@econbartleby and @billswindell at @TheEconomist and @NorthBayNews, respectively.

As I lamented the result from St James' Park this morning, I looked for an insightful article from The Economist. A nice part of focusing on one piece is the chance to learn about the writer. Knowing these journalists grow up and live in a certain context humanizes them. For example, I ran across a piece by Motoko Rich of the New York Times a few years ago, and was surprised to find she grew up in the small town literally next door in Sonoma County.

Philip Coggan

available at https://shrtm.nu/EYpO

So, today, it's the Bartleby columnist, Philip Coggan. He's a graduate of Sidney Sussex College, one of the constituent colleges at Cambridge University. His work at the Financial Times, authorship of several books, and awards won belies his skill, but details on his person are scarce. He has a feed at Medium, though, where his words on the loss of a pet say much. It recounts how he, his daughter, and his wife said goodbye, recalling Philip's loss of his own father as a child:

"We take small pleasures from our pets. The purr of a cat as it is stroked; the excitement of a dog as it chases a ball; the occasional bursts of madness as a cat attacks a piece of string or a dog chases its own tail. They create a rhythm to the day; the morning feed, the afternoon walk, the night-time arrival of cat on bed, eager for shared bodily warmth. And there is satisfaction from a relationship that is so uncomplicated; in return for food and affection, the dog or cat will stay around. There are no arguments; no sudden estrangements. These small joys help us through the long days and nights. My cat will no longer be the first to greet me when I open the front door. How can I not be sad that he’s gone?"

Julian Richer

available at https://shrtm.nu/o5fQ

Perhaps fitting for a financial journalist with such a sense of the personal, the piece this week is his writing on the appropriately-surnamed Julian Richer.  Richer made his fortune in peddling high-end audio equipment in the UK, from stores cheekily named "Richer Sounds." Richer's parents had both worked for Marks & Spencer (for an American, think maybe Macy's), and he entered the business at fourteen.  Coggan draws attention to Richer for the unusual fact that Richer has planned to give away much of his wealth to his employees.

When asked why, Coggan writes that Richer claims inspiration from the nearly 40-year-old book "In Search of Excellence." Richer maintains (and Coggan appears to agree) that the case studies therein illustrate that top performing companies treat both customers and employees well. "Organizations that create a culture based on fairness, honesty, and respect reap the rewards ... [t]hey attract motivated staff who are there for the long haul."

Coggan does not concede that Richer's arguments are ones for general application. He notes that Richer Sounds' turnover is a mere $157 million. That about matches the four supermarkets in the little City of Sonoma. However, he points out that the UK's high street retailers and supermarkets (M&S, Asda) have sought Richer out for his insight, suggesting lessons for the business community as a whole.

The point Coggan doesn't quite tease out (and I give him the benefit of the doubt here, for the column is a brief one), is that Richer, while not running a family business, is definitely in the family business.  His folks were retailers.  His approach to employees mirrors many family businesses in my part of semi-rural California. Bill Swindell of the Santa Rosa Press Democrat made this point five years ago, with his article "All in the Family." Swindell's quote from Marcus Benedetti (Clover-Sonoma) sums it up, as the CEO of the longtime dairy said "I look at myself as a temporary steward of something I can pass on to my children."

Over the past months and years, increasingly, navel-gazing about the raison d'être of companies has been a recurrent theme in the business press. The Economist has been no different. Contemporary capitalism often feels simultaneously disconnected from place while focused on individual cults of personality, provoking something of a crisis. It has not always been thus. When so many large business organizations in the United States came into existence in the Gilded Age, the personalities involved were known to one another, and the ownership thereof was often family-based, if dysfunctional.  Discomfort with family-type structures may therefore be present for good reasons -- embarrassing, emotional strife was and is common, messy details are inevitable, and nothing saps a meritocracy like nepotism.

Business is replete with family fortunes won-and-lost, the proverbial "shirtsleeves to shirtsleeves in three generations." It is understandable then, that with family life often resembling nothing so much as a blooper reel, that businesses would have a long-deep discomfort with management principles that may very well be family-derived. What irony there is, then, in the unstated suggestion of Mr. Coggan's piece — that at the core of successful businesses, those impersonal machines of prosperity, is the resiliency, reciprocity, and, yes, care for one another upon which family depends?

@TheEconomist (Ann Wroe?) on Dr. Robert McClelland and #JFK.

Wikipedia, "John F. Kennedy"

image available at https://shrtm.nu/8I21

Like many, I take Sunday afternoon and evening as an opportunity to review The Economist in print. While I scan its articles Thursday morning Pacific Time as they go live in London, I'm looking at the leaders in the throes of a workday. My review of the more detailed discussions and analysis of the newspaper takes place later, as the sun sets, children go to bed, and quiet descends on Sunday. I try to pick out at least one article to save: I don't have a formula for it, but I usually know the piece when I see it.

This week it was the obituary, and I suspect it was written by Ann Wroe (The Economist eschews bylines). She took a first in History and a doctorate in medieval history (Oxford, 1975), then worked for the BBC before joining The Economist in 1976 to cover American politics. She eventually became the Books and Arts editor (1988-1992) and US editor (1992-2000). She has edited the Obituaries page, usually writing the obituaries herself, since October 2003. I personally started reading the Economist in 1991 or 1992, so I've been reading her work for nearly 30 years, although usually unaware of the fact when I'm doing so.

Ann Wroe

Obituaries Editor

The Economist

available at https://shrtm.nu/k5r8 

The obituary this week regards Dr. Robert McClelland, a remarkable surgeon from Dallas in his own right. For nearly 30 years starting in the 1970s, he self-published “Selected Readings in General Surgery,” a regular compendium of journal articles — accompanied by his critiques. As the article notes, at one point, nearly 60% of America's general surgery residents subscribed, as the journal was a collection of the most useful new articles regarding first-hand surgical experience. That alone makes Dr. McClelland noteworthy, but it was the events of one week more than a half century ago that brings his passing to the attention of an English magazine in the 21st century. For Dr. McClelland was called to operate in an emergency on both President John F. Kennedy, and Lee Harvey Oswald, in the space of nearly 48 hours in November 1963.

The maelstrom of theories regarding the Kennedy assassination has never held my interest, despite the fact that the man has always been a hero for me. That he died for his country, rather than how, has always loomed far larger in my psyche. As Mark Shields, the longtime PBS Newshour commentator notes, Americans form individual relationships with the presidents.  Kennedy has always been the figure that comes to mind for me when I consider the office; as a near-mythical figure, and as the only Irish-Catholic (like me) to occupy the Oval Office, that is perhaps natural.

"To save a life"
"Robert McClelland died on September 10th, 2019"
The Economist
available at https://shrtm.nu/QNHI

However, the obituary of Dr. McClelland noted that, unlike the other surgeons in the room operating on President Kennedy, he disagreed with the conclusion of the Warren Report. His significant experience in dealing with the consequences of gunshots, and his position at the head of the table, caused him to examine both of the wounds of the stricken President. While the wound to the neck appeared to come from the back, the injury to Kennedy's head, in the opinion of Dr. McClelland, clearly came from the front -- indicating that more than one assassin participated.  After witnessing the Zapruder film years later, Dr. McClelland felt that the theory was validated, as the New York Times wrote in its obituary.

The tone and tenor of the obituary treats Dr. McClelland as a faithful and reliable witness. My sense is that the author thought Dr. McClelland's theory was right. If indeed Wroe is the author, she is unquestionably an individual with a great degree of reporting skill. She has borne witness to the reality of American presidential politics at the highest level for nearly fifty years.  What other discussions Ms. Wroe has had over the decades that informed her opinion, I and perhaps no one else can say.

But that she chose to draw attention to this careful, methodical, dedicated surgeon was no accident.  Both she and he fully appreciated the importance of what happened on November 22, 1963. Dr. McClelland preserved the blood stained shirt in which he operated that day for the rest of his life. He had fought that afternoon to save the life of a 46-year-old father of two, who happened to also be the leader of the free world. He would fight every bit as hard two days later to save the life of the accused assassin. There are fewer higher tributes to the medical profession than the sense of duty that compelled this surgeon to render aid under both circumstances. For that, the McClelland family has much to be proud.

@noahpinion on how Colleges affect Communities.

I tend to spot articles over time that I can tell will have some future relevance, but I can't always put my finger on it.  A good example of why saving copies of such pieces is important is here -- I didn't know what to make of that oil price article in 2012, but I certainly did by the end of 2014.

Similarly, I am linking to an article today from March, that I had thought would be part of a more complicated piece.  It's from Noah Smith, a former finance professor who blogs himself professionally for Bloomberg. The piece is interesting on its own merits because so many of us seem to think of a college as a place that educates the local population, and because, in true academic fashion, Noah points in a different direction:

"... ideas and technology leak out to surrounding businesses in myriad ways ... [a]cademics consult for local businesses. [Staff] start local businesses of their own. Companies ... hire smart people away from... campus jobs. [Colleges] provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment ... [h]igh-productivity technology businesses therefore tend to cluster ... in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals."

That the impact of an educational institution is, economically, in many respects due to the private-sector activity it influences in the surrounding economy, rather than the degreed individuals marching out the door in regular intervals, is I think a key to understanding the intuitive interest so many have in the fate and future of their local schools and colleges, beyond whether they or their children did, will, or do attend at any given time ...

@TheEconomist on #Homelessness in @SFGov.

I blog from time to time on the trustworthiness of news sources, and in general in the United States, the Economist is often considered the most reliable when surveys of the public are conducted. Before the June 5, 2018 primary in California, they took a look at San Francisco's Mayor's race. Their article touched the twin problems of the cost of housing and of homelessness, and I recommend the piece (available online here).

It's disturbing reading.  The author (The Economist eschews bylines) confronts the lived reality in terms that the reader can almost smell.  But the striking sentence to me was "[t]o voters, though, the problem seems to be getting worse ... '[but t]here’s not more homelessness than before. It’s just a lot more visible,” says [Jeff] Kositsky [San Francisco's Director of Homelessness Services]."

We all struggle in the San Francisco Bay Area to understand how wealth disparities in the nine county area can rival those on display in what the article characterizes as "poor-world entrepôts." But that the situation has become clear to so many is not in dispute, and perhaps that is the silver lining -- for we must have awareness before we can take action together.

The Return of #Cash.

Image available at http://tinyurl.com/yaxw3y5g

Just a brief note today, regarding reporters who are pointing to an economic and financial shift.  Extraordinarily low interest rates have had a significant impact on asset prices in Sonoma Valley (as I blogged about here, here, and here).  In 2015, Robert Shiller pointed out that in the San Francisco Bay Area, that most people expected annual home price increases over the next decade of 5%. However, more than a quarter of respondents thought prices would increase each year by 10% or more. Many of the second group leveraged (and profited impressively) as real property prices have continued to rise over the intervening 36 months.

S&P 500 dividend yield v. 3-month T-bill yield

courtesy the Board of Governors of the Federal

Reserve System (US), retrieved from the Federal 

Reserve Bank of St. Louis [FRED] May 15. 2018. 

S&P 500 dividend yield courtesy mutlpl.com,

 May 15, 2018. Excel data and graph available here.

Today, though, there is evidence that change is afoot, as the yield on "cash" (short term Treasuries) now exceeds the dividends on a broad range of stocks (the S&P 500).  The Financial Times' graph, courtesy of John Authers, is on the right.  I extended the graph back a bit (to 1933) just to get a longer perspective, via FRED and multpl. For about a thirty year period, dividends were generally always higher, until some point in June of 1963, when the rule flipped. Cash was king, more or less constantly, for the following ~2,335 weeks, until February of 2008. There are periods where these two measures briefly "invert" from the norm in both eras (e.g. 1959 for dividends, 2002 for cash), but it's unusual.

What does it mean? Stanford economist Bob Hall (who continues as chairman of the academic panel that dates American business cycles) notes that, economic syncopation being what it is, “[t]he next recession will come out of the blue ... just like all of its predecessors.” However, the Economist has pointed out previously that this economic cycle is already running exceptionally long at ~105 months, and it is now more than a year past the average of the last three (the longest ever, March of 91-March 01, was 120 months).  Meanwhile, valuations continue to be particularly rich (the Shiller PE is at 32.33, in excess of the '29 crash and only matched by the dot-com bubble). My sense is that the financial columnists pointing to this data are wondering how "out of the blue" a contraction could be at this point. Which is an interesting point to consider, when one reflects on the power of narratives in financial markets.

Casa Del Maestro, Pt. 1. #teacherhousing #sonoma

"Casa Del Maestro"
3380 Lochinvar Ave, Santa Clara, California
image available at http://tinyurl.com/htm8n2z

On Monday, the Press Democrat’s editorial board described a “brewing fiscal crisis” for Santa Rosa's schools, who must, as of their first interim report for 2016-17, implement a ~2.2% budget cut going forward.  SRCS is confronting flat enrollment coupled with declining rates of return on pension funds, that will increase budget pressure over the next four years. At least one board member’s suggesting a parcel tax in response.  

The editorial describes a problem familiar to Sonoma Valley Unified. SVUSD will implement a ~5% budget cut in a similar fashion to SRCS. While Santa Rosa must deal with a 1.6% reserve reduction due to an accounting error, and Sonoma Valley's audits have consistently been clean, it is the medium-term funding squeeze, with costs rising substantially faster than revenues, and an increasing inability to make up the difference via one-time funds, that’s driving concerns. SRCS' potential pursuit of a parcel tax is one solution that certainly appears to be on the table, but it could cause voter confusion, if not outright fatigue, given Santa Rosa's successful $229 million bond in 2014. As Jenni Klose, president of the SRCS board noted in a letter to the editor today, "[SRCS], as with all California districts, is simply wrestling with how best to meet its increased pension obligation while continuing to fairly compensate staff[.]" 

Sonoma Valley, grappling with the same situation, should investigate creating structural, long-term advantages to ensure our teachers and staff aren’t crushed between stagnant funding and our ever-rising cost of living. Housing remains the single largest expense for many teachers and staff, whether laterals or new graduates. Meanwhile, those further up the step-column need salaries that can pay for mid-life expenses, such as children starting college. Addressing one issue means more’s available to deal with the other. Much as our schools confronted rising power prices by getting on the supply side of the equation with solar panels, so too should our district pursue construction of high quality, reasonably priced teacher and staff housing, an advantage in recruiting and retention independent of state funding.

2.83 acre Sonoma Valley Health Care District Property

432 W MacArthur, Sonoma, California
image available at http://tinyurl.com/joonh66

Serendipitously, Sonoma Valley’s health care district must make a decision regarding 2.83 acres on West MacArthur in the next 18 months. The land is four houses from Sassarini Elementary, and down the street from the SVHS/Adele/Prestwood campus.  Due to some (very) recent changes in the law, SVUSD has an opportunity to pursue a teacher housing project there, before the main front of the financial storm hits our budget.

The model for such housing is Santa Clara Unified’s Casa Del Maestro. Commenced in 2002 on a previously closed middle school, the project utilized certificates of participation to fund construction of 70 units, subsequently rented out to teachers and staff via a functionally integrated public charity. Construction was done at market rates. No subsidy was involved. One bedroom apartments rent for ~$900, and a large two bedroom for ~$1,450 (typically $2,390 for one in Santa Clara, $2,930 for two).

The cost advantage has four parts. First, the District owns the land, and thus land costs are not included in the cost of ownership or operations. Second, the capital structure allows for tax-exempt finance. Third, the land and construction are both property tax-exempt. Finally, there is no profit -- rents are set at a level sufficient to pay back costs of construction, financing, maintenance and operations, and to fund a long-term reserve.

Former Cal. State Sen. Mark Leno
image available at http://tinyurl.com/zbw9tum

Despite such success, few K-12 housing projects have gone forward since, due to an aura of legal uncertainty. Is restricting residency to teachers and staff consistent with California’s Unruh Civil Rights Act? Can land held in educational trust be used for teacher and staff housing? Can Certificates of Participation be used to fund construction? Can schools cooperate with other agencies on projects? Are there legislative findings that the housing crisis is hitting teachers and staff?

We got our answer January 1. Mark Leno’s SB 1413, known as the “Teacher Housing Act of 2016,” codified at Health & Safety Code § 53570 et seq., provides the express authority to proceed. The law’s factual findings and statutory language gives the same type of guidance for K-12 districts long available at the junior college, CSU, and UC levels. Doubts regarding limiting the rentals to teachers and staff, about the use of lands held in educational trust, and the availability of innovative financing and intergovernmental cooperation were all addressed.

2.83 acre Sonoma Valley Health Care District Property
432 W MacArthur, Sonoma, California
image available at http://tinyurl.com/gtmavhq

And this brings us back to the 2.83 acre parcel. Ideally located, the site is nearly identical in size to the Casa Del Maestro. It’s within walking distance of supermarkets and the Sonoma Square. The neighborhood already has several master planned facilities (Village Green, Sonoma Hills, Pueblo Serena, Moon Valley). Further, the school district has broad powers available to support the project, given the financial flexibility of the authority granted by Health & Safety Code § 53573.

What of the hospital, the current owner? Hospital sites must be “multi-decade,” allowing new buildings to be constructed as others pass from use, like a wave traversing the property over decades. For now, the MacArthur parcel is surplus to requirements. But the two districts could allow for a future exchange of land with fair compensation. The Andrieux site could become housing and MacArthur a hospital, when contemporary structures reach their end of life.

There are any number of problems that could interfere with teacher housing at this site (or another), but the rough contours are clear.  Making sure teachers and staff can afford to live in our community was the first item I discussed when walking Sonoma door to door this past fall. There are few more effective proofs of the power of small-town cooperation, especially in the face of discord we now witness washing over our small valley.  Let’s get our government agencies talking about working together, and let's set an example, by having our health care and school districts discuss how they might make this land continue to serve the public interest for decades to come.

@SVHSDragons @SVUSD1 #SonomaValley College Readiness Going Up.

It's a day of sorrow, and for the acknowledgment of tragedy for Sonoma Valley's school district. But it's important to remember that great work is being done overall in our public schools.

Per Person Income vs. College Readiness, California Counties.

Sources and methods available here.

PDF version available here.

In particular, this year has been a strong one for SVUSD, because both governmental and commercial measures indicate our schools are having increasing levels of success.  For instance, US News & World Report found that Sonoma Valley's College Readiness Index, at 36.7, is now exceeded by only three Napa-Sonoma area schools: Maria Carrillo, Casa Grande, and Roseland University Prep.

This result is confirmed by State measures of performance, as the graph on the right shows. In general, Sonoma County rates poorly given what's expected for a county of its wealth. It is one of the clearest and worst under performers.

But Sonoma Valley is different.  SVUSD does 40% better on preparing students for college than the rest of Sonoma County. Sonoma Valley now outperforms Napa as well. SVUSD deserves a lot of credit for turning in such a strong result.

One of the best things about working for the past couple of years with the District's trustees, our very strong Superintendent, and so many dedicated principals and teachers, is that it gives some context concerning the regular and sustained progress being made.