Rain at Last in California! The Bleaker Picture?

Finally, the rains have come to central and southern California! We have been in severe drought, now, for many months, and anxieties run high as reservoirs run low and even go dry.

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Although the three to four inches over the last few days is quite literally “just a drop in the bucket” in terms of alleviating our drought conditions, the coming of such significant rainfall raises hopes that more is to come this season: It must!

Linda Was Right About “Water”

I recall my wife voicing concern many years ago about California’s rapid growth outrunning its resources – particularly water. At the time, I hadn’t given it much thought; today, I think a lot about the possibility – fast becoming a likelihood!

There has been a huge influx of people in California and, specifically, in the San Francisco Bay Area over the last several years. The primary reason aside from the region’s wonderful climate is the booming economy and the tech job magnet which is Silicon Valley. Every vacant space (and there are not many!) is giving way to developers and the apartment/condominiums they love to build. The housing demand is fierce which begets sky-high home prices and rents. However, it seems our city fathers and the state politicians in Sacramento have given little thought to water and the skyrocketing population/resource imbalance. Now, California’s long-term drought has finally spotlighted the seriousness of the situation.

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Locally, here in the San Francisco Bay Area, residents have been asked to cut water usage by 10 to 20%. Lawns have been going brown and showers have gotten shorter among the citizenry. The central valley of California, long known as “the salad bowl” of the world for its bountiful produce, continues to farm although there are sections of the valley that lie fallow for lack of water. In other locations, even such water-intensive crops as almonds are still grown in abundance.

Where Do the Farmers Get Their Water?

More and more, California’s farmers are going far below ground for their water, drilling deeper and deeper wells. Some of these wells are so deep that they cost a farmer hundreds of thousands of dollars to drill. Most of the shallow, easy-to-reach aquifers have been depleted over decades of easy drilling. Small farmers who cannot afford the drilling costs of deep wells see the handwriting on the wall.

I was surprised to learn – and not that long ago – about land subsidence. Here is how it works: Over a period of continual pumping of well water from the aquifers, a significant lowering of land elevation occurs. The nearby large city of San Jose, California, experienced some thirteen feet of subsidence in its early days when water came exclusively from wells. That degree of land recession can cause all kinds of problems today: New flood-zones (not a problem at the moment!) and infrastructure damage, for example. Imagine the potential stresses and strains on underground utilities like water and gas pipes as the land settles in a slightly uneven fashion.

The “60 Minutes” Program on California’s Water Problems

Lesley Stahl of “60 Minutes” recently devoted an entire program segment to California and its growing water problems. The program highlighted data which shows serious depletion of the state’s aquifers – mainly by big agriculture. The implications are clear: Any long-term climate change in California which results in less rainfall each year for an extended period will, in the not too-distant future, take a severe toll on the state’s agricultural output as aquifers are pumped dry faster than they can replenish – precisely the present situation. The resulting damage to California’s agriculture will have huge economic consequences on the state in years to come.

The de-salinization of salt water is seriously being considered right now in some regions of the state. Down south, Orange County and San Diego have already implemented sewage treatment plants which reclaim waste water (even sewage) back into drinkable water. At the end of the “60 Minutes” segment, Ms. Stahl finally gave in to urging from her host at one of these re-processing plants and drank a glass of water which had been reclaimed from sewage/waste: She apparently remains in good health and even admitted that it “tasted OK” – to paraphrase.

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Barely visible at the base of the Japanese Maple in the above picture is a little sign my wife has in our garden. It reads, “For all things, there is a season.” How true for the annual seasonal changes which we expect. I fear that little sign may portend a darker cycle – one with a period of hundreds of years – a cycle of severe drought in California. I hope not.

For more on the subject of unbridled growth here in Silicon Valley and cities and towns, in general, click on the following link for my post “Our Cities and Towns: About Growth and Quality of Life” (archives, May 31, 2014).

See “Our Cities and Towns…”

Why Small Investors Are Avoiding Wall Street

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Wall Street, banking, economics, and finance…not exactly “rocket science,” but, often, more obtuse, and decidedly, more obnoxious. Let’s start with Wall Street. A few years ago, I viewed a documentary about the hundreds of millions of dollars which were being spent on super/high-speed computer networks by certain factions of the Wall Street crowd. At the time, I wondered why shaving fractions of a millisecond (a millisecond is one-thousandth of a second) from computerized stock transaction-times could justify such huge expenditures. Last Sunday, the CBS program, 60 Minutes, showed how fractions of a thousandth of a second can be utilized to accumulate billions of dollars on Wall Street.

The 60 Minutes program focused on a new book by Michael Lewis titled Flash Boys. In the book, Lewis details the methodology whereby state-of-the-art, high-speed networks are used by certain factions of the money-grubbers on Wall Street to make billions of dollars by beating their competition “to the punch” on equity trades. According to Lewis, the market is therefore “rigged” against other traders, and certainly against mom and pop investors. Here is how it works.

Speed Is Very Expensive, Yet Disturbingly Profitable
The Rich Get Richer…at Whose Expense?

 The Money

When an equity (say, stocks) buyer in Manhattan sees a price on a particular stock that is favorable and initiates a routine purchase, he or she hits the “buy button” on their computer. That sends a computerized “buy” signal speeding through computer networks to an equities exchange on the New Jersey side of the Hudson River. Some portion of the buy-order shares may be executed there, often with the remainder of the shares to be supplied by other exchanges somewhat farther away geographically. In essence, the buy-order is executed and completed, daisy-chain style, down a network of exchanges, each progressively farther away from the buyer in Manhattan.

The boys with the super-fast toys (high-speed computer networks) “see” the buy-order on the trading networks as it arrives at the very first exchange, the closest one – just across the Hudson River. They proceed, in much less time than it takes to blink, to buy shares in that same equity – which serves to very slightly raise the market price of that equity. Then, virtually simultaneously, they sell those shares back, at the higher price, to the original buyer whose buy order is still loping along its daisy-chain path toward completion. The original buyer ends up with his equities, but not at the original price which prompted him to buy. In order to complete the purchase, he must now pay a slightly higher price for the balance of shares which were not available at the first exchange …and you can guess who reaps the profit!

The arrival of the original buy-order at the first equities exchange across the Hudson River ostensibly provides the first opportunity for the HFT boys, the so-called “high-frequency traders” to observe and instantaneously “intercept” the buy order; at that point, their computers spring into action before the original buy-order goes any further down the line.

Although each individual transaction may only net the high-speed, high-frequency traders a penny or two, multiply that by thousands of such trade transactions per second, and it adds up to a handsome profit in a six and one-half hour trading day. A penny of profit per transaction at 10,000 profitable transactions per second during six and one-half hours of trading nets a daily profit of $2,340,000! This structured example and its huge profitability is likely far more conservative than the reality happening on Wall Street.

Not bad at all for the high-speed, high-frequency traders who can afford this capability, but not so good for the average buyer whose “intentions to buy” are anticipated by what might be termed “virtual mind-reading” using high-speed networks. What chance does the little guy have who sits at home in front of his desktop computer trying to make money in the stock market? Can a minnow swallow a shark?

The practice described is termed “front-running” by virtue of the fact that the high-speed nets allow the speed-guys to get in front of the buy-transaction and alter the playing field before all the shares are actually purchased. The practice has not been deemed illegal by government regulators up to this point, but the FBI is now investigating as are other regulatory agencies now that the public is beginning to see and understand a quintessential example of how “it takes money to make money.” Many of us knew this all along – that politics and financial markets are rigged in favor of the rich. I believe the popular phrase is “income/wealth disparity.”

For non-techies: The speed of data along computer networks, even the slower ones, is still blazingly fast – close to 186,000 miles per second which is the speed of light in vacuum and represents the fastest speed possible in the universe; Einstein’s physics says so.

At the speed of light, it takes 5.4 microseconds (millionths of a second) to travel one mile. The difference between a standard, cabled data network and a high-speed fiber-optic cable network in terms of the time it takes to transport data one mile is very tiny, a fraction of a microsecond, and yet that seemingly innocuous margin of improvement is enough to make certain folks on Wall Street billions of dollars.

If the Hardware Chapter of this Story Seems Unbelievable,
Consider the Following Chapter: “Software on Wall Street”

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Yes, it is true: Computers are dumb slaves! They only do what they are instructed to do via software/firmware programming. Those “marching orders” in the form of data 1’s and 0’s, those computer “algorithms” as they are called in the tech world, are what direct and empower computers to do complex evaluations and calculations in much less than the blink of an eye. The computer programming which implements high-frequency trading on Wall Street and the complex calculations used in banking is among the most sophisticated, anywhere.

Do you recall hearing about financial “derivatives?” These are the shadowy and extremely complex financial transactions that ran amuck and, along with sub-prime mortgages, almost sank our economy back in 2008. Very few people completely understand derivatives – even high-flyers on Wall Street who profit from them. Very few bankers understand them, even at the highest echelons of financial responsibility in the banking world.

If not these folks, who does understand derivatives? In a real sense, only the people who have written the computer code, the programs which execute derivative transactions. Who are these guys? Very often, they hold Phd degrees in mathematics or physics, but they initially had little or no background in finance. Many were educated elsewhere, including Russia and the Ukraine. Among the ranks are folks who could accurately be described as “colorful characters,” non-conformists with different viewpoints and interesting motivations. After the 2008 financial collapse, many of these Phd types were called upon to help the financial world unravel the tangle caused by derivatives and their complex nature.

It is all just a bit scary, don’t you think? What kind of a world has man created for himself? The fact that we have all of this incredible technology gives fitting and glorious testimony to man’s tremendous resourcefulness and accrued knowledge. I am in awe when such technology is used to good purpose, as exemplified by further scientific research about man and his universe. I am grateful for the improved life we all lead thanks to technology’s role in advancing medicine.

Frankly, I am saddened that so much money and technology supports the non-productive, selfish money-grubbing that occurs on Wall Street and in our financial system. Please note that I carefully separate from my criticism the key role computers play in keeping accurate records within our financial system.

My Assessment of Today’s Stock Market

Lately, the market has been rather stuck for some time at the same optimistically high level, but with significant and frequent ups and downs. Although mom and pop investors made good money riding the coat-tails of the big boys during the recent, extended bull market (the only way for the little guy to prosper, these days), anyone’s small investment in today’s market is currently going nowhere but up and down. In contrast to mom and pop, you can bet that the big boys make money every time the market goes through one of its short-term cycles. The current, frequent ups and downs of the market are giving mom and pop investors a headache. The fat-cats are getting richer with every cycle.

As proven by history, it is only a matter of time until the financial system has another significant crash, once again, most likely self-inflicted by excessive greed and over-leveraging on the part of the people in its ranks. In today’s world, any number of events could suddenly knock Wall Street for a loop. At that point, much will be lost, but the big losers are usually the little guys who do not have the visibility to see it coming and can’t sell on a dime in time to get out. The next major crisis will likely not be followed by another extended bull market in which the losers can fairly quickly recover their lost capital.

It is no wonder that so many small investors have given Wall Street the cold shoulder in recent years. Small investor participation in the market is way down, while high-frequency trading is way up…surprise! The man on the street is getting smarter and wiser. If one still likes to gamble, the odds and the entertainment are better in Vegas.

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I have always maintained that technology is a two-edged sword which cuts both ways. Use it wisely and it will germinate flowers in the garden of life. Use it unwisely, and it will grow a weed-patch and become the root of much evil.

Meet David McCullough – Engaging Author, Historian, and Man of Common-Sense

You likely have heard of David McCullough, and so had I. I knew him to be a prolific author/historian who wrote several books including two Pulitzer Prize-winning biographies, Truman, and John Adams. Two of his books, 1776 and John Adams had been sitting unread on my bookshelves for some time, waiting their turn for my reading fancies to turn to the history of that period. I even had the unopened HBO DVD based on John Adams waiting and gathering dust on the shelf – a requested birthday gift from my wife last year.

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Two weeks ago, the CBS program, 60 Minutes, featured Mr. McCullough. The piece revealed a most engaging character, a fine author, and a man of most uncommon…. common-sense. I thoroughly enjoyed the piece, all the while savoring McCullough’s wonderful insights into people and history and his ever present sense of humor. For him, history is not about places and dates, politics and wars; it is about people, it is about music, art, science and medicine and their influence on the lives of human beings. It is about the course of human events. Amen.

 Over the past several months, our longtime friends, Linda and Gil who live at Lake Tahoe, have been having fun with my blog-writing and the fact that I published my book on science history a couple of years ago. Gil insists that I should have a writer’s hideaway, an intimate refuge for me and my typewriter (electronic version, of course) where I can toil away undisturbed. Accordingly, he has playfully sent us pictures of several ridiculously tiny cabins, even sheds, as “possibilities.”

 You can imagine my amazement and pleasure when 60 Minutes revealed that is precisely how David McCullough writes – in an eight-by-twelve foot rustic clapboard “cabin” set apart from his Martha’s Vineyard farmhouse, sitting quite by itself in the woods. No electronics or facilities are available – only bookshelves, a lamp, and his trusty antique Royal typewriter which he purchased second-hand in 1965 and on which he has written every one of his eight major books – mind-boggling prospect! My wife and I were delightedly amused during the program as the camera focused on that clapboard cabin amongst the foliage with a white-haired figure visible through the pane-glass window and a clearly audible tap-tap, tap-tap emanating from the tiny refuge – what he calls his “World Headquarters.”

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I love it! McCullough reportedly once said that nothing good was ever written in a large room! Amen. My den is small and cramped; maybe that offers some hope. Amen!

Wanting to know more, I went to the internet and found a piece on You Tube about McCullough titled Painting with Words which is precisely what he does. This piece is a work of art in terms of video biography. Barely a half-hour in length, it is a wonderful, light, and ultimately profound look at the man, his family, his work and his philosophy. No one who watches that will come away without real respect and affection for the subject and his work.

I’ve discovered there are some interesting coincidences between my life and David McCullough’s. For example, I knew the very first day I met Linda, my wife of 46 years, that she was a woman I could marry… and that I just might. I told my parents the next day about “this girl I met at a party yesterday” and that “I think I may have found my wife.” McCullough disclosed that when he met Rosalee, he was “head over heels from the beginning….I knew, I just knew – this was it!” I got a kick out of the fact that we both “just knew” right off the bat. Our gut-feel seems to have worked out just fine for us both given all the combined years of marriage!

McCullough’s second major book, The Great Bridge, published in 1972, is the story of the Brooklyn Bridge, its construction and its iconic importance. Coincidence has it that Linda and I took our vacation in New York last October, and one of our major goals was to walk across the Brooklyn Bridge and to spend some time walking around Brooklyn Heights – which we did. Mostly, this was Linda’s idea; her mother spent her early years in Brooklyn, so I went willingly along. Neither of us had any knowledge of McCullough and his book at that time. I received my used, first edition, first printing of The Great Bridge in yesterday’s mail; I look forward to reading it. I particularly wanted the first printing.

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We had a marvelous day walking the bridge and exploring the venerable, old brownstone apartment buildings along the tree-shaded streets of Brooklyn Heights. It turns out that McCullough and his young family lived right there, in the shadow of the bridge – where we walked – while he wrote his book. After seeing him walking the bridge and strolling through his old neighborhood on 60 Minutes, the memories of our day there have become even more poignant.

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In so many particulars, I have found Mr. McCullough and myself to be precisely on the same page – having discovered all of this only within these past two weeks. Two things especially stand out, although there are others.

In the nearly finished manuscript of my next book on science and math education, I examine the overall poor performance of our students in science and math (See my recent post of July 7, 2013, What’s Gone Wrong at Our Schools? It’s Not What You Might Think!). As I mention in that recent blog post, and contrary to so many popular indictments of the schools and teachers, I primarily blame parents and guardians for failing to prepare their children for the “learning experience” before they even begin school. With great interest, I learned from watching 60 Minutes that McCullough also singles out “the parents and grandparents” for blame when addressing the historical illiteracy of so many students in this country.

There is one revelation from McCullough at the very end of Painting with Words that made a huge impression upon me – first, because it agrees so strikingly with several sections in my new book, and, second, because it validates our very similar outlooks and attitudes. Here it is:

When pondering during what auspicious occasion, at what particular time and place in history, he would like to have been a “fly on the wall,” McCullough concluded he wished to have been present in 1825 when Ralph Waldo Emerson, fresh out of Harvard, went to Quincy, Massachusetts to visit John Adams during the last year of  the great man’s life. McCullough noted that Emerson wrote down much of what transpired that day.

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As the camera rolled at the John Adams House in Quincy, McCullough strode into the old dining room, walking up to the portrait of Adams hanging on the wall. He related that he wished he were there when Adams told Emerson, “I would to God there were more “ambition” in the country; by that I mean ambition of the laudable kind…..to excel!”

McCullough added, “Wouldn’t it be wonderful if we could reinstate, through what we do as parents and grandparents, as teachers and legislators, that old noble ambition….to excel.”

To which I say, “That sounds so familiar; amen, amen!”

Postscript:

 I have since begun reading John Adams, and my wife and I have watched the fine HBO production on DVD of the same title. To my great pleasure, I find that Painting with Words is an added feature on the DVD, providing much better viewing than does the internet.

If you come to know Mr. McCullough and his work through the programs cited above …and through his books, I can guarantee you will be very glad you took the time to make his acquaintance.

 Parting Comment:

As always, I have no connection with any product I mention on this blog except my desire to relate to you, my followers, something that I deem to be of great value or merit.