NYT on Law Firms Coping with the Recession

The NYT (April 4, 2009, Adam Cohen) had an article on the legal profession and the recession:

http://www.nytimes.com/2009/04/02/opinion/02thu4.html?em

For years, law school tuition rose along with big-firm salaries. Between 1990 and 2003, the cost of private law schools rose at nearly three times the rate of consumer prices. The average graduate now leaves with more than $80,000 in debt...

More schools may follow the lead of Northwestern, the first top-tier law school to offer a two-year program.

Astute readers can see that the high debt load and the length of most legal study programs are related. The third year of law school is usually unnecessary, unless students participate mainly in clinics or other programs that provide practical experience. My third year, I worked part time in a law firm. By year three, most law students are finished with their core bar classes and are spending most of their time looking for jobs or working. How much are they paying for this privilege of looking for work, interning for free, or working part-time? About $40,000 for some private law schools.

I have always said big law firms were pyramid schemes. At some point, all pyramid schemes collapse under their own weight. You can only get so top-heavy before something gets crushed.

Reason #3745 to Be a Libertarian

This video makes my blood boil. Bruce Babbitt is an idiot. First, he talks about retaliating against an employee for creating more transparency into his department; then, he refuses to answer any questions about how his department is using taxpayer funds. Didn't we fight a war to get away from people who acted like high and holy kings?

Update: Babbitt has not been Secretary of Interior since 2001. It's an old video.

Molly Ivins on Camille Paglia

I have to confess, I like reading Camille Paglia. When it comes to sheer entertainment value, she can't be beat. Molly Ivins on Camille Paglia is hilarious:

http://www.its.caltech.edu/~erich/misc/ivins_on_paglia

One fashionable line of response to Paglia is to claim that even though she may be fundamentally off-base, she has ``flashes of brilliance.'' If so, I missed them in her oceans of swill.

Ouch. If newspapers want more readers, they need more writers like Mike Royko and Molly Ivins. May they rest in peace.

My Call on Wells Fargo Stock Was Accurate

On February 25, 2009, Wells Fargo (WFC) stock was selling for $13.44/share. I wrote an article where I praised WFC as undervalued:

http://willworkforjustice.blogspot.com/2009/02/treasury-on-wells-fargo.html

http://seekingalpha.com/article/122533-wells-fargo-should-emerge-from-this-crisis-stronger

At the time, President Obama had said that the government would continue to do whatever it took to support banks. Recently, the government allowed banks to use more flexible accounting to value certain assets.

Today, Wells Fargo stock reported better-than-expected earnings. WFC closed at $19.61/share, a 46% increase.

Personally, I bought Wells Fargo on margin all the way down to the single digits and sold at around $14/share. If I had Warren Buffett's money, I would have held on, but I couldn't handle having so much stock on margin. As it stands, I ended up losing some money on the WFC trades because I started buying shares at around $20/share.

It remains to be seen whether my most recent prediction--that the S&P will go to around 950--will come true. At this time, I continue to believe the S&P will rise to somewhere around 920 to 950.

Government Deficits Do Matters

Fun stuff from the Peterson Institute:

http://www.owenandpayne.com/why_you_owe.php

Each American now owes 184,000 dollars because of America's deficits.

SJ Merc on San Jose's Budget Issues

John Woolfolk talks about San Jose's budget problems:

http://www.mercurynews.com/ci_12058054?IADID=Search-www.mercurynews.com-www.mercurynews.com ["Top SJ management agrees to pay freezes and cuts."]

I am curious to see how cities expect to get more revenue. It doesn't seem like anyone has the stomach for layoffs and other spending cuts. Thus, Californians should expect higher taxes in some form unless they accept the fact that government has expanded too much over the last ten years. Cutting back on government unfortunately means laying off some government employees and/or reducing pension and COLA contributions. When times are flush again, we can afford to be generous. 

Silicon Valley Income Statistics

According to the WSJ (2/17/09, B4, article by Pui-Wing Tam), 42% of households in Silicon Valley earned more than $100,000/year. "Meanwhile, the percentage of households earning less than $35,000 a year reached 20%, up from 19% in 2002."

I hate these kinds of statistics--the term, "households," is so vague. It could be one person earning $101,000/year, or two adults earning $51,000/year. Still, it looks like the recession may not affect Silicon Valley as harshly as other locations. I don't see housing prices dropping severely (not any more than they already have, I mean). Despite the recent condo construction, Santa Clara County doesn't have an oversupply of housing.

Also, the new developers don't seem to have thought things through. Most of the new condos are in downtown San Jose, which won't attract families. If they were trying to cater mainly to singles and young adults, they made a mistake. Most singles won't be able to pay a high price for housing because of two reasons: one, young singles have only one income; and two, they are not in their peak earning years and probably have student loan debt.