Wednesday, December 12, 2007
- CIA recordings: the CIA was apparently caught red-handed destroying evidence. it may become the agency's worst PR disaster ever.
- Iran nukes: after persecuting Iran and badmounthing them for years, we admit they're not all that dangerous after all.
- A federal sentencing body reduced sentences for almost 20k imprisioned crack offenders. it makes one ask whether the political arena will look to ending the moronic persecution of non-violent criminals. this is positive and could help dismantle the dominance of the old stodgy white-guy cultural norms.
- other notable events: Led Zeppelin performs with Jason Bonham on drums and may return as a band.
- the Fed seems to be in disarray: badly divided and incapable of expressing intentions.
- finally, Russia may have moved into the huey long phase, where putin runs things from afar through his lackey.
the first 3 events are the most important. all of them will hurt one man. he is white, american, middle-class and educated. he believes in fighting for america, fighting crime, fighting drugs, etc. he fits in with rush limbaugh and is generally patriotic. he is rudy guiliani, george bush, pat robertson, dick cheney... he is your typical CIA agent or police officer.
this character -- the stodgy, uptight white guy -- is loosing power in society. now he's been caught destroying evidence and misreading what was happening in Iran. some panel smacked him down by validating the arguments of black activists who have long complained about the sentencing laws. I have little sympathy for this obnoxious, self-serving white guy. he's the one who was ok with busting kids for drug offences, forcing them to be in prisons for years, virtually guaranteeing lives of crime and misery. he was the one who was happy to collect the pension and enjoy the benefits as a corrections officer, cop, or DEA agent etc.
he is also the one who drives massive SUVs and doesn;t give a sh1t about the environment. he's the one who sells corn-syrup laden factory-food to obese children and thinks it's just a job. he enjoys freedom only because better men came before him and cares little for justice or truth.
this kind of mediocre character has long existed, but only recently has he taken over the entire system. even under nixon, there was an attitude of trying to make the world a better place. nixon did, for example, affirmative action and a lot of environmental stuff. while I don't agree with these actions, they do reflect that the mechanism of government was at least looking to help ordinary people.
that was in the wake of LBJ and FDR. now, the intellectual legacy is a few reaganistic things like tax cuts, deregulation and patriotic references. the swagger worked in the 1980s; Russia was broke and needed to talk to the US. reagan knew he could force change on them, so was tough with them. on the other hand, bush picks fights with countries like Iran on false pretenses, only to back down... does Bush have any idea how bad that makes him and the US look?
what will the people of Africa and South America think of us?
do we appear sane and rational?
can they trust us? -- already we have betrayed Latin American countries in negotiations.
what happens when they don't need us? more importantly, will it make them seek to do business elsewhere?
will we drive latin america and parts of africa to china, russia, india and the arab world?
will the world continue to trust their financial security in our currency?
no matter which way we go, some very difficult times could lay ahead. the US is going to have to learn it's messed up and start trying to fix it. that will probably take 1-2 decades...
Monday, November 19, 2007
I often think of how the american century is unwinding before our eyes. the legitimacy of the US is questioned because of iraq and our incompetence handling basic domestic issues like katrina and home lending. our authority is dying along with the international institutions we built to excercise our influence: the world bank and imf. meanwhile, we're starting to accept european accounting standards, and we're exporting financial volatility -- less than 10 years after financial crisis in asia shook our markets.
it may seem impressive how fast the decline has occured, and how quickly the chinese have risen. but both developments were in the works for decades.
now we're approaching a series of events:
1-a possible recession in the US, but not the rest of the world. this probably hasn't happened in over a century. it would be a clear indication the US is no longer the global leader.
2-olympics in beijing: china clearly will use this as an occasion to enhance their position as a "big guy" in the world. they will increasingly position themselves as arbiters and players in big situations previously dominated by the US or other powers.
3-revaluation of the yuan. this could be the most important thing of all. ranking by purchasing power parity, the US accounts for about 20% of global GDP. china is 17-20%, depending on whose numbers you use. when china revalues, they will send a surge of money into OTHER countries.
the presence of the chinese consumer has yet to be felt in the world, where the american consumer has been dominant for decades.
the american consumer as driven the trade deficit wider as companies looked overseas for cheaper production. this has resulted in a gradual transfer of global GDP from the US to the rest of the world.
but now our trade deficit is actually shrinking.. we're becoming less of an importer. china could go from being a huge exporter to a big importer very soon. all they have to do is revalue.
this means china has the ability to quickly diplace the US as the market that drives the global economy. once they revalue and import more, they can step up and replace us as the dominant voice in the world.
for a long time, I wondered why they were so dense, and allowing their economy to overheat. but know I understand:
they know the inflation isn't bad enough to cause real problems yet. they have the olympics ahead of them... these chinese communists have played us very well diplomatically and politically. we have built them into being our equals, and now they plan to surpass us. we can be sure they will revalue in a manner that does the most to enhance their power. waiting for the US to enter recession, and then using their buying power to save the world economy would make a lot of sense. they have done everything right so far. why not expect the same this time?
the big story in coming years will be american decline. monuments will collapse, and crush victims under them... a moment of huge global change is at work right now. a shift is happening now on a metaphysical, hegelian level. it deserves reflection and respect. for next several decades, a new kind of world will emerge. there is no going back to good ol' america like we did in the 1980s -- when oil was cheap and our moral authority clear... when interest rates were falling and productivity surging...
now there is another player our size, plus others like russia, india and brazil. our supremacy is only just beginning to crumble.
for the first time in perhaps centuries, america is no longer in the ascent. I do not yet know what this means, but have to think it won't be good for our society and culture. we should look to the UK for some indications of what happened in the 1950s and 1960s as their empire disappeared.
Thursday, November 15, 2007
some parts from Gretchen Morgenson's story in NYT:
Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize. ...
Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”
here's what worries me:
these trusts all use the same language and concepts, essentially. wall st firms churn these things out like sausages. if there are problems with one or two, there are almost certainly problems with plenty of others. something like this is like seeing a roach. there's never only one. the mortgage industry has been doing business as usual for a long time.
I then spoke to a high ranking industry insider with a background in securitization. he said everyone in his office was very worried about the case. and, he assured that it was just "a few cases." just a couple of bad-apple loans that weren't recorded right. it sounded to me like the self-delusional statements of people having a nightcap on the titanic.
however, the article made it sound like in none of the cases in question had the banks obtained the physical notes before filing foreclosure. one wonders if they might not simply find a way to obtain them first to clean this whole matter up.
one way or the other, given the size of the securitization movement, if this does goes to the worst scenario it would be a catastrophic for the entire dollar-based fixed income market.
on more thing worth remembering is that lawyers are going to start going after the financial industry. an important risk-management expert just told me that, and it makes sense. the asbestos, tobacco etc wells have run dry. they will now attack wall street, asset managers, etc. that also means that all the legal genius that prevailed in other cases will now be used to unwind mortgages and everything else. that will be another headwind for financials.
Tuesday, November 13, 2007
some may say the problem is racism in the police ... even tho that probably has some lines of truth, it's the real cause of the problem. the real issue is that multiple police officers emptied entire magazines into another human being. while they might technically be able to justify it with fear of what he was carrying, going 100% to the max isn't necessarily right either.
I think the worst thing about these situations, like the other one in the bronx a few months ago, is that multiple cops fired vast amounts of rounds. where's the need for these kinds of extremes.
I fear it is natural once they start shooting. that's why we need to introduce scale into the use of force.
I propose that all patrol cars carry some kind of nonlethal weapon such as rubber bullets etc and that one of the 2 officers must use that weapon, while the other uses the pistol.
the nonlethal weapon would be fired first. if it doesn't work, he dies.
this way, the suspect can still be killed if needed. but the nonlethal device, such as a taser, or beanbags in a shotgun... will neutralize the perceived danger.
it just seems that the first shot fired shouldn't be a lethal one. the cost is too high, and error too possible.
Wednesday, November 7, 2007
rose's guests were richard armitage and joseph nye and smiley have lawrence wright, whose book about american operations in afghanistan seem to have a pulitzer. the overall impression I got from everything was that american agency is in shambles. here I mean agency in the most abstract sense of action. armitage mentioned how foriegners now actively question american competence. wright mentioned how the FBI has refused to hire arab americans, even after they complete military service, rejecting them as security threats.
my impression has always been the federal govt is like a swaggering marine corps sgt who needs to take charge of a situation in which he knows little. but, as a marine corps sgt, he must command authority from the start. so you begin with a combative, self-righteous sense of confidence. think of how ike coldly dissed churchill's wishes for an attack through the balkans. look how FDR forced the brits to drain their reserves, knowing it would leave them incapable of keeping their empire after the war.
while these actions might have been the right things to do, they were discharged with a stiff and obnoxious air that permeates everything the federal government does. just entering the federal building in lower manhattan is like entering some kind of hell built in the 1960s. it just feels like such a miserable, slow place where few people reach anything near their potential as human beings. I have a vision of federal employees setting up camps across california during the depression, battling segregation in the 1960s, defeating hitler, spreading wealth and health around the world.
these endeavors were all so full of goodness that you didn't have to be nice, or particularly great, to be heroic. but there was always ugly side. after all, the fedgovt has failed in every social mission from the very first -- taking care of the american indians.
in fact, the govt probably reached a peak of effectiveness sometime in the 1950s or 1960s in the wake of WWII, when a clear sense of mission shaped the country. but since then it has been downhill. the 1960s are interesting because you have tremendous failure at the macro level with a badly understood conflict. but on the ground it was a marvelously run war in which we achieved continuous victories.
the federal govt's managment of the country is the same way. now more than ever, the nature of our society should be clear: we live in an country full of artificial and sprawling communities that are terribly inefficient and unhealthy. people face long commutes, constant traffic and unnecessarily high basic living costs such as car insurance and gasoline. there is a reason for this: in the 1930s, when oil was practically free and housing was crushed by vicious deflation.
the logical response was keynes's: spend as much as possible. so, we fed europe and encouraged a form of economic development that required individual citizens to own and finance a complex and expensive array of assets. suburban living created demand for home appliances, cars and all the other consumer products. but it was deliberately wasteful. over time, the spending was increasingly financed with debt. and that's where we stand now.
sitting on top of most of our problems is the fat slug of the govt, just sitting there, causing problems. it is too slow and confused to do anything but sit there, with huge weight crushing down on all bystanders....
now is the time the rest of the world may learn they no longer require our leadership.
Sunday, November 4, 2007
first of all, corporations are people without conscience or morality. their statutes require them solely to seek maximum profit. while there is nothing wrong with this, it's worth noting that it can create moral hazard by encouraging and rewarding very short-term thinking. this is nothing to begrudge. it should be taken for granted that CEOs will seek to commit fraud. the assumption shouldn't be that executives are ethical people driven by a sense of right. after all, the rules governing corporations REQUIRE them to seek maximum profits at the expense of all other considerations. once we know it's the case, why not create another agency to counter that initiative and keep the organization balanced.
secondly, we now exist in a global capital market. over the next few years, we see more and more financial intermediation move to other jurisdictions. as decades of US domination ends, other countries' legal systems and regulations will gain credibility versus our own. before, foriegners had to accept our way of doing things because they had no choice. in the future, they will be able to choose the jurisdiction with the best and most ethical rules. investors will recognize which countries have the best rules and those markets will trade at premiums, which will draw more capital. while sarbanes oxley might be one of the big factors driving issuers away from the US, we need to think holistically about the overall situation and what permits all the misdeeds -- from abuses at RJ Nabisco in the late 1980s to Enron to Merrill Lynch -- renegade senior management teams that grew increasingly bad the longer they were in power.
thirdly, capitalism is becoming the world's philosphy. we are probably entering a period that will last another 20-30 years in which much of the former underveloped world will rise as market economies and modern financial intermediation spread. especially with chinese leadership and support, capitalism will spread. instead of relying on ineffectual organizations like the UN with governance problems of their own, corporations and business appear some of the best ways to improve human life in the future. other kinds of pressure will emerge from blogs and NGOs. but the vanguard of history will be corporations.
as a result of these considerations, I think the best way to start dealing with the corporate board problem is to create a corps of people to become independent board members. we could recruit a series of professors, community leaders, accountants, policemen, lawyers, military officers, and journalists. each company board of say 12 would have to include 3-6 such independent directors, who would rotate every 1-2 years. these outsiders would be prohibited from recieving compensation from the company or owning its shares, or those of any others (maybe.. not sure about how expansive this should be)
we could come up with a series of qualifications to find the right kinds of outside directors. they would be charged with maximizing the company's long-term success (maybe they could be paid in very long-term stock ownership). their main job would be to guard against the abuses that inevitably arise from any imperial CEO.
another potential offshoot of this idea would be for boards to have staggered compensation packages, that break the directors into factions so they have different kinds of priorities -- some short term profiteering and others long-term sustainability.
but the message from all these experiences are clear: boards work, but can be better. we've had a so-so system for decades. just like now people are demanding higher quality food, more efficient cars and healthier lives, it's time to raise the bar in terms of how companies are run. for our financial system to move on to the next level, we need to boards to fulfill their missions more completely. only by breaking up people's interests can you get them to look at things from multiple points of view.
Thursday, November 1, 2007
I just saw this today in the ny post:
November 1, 2007 -- In an unprecedented verdict, a jury yesterday found a Bronx gangbanger guilty of an "act of terror" for fatally shooting a 10-year-old altar girl outside a christening party.
For the first time, a prosecutor in New York state applied a post-9/11 terrorism statute to a street gang.
Jurors found Edgar Morales, 25, guilty of first-degree manslaughter as a crime of terrorism under the Anti-Terrorism Act of 2001.
As a result, he faces life behind bars when sentenced next month.
Had Morales been convicted of ordinary manslaughter in the first degree for the Aug. 18, 2002, shooting, he would have to serve no more than 25 years.
"They terrorized the community," juror Linnea Daniels said after a monthlong trial and four days of deliberation at Bronx Supreme Court. "They weren't invited to this party. Once you fire shots and the crowd scurries, that is an act of terrorism."
The mother of little Malenny Mendez, who was shot in the head when The St. James Boys street gang opened fire on a group of men they mistakenly thought were rivals, shed tears at the verdict.
Antonia Gutierrez said Morales - who she believes shot her daughter - got what he deserved.
"As far as I'm concerned, he could rot in jail," she said.
Bronx DA Robert Johnson said, "These were callous acts that resulted in the life of an innocent child being snuffed out. The jury's finding of terrorism is significant in determining an appropriate punishment."
Defense lawyer Dino Lombardi said he plans to file post-trial motions and probably an appeal challenging the use of the terror statute.
I have to wonder if I'm not the only one to worry about this. now this law only deals with a real violent crime. but if enforced and accepted over a few years, it will become easier for other laws that target "terrorism." it's just a bit worrisome.
once we lose a literal respect for our laws, everything starts to slip. that's why I worry about things like the spread of gay rights... once they gain traction, the old institutions that opposed them start to die out... mainly white christian religion. other religions that are equally anti-gay remain such as orthodox judaism and islam. the end result is we wind up with a society where christianity is weaker and islam is stronger. that's not good for anyone, including gays.
the truth is that when you look seriously at history and society, there's not much link between people being treated fairly and them being free or living well. the chinese and jews were badly mistreated in late 19th century america and had equal or greater success than priviledged whites. blacks had more stable communities in the 1920s under jim crow than after the civil rights movements. (one reason for this could be that people behave better when they are mistreated up to a certain degree. it makes them humble and appreciative of good things. it also makes them work hard. when you are nice to people for who they naturally are, they can become ornery and too self loving.
anyway, instead of treating the constitution and our republic as religions and dieties to be honored, we think of it as something to follow in rough spirit only. all those technicalities about things like who has jurisdiction where, we just try not to think about. basically, we put our own wishes before those of the Founding Fathers. they loved us and wanted us to have a stable country... these were people like john adams, franklin, madison, washington.
instead slip through one lie after another, claiming the interstate commerce clause allows things like the ADA or endangered species act. we allow the presidentially-supreme court to cite the bill of rights to strike down state laws, even though the bill of rights was designed to protect the states against the national government. we find that the word "coin money" can be extended to printing worthless paper fiat.
these are the kinds of steps we've taken in this country for years. when the constitution doesn't allow something, we won't make the effort to amend it rationally -- we simply ignore it and pretend it means something different. we think women should be able to have abortions, so we pretend the constitution says something it doesn't. we've disregarded the text for so long it means almost nothing now. so what will we turn to when we need the freedoms inherent to a free republic? our years of self-serving intellectual dishonesty have taken the bones out of our champion. states are beholden to the federal government. all power is focused in a poorly run national state that is reaching the final stages of a multi-decade bull market. it has surged in size and power. we're only at the beginning of reckoning with this monster.
anyway, I just saw mike huckabee on charlie rose. he was very interesting and defintiely could have some promise in 2012.
Wednesday, October 24, 2007
an interesting question I must ask is whether the yuan is propping up the US currency? given that every dollar can buy more yuan than it should, it adds value to the dollar. if you hold dollars, you're getting more yuan than you should. the next question is what happens to the dollar globally when china revalues. at some point it has to be coming. they need to raise their rates and are overheating terribly.
(one must wonder whether the yuan makes the dollar like buying EMC or CY to profit from VWM or SPWR. there is unlocked value...)
Monday, October 22, 2007
in this case, however, I do wonder whether they might not be smarter. Former Lehman CFO Brad Hintz tells AP:
Brad Hintz, an analyst with Sanford C. Bernstein, said the pact is more important to Citic in the long run as it evolves into a more global competitor.
"Bear Stearns will get more profit out of their Asian operations," Hintz said. "But, more importantly, over the long term Bear Stearns will end up with a credible competitor who will have learned global finance from Bear Stearns themselves."
it will be facinating to see whether the chinese can replicate american financial capitalism. I think it will be a bumpy road after years of corrupt development at any cost in the absence of a functioning court system or any kind of institutional regularity. even though you couldn't accuse wall street bankers of being hugely moral or honest people, the rules treat people equally and more or less fairly. people need to follow the letter of the law millions of times financing a single transaction. lawyers spend hundreds of hours structuring companies and deals. the primary reason it all works is that people all know beyond question that courts will always enforce certain rules certain ways. in finance, dozens of layers of laws and rules breath life into entire entities. living, breathing, growing entities are built from intangible concepts and constructs. this requires a level of intellectual and ethical integrity.
one must ask whether china's past, including the 5 year plan, tianamin sq and the cultural revolution, has prepared the its people to respect all the layers of rights found in a simple ABS pool.
they will learn over time, and surely will have some success along the way. but I have read books like Mr China and know the stories of the bureaucratic insanity and unfairness. the thing they haven't learned from our country yet is that it's best to treat everyone fairly. China has been exploiting our companies and stealing their technology for years -- at least back into the 1990s. they deliberately and grossly devalue their currency. they spew vast amounts of coal smoke into the air and are ruining massive rivers. everyone knows they are unaccountable and dangerous. in constrast, we are the same country built on the greatness of washington and lincoln. they have grown opportunistically on capitalism from the pits of hell under mao. we know events like WWII and the civil rights movement, in which americans rallied for the betterment of humanity. China's leaders have been enemies of human life and liberty who embrace freedom only when expedient.
as Americans we should be ashamed for such a country to hold sway over us. all so we can have $3 toys at wal-mart, and vast amounts of junk to fill our lives? I am not saying we shouldn't trade with china. but their currency scheme is increasingly insane as the dollar falls. our imports from china are up something like 500% in the last 5-8 years. their growth is so fast and so reckless it will take years and cost trillions to clean up. why must we subsidize a kind of economic development we'd never tolerate in our own country?
(interestingly, europe bears the brunt of China's currency scheme it, but that's another issue... )
china's cheap currency allows its employees and companies to serve 2 markets at once -- their own and the world's. before, it was just the world's. but now as the chinese buy homes and cars, and fill them with appliances powered by government subsidized coal power plants, a second set of demand for their products is growing. since the currency can't appreciate, the products are still cheap internationally. that way they can run their economy on two sets of buyers. (and of course, have plenty of money to subsidize electricity rates because of their huge trade surplus and trillion+ of reserves.
the currency scheme has worked, but their continuation of it now is insane. their economy is already overheating. and, they are growing more confrontational with the rest of the world.
(as an aside: Americans are going to have a very rude surprise after the olympics next year when China tries to claim an EQUAL footing with us on the international stage and other countries listen to them -- and CHOSE them. soon they will have to revalue the yuan. (I imagine the best way to play that is with singapore$ or NZ$, etc. sadly, we are making all of it possible right now. that's one debatably good reason not to buy stuff made in china. )
anyway, my original point in writing this post was that a lot of money will be made in coming years as china spends its billions on US assets like Blackstone. I wonder if Bear will be the same. on one hand, yes. but after reading Hintz's point, it seems like China made a smart investment. if they really can buy the germs of an entire industry in the world's largest market for just $1bln, maybe they're smarter than we think. it will make money for them for a while before it blows up. but that will take a long time.
one way or the other, the era of american domination is starting to fade. we should enjoy it until next summer. the world will be different in coming months. the post WWII world order, in which the USA claimed leadership in terms of freedom and prosperity, is coming to an end.
Sunday, October 21, 2007
but just as out economy has a trade deficit, they have a green gap. the same way our capital account surplus allowed us to finance a trade deficit, china's green deficit allows them to finance a trade account surplus.
china is growing fast because they're holding their currency low AND destroying their environment. they grow without planning or regard for long-term environmental impact. it's time we stop allowing american retailers and people like jack welch to enable chinese companies to destroy the environment. their pollution and ecological damage have much longer-term costs that they're not including. there's not much we as americans can do about that, but we can control our own companies.
so, we should tax companies by their carbon consumption. we need companies to audit their supply chains as part of their normal tax process. and then they should pay a certain tax, of so many dollars per ton of carbon, etc. this way, even if they buy from other manufacturers it would be covered.
Saturday, October 20, 2007
this way, states can make choices and do things like recruit young people.
they get more money as rewards for being first to cut.
the most important thing in health care is rising care costs. those are set by local forces such as liability, insurance, etc. state govt's would have best way to drive down costs if they were rewarded for it.
Sunday, October 14, 2007
doc offices: 2.2mln
outpatient ctrs: 500k
home healthcare: 934k
nursing, resid care: 3mln
nursing care facil: 1.6mln
social assistance: 2.4mln
child day care services: 800k
there are about 33 million people over the age of 64, supported by about 3 million workers in nursing homes and almost a million in home health care.
there are now at least 50 million american children between the ages of 1-16, and about 80 million in the baby boom generation, now aged 42-62. currently, we have about 3 million workers in nursing homes and another million in home health care.
nursing home prices have been about consistent with overall price increases for healthcare costs overall, climbing about 34% since 2000. prices for everythign in the economy are up about 19% over the same period.
most important for healthcare costs overall, hospital-related costs have spiked higher:
Medical care ...........................................................................
Medical care commodities
Nonprescription drugs and medical supplies 1 7
Internal and respiratory over-the-counter drugs 1
Nonprescription medical equipment and supplies 1
Medical care services
Physicians’ services 5
Dental services 5
Eyeglasses and eye care 1 7
Services by other medical professionals 5 7
Hospital and related services 5
Hospital services 5 12
Inpatient hospital services 2 5 12
Outpatient hospital services 1 2 5 7
Nursing homes and adult daycare 5 12
the next question is how can we use the pool of child and teenage labor to alleviate some of this cost?
for info on individual jobs in the economy, like nurses, see http://www.bls.gov/oes/oes_dl.htm and ftp://ftp.bls.gov/pub/special.requests/oes/oesm06nat.zip
Wednesday, October 10, 2007
there are roughly 60mln americans now aged 7-22,
versus about 80mln people aged 42-62
and 40mln aged 7-16
there are probably another 12-15mln under the age of 7
next we need to find how many people in the USA work in healthcare:
there about 13mln people in healthcare:
ambulatory facils 5.5mln
doc offices: 2.2mln
outpatient ctrs: 500k
home healthcare: 934k
nursing, resid care: 3mln
nursing care facil: 1.6mln
social assistance: 2.4mln
child day care services: 800k
overall, it seems there is plenty of opportunity for young people to participate. one would imagine nursing homes and home care will have the largest growth in coming years.
Friday, September 21, 2007
Canadians are expressing pride in their economy but might be more inclined to go on shopping sprees in the U.S. after the Canadian dollar reached parity with the U.S. dollar for the first time since 1976.
with the dollar falling and gold and oil rallying, I think we may have begun a long awaited selloff in the dollar that will render all of us poorer by 33-50% in the next year or two. I have no scientific way of setting that amount, but there is a huge amount of dollar negativity brewing around the world. now that it's thru a certain level, no one will step in as a buyer for a while. that's the way trends happen. today was just a dawning of that.
I think EM and other intl stocks will go nuts in coming months in one finally bubble-mentality rush towards the beijing olympics.
it's just worth noting that history is being made. for the first time in over 150 years, america is no longer in a positive uptrend. we're clearly at the end of a long run of greatness, and the currency decline will cause a broad longer term malaise of high prices, high rates and low growth. however, there will be strong demand from overseas. after running a huge deficit in consumer products, we'll now be serving more foreigners as tourists and visitors. one has to wonder what kind of humbling impact that will have on our country and our younger people. will we be like the brits in the 1960s, the post imperial generation?
anyway, history is being made. when you consider the pathetic weakess of the dem presidential debate, completely lacking in any new ideas. no, america needs to find its way again. it's not going to be pleasant.
we're clearly entering a new phase where the
Wednesday, September 19, 2007
in the process, the new story globally becomes "look how messed up the USA is." our primacy in the world allowed us to remain the benchmark for global ratesfor a long time. those days seem to be finally closing. when china revalues the yuan AND holds theolympics, our country is certain to lose luster. throwin what could be a very uninspiring presidential election, with washington continuing with business asusual, and there's really nothing to be positiveabout. -- except that the fed just cut rate. that really is the only thing going for this market right now. at the end of it all, the USA is going to weaken as a credit. we have a lot of unfixed problems from the last 70 years. is it just time in the cycle for us to be brazil for a decade or two?
Tuesday, September 18, 2007
WASHINGTON, Sept 17 (Reuters) - The U.S. Department of Justice, which has been overseeing an antitrust settlement with Microsoft for five years, said on Monday it was "concerned" about a European court's decision to uphold an antitrust ruling against Microsoft (MSFT.O: Quote, Profile, Research).
it's merely one more example of how the US govt bombards the world with little messages saying "we don't approve of this.. or that." such urgings have fallen on deaf ears in places like caracas, literally placing our heads on the chopping block for chavez to disregard us, showing others it's possible and even ok to differ with the USA. now you have europe following decisions that don;t only threaten to limit the market shares of major companies like aapl. monday's decision was an outright rejection of american philosophy and authority. europe has chosen its own path for this issue and doesn't really care what we think.
it also makes me think of how US investors have shied away from US stocks ever since the dot-com bust in 2001... in 1-2 years as the subprime bomb goes off, what will overseas investors say about USD assets? I think the whole notion US assets are safe is going to deteriorate.
Friday, September 7, 2007
to start, one solution to many problems, ranging from health care to college education, is to create an organization that gets young people to care for the elderly, in return for the government paying their education IF they study medicine. this will also help counter the effects in our culture of video games and other activities that isolate youth from adults. the current youth culture seems full of problems culturally and healthwise. there seems to be a new generation that's more communal and uninterested in the same institutions that have served us for decades. most of our institutions like social security, health insurance, federal student aid etc trace their origins to the 1930-1960 period. its time for new solutions.
for the first time perhaps ever, our problem is not a lack of overall wealth. even the poor in this country have more than they ever would have imagined even 50 years ago.
our problem is the way we organize the work for millions of people, and the way we deal with our needs. our system grew incrementally over decades. like the NYC subway, it was built over stages to deal with individual problems. it's remarkable how well it still works, considering how poorly it's planned on a macro level.
it seems to my less than fully informed eyes that health care's problem is that costs are paid by a separate party, preventing any kind of market forces from operating. instead of individuals making decisions and accepting prices, someone else makes it INCREMENTALLY free. in other words, each greater bit of service you consume doesn't cost you anything extra (yes there are co-pays, but they cover such a smart part of the overall cost...) people don't make decisions based on price. instead, the HMOs try to connive and bully doctors into cutting costs. instead of dealing with a sick person, they employ an army of clerks to deal with the insurance companies. they're not encouraged to behave like retailers, which do the best job serving people's needs.
as a result, the patient never knows that the doctor is charging $150 for a 15 minute visit. if he/she were to learn this, he might call the doctor a theif, until he learns the doctor must pay $80,000 a year in liability insurance. if the patient/vote were to feel the pain of this cost personally, it would hurt everyone enough so that politicians would quickly limit medical malpractice suits. but since we outsource the responsibility to a company that everyone hates and shouldn't even exist in the first place.
normally when a transaction is made, one person bears the cost and is fully aware of the pieces of the deal. if I buy a car, my money is being used to deal with somehting I need done. I alone know how much money I have and how important it is that I have a vehicle. I know whether I own a garage, whether I like the car, etc. all of the knowledge and money behind the decision is united in one conciousness. this is the way most decisions are made in the world.
our current healthcare situation, however, divides the decision making into peices. the cost is decided in a negotiation by a massive company by some complex method I won't even pretend know anything about. but the decision itself of the cost (will you as a consumer surrender x amount of your resources for a service?) is not made by the person consuming/needing the service. since it's officially free to them, they have no incentive to make sure the costs are resonable. the decisions about cost are also made by all of the employers who chose health care providers (along with 401ks, which is totally unjust). somewhere executives of giant companies hold sheets with hundreds of thousands of employees being maintained as if they were machines or the electric bill. it just becomes one more cost. again, the decision is made nowhere near the consumer, or by anyone remotely intimate with his situation.
health care is a noncyclical core service in the economy. other providers of necessities like food and clothing have been profitable businesses forever. for decades, we've managed to shop and make the decisions about most of the things in our lives by spending our money the way we chose. it's time to move healthcare into that sphere of activity. imagine if we had food insurance that would pay for our groceries ... after a co-pay of course .. imagine only being able to shop at in-network groceries ... the insanity of it is clear. but why, essentially, should health care work that way? the truth is that HMOs arise from a few tax decisions made by congress in the 1940s and 1970s. it all started during WWII and companies asked for permission to pay their employees health costs as a way to give them more compensation without giving them actual raises, which weren't allowed under the price and wage controls. it's a good example of how we're still living under the shadow of the new deal. so many institutions date to that time and are so obsolete. finally, I think HMOs make doctors less compassionate because it allows them to not be responsible for the cost of service. in essence, the HMO system looks a lot like life with a ration card in the USSR.
the solution doesn't involve more money. a good solution will solve many problems so that many people want it to happen.
one possible solution is to use this problem, healthcare, to solve another problem, youth culture. between video games and hip hop, it has grown terribly self-centered and belligerent. but there also seems to be a new kind of awareness of the need to solve problems. volunteerism is supposedly on the rise for many kids, according to cokie roberts and william frist on charlie rose... why not create a program for kids of 14-20 to care for the growing elderly population. part of it should be mandatory, like the draft. it should be added to school graduation requirements, like in jesuit schools. if they want to continue after high school, they should get paid at the low levels typical of the military, but will then have their college education provided if they stay in medicine.
this will solve one of the big disincentives for people becoming doctors: the fear of borrowing $100k-300k at the start of their careers. it will also give our kids a sense of community and service. the same way the draft brought together a nation with the colorful diversity of the proverbial WWII movie. the draft has been gone for more than 30 years now. young people have no uniting institutions. a call to service could do a lot of good. plus, it would allow them to learn from the baby boomers and make friends. some of them could become archivists, historians and writers about the baby boom generation.
how much help they could offer I do not know. but it is something worth exploring further. I will try to find the #s for healthcare workers and teenagers.. I imagine there are probably far more teenagers than health care workers.
secondly, they could create a system where medical offices have peple who arent doctors. one person could be trained merely to deal with knees, or sinus problems, etc. they could just study that one thing and treat those individual problems. they could then be overseen by a doctor who would review the info on all the cases in real time.
these people could also use flow charts, like the health care flow charts for doing STD interviews in africa.
Wednesday, August 15, 2007
-there is more wealth concentration
-there was lots of unregulated use of leverage
-there is a blowup that has hurt the real estate values of the average american... in the 1930s, mortgage debt and deflation crushed farmers. is something simliar going to happen now, or will the fed allow inflation to soften the blow before a subsequent collapse of the dollar?
-there could be a developing xenophobia with mexican immigration, toxic chinese imports and islamic terrorism.
-we may also have a fed not willing to cut rates quickly, which could mash asset values for a little while.
this environment, where lots of people dont feel as if they are growing richer, seems ripe for a political attack on the hedge funds. they took the people's money in the form of public pension funds etc and levered it up using the people's money. much trust was placed in them, and they used it to get spectacularly rich by riding a ponzi scheme where assets only held their value because no one tried to sell them.
the end result was a bubble in housing that now has hurt ordinary people and roiled the stock market. it's time for regulation. they simply cannot be allowed to exert influence like that over our banks and rating agencies.
my other observations relate to china. these defects are causing an historic moment that could transform the society. they can either find a way to put aside the traditional deferential culture, where a subordinate would never challenge a senior engineer with "this bridge will fall down"... instead the Tuojiang River Bridge in Fenghuang collapses and kills more than 20.
add in lead contamination, sick pigs at home and bad seafood abroad. suddenly the chinese state is facing a problem of public opinion unique in its history. just 40 years ago, it could starve millions in the great leap forward, but now has to apologize for killing a few dogs and cats in the US? the eyes of the world are focusing on them. can they actually pull off this new great leap forward?
this also raises the question of when this chinese stock runup will end. perhaps we have the last leg of an elliot wave, meaning the big move has happened, but another surge higher remains.
but after that, you have to wonder how much more staying power this rally has. I think development will continue in china, but not at such a pace. there will be a correction heading into the olympics, or after... one also has to wonder if beijing is above propping up its own stock market. after all, with the yuan still relatively undervalued, what could be better than selling dollars now? it makes me think chinese stocks have one more move up. the state has to be feeling a little scared right now, but at a certain point the liquidity conditions should permit another blast higher. after that I think they will let the yuan move higher and then they will accept something of a slow down. it's foolish because it would have been better to slow exports earlier to free up capacity for all the building.
but after that, I wonder if much of the global stock market rally won't be over for a while, though healthcare and some tech, industrials and utilities should continue to gain.
the other thing I noticed and havent had time to study, but must weigh in on is this from nyt:
WASHINGTON, Aug. 15 — The Bush administration, struggling to find a way to keep Gen. Pervez Musharraf in power amid a deepening political crisis in Pakistan, is quietly prodding him to share authority with a longtime rival as a way of broadening his base, according to American and Pakistani officials.
all I know is it could cripple him and create a conflict where neither of them have control. then if the taliban-like guys take over there, now there could be a nuclear state sensing a religious axe to grind with india. suddenly this whole EM story is over.
still, these things are far enough off, for now. it should be months before things really get bad. I think there will be a bounce and another rally higher... but I fear that afterwards, people will realize how far markets like china have moved and there will be a pause for a year or two before EM takes off again. I think global growth is a real story. but the markets can't just keep blasting higher the whole way through...
of course, the other possibility is that this IS the end of the rally. we've seen our top for now. not many think that now. but one has to wonder about it. I get nervous when everyone expects one thing.