There is Absolutely No Hope

One of the things I often have to remind my clients in my work as an Investment Manager is that while the sum of our parts is always going to be just fine, it is irrational to expect that each individual part will always be just fine.  We can expect certain pieces to lag or even die, but we need not fear that as long as the aggregate package is doing what we want it to do.  There is an analogy there to the way I feel about the election results on Tuesday night, in that my confidence in the sum of the parts of America (“the United States”) is stronger than ever, whereas my confidence in one of the particular parts (the state of California) is irrevocably damaged.  The problem is that California is not one piece of a 50-investment portfolio I own; it is the state I live in.  And I confess, I do not see that lasting forever.

A few comments about the election results are in order and I will get there very soon, but let me just explain the overall point that I think needs to be made: California has no competition whatsoever for the most beautiful and impressive state in the union; the gap between first and second place when one analyzes weather and natural resources is gigantic.  And California, my friends, is an absolute utter disaster – a laughingstock – a literal manifestation of all that can go wrong in government – and there is no hope – none – for her restoration to civilized society.  It is a cesspool waiting to happen.  When all is said and done, conservatives will have no one to blame but themselves.

The state has been headed down this frightening path for a long, long time.  Ultimately, California has been a wholly owned subsidiary of public employee unions for several decades.  The 1990’s intensified this reality in a way that should have caused riots on the street, but not the kind of riots we actually had (I digress).  By the 2000’s we responded to our frustrations with the state of affairs in California by recalling a unionized whore Governor named Gray Davis, who was a Democrat, and replacing him with an ineffective fraud named Arnold Schwarzenegger.  Now, with Rome burning, we see the Republican who has been there and know we don’t want more of this guy, so we understandably reject the ineffective billionaire CEO who reminds us of the centi-millionaire Arnold, and instead find another unionized whore who used to be our Governor many, many acid trips ago, who happens to be in a different political party than the ineffective guy we have had is in.  Translation (because I am not being nearly as sarcastic or polemic as you might think – no need to be inflammatory – just the facts, ma’am):  If we had not recalled Gray Davis, the state would have burned.  We did recall Gray Davis, and it still burned.  Arnold (who has a R after his name) now gets the blame.  Jerry Brown gets the Governor’s mansion.  Where is my dad’s Linda Ronstadt CD when I need it?

California is a demographic anomaly, and there is truly no way it can be fixed.  The Democrats have permanently bribed the Hispanics into voting for them.  Hispanics will eventually be 40% of our voting base, and even right now they are approaching 20%.  Republicans have permanently told Hispanics to jump off a bridge, which is rather bizarre since we are the party of faith and hard work, and Hispanics are, well, often very faithful and hard working.  The toxicity on this issue is going nowhere.  Both sides are dead wrong.  And the political beneficiary of both sides being dead wrong is the Democratic party.  But our Democrats are not your Democrats, my dear friends in North Carolina or Virginia or Tennessee or even Pennsylvania.  Our Democrats are insidious little bastards who will suck the life out of you while you sleep, and they will do this with every single public employee union known to mankind filming it.   And this is the point I will make: We do not have a demographic problem in California because we have too many Hispanics, or too many gays, or too many blacks.  And God knows we have way, way too many colleges and college students, but luckily these walking amoebas of apathy and 2.1 GPA’s do not vote, or get out of bed before noon.  What we have is a problem with one thing: Employee unions. And the only other places I know that can say that are Greece and France, and they are rioting as I type about whether or not people should work 30 hours or 32 hours per week.

Public education has only partially ruined the state.  It did its job by creating a couple generations of indoctrinated statists.  It is the expense of public education that has put the final nail in the coffin, and I want out.  Thriving, inspiring, fantastic businesses are fleeing the state the way guests flee my house when I announce that I made the dessert.  Wealthy people and retiring people are fleeing the state for more competitive pastures in droves (admittedly, ones with more bugs and less dining options).  Our tax system is the very very worst in the country, and Illinois, New Jersey, New York, and Michigan are still in this country.  To afford a public school system that ranks near last place in every major category, we are spending over $60 billion per year, well over 60% of our total budget, and we are running deficits the size of the Golden Gate bridge.  We produce more here than anywhere in the country.  We innovate here more than anywhere in the country.  We have coastlines and forests and natural resources and history and technology and overall grandeur that is too amazing to describe.  But alas, we have public education superintendents too, and they are going to dance – not just play a violin – while California burns.

I am not being melodramatic.  Across the country, the candidates and causes that most represented freedom and improvement over massive deficits and fiscal unsustainability were rewarded by wide, wide margins.  In California, where teacher’s unions can spend $50 million at the drop of a hat, or police unions who think it is cute to make smoking weed a crime can spend $5 million, saw results that basically averaged about 60% bad guys to 40% good guys.  This era we are living in represents a paradigmatic shift in the way Americans are viewing Washington D.C., but here in California where I pay well over $100,000 per year in state income taxes alone, and $30,000 in property taxes alone, and nearly 9% in taxes for every McRib sandwich I buy at McDonalds, the voters said, “Senator Boxer, you have worked so hard to spend us off a cliff, and we want you to keep your title.”  The people in this state deserve her. And we deserve Jerry Brown.

Meg Whitman was an atrocious candidate who ran the worst campaign I can remember seeing in my adult life.  If $130 million of your own money and an opponent named Jerry Brown who smells like 1970’s radicalism can not win you an election, then you have a major problem.  The political consultants who ran her campaign will all be hired again some day, which would be like a major college football program hiring Paul Hackett again.  And I guarantee you it will happen (the consultants, not Coach Hackett, thank God).

People like me have a decision to make.  Fortunately I live in a very conservative county, right at the beach, and don’t have to go hang with the people ruining our state very much.  Prices are astronomical, but the restaurants are good and my kids are in private school.  There is no place in the world with more consistently pleasant weather than right here.  But they are burning our state to the ground, and the people are willing accomplices.  I have worked as hard as you could ever imagine to build a business that I am extremely happy with, and thank God, can actually afford me this life here in California.  The moral dilemma I face is this: Will my kids ever have a remote chance of working hard enough to do the same?  Will the 50-60% of the people around them who will inevitably work for the state or county government feel the same?

I would rather send them to Athens to find out, where at least Socrates once walked.  If a public employee union nightmare is going to play out, I like the Greek philosopher soundtrack more than the Jerry “Moonbeam” Brown one.