New York and Twinkies

by JDH on November 24, 2012

Two topics today: New York, and the Twinkie. First, New York.

I spent last weekend in New York, my first visit to the “Big Apple”. My wife wanted to go to New York to celebrate her birthday, and since my boys had Friday and Monday off school, we flew out on Friday, and back on Monday. My observations, in no specific order:

Air Canada, the airports, customs, and the TSA did a fine job. No complaints. (It probably helps that we have Nexus cards and can bypass the lines).

As for New York, it’s like Toronto, only about three times as big. You can’t drive in New York; the traffic is chaotic, so we walked everywhere. We saw two plays: Spiderman (cool special effects, but a silly story), and Dead Accounts (no special effects, but an interesting story); my two teenaged sons preferred the interesting story.

What most impressed me was that New Yorkers were all quite polite. Everyone seemed happy to give directions, or help out as required. Walking back ten blocks from the theater at midnight we felt completely safe in the city that literally never sleeps. Of course part of that safety is due to the fact that there are cops everywhere. They all seem to be short, stubby guys with a thick New York accent, but they all appear friendly. On the subways there are numerous recruiting ads for more police.

The ads make me think they are not recruiting a city police force, but instead a military force, which I suppose is what it is. They are all friendly, but I still prefer not to live in a big city.

We took the subway down to Wall Street and Ground Zero. Some subway stations remain closed, and the evidence of Hurricane Sandy is still evident at the bottom of the city, but New York has done a remarkable job of getting back to normal. We didn’t tour New Jersey or other hard hit areas, so I can’t comment on their status.

City of Immigrants

On Saturday a big section of Madison Avenue was closed to traffic, and street vendors set up tables selling everything, and that brings me to my only worthwhile observation about New York: it appeared to me that the entrepreneurial work is all being done by immigrants. At the Madison Avenue flea market the vast majority of vendors were immigrants. Every food cart in the city (at which my boys ate numerous hot dogs) are staffed by hard working people that were not born in North America.

What’s my point? It would appear that America is still the land of opportunity if you are willing to work hard, but it’s possible that a lot of the hard work is being done by people from somewhere else. Perhaps the immigrants have always done the hard work (which is the point of Steve Earle’s City of Immigrants song), so there is no point to my observation.

However, if immigration slows down, and if it really is the immigrants who do the real work, what will happen to America? I don’t know the answer; I just ask the questions.

The Twinkie

I ask the question because the workers who make and transport the Twinkie in America are no more. The Twinkie is bankrupt. There are two sides to this story.

Some commentators are of the view that the Twinkie’s demise is clearly the fault of management. As consumer’s tastes changed, consumers were unwilling to pay high prices for unhealthy food. (They like unhealthy food, but not at a high price). So, instead of finding more healthily alternatives, the company tried to keep the dying entity alive with an ever increasing amount of debt. The inevitable bankruptcy was a failure of management.

The alternate view is that the demise of the Twinkie is a failure of the unions. Apparently the Teamsters Union had a rule that bread (like Wonder Bread, a Hostess product) and pastries (like Twinkies) could not be delivered on the same truck, even if they were going from the same plant to the same store. Apparently drivers could only drive, not unload. If that is true, it’s no surprise that the company was not viable.

So which story is true? I suspect both. There is no doubt that, as in all bankruptcies, the company had a massive amount of debt. That can only be blamed on management. It also does not appear to be in dispute that two trucks were mandated by the union where would would do, and as a result there are now a lot of unemployed Twinkie workers.

Which leads to the obvious question? How would the hard working immigrants selling hotdogs on the cold streets of New York at midnight view Twinkie management’s addiction to debt, and the worker’s insistence on excessive benefits? I think we know the answer.

Does this mean America is doomed? There is no doubt that excessive debt is a prescription for failure, but at the moment, all is good. Excessive debt is keeping the stock market inflated, so perhaps we have no worries. The Dow has corrections, but then heads higher. Gold is in a consolidation phase. It may break out tomorrow, or stay range bound for a while. Who knows.

My plan is to assume that hard work and thrift will ultimately be rewarded, so I continue to consume less than I earn, I have cash on hand, and I am maintaining my precious metals investments. Time will tell whether or not that is the correct strategy.

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