Weekend Ombudsman: Musings

I have varied interests.

TWO spent a lot of time thinking this weekend. Here are some musings:

1) The Masters. Is there any other sport where the fans dress exactly like the athletes? Golfers all have their own style, from the understated, to the full-vest/visor accoutrement ensemble, to the late great Payne Stewart, who did his own thing. Here Payne appears to be playing golf for the Chicago Bears. I miss Payne Stewart.

But back to the issue. So I will accept the actual golfers wearing whatever they feel they need to to compete. But why is it necessary for fans (ignore numbering) to dress the same way? Yeah, honey - I've got tickets to the Masters...have you seen my golf pants, three button shirt, functionless golf vest and PING sun visor - I should probably bring my glove too, just in case.

Its as if each fan is hoping that, against all odds, Phil Mickelson might turn to them in the gallery and say - "Hey... you...yeah....you look like you know golf. Why don't you come out here and talk to me about this next hole. Hell - do you want to hit for me?"

"Why YES! Its a good thing I wore all my golf gear!"

Can you imagine this in any other sport? Do you see fans at a basketball game wearing high tops, ankles taped, headbands on, mouth guards in? Are women in the stands at Wimbledon wearing wristbands and tennis skirts - like a tennis match could break out at any point on their way to the ladies room and concession stand?

2. Economics. Two things interested TWO this weekend: price stickiness and stock market projections.

First, free market proponents (of which TWO is one) hail the ability of prices to fluctuate relatively quickly to reflect market conditions. However there are some areas where this does not happen. One area - a particularly troubling one - is commercial real estate. In New York City for example, where unemployment is skyrocketing, incomes and spending are falling, and businesses are failing, one would expect that rents charged to commercial tenants would decrease across the board. They have not. Many landlords have increased their rents up to 6%. As a result, businesses are closing their doors all over the city. Why?

The answer is that commercial rents typically lag well behind residential rents. Most of the commercial landlords have earned so much money from rents over the life of their holdings, that they can afford to receive no rent for extended periods of time. Banking on the fact that the economy will recover eventually, these landlords would rather get nothing for a year or so than lower rents and lock themselves into a 10 year lease at a rate that will be, in a few years, viewed as beneath market value.

While the landlords' behavior could be viewed as rational on a certain time horizon, it undeniably acts to sink us deeper into recession. TWO knows of a number of entrepreneurs interested in starting new businesses that have not been able to because of unreasonably high rents. The aggregated effects of this are immense when one considers that more than half (51% in 2004) of all employed people work for small businesses (defined as companies with less than 500 employees).

Second, many of you may have heard about investment houses issuing internal projections of 10% or more gains in equities by the end of 2009. Many think that this signals the beginning of the end of the economic downturn. They should think again.

Increases in equities can not be viewed outside of the context of money supply and spending levels. The deficit is already nearly $1 trillion, only half way through 2009. This is two times the highest-ever annual deficit. Barring increases in actual production, all of this spending - mostly funded by simply printing more money - will manifest itself in inflation. Inflationary periods are typically times when the bond market suffers (creditors are hurt and debtors are helped) and equity markets can do well, in nominal terms. However, in real terms, there is no reason to think that equity gains - if any - will signify any actual improvement in our economy - and in fact there is some reason to think that it might signify a dangerously inflation.

3. Boxing. Three things. First, Paul Williams, who dominated Winky Wright on Saturday, should never lose a fight. He is a 6 foot 2 inch boxer who fights anywhere from 147 - 160. He has an 82 inch wingspan and throws over 100 punches a round. He was - somehow - upset in one fight (in the re-match Williams avenged his loss with a devastating 1st round knockout). But that fluke aside, this guy should beat everyone at 147 and 154 and possibly even 160 (although Kelly Pavlik could be a tough matchup). Look for Williams and light-heavyweight Chad Dawson (with honorable mention to welterweight Andre Berto) to be the next great American boxing stars.

I purposely did not mention Chris Arreola. I am a Chris Arreola fan - he has an aggressive and fan-friendly style in the ring and star quality (complete with amazing interviews) outside of it. But before Arreola can convince me that he is ready to be the Mexican Tyson, he will have to show up for big fights in better shape. Additionally, Arreola takes a lot of hits. It is unclear how he would fare against a Klitschko were the fight to go into the late rounds and stamina became a factor.

Third, is there any sports show better than 24/7? The new series, of course, is about Hatton and Pacquioa's May 2nd fight. My view: I would short Pacman. I think Pacman's value is a bit inflated because of his domination of a frail Oscar De La Hoya. And because of exaggerated odds, Hatton might be the better bet. Look for odds to narrow closer to fight night.

In conclusion, I could out-box most economists.