08/20/08 Greenwich Hedge Fund Dennis Keegan says things are going great

'Reality Check' Looks on the Sunny Side of America

Huntington News

By David M. Kinchen
Huntingtonnews.net Book Critic

We in the news media are often accused of reporting only bad news, ignoring the mostly good news that's happening all the time. "If It Bleeds, It Leads" is a hoary mantra in the news business.
Dennis Keegan and David West, authors of "Reality Check: The Unreported Good News About America" (Regnery, 256 pages, notes, NO INDEX! $27.95) attempt to balance the often reported bad news about America -- the Iraq and Afghanistan wars, the economy, health care, trade and budget deficits, high gas prices -- with what's going well on these fronts.

Keegan is a hedge fund manager in Greenwich, CT. and West is the CEO and founder of an advanced telecom and web servicing business. Keegan has an MBA from UCLA's Anderson School of Management, one of the nation's top business schools. West has a Harvard MBA, just like George W. Bush.

In a book that should be read by everybody who is confused about the direction the nation is taking -- and that's just about everybody -- Keegan and West take on the (mostly) liberal mainstream media, as well as such conservative publications as The Wall Street Journal, which paint a dismal picture of today's America. If you listen to politicians (something I don't recommend if you value your sanity), you'll find both Democrats and Republicans talking about a Washington, DC that's "broken" and needs to be fixed by the "original maverick" -- John McCain -- as well as similar doom and gloom statements from his presumptive Democratic opponent, Barack Obama.

I have to plead guilty to sometimes focusing on what's wrong with America, with my reviews of books like Steven Greenhouse's 2008 "The Big Squeeze" (link:http://www.huntingtonnews.net/columns/080526-kinchen-columnsbookreview.html) this past May and Louis Utchitelle's 2006 book "The Disposable American," focusing on outsourcing and downsizing and the loss of manufacturing jobs. (Link: http://www.huntingtonnews.net/columns/060521-kinchen-review.html).

Both of the above books were written by New York Times reporters and describe and name Americans affected by outsourcing and downsizing. That's the approach most reporters take because we want to personalize our stories and make them appealing to the average reader. It's an anecdotal approach to news coverage that makes for interesting reading, but it has flaws, as Keegan and West note.

Keegan and West take a different approach, looking at the Big Picture, with what they present as solid, statistical (what else would you expect from two MBAs?) proof that the U.S. is not in a recession; that our unemployment rate is half that of most European powerhouses like Germany and France; that the Bush Administration's tax cuts have actually increased tax revenue; that NAFTA, enacted in the Clinton Administration is a success, not a failure, improving the lot of workers in the U.S., Canada and Mexico; that sky-high U.S. gasoline prices are going to come down (this has already happened in many states) and that China is not about to take our place as the world's biggest economy, despite the anecdotal evidence of Chinese and other "Asian Tiger" products at Wal-Mart, Target and Costco.

"Reality Check" is chock-a-block with graphs and charts and statistics that show that, among other things:

* Rising gas prices are not the result of greedy oil executives and commodity traders; costs are rising because oil companies face bans on domestic drilling in offshore Florida and California and in Alaska which forces them to buy expensive oil from foreign companies and countries. I bet you didn't know that our two biggest foreign sources of oil aren't from the Middle East: They're Canada and Mexico, No. 1 and No. 2.

* The growth of the U.S. economy in the seven years of the Bush Administration is greater -- just the increase -- than the entire economy of China.

* The war in Iraq is not bankrupting the U.S. Defense Department; defense spending, the authors say, is actually lower -- as a percentage of the GDP -- than it was during the Clinton Administration when we were bombing Serbia and conducting daily bombing runs on Saddam Hussein's Iraq.

Each chapter starts out with a nugget of "conventional wisdom," which Keegan and West proceed to demolish. For instance, in Chapter 15, "Sub Prime Simplified," they start out with the conventional wisdom: "The housing situation is a complete disaster and will just continue its downward spiral."

Keegan and West say that, averaging the numbers from the 1940s to 2003, homeownership has been at the 64 percent level for decades. Only in the frenetic boom of 2004 and 2005, during which "creative financing" became the norm in many places -- not West Virginia -- did buyers who stretched their budgets enter the market to buy bigger and more expensive houses to push to homeownership rate in 2005 to an unsustainable 69.2 percent. What's happening now is a correction and some groups -- I did a story the other day about the NAR saying that declining home prices are creating opportunities for buyers priced out of the market -- are saying it's really a good thing.

Chapter 15 jibes with my take on the housing industry, based on my covering it since 1970, and I read it with particular care. I praise the authors for telling it like it is. The 2004-2005 boom, which began to disintegrate in 2006, is a classic bubble. And you know what happens to bubbles.

OK, so Keegan and West are on target on housing and sub prime and "no doc" financing (where a buyer didn't have to substantiate his or her income -- what a crazy idea that is!) and rank stupidites like adjustable rate mortgages. What about the federal government's failure in Louisiana and Mississippi when Hurricane Katrina struck almost exactly three years ago? Keegan and West lay most of the blame at the feet of then Gov. Kathleen Blanco of Louisiana and Mayor Ray Nagin of New Orleans for the miserable response to this Category 5 hurricane.

This is in line with my personal take on the devastation when I visited New Orleans last February and saw first hand the destruction in the 9th Ward and St. Bernard Parish. Most of the people I talked to blamed Blanco and Nagin for the lack of response to Katrina, including the failure to evacuate victims with school buses (Nagin says he didn't have any drivers!) that were ready to go but were never used in New Orleans. Amazingly enough, Nagin was re-elected in 2006.

The authors say the Federal Emergency Management Administration (FEMA) made mistakes, including the failure to have compatible communications systems. They recommend historian's Douglas Brinkley's exhaustive 2006 book about Katrina, "The Great Deluge" for telling the truth about Katrina. They say Brinkley is the son of newscaster David Brinkley; that's not correct; Alan Brinkley, a professor of history at Columbia University, is the son of David Brinkley (1920-2003).

Despite the lack of an index -- why do publishers of nonfiction books persist in omitting indexes? -- I recommend "Reality Check" to those who are confused by today's 24-7 news culture. You may or may not agree with Keegan and West, but their book is worth reading.

Authors' web site: www.realitycheck-us.com

Publisher's web site: www.regnery.com

=================================================

Please send your comments and book reviews to GreenwichRoundup@gmail.com