoved down in the sand now matter how we struggle to get a look around.

The Reader has been locked out of City Hall for how long, Don? Matt?


The mayor and council just unilaterally decided, "Oh, we only talk to journalists who report the right type of news with our spin and no contradictions."

What a bunch of cowards.

Or crooks...

If they won't cut obvious turkeys like CCDC and SEDC (and how about that Housing Commission, huh?) they're simply not serious.

I'm looking forward to what the new council will do. How ironic than in "republican" San Diego, fiscal sanity might finally be restored by two gays and three liberal women.

(In your face, Madaffer!)

Don and Matt, keep up the great work. Keep reminding everyone that we don't have to continue paying for Moores and Spanos' stadiums. We don't have to honor corrupt deals behind closed doors. We don't have to continue down the path we've followed for the last two decades.




SanDiegoWatchDog Dec. 4, 2008 @ 6:58 a.m.

Don - Agree the pension system is in the tank, however, even if the economy is in recession for the next 12 or even 18 months, on a 40-year pension earnings graph, isn't this really only a dip on the 40-year graph?

And with all the talk about San Diego's pension, what gives with the State's pension system? Last time I checked, CALPERS uses the same stock markets as the San Diego Pension - what is their unfunded liability and what are they doing to correct it?


Don Bauder Dec. 4, 2008 @ 7:15 a.m.

Response to post #10: The Reader has been locked out of city hall (with the exception of providing documents mandated by law) for as long as Sanders has been around. The word "crooks" describes them better than "cowards." They can feed news to media that suck up to them, such as the U-T and shut out those seeking the truth. Don't believe a word they say. Best, Don Bauder


Don Bauder Dec. 4, 2008 @ 7:19 a.m.

Response to post #11: I don't know that it is just a dip. The broad market is about where it was 10 years ago -- that's one-fourth of the 40 year period. I don't know about the SDCERS 10-year performance; that should be available on SDCERS website. Incidentally, while everyone boasts of the seemingly wonderful performance of SDCERS, that performance should be thoroughly audited. Best, Don Bauder


Arborigine Dec. 4, 2008 @ 10:03 a.m.

San Diego needs money and there is no better way to raise cash than a separation of sport and State. Sell the football and baseball stadiums to the highest bidder. If the teams don't like it, too bad, leave. The City has no business spending public monies to benefit sports corparations. Public parks and schools are the only place the city should spend money on sports.


weeorphan Dec. 4, 2008 @ 11:29 a.m.

A simple monthly chart of the Housing construction Fed Data Series and the residential contruction index, $HGX, would have clearly and unmistakeably shown the beginning of a major collapse in the housing bubble by June 2006. Several residential housing stocks like KBH, CTX, LEN and DHI showed similar patterns. Anyone charged with Pension Fund Management should have been watching and deciding to exit the Reits markets by these publicly available charts. See www.Economagic.com.

Simply using a 50 cross 200 daily moving average on stocks and other asset classes like bonds and commodities should have induced astute money managers to safe money market funds. The typical 'Buy and hold' strategy that has gripped the money managers and investors for the last 26 years is inadequate in this sideways stagflation environment that could last till 2020.

One cannot label these money Pension managers corrupt or crooked. But one might argue them unwitting victims of programmed incompetence, though they would plead otherwise. We can only judge by the results, and 40% losses are convicting.


shizzyfinn Dec. 4, 2008 @ 1:50 p.m.

I'd say the author of post #1 is on to something, at least sort of. True crisis only hits pension plans when obligations must be paid but there isn't enough money in the kitty. Luckily, the City has some years before inability to pay becomes an issue - and in the interim, high inflation could very well come to the City's rescue.

Inflation screws lenders (like employees who are owed pensions) while helping debtors (like pension plans) by reducing the real value of the money owed. If inflation ratchets upward significantly in the US over the next few years - which economic theory says it will, given the mind-boggling amount of Gov't spending going on right now - nominal prices of the City's pension assets will climb big time, while the City's obligations to pensioners stay flat. Voila, funding levels up, and insolvency avoided.

Of course, the losers are the City retirees. They will still get their pensions of $30,000 or $50,000 or $80,000 a year. But by then, McDonalds employees will be making $100,000 a year, and Big Macs will cost $400 each.

In fact, this is the scenario that will likely unfold across America in the years ahead. Inflation will enable us to pay all the bills out there, from mortgages to the national debt. But at the same time, it will eat away our purchasing power relative to our counterparts in India, China, and everywhere else. So enjoy your I-Pods and your Escalades while you can, folks!


Don Bauder Dec. 4, 2008 @ 8:06 p.m.

Response to post #14: I agree there should be a separation of sports and state. I would like to see Petco sold, but who would buy it? It's a loser. And who could get credit to buy it? Still, it's worth considering, so I added the thought to the column. Best, Don Bauder


Don Bauder Dec. 4, 2008 @ 8:07 p.m.

Response to post #15: There certainly were technical hints aplenty of the calamity that was coming. Best, Don Bauder


Don Bauder Dec. 4, 2008 @ 8:10 p.m.

Response to post #16: Good points. The U.S. has already thrown $8 trillion at the current crisis. That is half of gross domestic product, or half the total yearly output of all goods and services. It will be very difficult to assure that this doesn't turn into inflation once the economy recovers. Best, Don Bauder


Fred Williams Dec. 5, 2008 @ 5:34 a.m.

Shizzy and Don,

I guess what we're seeing right now is asset price deflation. The Japanese can tell you what a bummer that is, and how long it can last.

So it appears the Fed and Treasury are doing everything they can to inflate the currency. What's panicking them is that it's not working. The dollar is still strong against other currencies and asset prices continue to drop.

They've made the decision that inflation, while bad, is preferable to deflation. Argentina showed us how that works out, with the middle classes and poor taking the hit while the wealthy move their wealth into other assets and end up with more than ever before...

How did that old song go?

"The rich get richer, the poor get...children."


Don Bauder Dec. 5, 2008 @ 7:10 a.m.

Response to post #20: Right on. Defeating deflation is far worse than defeating inflation. The problem is that this is not a credit crisis. It is a debt crisis. Consumers are vastly overleveraged and can't boost spending. Ditto for governments, many corporations, and in particular, the financial industry. (Wall Street firms have been leveraged 40 to 1. The SEC officials who permitted this should be shot.) So in some senses, the Fed in trying to induce spending is pushing on a string. Best, Don Bauder


seahorse Dec. 5, 2008 @ 7:36 p.m.

Response to #12,

The UT could only get away with that if the public trusts the paper to some degree. The reader exposes the UT bit by bit every week, but that only penetrates so far.

Where is the case compiled in a cohesive and compelling manner that the UT has let our city down? For instance, if I want to email a link to a friend who thinks the UT is a great paper that can be trusted, sending them an article or two from the reader won't do it. I'll need to provide an analysis that has a more comprehensive view to be compelling.

Does anyone keep a list of the UT's acts of manipulation?


Don Bauder Dec. 5, 2008 @ 10:33 p.m.

Response to post #22: I don't know anyone who keeps a list of U-T's regular sins. Matt Potter did an excellent cover story earlier this year. It had a broad historical sweep. Somebody should have kept track of the wholly inaccurate hit pieces on Aguirre. Those could be easily resurrected from electronic records. The history of that vendetta would make an excellent master's thesis or even PhD dissertation. Best, Don Bauder


Fred Williams Dec. 6, 2008 @ 9:22 a.m.

Re: #23

Speaking of Aguirre, I sure hope he now is free to spend more time in D.C. and N.Y. pursuing the bulshytt artists who conned our nation into this mess.


Don Bauder Dec. 6, 2008 @ 10:15 a.m.

Response to post #24: What you describe is very likely to happen. Unfortunately, those bulshytt artists who conned the nation into the mess are joining the Obama administration. That will complicate any cleanup job. Best, Don Bauder


JohnnyVegas Dec. 6, 2008 @ 12:08 p.m.

SDCERS' historical track record is clear. It has performed substantially better then hundreds of other public pension systems. And while agree, past performance is not an indicator of future performance, the fact is the fund has out performed the market year, after year, after year.


SDCER did NOT out perform the market in 2008, it did NOT even have a positive return.

Justwondering is just the basic welfare queen City employee spouting off nonsense.


JohnnyVegas Dec. 6, 2008 @ 12:10 p.m.

The City also expects property tax receipts to go up 1 percent in the 2010 fiscal year, with the hotel tax (transient occupancy tax) up 4 percent and sales taxes about flat. C’mon, Andrea, were these forecasts cooked up by Rebecca of Sunnybrook Farm?

There is NO chance of property taxes raising even 1/100,000,000th of a percentage point in 2009.

Tax payers are having their property taxes reset DOWNWARD right now and those tax rates will kick in in 2009-2011-there could be a 10% or more DECLINE in property tax revenue staring this 2009.


Don Bauder Dec. 6, 2008 @ 1:40 p.m.

Response to post #26: I have been reading for some time that SDCERS's portfolio performance is much better than most other comparable ones. To believe the claim, I would have to see a thorough and objective audit. Best, Don Bauder


Don Bauder Dec. 6, 2008 @ 1:42 p.m.

Response to post #27: A ten percent drop is probably not realistic in 2009, the current year. But watch out for the following fiscal years. Best, Don Bauder


Visduh Dec. 7, 2008 @ 8:31 a.m.

While housing prices were running upward to stratospheric levels during the first half of this decade, every time one changed hands it was revalued at the new selling price. That meant that for some homes, the value tripled (or more) in only four or five years. The property tax take went up just as fast on those properties that changed hands then. Yet, the city, county and state, all of which had a stake in property taxes as a source of funds, were finding it progressively harder to close budget "gaps." What would have happened had they not had that burgeoning tax take coming in?

So, now, the holders of those overpriced properties can apply to have them revalued downward to reflect the current market prices. The budget gaps are bigger than ever, and the tax take has to come down, and come down a lot. What now? The problem as outlined above is even bigger than anyone in local (or state) government wants to admit.

As the surf rats might say, "It's gnarly out there, dude."


Don Bauder Dec. 7, 2008 @ 10 a.m.

Response to post #30: It is definitely gnarly. By law, people can apply for and get a lower valuations. The property tax take will come down sharply. The Sanders administration is pretending it won't. But that's its typical method of operation: lie to the public and lie to itself. Best, Don Bauder


JohnnyVegas Dec. 7, 2008 @ 2:45 p.m.

Next the city will take out all public restrooms at the beaches, parks, and bays too.

By JulieParrots

No, they will just start charging a "fee" for their use, because us taxpayers want services but don't "want to pay for them" as JF would say!


JohnnyVegas Dec. 7, 2008 @ 2:48 p.m.

The property tax take went up just as fast on those properties that changed hands then. Yet, the city, county and state, all of which had a stake in property taxes as a source of funds, were finding it progressively harder to close budget "gaps." What would have happened had they not had that burgeoning tax take coming in?

What would have happened?????...... for one there would not have been any retroactive (and illegal) pension spiking.

When tax revenue is going up in double digits year after year after year and you still cannot balance a budget- you have a SPENDING problem, not a revenue problem.


Don Bauder Dec. 7, 2008 @ 4:54 p.m.

Response to post #32: Actually, some strategically-placed pay toilets might net the City a lot of money -- say, placed above the photos of local pols. Best, Don Bauder


Don Bauder Dec. 7, 2008 @ 4:56 p.m.

Response to post #33: Good point. Revenues have been going up steadily, but the structural deficit remains and grows. Best, Don Bauder


JohnnyVegas Dec. 7, 2008 @ 5:35 p.m.

Response to post #32: Actually, some strategically-placed pay toilets might net the City a lot of money -- say, placed above the photos of local pols. Best, Don Bauder

LOL!...some people may think above the local politicians HEADS would be a better location for pay toilets.


Don Bauder Dec. 7, 2008 @ 9:25 p.m.

Response to post #36: Yes, but the cost of installation might be prohibitive. Best, Don Bauder


shizzyfinn Dec. 7, 2008 @ 9:58 p.m.

Response to post #21: Don and Fred, thanks for your points on deflation. Sounds like it may prove to be a big enough problem on its own to preempt the problem of long-term inflation. Almost feels like deflation is arriving already, with current sales on the goodies at the store, and the price of gas back below two bucks a gallon.

And I guess what the Govt is doing right now is trying, rather desperately, to pump money supply into the situation, in the hopes of fighting deflation and instead bringing about the lesser evil, inflation.

So I guess it's if the Govt gets it done, we get inflation. And if the Govt doesn't, we get deflation.

I think I'm getting it now. But I'm not sure I like what I'm getting!


Don Bauder Dec. 8, 2008 @ 7:14 a.m.

Response to post #38: You have it pegged correctly. The government and Federal Reserve have pumped more than $8 trillion into the current mess. That's half GDP, or total annual output of goods and services. A staggering sum. How much of that $8 trillion winds up being money that the government prints remains to be seen. Any prudent person today is planning for the possibility of hyper-inflation down the road. Best, Don Bauder


SanDiegoParrothead Dec. 9, 2008 @ 3:43 p.m.

Any prudent person today is planning for the possibility of hyper-inflation down the road

Don - suggestions?


Don Bauder Dec. 9, 2008 @ 7:35 p.m.

Response to post #40: 1. Bring up your savings rate very sharply. 2. Consume less. 3. Cut out or reduce expensive vacations, dining, in-house sumptuous meals. 4. Invest your money conservatively -- high quality muni bonds, money market funds, TIPS, etc. 5. If you buy stocks, stick with quality ones, such as utilities, with well-protected yields 4 to 5 percent. But don't allocate a great deal to stocks unless the market really tanks, in which there should be bargains. 6. Avoid exotic financial instruments. 7. Do no real estate speculation. 8. Do not take on new debt and try to pay off existing debt with the goal of being completely debt-free. This should be a good start. Best, Don Bauder


JohnnyVegas Dec. 9, 2008 @ 8:23 p.m.

Don's suggestions should be followed in bull markets as well as bear markets-it is rock soild advice.


Don Bauder Dec. 10, 2008 @ 8:42 a.m.

Response to post #42: Yes, I am a believer in old-style economics: prudence, caution, saving, etc. I personally try to follow that creed in good times and bad. I recommend the public do so, too, but the economics profession prefers excessive consumption and debt. Best, Don Bauder


Fred Williams Dec. 10, 2008 @ 9:45 a.m.

Don, your advice is what my grandparents' generation followed, and my parents' generation ignored.

So much of the media's slant on the economic situation is the effect on baby boomer's retirements. This is understandable considering the true effect of the establishment of 401k's and the like was to create an inflationary spiral in stock prices over the last twenty years. All that money, month after month, seeking something to buy...a huge ponzi scheme with side-betters adding to the spiral when they created derivatives and other hedges.

No surprise, it's all collapsed.

We've been called Generation X, but maybe the "disposable" feels more accurate. We're used, then tossed away. We've got the burden of paying into pensions that we have zero possibility of receiving ourselves. Our own meager savings have been destroyed too, but we're neither senior nor junior enough to have much prospect for the future.

That's some hard reality to deal with.

Now, not only are there few jobs around, many of my friends and colleagues around the world have been laid off in the last three months. The ones who are still employed are nervous for their jobs.

That isn't just here in San Diego. I'm talking about Silicon Valley, Prague, and Stockholm...all holding their breaths, dreading what's next, living paycheck to paycheck, and with few prospects for finding a new job. They're all making in the range of $30-70k annually, but after housing, transportation, and paying off debt there's just nothing left.

As a disposable generation, we feel forgotten.

We'd love to follow your 7 point plan, Don...but it's not looking very applicable to our situations:

  1. What revenue we have is already over committed to living expenses.

  2. It's already a frugal life.

  3. Buying food at the dollar store and Walmart, Don. Getting good at cooking beans.

  4. Cannot invest what you do not have.

  5. If we did have money to invest, we wouldn't trust stock peddlers or "financial advisors" any time soon.

  6. Exotic financial instruments like our landlord's mortgages, which we pay-off in rent, which in combination with our student loans, car payments, food and gas, gobbles up everything we're currently paid at our at-risk jobs? Exotic instruments like our bosses dabbled in, so that the whole company -- otherwise sound -- is going bust? We never decided to make those investments, but we're paying for them anyway.

  7. If our kids are going hungry, we just ignore the mail and always let the answering machine get the phone. Sure, we'd love to pay down debt...with what?

I'm describing your friends and neighbors, young families, bright, hardworking, educated...and feeling utterly abandoned and betrayed by their baby boomer parents' busted ponzi scheme on Wall Street.


Fred Williams Dec. 10, 2008 @ 9:51 a.m.


I'm not describing myself. I have zero debt, and since I'm multi-lingual and technically skilled, I can work anywhere in the world (and have).

Yet what I am describing is, based on my first hand knowledge, happening all around the world to people my age...especially those with kids.

They are feeling completely trapped.




Don Bauder Dec. 10, 2008 @ 12:28 p.m.

Response to post #44: Yes, you and your confreres are in a jam. It does not appear that the $8.4 trillion the government and Fed have tossed into this mess (thus far) will help you dig your way out. Best, Don Bauder


Don Bauder Dec. 10, 2008 @ 12:30 p.m.

Response to post #45: Zero debt is ideal. Your technical and linguistic skills are also ideal. Best, Don Bauder


SanDiegoParrothead Dec. 18, 2008 @ 2:21 p.m.


Was wondering what you thought about Gold. Was listening to John & Ken program (KFI640), and they had on a guy named Gerald Celente from the Trends Research Institute. Ever hear of him?

He was claiming that it will get worse in 2009, and just as we had a housing market collapse, the next collapse will be in the commercial business market - companies colapsing - with loads of unused office/retail spaces - like what is happening with Mervyns, Office Depot, etc.

Anyhow, he suggests that there will be hyper inflation, and the way to beat this is buying gold, spreading your bank accounts around overseas - Swiss, France, etc - to diversify.

Any thoughts on this?


Don Bauder Dec. 18, 2008 @ 5:50 p.m.

Response to post #48: Somebody else asked me about Celente. My opinion: 1. Yes, economy will get worse in 2009 and deepest recession since 1930s will last into early 2010; 2. The housing price decline is not over; 3. Commercial real estate is the next to go into the tank -- some already has taken a dip; 4. Not sure about hyperinflation, but I do fear inflation if and when the $10 trillion thrown at the current crisis involves too much running the monetary printing press; 5. I've never been a gold fan, although I write about it a lot. If there is hyperinflation, gold should do very well. In 5 or 6 percent inflation it should do well. In 2 or 3 percent, probably not. Best, Don Bauder


Fred Williams Dec. 19, 2008 @ 7:58 a.m.

My guess is that inflation will be something like 10%...but that's for goods that the rest of the world buys/wants too.

For immobile assets, buildings especially, there will be continuing deflation.

Credit is not going to come back soon. Credit cards are next to fall into crisis. The money we're pumping into the system is paying off tertiary investors with power, not alleviating conditions for honest businesses. There'll be additional big retailer failures, and malls are going to be hit hardest.

So you'll have lots of defaults on buildings, and no more leveraging future earnings to buy assets on credit. Simultaneously, savings and cash for necessities will be the priority of most consumers.

This will last at least until 2010. The news is not yet dire enough. It's going to get hysterical.

Be contrarian and listen to the buzz words thrown around by the popular media...and do the opposite. While there are still shills screaming that it's a great time to buy, it's not.

That's why I'm not a gold bug. Too many people telling me to buy it now.


Don Bauder Dec. 19, 2008 @ 7:16 p.m.

Response to post #50: You're right to be concerned about credit cards. Credit card debt has been bundled up like subprime debt and sold in tranches by Wall Street. It will come down. The world is deleveraging. I also agree that commercial real estate will be next into the tank. So some prices (goods and services) could be soaring while others (commercial and residential real estate) are still deflating. Best, Don Bauder


Don Bauder Dec. 19, 2008 @ 7:19 p.m.

Response to post #51: Fumber, what does o.b. mean? Oh boy? Ocean Beach? Explicate, please. Best, Don Bauder


MsGrant Dec. 20, 2008 @ 2:30 p.m.

It's "the mouth of the river...of barf." Don't you know Fumbler well enough by now?


Don Bauder Dec. 20, 2008 @ 4:20 p.m.

Response to post #54: Thanks. Maybe I am not reading Fumber closely enough. Best, Don Bauder


Fred Williams Dec. 22, 2008 @ 11:02 a.m.

Fumber, as always, is wise and erudite.

He's merely explaining that when I put my bloated barge of inane bullcrap on the San Diego river, it will float downstream only as far as Ocean Beach.

From there, concerned residents will have to erect cranes to move my mountain of barf from the fouled shores onto shadowy Liberian registered freighters.


Fred "Humongous" Williams


Don Bauder Dec. 22, 2008 @ 7:36 p.m.

Response to post #56: Those Ocean Beach folks could load some of the mountain on to David Copley's $33 million yacht, which is registered in a different tax haven. Best, Don Bauder


Burwell Dec. 22, 2008 @ 10:09 p.m.

I almost followed Bauder's investment advice back in 1979 when he advised his readers to buy silver bars. I took my life savings out of the bank and went to the San Diego Coin Exchange on El Cajon Blvd and stood in line along with hundreds of his readers who were also there to buy silver bars. The line was almost a mile long due to the frenzy. By the time I got to the front of the line, the silver bars were sold out. About that time the supply of silver bars had dried up and only well-heeled local investors with connections could buy silver bars. Several months later the price of silver collapsed and thousands of San Diegans were wiped out. I dodged the bullet on that deal. Bauder was rumored to have buried $250,000 in silver bars in a vernal pool somewhere in Kearny Mesa.


Don Bauder Dec. 23, 2008 @ 7:11 a.m.

Response to post #58: I honestly cannot remember ever recommending either gold or silver -- especially in 1979 when both were spiking up so wildly. I quoted many people who did tout the precious metals, but I never did myself, and never bought any of the stuff either. Maybe I was quoting Andre Levie, Dick Russell or the late Ken Gammage. Depending on when I would have purchased gold or silver, I could have been doing OK now. I only buy things that throw off good income and precious metals or generally their stocks don't fit that bill. It's my wife who is the lover of and expert on vernal pools. She would never have permitted me to bury anything in one of them. Now the back yard -- that's something different. Best, Don Bauder


Burwell Dec. 24, 2008 @ 11:03 p.m.

Don’s column was hitting on all cylinders in the late 1970s when he was publishing stock tips by Dr. Dean, Hypnotist. I and many other small investors made a lot of money following Dr. Dean’s tips. When Dr. Dean retired and moved to Las Vegas the stock tips stopped and the column was never quite the same.


Don Bauder Dec. 25, 2008 @ 6:28 a.m.

Response to post #60: For the life of me, I don't remember Dr. Dean, Hypnotist. Best, Don Bauder


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