Today I want to talk about one of the greatest films of all time, Chinatown. It stars Jack Nicholson as J. J. Gettes, a a private investigator, and Faye Dunaway, an eccentric beauty, and John Houston is the incomparably evil Noah Cross, Chinatown was incredible and yes you should watch it and listen to it, but I am interested in the man behind the story and his powerful lesson waiting to be learnt. In the movie Hollis Mulray was one of the men loosely based on the real-life William Mulholland. Willie M as we shall call him, he won’t object because he died in 1935, was an Irishman who became a self-taught civil engineer and was probably responsible for the growth of Los Angles more than any other individual. A brilliant visionary, he realized that water was a problem being on the edge of a desert. Before there was even a water department, he managed to corral some big wigs and their financing, and he brought water to the valley as they say in the movie. He went to the bottom of the California Sierra mountains and managed to broker the water from the Owens Valley and send the water to the city of Los Angeles via the Los Angeles Aqueduct. This project was so complex that many people compared it to the Panama Canal. Now long before LA turned into the drug infested shit heap that it is today, Los Angeles was the city of Angels. The weather, the sunshine, the farming, the produce, the ocean, and eventually the Laker girls. It truly had it all, but back in Willie M’s day it needed water, water to grow, and he brought the water and the advertisement real estate flyers of orange groves and Malibu beaches did the rest. On the day when the water from the Owens River hit the reservoir in the San Fernando valley, Willie M uttered these words, “There it is. Take it.” Those happened to be the same five words that Bill Clinton uttered to Monica Lewinsky in the oval office but that is a story for another day.
This stealing of the water didn’t go over well with some of the locals especially in the Owens River country as the Owens Lake has pretty much run dry. It now has barely enough to be a bird sanctuary. Lying down below Mt. Whitney, the lake gathers salt as the Owens river is diverted to LA now. Last year when we talked about Tulare Lake, it was the same thing. Man interfering into the environment but getting the environment to do things that were almost impossible to imagine for the sake of commerce. Los Angeles grew into the huge city it is now because of Willie M. In the twenty years from 1890 to 1910 the city’s population grew by 6 times. He was popular, and his aqueduct was popular and this might of even been a good thing. It was for more people I suppose as though the Owens River folks got screwed the city of Los Angeles made the best and highest use of the water which I believe is the legal definition determining who ultimately gets the water. It was popular I repeat, and it made Willie Mulholland a hero to the city. Commerce had won out over maintaining the beautiful Owens River and had artificially inflated the fortunes of a city that would be famous for its artificial inflations for decades.
His offices were atop Sig Grauman’s Million Dollar Theater giving him a view of his empire that he built. He was so popular that he was asked if he was going to run for mayor. His response was something I am proud to share here in CTPC, “I’d rather give birth to a porcupine, backwards.” Now I didn’t ask if he was referring to himself or the porcupine being backward, but the man could spin a good piece of media copy. This was in 1914.
8 years before he had become the first American engineer to use hydraulic sluicing to build the Silver Lake Reservoir in 1906. You can think of this as using water to float rocklike material and then sediment to have the big stuff fill and the fine stuff fill in the cracks of the newly formed core of the dam. This new method attracted attention and was even copied in building the Panama Canal of which Wille M. was a consultant. In 1913, Willie M. was also a consultant on the Calaveras Reservoir project for the Spring Valley Water Company (SVWC) up near San Francisco. The San Francisco City Engineer Michael O’Shaughnessy wrote about Willie M. and F.C. Hermann, chief engineer for the SVWC “so intensely conceited that they imagine all they might do should be immune from criticism.” I gather that dam engineers were the equivalent of damn central bankers today. O’Shaughnessy thought their work sloppy and reckless and in 1918 the Calaveras Dam suffered a partial collapse although no water was released. Despite this, a year later he would be asked if he wanted to be mayor.
In the movie Chinatown Willis Mulray was the water superintendent that had given the city the water department which he had privately owned with Noah Cross. Now giving the water to the city when his company kind of owned it made him the most charitable man since big Ernie McCracken. This was based on the fact that Willie M. and future mayor Frederick Eaton worked together for the private Los Angeles Water Company. When Eaton became mayor, the private became public and both became more powerful. Chinatown is all about power as Noah Cross is the old rich powerful man that is the overbearing father of a woman that hires a private investigator J.J Gettes. A film noir classic, it tells a wonderfully entertaining fictional version of our Willie M.
In real life Willie M, didn’t need to be mayor as he had access to the office. He focused on water and water led him everywhere. As we mentioned he was in demand as a consultant from the Panama Canal to the Bay and all over California. Meanwhile, Los Angeles wasn’t done growing. It had doubled again, and the town was again starting to need more water and they knew just who to call. William Mulholland set about trying to figure out a way to stay popular. Get more water to the city the people requested, and he complied. He was liking the popularity of being the man that could change the world.
First, he built a new concrete dam which he humbly named the Mulholland Dam and then a year later set out to create another named the St. Francis Dam. The St Francis Dam was a concrete gravity dam constructed between 1924 and 1926 in San Francisquito Canyon in northern Los Angeles County.
Now part of this story often goes untold in that the Owens River group was pissed off. Now Willie M. had had enough of the Owens Valley boys. After taking their water and watching their trees dry up and die, he said, he “half-regretted the demise of so many of the valley’s orchard trees, because now there were no longer enough trees to hang all the troublemakers who live there.” Their land was parched so they took to dynamiting parts of the Aqueduct during the 1920s. Isn’t this great fodder for a movie? That made Los Angeles realize that they needed a serious store of water should the aqueduct be out of commission for any amount of time aka reservoirs. Sure enough on May 27, 1927, a large section was dynamited on the aqueduct and the city called on the water stored in the St Francis dam which was almost full at the time. The water from the dam was released down to the city and it fulfilled the purpose as intended. The city rejoiced and praise was again bestowed on the water king. Over the next winter the dam was filled to within 3 inches of its top and although a few cracks appeared and some leakage these were determined to be setline of the structure and grouted over to reduce seepage. On March 7, the dam was once again within 3 inches of its maximum when Willie M. said no mas and had additional water turned away from the dam. He was out inspecting a new leak but after hours of inspections felt that it wasn’t of sufficient cause for worry and he returned to Los Angeles.
On March 11, just before midnight the dam failed, it actually burst. The pressure was too much to bear. The initial wave was 140 feet tall and roared downhill and showed the power of water. The largest piece of the dam was 10,000 tons and found ¾ of a mile downstream. 5 minutes after it burst the wave was 120 feet tall and had traveled one and a half miles. An hour later the wave was 55 feet tall at 5:30 the wave was almost 2 miles wide and traveling at 6 mph emptying into the Pacific Ocean 54 miles downstream. What was left was what has been called the worst civil engineering disaster of the 20th century killing 431 people.
The man despite his arrogance, conceit, and power-hungry nature had helped thousands for decades. He brought water to a city and built America’s second largest city out of a desert. He had tried to help people, the water-needing citizens of his city, for decades. He tried to help but in one fatal night, his legacy was ruined. What followed was investigations and for that our Willie M. was no longer the arrogant but the man of character as I have rarely seen anyone take such ownership of failure. He was quoted as saying about the investigation, “this inquest is very painful for me to have to attend but it is the occasion of what is painful. The only ones I envy about this whole thing are the ones who are dead.” He also was quoted as saying “Whether it is good or bad, don’t blame anyone else, you just fasten it on me. If there was an error in human judgment, I was the human, I won’t try to fasten it on anyone else.”
The nobility he showed was admirable, but it didn’t restore the damage. Reports are that Mulholland lived out his days in seclusion devasted by the tragedy, and he died in 1935. The man who tried to help, was rewarded with popularity and admiration for helping, ultimately was the cause of tragedy. What can we learn from the life of such a man?
The movie itself carried a similar theme- the main character J.J. Gettes was trying to keep someone from getting hurt and by helping he made sure she did. Mulholland built the dam, and by doing so, owned the consequences of that fateful night. In today’s financial parlance, Mulholland is the Federal Reserve, and this is why our founding fathers had no such plans for interference. Commerce built that dam, businesses built that dam, job built that dam. It was the greed that ruined the Ownes River Valley that built that dam. Mulholland was just trying to appease the people and he did well until the end. This is why Andrew Jackson dissolved the national bank in the 1830s. It is why we need no such interference into the economy. We have built structures with poor foundations that are ready to explode. The Federal Reserve buying bonds and quantitative easing and lowering interest rates is just filling the reservoir. The help is the problem. When the dam bursts, the devastation will be similar to the St Francis dam. Far away from the scene of the failure will be destruction. Mulholland had good intentions and I think that the Federal Reserve does too. However, I see the artificial creations of reservoirs being built to appeal to the popularity of the citizens. They like Los Angeles, they want to call it home, just as today’s investors love their portfolio’s returns and the equity in their home and the Fed is being popular and allowing it to continue far longer than it should have. Los Angeles should have been out of water long ago and the reservoirs would never have been built but the show must go on and the city must be built, and the stock market must go on as well. America’s wealth is the stock market.
Two weeks ago the market faces a shock and the bond market rallied as 10 year yields fell to 3.79%, almost 50 basis points in a week. The Japanese Yen rallied from 162 to 143 in three weeks. Investors around the world feared the Japanese carry trade was over, but then it wasn’t and the stock market which had sold off over 10% had now bounced back to even or even higher than when the sell off began. There is only one problem. The Yen bounced to 149 is back at 145, bonds which had sold off with yields almost hitting 4% are right back to the lows of two weeks ago at 3.81%. The only thing that is still standing is the stock market which never sells off as it is 10% of the bottoms. Last fall when the market was floundering, and Janet Yellen said I will buy more treasuries at the front end of the curve the Nasdaq market rallied from 12,700 to 15,000. This helped keep the long end of the curve down where the bond vigilantes might come and wreck the little narrative. At 15,000 and the market priced in 7 treasury cuts and the market received none of them from Jerome Powell the market rallied to 18,000. The market is now assuming certainty that the Fed will start cutting in September. Remember, William Willie M. Mulholland. You don’t want them to help because when they do, that is when the destruction happens. Everyone that lived downstream assumed nothing bad could happen, it wasn’t even a consideration. Welcome to pensions, endowments, and 401k investments in the largest bubble market ever blown in the history of finance.
Sincerely Yours,
C Thomas Printer
On this date in history… 37 years ago to be exact Dirty Dancing came out and became a huge hit. The sequel is being made with Jerome Powell playing the Patrick Swayze part and Jennifer Grey being played by Janet Yellen. It shall be called Really Dirty Dancing.
Also born on this date … Two men who are on the short list of greatest athletes ever: Usain Bolt and Wilt Chamberlain.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.