Duff McKagan's Column 'Duffonomics' @ Playboy.com

[FunkyMonkey]

The next couple of columns...


Duffonomics: A New Metric: The NASCAR Index

http://www.playboy.com/articles/duffonomics-a-new-metric-the-nascar-index/index.html

Duffonomics: West Virginia is the Future of America

http://www.playboy.com/articles/duffonomics-west-virginia-is-the-future-of-america/index.html

[FunkyMonkey]

Suze Orman Said What About Me? Find Out?and Learn the Real Meaning of Long-Term.

By Duff McKagan

?The successful man will profit from his mistakes and try again in a different way.??Dale Carnegie

Now that I have my own financial column, other luminaries in the financial media have been able to publicly comment on the strategies that I have tried to outline here. Case in point: Suze Orman (whom I think is really pretty great) recently stated that my investment strategy was ?old-school.? I happily agree.

It has become painfully apparent that the new-school tactics of day-trading, short-selling, second mortgages, and other short-sighted, quick-bang investment schemes have woefully failed. Can any of us really ?time? a market? History shows that no one person or strategy has perfected a method to do so as of yet.

I like to think about the long-term. What qualifies as long-term? These days, some would say that anything more than a year fits that description. What I focus on is something different: I would argue that any long-term investment must exceed the need for cash in the times of a recession. Even if you are not planning on cashing in your 401k or IRA accounts for another 20 years, you must take into account economic roller-coaster periods and prepare for a recession of some sort happening at the very moment you want to cash out.

If you don?t prepare you could be screwed. You never know when the economy may take another dive and there are no reliable forecast models for something like that. Which is why I advocate so much diversity in your portfolio. Usually, when one sector (say, microchips) is up, another (maybe telecommunications) is down. Booms and busts often vary by region, too, so you can hedge your bets by holding, say, both emerging Asian market indexes in India and blue-chip Pacific Rim mutual funds. Have an investment plan that gives you the best possible chance of an upside when you finally need the cash.

For the long-term investor, asset allocation plays a key role. The term refers to how much dough you put into each asset class?stocks, bonds, cash, etc. This recession has shown that many of us thought we had a higher risk-tolerance than we in fact have. In good times, a high-risk portfolio can certainly reap higher rewards. But when things begin to fall, a high-yield portfolio can and often does fall faster and remain lower for longer when recovery does come about. It?s a simple concept?high risk, high reward. But you can?t avoid being realistic (and smart) about the risk part of that equation.

The best asset allocation in my opinion is something safe, something that works in good times and bad. If you want a sexy stock that you hear about at the office, that?s fine; just don?t fill your portfolio up with nothing but high promise pipe dreams. Running all hail-Mary plays is no way to win a game. The point here is to retire with your retained wealth remaining just above inflation.

I know this doesn?t sound particularly racy or exciting, but come those golden-years you may look back and think what a wise thing it was to have bypassed the shot at some quick cash in a stock with no real promise beyond Wall Street hype or Jim Cramer-like bluster and bull. It?s guys like him?and people who bought into that mentality?who got us into all this trouble in the first place. And like Suze Orman said, I?m at the other end of the spectrum?as far as I?m concerned, slow and steady wins the race.

http://www.playboy.com/articles/duffonomics-suze-orman-said-what/index.html

[FunkyMonkey]

The Dirty Side of the Music Business

By Duff McKagan

Up to this point in this column, I?ve been writing almost strictly about financial vehicles or wading into the economic muck that we as a nation have gotten ourselves into and trying to bring some clarity to the situation. If I may be permitted, I would like this week to go on a little rant about some things that have been going on in my business and also how the business model for music has pretty much been flipped upside down over the last 10 to 15 years.

Back when I was in GN'R, bands like us could pretty much operate at a break-even point on the road because acts were selling more records than is even imaginable these days. The reason for the dramatic downturn in record sales, of course, was the digitizing of music. Putting music on CDs meant it had to be in digital form; eventually this led to the situation where digital files like the MP3 were divorced from any physical product, making the Internet and home computers the prime means of distributing music. A rock tour back then, at the dawn of the digital era, was really just a huge commercial to sell your record. Because a larger portion of people get their music for free via piracy these days, touring, ?merch? sales (mostly t-shirts, but also stickers and pins and anything else you can slap your band?s logo onto), and licensing of one?s music for ads and ringtones must support the average music act these days.

The major record labels missed the only real opportunity to get paid from illegal downloading back in 1997 or so. We all remember the Napster conundrum when Metallica sued them, right? Hey, as far as I?m concerned, Metallica had every right to demand payment for their hard-wrought recordings. But there was another deal on the table then from Napster that was never really publicized?and this where the ?major labels? fucked up in my opinion.

Napster was making truckloads of dough off banner ads back then. It seemed the site was the most looked-at space on the Web and therefore a hot property. Car companies, cola bottlers, movie companies, and many others were paying top-dollar to get access to those Napster-glued eyeballs back then. Napster offered to share this ad revenue with the major labels so that artists would get paid for the downloading of songs that Napster made available for free. It now seems like the perfect business model for what was then a largely unanticipated future of digitized music. The majors balked and a huge opportunity was missed.

Again, in 2005 or so, the remaining major labels tried a lawsuit against pirate music source Kazaa. And again, the company under attack offered to share its ad revenues but were turned down. Actually one major peeled off from the lawsuit and did a deal with the Kazaa; the rest just simply dug their heels in and are still in the same spot to this day, left in limbo with neither them or their artists getting paid.

Nowadays, if a band wants an even remote shot at getting a deal with a major label, they must yield to the new business paradigm of giving up a portion of their publishing, their merch sales, and even concert receipts to the label in return for the release and marketing of the band?s music. This all seems dirty to me, but it?s the way things are now done?at least in the old corporate music world.

Back in the mid-to-late 1970s, there was a grassroots revolt against the then-bloated music industry (read the book Hit Men to get an idea of just how extreme the business had gotten). Independent record labels like IRS, Slash, SST, and Beggars Banquet began to spring up, giving new and different bands a chance to succeed and reach a national audience. The same thing has happened again in recent years as a result of Internet distribution. But right now, there?s almost too much information out there. A club booker now books bands based on how many views they get on their MySpace page. Bands have to hustle?maybe even more than in the pre-MySpace era?just to get a gig at a shitty bar. What seemed like a revolution fueled by the Web now looks somewhat tenuous.

But maybe the rest of the dominoes are ready to fall?and by that, I mean the ancillary parts of the music industry. I hope there is a true music revolution bubbling right beneath the surface of the underground that will hopefully surprise us all and get us away from, for instance, the vanilla agenda rock radio feels it has to follow these days in order to sell ads. Music blogs, internet radio, mashup sites?there?s a lot of things out there, of course. But with the possible exception of iTunes, the world is still waiting for the next wave of tools and institutions that will allow new acts to ingrain themselves into the popular consciousness the way bands like GNR were able to do?to create generational anthems, to mark moments in time for an entire nation, to unite our culture through music. Here?s hoping their arrival is right around the corner.

[FunkyMonkey]

The New American Business Person: It's Not Who You Think It Is

My job as a touring musician allows me the chance to see a lot of places. My job here as a financial columnist sharpens my skills of observation when I?m out on the road and makes me see things differently or to notice things I might have otherwise missed.

A couple of weeks ago I wrote about how Huntington, West Virginia seemed to be a place that exemplified how America can and will recover from this recent economic downturn. I like to be able to highlight positivity and to shine a light on the things we can do to help pull ourselves up by our collective bootstraps. Well, I?ve just stumbled upon another little town that I think needs a mention. Let me explain.

The other day, I woke up on my bus and hopped out to go into my hotel room. Apparently, I was in Freeport, Long Island?in New York state. We drive all night and at times I have no idea where I am at when I wake up. The Freeport Inn and Boatel offered clean, comfortable rooms right on the water (all for $111!). By the way, sometimes I will "tweet" if I make a cool find on a hotel or restaurant (I am Duff64, FYI). I tweeted this place and got a tweet back that this was the hotel where the Joey Buttafuco and Amy Fisher had their now-famous trysts back in the day. But none of this is my point here, actually. What I really noticed about this place was the new paint and clean landscaping. A real pride of ownership was obvious.

I love the water, and as far as I?m concerned anything waterfront kicks ass. I was greeted in the parking lot by the general manager of the hotel, Joseph Creamer, and we started to talk. Joseph is 29 years old and also serves as the VP of the Freeport Chamber of Commerce. Creamer has a plan to spruce-up some of the blight that currently dots many areas on an otherwise pristine and potentially income-producing waterfront area. He envisions the industrial buildings and power plants being moved out of the area to make way for boardwalks with nice restaurants, boat marina services, and clothing shops.

Joe pointed across a little sliver of water to a big vacant building. Right on the water. Apparently, the Freeport Fire Department uses it once a month to do real fire drills; the rest of the time, it stays empty and unused. Joe suggests that another building be built for the F.F.D. in neighboring Hempstead so this one can be leased to a catering service that could hold waterfront weddings, parties and corporate events. The money that Freeport would make on the liquor license would pay for the fire department facility in Hempstead and Hempstead would come out a winner, too. This was only one of many prudent and well-thought-out ideas Creamer had for what he hopes can be a thriving and prosperous Freeport. He is the kind of person we need to eventually lead us out of these muddy financial times.

It seems common in our cities and towns for mayors and city managers to be in their late fifties or older. Many are stuck in an old way of thinking and perhaps a little too comfortably entwined with the business and banking establishment that got our country into the fine mess we are in right now. It might take guys like Joe to see a ?toxic asset? like a foreclosed house as an opportunity to put some people to work refurbishing that house and getting money circulating again from the ground up. Simply put, it?s time for you 20- and 30-somethings to get off your asses and let your voice be heard. Get active in your community like Joseph Creamer has. He is the new paradigm of the American business person?tattooed and full of positive energy and fresh ideas.

[FunkyMonkey]

How Important is Consumer Confidence?

Something called the Consumer Confidence Index was measured as having the highest weekly gain in six years last week. The CCI measures and averages the buying patterns of Americans here in the US on things that are not only necessary like utilities, but also non-essential things like movies, books and new cars. Wall Street seemed to momentarily exhale and the Dow Jones Industrial average (the Dow) shot up some three percent the day the news was released. Good news indeed.

Back in 1936, when the US was into its seventh year of the massive Depression Era, unemployment had finally dropped to a national average of 14 percent from a high of 22 percent. Of course, 14 percent had been the peak unemployment during the recession of the 1920s (yes, there have been many recessions), but in the context of 1936, this drop was a welcome and huge relief from the previous few years. During those years, the sight of jobless men wandering the streets had gone from shocking to commonplace. The thought of any kind of progress had long since been replaced by dreams of simple recovery. Our memories are short, and if you are not a student of history, maybe it is time to start to bone up a little on some of the many historical economic recessions since our country?s inception.

It has been only one short year since the Dow reached its all-time high of 14,000. Doesn?t it feel like a lifetime has passed since then? Back then, we all had dreams of our 401Ks doubling again in another five years. The sound of our jet-skis whining on the lake and the sights of our hi-def big-screen plasma TVs were thought to be some sort of God-given right. And, oh yeah, housing prices were going to continue rising through the roof into perpetuity, too. Ah, but we have all learned a most valuable lesson and I for one, think that we will eventually come out of this whole thing a much stronger and healthier nation because of these hard-learned financial lessons.

The ?Buy American? segment of 60 Minutes was rebroadcast again last week. Six months ago, shutting off our borders to foreign trade seemed like a good idea. The idea was to buy only American steel, American-grown produce, American cars etc. This was, however, an emotional aspirin that was ill-thought-out and, thankfully, smarter and cooler heads prevailed. Raising any sort off tariff would of course diminish the chances of us selling our goods abroad as well. For a company like John Deere, which exports a lot of its equipment, this could spell absolute disaster and perhaps even bankruptcy. Our American sellers badly need customers right now; a ?Buy American? clause in any sector of our domestic production would be likely to create repercussions from outside on a scale we would just not want to contemplate.

This week?s piece is certainly not meant to be any sort of downer or harbinger of future gloom. Actually, I am excited about things ahead. I wrote last week of a gentleman I met in Freeport, Long Island who was already envisioning future boom times for his town. This week, I met and spoke with a young contractor whose business had been slowing to a stop?until he heard a piece on the news about the Federal Government threatening to fine banks that didn?t keep their foreclosed houses in better shape. (Whole communities are becoming peppered with these eye-sores, as banks neglect properties they?ve repossessed.) My contractor friend is now contacting these banks to offer his services as a sort of property manager/upkeep guy.

Necessity begets invention and that is the American way. What are you going to do?

http://www.playboy.com/articles/duffonomics-how-important-is-consumer-confidence/index.html

[FunkyMonkey]

A Reconstituted GM Might Want to Look to Harley-Davidson as a Model

My manager Rick Canny and I should take a stab at getting our U.S. economy back on track. I swear that by our third cup of coffee on a usual morning, we have pretty much trouble shot every newsworthy business quandary of that particular day. We are well-read dudes in the business world?why not us? Let me invite you all inside one of our conversations.

First off: I am all for government spending. But I am for the kind of spending that creates long-term jobs. It?s tough to say how much of the spending back in the 1930s led to jobs with longevity. Seems as if a lot of WPA projects back then were pet projects of various politicians. Politicians are not a group with a great reputation for seeing things through for the long haul. Obama talks a good game, but only time will tell whether his projects are designed for longevity.

Okay, now on to solving America?s business dilemmas. This past week GM became the biggest bankruptcy in the manufacturing sector in the history of our country. Where do I start? So, as I understand things right now, we taxpayers will end up with a 60 percent stake in GM when it reemerges from Chapter 11. On top of that, via a union controlled trust fund, the United Auto Workers have another 17.5 percent, basically by default because the UAW pension fund is that big at this point.

Obama wants GM to make fuel efficient cars and I think that is great. But folks, we are in a fight to save a gigantic car company?the world?s largest?and one that fuels a large part of our US economy. Let?s face it, as far as I?m concerned, GM makes a lot of crap. I was being driven in a Cadillac the other day and the insides were basically falling apart. It was a new car!

With this in mind, I was thinking that Harley-Davidson might be a good company to look at and find some lessons. In 1969, after diversifying into scooters and boats and all sorts of bikes, Harley merged with AMF, a company with no experience building motorcycles. The Harley brand got pimped to the hilt, and the quality of the bikes became something of a joke. The company sputtered. And the story could have ended there.

But instead, in 1981 a group of 13 heartsick Harley executives bought their company back from AMF. They realized that the only way for their company to recover from the laughing-stock status it had reached would be to return to quality. They instituted a ground-breaking just-in-time production regime. They designed innovative new power trains. They did research to find out what buyers actually wanted and started make those sorts of bikes?customs, heritage re-issues, raked-out choppers, lots of chrome, an emphasis on reliability, etc. They created and nurtured an owners club, called H.O.G., that had almost a 100,000 members within six years and half a million by 2000.

And what do you know, the company made a robust recovery. By 1986 Harley was able to go public on the American Stock Exchange, switching to the New York Stock Exchange the following year. I can personally attest to the attraction of their bikes to consumers?I own two myself, a 2006 Road King and a 2007 Street Bob. I?ve ridden that Road King all over the country. As for an American car? It?s been about 20 years since I bought one of those, I?m afraid. And that?s telling.

At some point in the 1980s, GM seems to have decided that their new business model was to become the world?s largest automaker. They began to buy up other brands such as Opel and Saab; their own brands proliferated with Saturn. The focus seems to have diminished as far as getting a customer a car they wanted at a fair price, and to have increasingly been set on getting the bottom line to soar like a high-performance engine. It is obvious now that neither of those two things happened.

This is my public plea for GM chief Fritz Henderson to return to quality and innovation. Follow an example like Harley-Davidson and make kick-ass cars that we consumers want. It is possible to have high-performance and energy-efficiency. That is probably the defining engineering challenge for the industry, and it would seem manufacturers like Nissan and BMW have a leg up in an arena?car engineering?where US companies took pride in leading the world for many decades. Not surprisingly, those were decades of profitability?and decades when people around the world lusted after American cars. The UAW and the US government must get active through their ownership stakes; their input can help make this all happen. Let?s put our people back to work and have an American car company that we can once again be proud of.

http://www.playboy.com/articles/forum-newsfront-a-reconstituted-gm-might-want-to-look-to-harley-davidson-as-a-model/index.html

[FunkyMonkey]

This Week: Don't Believe the Hype?the Recession is Not Over.

I travel a ton. Because of that, I?ve seen this financial crisis from some very different perspectives. It?s proven interesting?especially against the backdrop of today?s 24/7 business news. How financial news is covered affects how the viewer perceives good or bad economic data?and I?m not immune to that. So it?s useful to be able to compare not only various places, but to be able to compare on-the-ground impressions of these places with media reports.

Last fall, some of you may remember a photo used on the cover of practically every newspaper in the world, and run as a header on nearly every TV news broadcast. The shot was taken outside a Lehman Brothers office in London and showed the backsides of a row of financial workers who had just been laid off. It was the beginning of our credit-crunch freak out. I was actually in London when the events in that photo happened.

Last week, I returned to London to find the headlines of The Independent, one of the main British daily papers, declaring the recession over!

Well, there it is folks, that was quite the recession rollercoaster ride wasn?t it? All joking aside, there is an air of confidence building right now?and it is a bit stronger over here in Europe, where I?ve been touring lately. Part of that may have to do with the fact that in the UK and Europe the average citizen is not barraged with politically slanted financial news on a daily or hourly basis. Sure, MSNBC International can be found on your hotel room TV, but the recession and home foreclosures certainly are not a staple in the daily conversations of your average Joe over here. As someone said to me here last week, ?We don?t freak out here like you do in the States.? And with perceptions, rather than fundamentals, playing such a significant role in our modern global financial system, this does indeed seem to make a difference.

I was on a plane from Geneva to London last week and the person next to me happened to be some big-time Swiss finance guy. He was going to London to try to poach a financial planner out from under some other firm?s nose. (Talk about confidence.) As we chatted during the flight, I wondered aloud why he shouldn?t give me the job?and I was only half-joking! I mean, when it comes to financial matters, I get stuff right at least most of the time.

But there?s a reason for that. I pay attention. There was a British pension fund that came under fire during my visit for not doing its due-diligence before investing in some Icelandic government bond funds last year. Iceland defaulted on its bonds in the wake of the global meltdown. I guess all I am trying to get at here is that you as an individual must do your own research when determining what is actually going on. That is true with your own investments and, importantly, with investments made for you by others.

Obviously, we can?t avoid mistakes. And there are fundamentals we can?t avoid being affected by. But it?s still important to make up our own minds, to gather our own evidence, to assess things based on our own perspectives. Financial news in America right now is plagued by an underlying political slant. May I suggest for now, close your ears and open your eyes. There is useful information all around you.

Another example: at the end of my stay in the UK, British Airways asked its 40,000 employees to work for up to a whole month without pay. Like I said, don?t always trust what you read?even if it is the fucking Independent. Recession over? Maybe not quite yet.

http://www.playboy.com/articles/duffonomics-don-t-believe-the-hype-the-recession-is-not-over/index.html

[FunkyMonkey]

A Word That's Too Dirty Even for Wall Street

By Duff McKagan

U.S. Treasury Secretary Timothy Geither stated flatly last week that ?capitalism will be different? and that American companies would reset the way they work.

The ideological roots of capitalism were codified by Adam Smith back in the 18th century. A simple distillation of Smith?s ideas would go something like this: In a free and open market society, every niche market will eventually be filled by necessity?because of a profit motive. If that guy is selling apples, then I guess I will sell oranges. Smith went on to state that the need for a large governmental system would be minimized since prices would set themselves, resources would be utilized with thrift and new ideas would be prized and harnessed accordingly.

For the first 140 years of America?s history, that sort of capitalism and a democratic government made for an inventive, hard-working and free-willed society. We made the best of everything and our average citizens were hard-working and full of enterprise because of a realized reward at the end of a hard day's work. One could come to America and simply become anything or anyone that one wanted to be (unless you were a slave or Irish, but that is a whole different essay). Sometime in the 1950s, when all of our men from World War II had settled nicely into their well-deserved office jobs in a thriving post-war economy, corporate America and its underlying greed started to rear its ugly, fat face.

More and more of the economy came to be dominated by corporate entities instead of family farms, small businesses and private companies. One of the downsides of that type of ownership is that corporations are by definition amoral actors. Their responsibility is to the shareholder?profit must be their only consideration. Aiming for profits is all well and good?that?s what drives small businesses, too. But the corporate charter divorces that aim from any other considerations that might affect the decision making at a family or private company (like the effects their decisions have on their community). Decisions being made by corporate executives at AIG and various banks may have been bad for society, but they were basically the right decisions for the corporations, as they were big money-makers. You could even argue that it would, in fact, have been irresponsible on the part of those executives not to exploit regulatory loopholes and innovative business models that could yield such huge profits. But when the gap between those two ends?corporate good and societal good?becomes wide enough to cause the kind of crisis we?re now in, you have a problem.

We are glad to see people like Bernie Madoff personally punished for their greed, manipulation and insider know-how. Markets, on the other hand, do not care about who did what or how long a jail sentence is. Markets only seek stability and then they move on. Markets will not seek to address underlying issues on their own. After all, those executives who put us in this mess may have been laid off, but they still have their fat bank accounts. And the imperiled corporations are getting our tax money to stay afloat. It?s a win-win for insiders. But it?s not fair to the rest of us.

For markets to function as Adam Smith discussed, regulation is absolutely necessary: How else can you insure the quality of information that allows markets to operate in a rational way, for instance? How else can you avoid fraudulent assertions by a corporation about its own financial health? How else can you keep corporations from over-reaching when their sole responsibility is to create profits, consequences be damned? You can?t. Despite the way ?regulation? has been hurled around like a bad word in recent years, a properly functioning market is a regulated market. As the current crisis has shown, the openness Smith lauded?and which is necessary for markets to work correctly?is not something businesses are inclined to foster on their own; insiders stand to gain too much from a lack of transparency. Openness must be forced upon them via regulation.

The machinations of American capitalism may well be getting re-tooled right now. Ceilings on corporate salaries and new federal watchdog groups could help stem drunken, reckless financial greed. And that?s a good thing. Many of the talking heads right now would not admit it publically, but it?s possible that the markets may indeed be stabilizing. Why would the commentators admit it?how could the situation be improving if their solutions to the problem have not yet been implemented? As I have stated from my first column here months ago, turn the volume down when FOX News, Bloomberg, CNBC and MSNBC are airing.

Market capitalism may not be perfect, but it?s the best system yet devised and has created the best standard of living for the most number of people in the societies built on it. But for it to survive, it must be regulated, it must be fair and it must be ethical. Transparency and fairness are two principles that must be made priorities as we work our way out of the mess we?re in at the moment. With those principles, the markets can hum efficiently to all of our benefit, as they should; without them, we will inevitably face another crisis like the one we are going through now.

[FunkyMonkey]

By Duff McKagan

This Week: Can Berets Save Washington State Farmers?

I have finally returned home to Seattle after touring in the States and Europe since the beginning of April. During that time I wrote of my travels and how this recession has impacted different parts of the world I have visited since taking up the pen for Playboy. Regional economic awareness is important for us all if we want to fully understand how we are to take advantage of the upswing out of these flat times, no matter where you live. Local knowledge gives us the granular understanding; global insight will give us breadth and scope, which is also important as our economy is part of a worldwide spectacle.

This week, I?ve found myself focusing again at that regional or local level?back home in my own region. In 1998 I bought a little slice of heaven in Central Washington, right on the Columbia River in the valley where most Washington apples are grown. Until the 1980s Wenatchee, Washington had thrived as a clearinghouse for most of this area?s fruit produce. This high-desert plain is the westernmost reach of Big Sky country and is perfect for growing healthy and delicious apples, cherries, peaches, nectarines and various berry crops.

About 30 years ago, real estate along the river began to rival apple growing as a riverfront money maker (crops, of course, are more cost effective to grow with easy access to the river for irrigation). People with fortunes amassed at Microsoft, Oracle and Amazon began to see Central Washington as an easy-access playground, a short distance from Seattle, and a place where things like golf and water-skiing could be done in warmer and much dryer environs.

We all know what has happened over the last couple of years to those people?s wealth.

I have had the chance to see this area expand and contract with an outsider?s eye. I don?t really live here. I visit a few times a year, and when I do, I go to the same restaurants and stores that I?ve always gone to. I?ve seen new houses built where there were orchards before. I?ve seen Jack Nicklaus golf courses sprout up with luxury resorts attached. In short, I believe this area has grown too fast based on the assumption that profit margins and ever-expanding wealth would never wane.

What made this area prosperous for so long was quickly forgotten; the prospect of a fast buck trumped crops on acre after acre. The apple growers have been hurt by it. The nouveau riche have been hurt by it. The Columbia River flows on, unaffected and as unconcerned as when Lewis and Clark first floated down it in 1805, or when the Grand Coulee dam was built on it during the Great Depression.

But this is America?s heartland, where adaptation seems to happen quicker because the average working man doesn?t have much of a cushion to land on in a financial fall.

As of late, farmers and growers have focused their gaze on the steep hillsides above the old apple orchards. The aridness of this area approximates the weather in the best grape growing sections of Italy and southern France. Irrigation is cheap because of the Columbia River and its many tributaries flowing out of the snow-capped Cascade mountain range. Local wineries in this area are now regarded as some of the best in the world.

The central Washington farmer is back in business it seems?though now with slightly red-stained feet and a keen eye for berets and fitted shirts. America will always find a way to adapt, and it?s a nice thing to witness.

[coolman78SLASH]

I really have to give it to Duff, he have grown so much mentaly since the GnR days, he is a different person. Who would have known that Duff is so smart, and well articular as he is now. Im glad that he focus on positive things like health, family, his children, and still show so much interest in politics, economics and enviromental issues.. From what I see and hear about Duff today, my respect and support for the man is on a whole other level, and he is a damn fine musician and bassist as well!

[14 Yrs Of Silence]

I really have to give it to Duff, he have grown so much mentaly since the GnR days, he is a different person. Who would have known that Duff is so smart, and well articular as he is now. Im glad that he focus on positive things like health, family, his children, and still show so much interest in politics, economics and enviromental issues.. From what I see and hear about Duff today, my respect and support for the man is on a whole other level, and he is a damn fine musician and bassist as well!

I second that!  Much respect.

[FunkyMonkey]

By Duff McKagan

This Week: The Pros and Cons of Capitalism, Part One

An economic crisis slows growth, and when countries need growth, they turn to markets. After recent currency crises in East Asia in 1997 and Mexico in 1994?which were far more painful for citizens in those places than our current meltdown has been on us here in the U.S.?we saw the pace of market-aimed reform and "push-starts" speed up. In the years ahead, if American consumers remain reluctant to spend their squirreled-away dough, if federal and state government continues to squirm under a looming shadow of debt, if government-owned companies remain expensive burdens, then private-sector activity will be the only place where new jobs will be created.

I know that I have previously touted FDR-type government spending as a key component of economic recovery and job creation. The simple truth, however, is that despite all its flaws and fuck-ups, capitalism remains the most productive economic system we have yet to invent. This week?s piece is part one of two on the turmoil inherent in that system and how, ultimately, it may be a key component of its success.

The capitalist system means growth, but also instability. It is prone to crashes that cause ugly damage along the way. For about 90 years, we have been trying to regulate the system to stabilize it while still preserving its dynamic energy. We are at the beginning of yet another set of these Herculean efforts ("set" because of course, no single fix will work). I am a student of history, so in undertaking this new set of efforts, I think it is important to train a keen eye on the things that got us here this time. What got us here is not a crisis of capitalism. It is a crisis of finance, of democracy, of globalization and, in the end, a crisis of ethics.

Our financial system got screwed up?or more to the point, financiers screwed it up. In 2007, when the economic crisis began, blue-chip companies like Microsoft, Coca-Cola and Wal-Mart were all running their companies with strong balance sheets and tried-and-true business plans and models. These American companies were highly profitable and they were spending wisely, holding on to cash in case of any economic downturn. For that reason, many such companies have been able to weather the storm well. The finance industry and anything finance-related (including real estate) is a whole other story.

Finance has a history of fucking up, from the Dutch tulip mania of the 17th century, the South Sea bubble of the 18th century, and through a series of panics here in the U.S. during the 19th century, culminating in the prolonged depression following the 1873 crash. The specific causes of these busts has varied, but they follow a mind-numbingly similar pattern. In calm times, political stability, economic growth and technological innovation all encourage an atmosphere of easy money and new forms of credit. Cheap credit causes greed (see my earlier column on that topic), miscalculation and, ultimately, ruin.

To be continued next week.

[FunkyMonkey]

The Pros and Cons of Capitalism, Part Two

By Duff McKagan

It seems that monetary incentives for banking executives have been skewed toward the riskier side of things. But the money they have been gambling with is not theirs. As I said in last week?s column, when times are good financiers get reckless. Which in the past few years meant, for instance, bundles of bad mortgages getting sold to the general public without much disclosure or transparency about the real content of those bundles.

Banks were being called casinos because of the way they gambled with people?s money. But that would be unfair to casinos. Las Vegas casinos must?by law?keep a specified amount in reserve to cover their asses. The banking industry does not have the same regulation. You read me right.

This does not mean that we must now over-regulate and clamp down on every last aspect of the American finance industry. We tried that for a while in the 1930s and it just about killed us as loans became too difficult for banks to make, choking business. But I do think continued regulatory tinkering is warranted. Why? Take Canada. That country?s banking system has weathered this latest crisis better than almost any other?because, it would appear, the same basic regulatory framework for their banking industry has remained in place even as industry trends have changed with the times. Canada has not lowered the regulatory bar to suit whatever the financial fad of the day was.

Our past few Presidents, along with Congress, have touted the idea of home ownership. And we the people bought into it. Since the 1980s, Americans have also consumed more than we have produced. For home ownership and all the consumer goods that we have demanded, we have borrowed with an almost reckless abandon. It is true of us as individuals?increasing credit card debt, mortgages that represent bigger portions of our potential earnings, and so forth. And it is true of us at a societal level, as our governments?from local on up to federal?have used debt to cover almost every conceivable burden. Only by raising taxes and cutting expenditures will we begin to lessen our national, state and municipal debt.

The U.S. is not alone when it comes to putting off paying for things like Social Security and health care to a later date. Europe and Japan suffer from the same disease. At some point, though, we will all have to pay for the borrowing and procrastinating, and when that day comes, we had better be prepared. Obama is not a dumb guy, and I hope he is at this very moment studying flubs from the past in order to learn a thing or two about getting us all out of this crisis with the least amount of pain?and in a way that fosters more sensible financial behavior in the future.

What happened to the global financial markets over the last 30 or so years was made possible by cultivating a willful ignorance of the failures of the past that have resulted from boom-time lust. Our current crisis is not a product of failure. It is a product of success.

[FunkyMonkey]

By Duff McKagan

This Week: What's the Real Deal with Health Care Reform?

This past week, I was fortunate enough to be included in the beginning stages of what could be a breakthrough financial news show on a major 24-hour business news station. If it goes forward, the format will be a roundtable discussion, and all of the people they had me sit in with were ridiculously smart?a good thing for me, because at times I have a really hard time trying to understand what is at the core of some of the more heady financial topics. In fact, I feel that way right now about the health care reform bill. Are some of you with me on this?

I voted for President Obama, and when I cast my vote for him I did so with the understanding that I was also voting for some sort of reform that would make health care, if not universal, at least more accessible to those who needed it. But when I voted for Obama, I thought I was also voting for a guy who could best articulate such reforms to me so that their many implications would be somewhat transparent. With Congress taking five weeks off now, is it time we rethink rushing this bill through? (By the way, this congressional recess dates from the 1800s when Washington got too hot to hold sessions on the Hill?but hey, we?ve got A/C now, people!)

What are the main points of this bill and who wrote it? (Not what members of Congress wrote it, but what interest groups?good or bad?are behind its myriad details?) Exactly who will this money go to and how much will be eaten up by administrative costs? Has anyone in Congress read the full text of the purported 1,080 pages of this bill? Has President Obama read it in its entirety? And all of these surtaxes and ?tax the rich? taxes?where does that money go? I also can?t help thinking that perhaps we should balance our budget and deal with the recession and our escalating debt before we adopt new, potentially expensive programs.

Let me add that I'm inclined to support health reform in the abstract. In addition to the obvious benefits, our economy would be stimulated as a result of freed-up disposable income. And I would be the first in line to pay a higher tax rate if I thought a well-planned universal health care program would be the result. I would welcome the burden of those costs falling on my shoulders.

I heard over the weekend that some 47 million Americans do not have health care. Okay, but how many of those are illegal aliens?and do we want to pay for their health care? I think that?s a legitimate thing to discuss and it shouldn?t get lumped in with the jingoistic anti-immigrant rhetoric or glossed over because people are afraid of being lumped in with the anti-immigrant crowd. There is also a large number of people who are offered health care through their workplace but choose not to take it?do we suddenly want to cover them? When I was in my twenties, I thought I was ironclad and invincible, and chose not to buy health coverage of any kind. People like that would now be covered. Hey man, I would have taken free health insurance back then if it was offered. But are we willing to go a reported $1.3 trillion in debt to cover some of these things?

Sometimes debt is warranted?it can even mean long-term savings. Just think about a fixed-rate mortgage. When you go to sign that paper and see the total amount you would pay over those 30 years, you think, Holy shit, that?s a lot of money. But then you realize that renting the same place for those 30 years would cost more, as rents go up whereas your mortgage payment will stay the same. That?s good debt?when you come out a winner despite the initial sticker shock. I think the question with this version of health care reform is?or should be?whether we can be reasonably sure the expenditure now will save us money in the future. Because any halfway decent reform should result in huge savings. As it is, we spend much more per capita for health care than other rich countries and for worse results. If a reform could really move us in the other direction, it would be worth quite a hefty upfront cost.

But I?m not convinced. How can we as Americans be sure where this money is going especially if we are being kept somewhat in the dark about the details of the bill? At this point I am so sick of waste and politics?and I fear this reform may exacerbate both. I?m pretty damn sure that I don?t back this thing at this point. I want Congress and the President to take more time to get this right and to explain it to me.

Write to your representative now via email if you are concerned like me. Demand details about the money trail. Every email counts as ten votes to them. Better yet, Twitter or Facebook this article to your friends. If your representatives are like me, they will listen.

http://www.playboy.com/articles/duffonomics-what-s-the-real-deal-with-health-care-reform/index.html

And

Artisan News: VELVET REVOLVER DUFF MCKAGAN GETTING FINANCIAL WITH PLAYBOY

http://www.youtube.com/watch?v=jW-7fFemJFo

[FunkyMonkey]

Artisan News: VELVET REVOLVER DUFF MCKAGAN GETTING FINANCIAL WITH PLAYBOY

http://www.youtube.com/watch?v=jW-7fFemJFo

Duff McKagan On Getting Approached By Playboy To Write Financial Column

"They're trying to pimp out Playboy.com and make it a place where people go for, not just to look at naked chicks but to also get music news and try to make it sort of young and hip I suppose. So for business news, they wanted to find somebody that was a little off kilter. 'Huh? He's writing about finance?' So, they approached me. I'm kind of the guy that if I haven't tried something and it's put in my lap then I'll try it once and see how it feels. So I'm in my tenth week with Playboy and I can write about whatever I want to financially."

Duff On Wanting To Go Back To School

"I was thirty years old and looking around and realizing, I thought I was alone in not knowing how money worked. I had made some money and I heard all the bad stories about bands getting ripped off and the artists getting ripped off and I didn't want to be one of those guys. I was too embarrassed to ask anybody what all that financial news on T.V. meant. So I went to school. I got into a class. After that class I got into another class. Then I started eyeballing schools that I actually wanted to get into and I got into Seattle U, which has a high ranking business school there."

Duff Started To Invest Simply At First

"I started off simply and by that I mean, I looked around me at companies that seemed like they were working and people were buying there product and they were growing. I was living in Seattle at the time, this was '94 or '95 when I first started investing and Starbucks was growing. Microsoft was growing. They were building more building for their campus, The Microsoft campus is what they call it."

Thanks Ultimate Guitar

[FunkyMonkey]

Cash for Clunkers is More Than a Program?It?s a Paradigm Shift

By Duff McKagan

A couple Fridays ago, I happened to be watching CNN Headline News when a story came on about the then-upcoming ?Cash For Clunkers? program. It sounded interesting enough, but to be honest it was just another news story to me. Around noon that same day, I went to my mailbox and saw I had received something from the U.S. Department of Transportation. Huh? It seemed?the DOT explained?that my 1995 Ford Bronco now qualified me for up to $4,500 if I were to trade it in and buy a new car.

Because I had been directly contacted and considered for a government program, I suddenly took some interest in how this program?official name CARS?worked. Apparently, you take your clunker to a car dealership and choose a new car to buy or lease. The dealership must destroy your old engine and show proof to the government that it did so; the dealership must scrap your old car at a scrap yard and show proof of that, too. You get the scrap value in addition to your government credit, then you buy the new car from said dealership. The dealer submits all the paper work and the National Highway Traffic Safety Administration (the part of the DOT that administers the program) reimburses the dealer for the credit you got on your new vehicle. The actual amount of the credit is tied to the difference in fuel economy between your old vehicle and your new one?a difference of four to ten MPGs gets you $3500 and a difference of more than 10 MPGs gets you $4500.

It seems that everyone wins here, right? We are getting some much-needed cash flow into our economy and the car companies are getting a much-needed boost. The program has been capitalized with $1 billion and an additional $2 billion is pending Senate approval, having passed the House. Together this equates to enough cash to subsidize the sale of somewhere in the neighborhood of 750,000 new cars. Last year, the total number of cars sold in the US dipped to 13 million, down from a high of 17 million in 2006 (and America?s Big Three manufacturers saw their sales decline faster than those of major foreign automakers). Some would argue that this new government incentive will barely make a dent, but at least we are getting some money flowing in the right direction.

But what about greed and corruption? We all know that car dealerships are the kings of hidden costs. Are they acting with full disclosure and crystal clear transparency? Do you have an underlying mistrust now that we?ve all been screwed by one greedy bastard or another in the last few years? I do find it very interesting that GMAC is suddenly making car loans again. We have all got to be careful this time around, people.

That said, I do warily applaud this new program. In my case, I won?t scrap my Bronco because I like it, it?s worth more than $4,500, and it?s driven so rarely that we use a full tank of gas only a few times a year-making its de facto carbon footprint negligible. But I think the program has been well thought out?the laws regulating the CARS program specifically target a lot of the areas where dealerships and scrap yards might try to play fast and loose. And certainly it will pump some much needed cash into our stagnant economy by convincing some of us to dip into our dusty coffers and spend money on a new car.

There?s another interesting aspect to this program: We have now seen what our government is capable of in terms of competence and speed. They have quickly worked out a comprehensive plan here, from destroying engines and scrapping cars to finding those of us who qualify for the program (like me and my Bronco). The fact that our government can pull this all off has me thinking about the health care reform bill.

We often hear that something like 46 million Americans are without health insurance, right? If the government could create a database to find those of us who owned cars with fuel efficiency ratings below 19 MPG, could they not also ascertain who among us chooses not to carry health insurance despite the fact that they can afford it? How many millions of us are in our twenties or early thirties and have good jobs but don?t even think about health insurance because, frankly, we have yet to experience any serious medical problems? What about those people who would rather buy a fancy car or a house they couldn?t otherwise afford and forego necessities like health insurance in order to keep up with the Joneses? Wouldn?t it be more palatable to us all if we knew that any health care reform was covering only those us of us who actually needed it? I believe we Americans would happily supply a safety net for needy single moms, for instance, but many of us fear we?ll also be underwriting BMWs for status-conscious twentysomethings. If that fear could be removed, health care reform would be a piece of cake.

All I am really saying is that with this Cash For Clunkers program, the government has raised the bar. The government has proven it can find people who qualify for a very specific set of criteria. It has shown it can create a well-thought-out plan and implement it. Let?s keep that going. What do you say?

http://www.playboy.com/articles/duffonomics-cash-for-clunkers/index.html

[FunkyMonkey]

Why Is This Country Stuck in Partisan Limbo?

By Duff McKagan

So much is happening?and so quickly?that a weekly column barely stands a chance of staying up to speed. I thought that maybe I could try to recap what is going on and see if any of you has a comment or feels a need to sound off.

GM announced plans for the release of the Chevrolet Volt, a new form of electric/gas hybrid that gets a purported 230 mpg and can be plugged into ordinary household electric outlets. Right now it will only go 40 miles on battery power alone, but the onboard gasoline engine recharges the batteries on the fly and allows the Volt to go more than 600 miles per tank of gas. GM also announced a partnership with eBay to start selling cars direct to consumers via the internet. Is this stuff sexy enough to turn the tide for GM? Is it strictly symbolic, or does it demonstrate that GM is finally going to catch up to the times and also listen to consumers and make a product we want?

On the other side of the coin, have we as a nation learned to be more prudent and economic shoppers? Some experts say that consumer confidence is showing a slight rise. Last September, when Lehman Brothers were making their first job cuts?indicating to the rest of the world that something was seriously wrong in the financial sector?it was the beginning of what became a pandemic consumer panic in the West. We all just turned off the spigot as far as our spending. Any tax bonus that we saw in the stimulus bill was instantly squirreled away as opposed to being spent. We were too scared to stimulate anything, and that was probably not accounted for sufficiently.

Recent talk about whether the bank bailout is working has me confused. It?s like the banks had a hostage and we paid the ransom?except they still have the damn hostage. I?m not a banking expert, but this whole thing never smelled right to me. Still, I do feel a tangible change in the air as far as people parting with their hard-earned dough. The news that we are losing our jobs at a slower rate helped. I guess the situation is still pretty dire, though, if news like that boosts confidence on Wall Street and Main Street alike.

These recent town hall meetings regarding the health care reform bill have given rise to a disturbing realization that we must face here in America: 38 percent of our population didn?t vote for our current president, and that minority seems to hail from a place where yelling about false realities is not only condoned but reckoned to be intelligent. I know the euthanasia provision is a really bad part of the bill and we should all rally to get that shit taken out of it right away?how dare that Obama put anything about my Grandpa anywhere near any sort of national health legislation, how dare he!

Um, actually, no, hang on a minute. Note to America: Read and understand things before you start an uproar over something you heard. I downloaded the entire 1036-page proposed health care bill and found not one reference to euthanasia. We are all collectively and singularly smarter than this?or should be.

http://www.playboy.com/articles/duffonomics-partisan-limbo/index.html

[FunkyMonkey]

Why Glenn Beck Is a Symptom of What Is Wrong with America

by Duff McKagan

This Week: Why Glenn Beck Is a Symptom of What Is Wrong with America

News broke last week that many major sponsors advertising on Fox host Glenn Beck?s nightly show will be pulling out. If any of you saw his ?Obama is a racist? segment, you would probably agree that having your corporate name associated with this loose cannon is most likely a terrible idea.

The thing that gets me about Glenn Beck is that I used to think he was pretty cool. His CNN show a couple years back was a show that I?d sit and watch. Back then, Beck seemed to have a cat-bird seat somewhere in the political middle, where he?d toy with guests and challenge the viewer. Now, however, he has apparently bought into some weird angle that I am sure he hoped would keep a certain type of advertiser supporting of his gig for life. I am glad to see this scheme has backfired. What a moron.

I have previously addressed the problem I have with certain factions of the left or right trying to spin the other side into the worst possible light. At what point do we just drop the politics and try to do what is best for our country? Aren?t two wars and the biggest economic recession in 80 years enough to get us to unite for the purpose of making a safer and stronger country? Let?s all get with the damn program.

This polarization has got to stop. I can?t in good conscience just point my righteous finger at the conservatives. Liberal media, too, skews the news to fit their political motives, albeit with less bluster and shouting.

This brings me to an idea that just might work: Let?s run the U.S. like a corporation. That?s right, let?s stop trying to get Presidents ousted as soon as they take office and instead do the opposite?make terms an eight-year commitment. Would Lee Iacocca have been able to realize all of his reforms if he had to worry about a re-election two years into his reign at Chrysler? Or take Bill Gates. This man is a visionary and is constantly unveiling new ventures that you realize are the result of a well-thought-out, long-term plan.

Corporate security at a company like Microsoft is taken very seriously. Do you think Bill Gates would commit his firm to some ill-thought-out war in Iraq on a rumor? Hell no. But that?s not my point really.

A guy like Reagan got the country close to the way he thought it should be run, and Clinton pretty much spent his time tearing that apart and remolding it according to his vision. George W. Bush in turn tore apart Clinton?s efforts and now Obama is reversing a lot of Bush?s work. It?s kind of like a damn rollercoaster if you really think about it, right?

Has there ever been a sort of ?happy medium? in the history of this country?a time when a workable balance between social programs and business incentives was struck? A balance where Democrats and Republicans were both happy with the direction of this country? It seems that we could indeed come up with one and this could possibly turn back the current tide of anger if not alleviate this antiquated (in my mind at least) two-party obnoxiousness.

That?s right, run this country like a great corporation?with pensions and health insurance, security and growth potential, research and development. We would act as the shareholders, with the power to axe the acting boss, or at least put a chief on notice. Does this sound too much like a utopian dream? You may argue that we need the checks and balances the legislature and courts were originally set up to provide. I guess I am just getting real sick of politics and wonder whether TV and its bellicose talking heads will ever again let an acting President just do his or her job.

http://www.playboy.com/articles/duffonomics-glenn-beck/index.html

[FunkyMonkey]

Duff on Banker Bonuses

By Duff McKagan

This Week: The Banker Bonus Debacle

Last week, as I traveled back to the States from 20 days in the U.K., it seemed the front pages of every newspaper were splashed with outraged headlines about baker bonuses. Goldman-Sachs is considering a worldwide bonus package of $35 billion, an average of $600,000 to each of its 5,500 London workers alone. Why would banks consider any sort of bonus at all with the U.K. and U.S. taxpayer carrying most of the burden of making these banks "whole" again through the massive bailout packages put forth in the last year?

It's interesting to note that the word "bonus" stems from the Latin meaning of good, as in beyond the call of duty. So how and why are bankers considering any compensation above and beyond their base salaries? In this whole economic crisis, had not the banking industry been to blame from the start? Was not greed in our financial industry the genesis of this credit crunch? (See my previous column on greed.)
When bonuses started in the banking industry some two decades ago, it was at a time when banking executives were making a relatively low yearly salary (say $100,000), but they were generating large amounts of capital. When we all started to "win" in the stock and real-estate markets a few years back, no one really blinked an eye when hearing stories of hedge-fund managers getting $20 million as a bonus. No, we all thought they were financial "rock stars."

Getting back to the Latin root for bonus: wouldn?t it make more sense to re-phrase this as "commission"? Personally, I have no problem at all with an investment guy making money off of me when he makes me more money. That's the way it works in most businesses. The more my band manager makes for the band, the better his commission is, but he doesn?t get a bonus and would never expect one?he's just doing his job. Conversely, if my band manager makes us nothing?or worse, puts us in the hole?he makes nothing, and would be rather apologetic. His reputation in the music industry would probably suffer, too. Who would want to be with artist management that makes no money for the artist? The word and underlying precedent of ?commission? would work, look, and sound much better for bankers.

http://www.playboy.com/articles/duffonomics-banker-bonus/index.html

[FunkyMonkey]

By Duff McKagan

This Week: Why China Owns Us?In More Ways Than One

Understanding the U.S. and China Debt Situation: 101Treasury bills, notes and bonds have long been considered some of the world?s safest investment vehicles. When you buy a Treasury security, you are simply loaning money to the United States government; in return, you receive a guaranteed interest payment. In other words, Treasuries put our government in debt.

In the last year, China has become the biggest holder of U.S. debt, surpassing Japan. China now holds roughly $800 billion in U.S. debt of which we must pay about $50 billion in interest every year. This debt has been sold off by our Treasury Department to pay for Obama?s stimulus package. Trading debt in a global economy is a usual part of business and should cause no alarm. The debt trade plays heavily in how different currencies are valued on a day-to-day basis?but that is a subject for another column. This administration does hope to buy back this debt at some point, but for now, China holds the cards.

However, those cards also dictate another area when it comes to economic issues: the trade of goods between China and the U.S. Follow me here for a second. First off:

?China has recently attached their yuan currency unit to the worth of the U.S. dollar. That is, whatever the dollar is worth in world markets from day to day, the yuan is worth the same amount. Most other currencies, such as the pound or euro, have a floating value of their own, independent of the dollar. Attaching the yuan to the worth of the dollar makes inexpensive goods produced in China appear even cheaper.

Secondly:

?The U.S. will buy goods made in China because they are cheaper, and tariffs on these goods would only worsen the relationship between China and the U.S., thus complicating the debt situation and shutting down our already limited exports to that country.

Last year, "Buy American" clauses were being discussed during the presidential campaign. If we were to simply buy only American goods in the U.S., the backlash from other countries buying goods made in the U.S. would be truly horrific to our economy. (For instance, John Deere sells 80 percent of their product overseas. A "Buy American" clause would arguably shut down that commerce.)

The term trade means what it seems to mean: You give me something in exchange for something of equal value. The world trade stage is indeed a tenuous balance of give and take. President Obama has his work cut out for him when it comes to commerce with China and all of its machinations (human rights being the biggest collateral issue). For now though, trade between China and the U.S. appears to be a lopsided affair.