Essence of Wisdom

All Financial Crisis End!

2008-12-01T00:30:00.003-05:00

Just about a week ago on November 20th the S&P 500 Index closed at 752 down 22% for the month, but in just five days in yet another sign of these days extreme volatility the index rallied 19% from the lows to close at 896 down 7% (vs. 22%) for the month. A five day rally that the market hadn’t seen since 1933 in yet another eerie (but no where close) comparison with that time frame.

The extreme volatility as reflected by the VIX index which reached the intraday and historic high of 89 on November 20th and then has fallen to 55 could be attributed to two broad factors. First being the uncertainty with economic slowdown and its effects on corporate earnings, and secondly the continuing tangential effects of having several bubbles bursting at the same time. Whenever a bubble is created just as the moves that push prices above the real intrinsic value or as statisticians like to refer to as the mean average returns are extremes and irrational -- so are the moves down when the bubble eventually bursts.

One of the after effects of the heavy and at time indiscriminate selling has been that pretty much all asset classes except for cash and Treasury bonds have lost value so far this year. Be it precious metals which used to be a safe haven during market downturns, of course real estate, commodities, and needless to say pretty much all sectors and styles of equity and fixed income investments.

That said with a market that has been down from its peak last year to its trough last week 51% --and year to date is down 39% it does seem as that if not there yet now, at least with each passing day the capitulation and/or despair stage is nearing, a hallmark sign of a market bottom. Worth noting that of the 8 bear markets for the S&P 500 since 1960 (i.e., a peak to trough drop of at least 20%), the average length of time from the index's bull market closing high to its bear market closing low has been 13 ½ months. The index's most recent bull market closing high (set on 10/09/07) occurred 14 months ago (source: BTN Research).

Since many in the general media attributed the first day of the sharp 19% rally that we just had to the selection of President-elect Obama’s economic team it is only befitting to share the viewpoints of one of his top economic advisor’s Larry Summers. In a speech on October 28th Summers suggested that since markets tend to ‘overreact’ policy makers need to do the same, as it’s a lot easier to correct the errors of overreaction than the errors of underreaction.

Clearly given the lessons of previous financial crisis especially the 1929 Great Depression the odds of policy makers repeating the ‘same’ mistakes is low and thus should be encouraging for long term investors (not necessarily short-term traders that trade only long positions). This past week we had the Treasury department and the Federal Reserve (more than likely with coordination and approval with the coming administration) make two major announcements.

First the Treasury stepped in to inject $40 billion into Citigroup as well as guarantee $306 billion of their assets. We then had the Federal Reserve effectively getting into what some refer to as ‘quantitative easing’ mode which in simple terms means printing money. They announced an $800 billion package to buy various financial instruments to unclog the credit market. $600 billion of that package was to buy mortgage back securities and $200 billion worth of asset-backed securities that are collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration.

All pointing again that the policy makers are not going to sit idly by as they did in 1929 in U.S., or in the case of Japan in 1990’s be slow to react. When so much money is injected to the economy an amount that more than likely when it’s all done will be near $2 trillion then eventually there should be some type of a turnaround sooner or later. Now of course printing money does come with its own risks – meaning inflation. However with the deflationary pressures in the global economy this is one risk that policy makers can deal with for time being.

Finally as Larry Summers also mentioned in the end of his speech it is worth remembering: “all financial crises end – and when they end, they end in ways that create spectacular opportunity.” To take advantage of these opportunities first goal is to weather the storm, and then at some point (preferably earlier than later) risk new capital to take advantage of opportunities that will begin to prop up when the crisis is over.

Yes We Can - Still Dissent

2008-11-20T22:42:00.011-05:00

The 2008 election is now over. Over 125 million American citizens ended up voting this month – 66.8 million or 53% for Obama and 58.3 million or 46% for McCain.

To me one of the most important take aways of this election was first seeing the creation and eventually the sheer power of a well organized and well funded grassroots movement headed by an intelligent and rhetorically skilled leader.

As been suggested by many others I firmly believe that now that Obama has won the election, those who voted for him and especially those involved in his grassroots movement should adopt a new mission and that would be to hold him accountable to the promises he made during his campaign.

A common critic we heard during both the primaries as well as the general election from the opposing campaigns was most Obama supporters are irrational and through their naiveté had fallen for the hype surrounding his campaign. This is why now that the election is over it is important for the movement that helped Obama to get to where he is now to not remain silent and give him a free pass if he sways of course from most of the promises he made during his campaign for presidency. If they do then they will in fact be proven to have been irrational and naiveté - read stupid.

The job of a lay citizen in a civil democratic society is not to have a crystal ball and predict what their elected officials will do once elected. Their job is to exercise their democratic right and vote for whoever that is on the ballot and is well qualified in their view, and then like everything else in life allow the chips fall where they may.

In fact it is naïve to expect that in the rough and tumble world of politics an elected official especially a president will do every single proposal and promise he made before getting elected - right down to the nitty-gritty. Or for that matter to not have our elected officials change their opinion on a particular matter should the ‘real’ facts on that issue ends up changing.

That said though, history has shown that whether by some planned ill will or by the sheer compromising nature of politics some politicians do in fact go way off course from the promises they made. This is why the civic duty of voters’ doesn’t stop by simply casting a vote. If every individual voter that voted for that candidate continues to make an effort in holding that elected official accountable based on the core principal reasons or policies that was important to them, then through the collective efforts of all voters the elected officials will know if they don’t stay true to most of their promises and principles then comes the next fundraising or next election there will be repercussions.

In the past 8 years especially during the 04 general election many on the left kept pointing to the failed promises made by George Bush during his 2000 campaign. How he wasn’t for nation building, how he was going to bring 'change' to Washington or how he was for less government spending etc ... Many republican activists who are now done with Bush are putting all the blame on these off course messages on him without owning up to the fact that part of the blame was on them for staying silent throughout those broken promises.

So don’t stay silent – don’t give anyone a free pass – and remember that we can still dissent!

Labels

2008-10-28T17:33:00.009-04:00

Yesterday I got another one of the typical emails from a Republican friend. It read:

“Are you sure you want to continue to support the candidacy of a Socialist, Anti-American, Racist, Gun Grabbing, Child Killer with no experience doing anything but campaigning?”

I quickly wrote back to him suggesting that he left out the Anti-Christ label that indirectly McCain's campaign and directly far fringe groups have been labeling him to be. Now to many Americans such a label may seem ridiculous, but not to the McCain & Palin supporters who still believe that Adam & Eve lived right along with the dinosaurs some 230 million years ago.

Anyways I then went to regretfully let him know that I am still among the un-American citizens who have been fooled by him and on November 4th I am going to cast my vote for Barack Obama or as they prefer to label him Hussein Obama.

That said since last time I had heard from him was before the meltdown in the financial markets I found it ironic albeit not surprising that he was still labeling Obama as a ‘socialist’. Even in light of the FACT that this administration is going to spend $700 billion to not only rescue many financial institutions (perhaps eventually GM or Chrysler as well), but more importantly take an ownership stake in many of the banks in this country. Not to mention John McCain’s own proposal - not George Bush proposal to use $300 billion to just pay off the mortgage of the homeowners who are over their head. I assume in his mind the facts cited are examples of ‘capitalism’.

The problem with folks influenced by any label like that of a ‘socialists’ is that for many of them they don’t even have a clue in what they mean. If you ask them about the differences between the theories of Keynes, Hayek, Galbraith or Friedman, or capitalism, socialism, Marxism or any ism for that matter, they more than likely either give you a blank stare or resort to giving a typical McCain & Palin like robotic meaningless ramble.

Through the garbage being pushed through various media outlets many of these folks are being influenced by all of these labels. So on this socialist label the strategist on the Republican side are trying to tie Obama to a left leaning activist Saul Alinsky who by the way died in 1972 when Obama was 11 years old.

They mention Alinsky without ever saying that in 1930’s during the Great Depression he was just a successful community activist and organize and although his book did have the word ‘radical’ in the title what he basically pushed was a productive method for grassroots movements. Granted his beliefs in the 1930’s like many others in that time frame including one of GOP’s forbearers Ronald Reagan was more to the left of political spectrum -- or as some may like to label it socialist, but given that time frame it was very normal. After all if you were a New Dealer like Reagan admittedly was then you must have believed in socialism. However the tie between Obama and Alinksy isn’t because Obama has ever suggested that he ascribes to his economic viewpoints (not that if he did it would be sacrilegious) rather than because he had cited and admitted to using some of Alinksy’s successful grassroots and community organizing techniques during his time as a community organizer in the 1990’s.

Yet since the Republicans and McCain's campaign are absent of a coherent message they are once again using the old scare tactic to scare folks into thinking that Alinksy was somehow a bad person and thus Obama is some type of radical figure or as they label a socialist!

The Anti-American label which is based on Obama’s ties with attending a church that was led by an outspoken, provocative and fallible preacher, and his association through the board of two prominent charities with a 1960’s radical anti-war activist who was involved in some bombings when Obama was 8 years old is another poor and failed attempt at scaring and persuading those who can in fact think for themselves. But admittedly and unfortunately successful endeavor for those who rely on others to think on their behalf.

The gun grabbing label is another interesting one. In order for Obama to grab people’s gun(s) as some are suggesting first he has to deal with a minor obstacle called the 2nd Amendment. An amendment based on the long standing policy started I guess in the Middle Ages to have an armed militia to help protect the nation.

Now in light of the fact that US military is comprised of 1.4 million active personnel and 850,000 in reserves and US law enforcement employees (FBI, police, sheriff) are about 600,000 in number. Even if we “assume” given the sheer size of these numbers which are clearly way higher than what they were in 1776 - Obama comes to the conclusion that no longer he sees the logic behind having a “regulated militia” that is armed, the whole process of overturning it will be as cumbersome and laborious. Just as it has been for the conservative Republicans who have been trying to overturn Roe vs. Wade, and that was just a Supreme Court decision and not an actual amendment in the constitution. Now I’m not a constitutional lawyer but my guess is that overturning an amendment in the U.S. Constitution will be much tougher than many Republican strategists are making it to be. More importantly given everything else going on in this country my ‘opinion’ is that, the astute politician Obama is he would knows better how to pick his battles and will focus on other important matters. That doesn’t mean I don’t think he won’t suggest sensible gun regulations that will allow the hunters to hunt, while allowing those who need a weapon for home protection to be allowed to continue owning one to do that, but I can't see the logical rational behind the idea of him trying to take everyone’s gun(s) away.

As far as labeling him a Child Killer – what can anyone say to that way of thinking? As if Obama personally performed the actual procedure on all the abortion cases in this country! My only comment is what Obama has said many times and that is for ‘most’ women this decision is a tough decision and for many of them it isn’t just another form of birth control. Since there are so many women who are performing this procedure we need to respect their rights as a citizen and their rights as it comes with what they want to do with their body. However, there also has to be a sensible way of dealing with this where there is a gross and malice attempt to take advantage of this right. What is ironic is that many of the pro life Republican advocates are also against allowing the government to help the poor single mothers who can’t afford to raise that child. If I’m not mistaken they label it as socialism, welfare or something to that effect. To them destroying the 1 inch blastocyst they call a baby is more sacrilegious than giving it 9 months to be grown into a baby and delivered into a world where the odds of having any chance of true happiness is very low given the parent(s) poor socio-economic status and/or being born with a physical/mental deformity.

But that is the beauty of labels. They are easily spewed out and for the uneducated fools easily absorbed.

Related Previous Post: Bullshit Is Most Important Issue For 2008

Credit Bubble Bust

2008-10-15T23:00:00.016-04:00

After 9/11 some Republicans began pushing the idea that the core blame for the attack had to be placed on none other than Bill Clinton. Suggesting it was his inactions during the planning stage that caused the event. In light of the fact that George Bush and his team had over 9 months to not only get fully disclosed on threats from that terrorist group - as they did, but more importantly do whatever they had hoped Clinton should’ve done when he was the president. And they didn't so instead they blamed Clinton.

These days they are again passing the buck on yet another major failure during the Bush presidency. That would be the creation and subsequent bursting of the credit market bubble and all of its tangential effects in the financial markets. Many 'partisan' Republicans are always quick to demand accountability and responsibility – usually from others especially poor folks and Democrats, but never from themselves. It is time for them to do so.

Instead of accepting responsibility for having these events not only happen under their watch but also its high correlation with their core principals of deregulated / less government oversight policies that came into vogue during Reagan presidency and has continued until now; they blame a whole slew of others including Bill Clinton, Democratic members of Congress, Fannie Mae and Freddie Mac and of course in the end tying it in all to Barack Obama.

As I had mentioned 4 years ago in one of my earlier post here a large complicated economy like U.S. is not solely moved by one president's policies, but at the same time you can't ignore the underlying effects of ideological shifts in policies that are implemented by our policymakers as we saw from FDR's presidency to Reagan's and then from Reagan to Bush II.

This is why I will try to show in this admittedly lengthy post several facts often not mentioned that will support the logical belief that the creation of this credit "bubble", and the major growth phase of the unregulated derivative market really began under this Republican administration and congress and by the help of an ardent free market central banker Alan Greenspan. My writing is not to completely vindicate the Clinton administration and its policy makers like Robert Rubin or Lawrence Summers and/or the executives of all companies on Wall Street or on Main Street that took advantage of these policies. Rather just from a factual standpoint just show how with it's policies this administration ended up allowing banks, hedge funds, and individuals to borrow excess amount of money.

Before doing so I should go over another tactic of the right. These days now that both the GOP and especially McCain's campaign are done with George Bush, they are trying to differentiate McCain's economic policies from that of Bush. They suggest that Bush's policies were not grounded in traditional Republican beliefs. Part of this statement is correct. After 8 years it has become clear to pretty much all those on the right that George Bush wasn't your typical Republican that was in favor of controlled spending. However what this failed attempt in differentiating or I should say not owning up is missing is that throughout his presidency -- at least until this month, George Bush was true to the two core economic philosophy of Republican party. The first philosophy of supple side economics which suggests tax cuts regardless of we are in peace time with a surplus or at war with a large deficit, and the second philosophy of allowing the free markets to operate free willy with little or no regulations.

Since partisan Republicans know this differentiation between Bush and McCain may not get through too well, instead they try to pass the buck by going back to Clinton years - the previous evil Democrat. They circulate a NY Times article published in September of 1999 to show that under pressure from Clinton's administration Fannie Mae was pushed to began easing the credit requirements on loans they were buying from banks and other lenders all to allow low income and minorities to own homes Fannie Mae. Also suggesting that the Community Reinvestment Act or CRA program that was started in 1970’s also played a role in the mess we are in now. They then mention the repealing of Glass Steagall Act or signing of the Republican led Gramm Leach Bliley Bill in 1999, or how Republicans had tried 6 years later in 2005 to revamp Fannie Mae and Freddie Mac, but were somehow road blocked by Democrats who were in the sack with these GSE’s.

One minor factoid that they don’t mention in these emails that are circulating (most likely by the likes of people like Andy Martin) is that since the trouncing in 1994 mid-term election where the Republicans badly beat the Democrats in both the Senate and House of Representative it has been the Republicans who have been in full control of Congress until 2006! All those legislation were created by the lawmakers in Congress and the president only signed it! Not to mention since 2001 the have had a Republican president. Which begs the questions why did they wait so late until 2005 to start such reforms, and why they couldn't muster up enough majority on their own party to get the deal done?

Skipping over these facts they then point out the top recipients of political contributions by these two organization from 1989-2008. Pointing Democrats have received 57% of the contributions with remaining 43% going to Republicans (opensecrets). They also highlight the $126,349 that was contributed to Barack Obama since coming to Washington in 2004 which was second in line.

However, one important caveat they don’t include (as usual) that only $6000 was from Political Action Committees (PAC) money and the rest were from individual donors that were happen to be working for these firms. Now I agree that some of them were bundlers but it would be unrealistic to assume all of that money was from bundlers and none from everyday folks that happened to work at Fannie or Freddie. More importantly let’s not forget that so far Obama has raised over $400 million for his presidential campaign and at last count over $160 million of it has been from small donors, so to suggest that he was overly influenced by these contributions is stretching the bounds of logic.

Also what they don’t mention (I know a common theme) is that the general tactic for these firms was to make strategic contributions. Up until 2006 when the Republicans were in control of Congress approximately 56% of contributions were being directed to their members of Congress on the Republican side, but when they lost the Congress in 2006 and as Obama gained grounds in the primaries it was natural for them to switch their contributions.

Yet the Republicans and McCain’s campaign keeps on mentioning these partial facts and at every chance throwing in the names of Fannie Mae and Freddie Mac all to somehow suggest that it was because of them that the financial markets are where we are and since for the last 2 years the Democrats and more specifically Obama has gotten some money from them they are to blame.

So let’s review again what these GSE’s did and still do. Fannie Mae and Freddie Mac didn’t make loans to individuals. No one could call Fannie and Freddie (unless they were calling their aunt Fannie or uncle Freddie) to get a mortgage for their house. These institutions were created with one goal in mind and that was to provide liquidity to the mortgage market. This meant that they had to buy mortgages from banks and other lenders so those banks and lenders can go out again and make more loans.

For many years before 2004, Fannie and Freddie had followed relatively prudent investment strategies, even with respect to affordable housing initiatives that had started under Clinton, but they suddenly changed their approach in 2005 which if you are interested in know why they changed course you can read this article.

So again let’s go back to the claim that Clinton’s initiative in 1999 had contributed to this chaos. First it is important to reiterate the fact according to Federal housing data it was the private sector, not the GSE’s that was behind the soaring subprime lending at the core of the crisis. As it was cited in this McClatchy article Federal Reserve data showed that: “more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions and that these private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers in 2006. While only one of the top 25 subprime lenders in 2006 was directly subject to the housing law”.

This doesn't mean that somehow Fannie or Freddie or for that matter the committees that were in charge of overseeing them were some innocent bystanders. But what it does mean that they weren't the cause or even the main cause of this house of card falling.

Another fact in blaming Clinton and the Democrats that is often skipped over is that real estate prices or for that matter speculative real estate buying didn't start in 1999. After all as you recall back then Americans were busy speculating in internet stocks. The move into real estate as an asset class of choice really began in late 2000 as the stock market entered into what became a three year bear market, and it began increasing a year or so later in 2002 full after the Federal Reserve under Greenspan had pushed interest rates to extreme low levels. All events that took place full into the Bush presidency years.

The frenzy where we had lines forming on Open Houses and multiple offers with escalation clauses with increments for some houses in $10K, some in $50K and others by $100K didn’t start until late in 2003, and the rush to own real estate really kicked in high gear by 2004. Right around when we had so many different mortgage products hit the market. Products like no doc loans to adjustable rate loans like MTA and COFI loans and not to mention the subprime loans that allowed everyone to own million dollar homes or multiple investment properties.

It was the wild wild West in the mortgage industry; needless to say an industry that was NOT regulated. You can recall the euphoria because that was all you probably heard from your family members during holiday gatherings. Everyone had a story in how they just made $100K in one month flipping a condo.

So what is not mentioned is when this real estate bubble really started. Moreover they don't mention that on June 17th, 2004 George Bush offered his own housing initiative. He referred to it as the "Ownership Society". Suggesting that: "...if you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country." He too then challenged both the real estate and mortgage industry to increase home ownership rate by 5.5 million families. Worth repeating that this was in 2004 and not 1999.

Perhaps the most important one they don't mention is that on April of 2004 the Securities and Exchange Commission SEC cave in to pleas from the five major and largest US investment banks to allow them to take on more debt. The banks were Goldman Sachs, Merrill Lynch, Morgan Stanley, Bears Stearns, and Lehman Brothers. Prior to the ruling these 5 banks were only able to borrow as much as 15 times their net capital. The new exemption which was called the "net capital rule" allowed these five investment banks to borrow as much as $40 or $30 for every $1 they had in capital!

Needless to say by allowing banks to take such gamble with not only their shareholders capital and eventually at a cost to taxpayers is why Lehman and Bear Stearns failed and why Merrill Lynch was rescued by Bank of American and the remaining two have changed their charter to be a bank holding company. This is one of the reasons why American taxpayers were forced to inject over $250 billion into the banking system by taking partial ownership in some of the 9 major banks.

Finally given the role of various unregulated alphabet jargon derivative instruments like C.D.O.'s or C.D.S.'s in the 2008 financial market meltdown it is also look back to see when they were created. The first derivative instrument a C.D.S. was created in 1991 by Bankers Trust. The C.D.O. instrument was created by JP Morgan in 1997 to hedge events such as the Asian market financial crisis. Although they were created in early and late 90's but their real growth didn't happen until we entered the new century. Which is why in mid 2003 Warren Buffet referred to them as "financial weapons of mass distructions. It is said that in 2001 the size of the C.D.S. market was about $900 billion, and by 2007 it had gotten to estimated $62 trillion. All with no regulations!

Now after dishing it out to the Bush administration it is only fair and appropriate to give them credit (really to Sec. Paulson and Fed Chairman Bernanake) for at least not holding on to their ideological dogmas, and not doing what Hoover had initially done in 1929 and that was to let the free market operate on their own. However even with all the new reactionary policies we have been having, albeit some of them little late, there are still areas that we are not hearing any proactive plans to regulate another trillion dollar industry the hedge fund industry, or for that pushing the idea of moving these derivatives like C.D.S. and C.D.O.’s to exchanges like CME or CBOT. Regulated exchanges that provide liquidity, and transparency.

I realize this was a pretty long essay, but I thought it was vital to point out the flaws in the arguments made by our friends on the right. That said we are where we are. This doesn't mean it is an end to core positive principles of capitalism, free markets, and individual liberty. However just as Naomi Klein suggested in a speech couple of weeks ago were in that just as the fall of Berlin Wall was equivalent to the demise of Communism, the recent events in the financial markets should also be an indictment on the extreme beliefs of capitalism especially as she suggested those professed by the likes of Milton Friedman.

The belief free markets will have its own checks and balances, an idea that frankly I used to subscribe to sounds good on paper and in theory but as evident by what we’ve seen in 1929 in U.S. and in the past 20 years in various emerging markets and again here in U.S. is just good on paper. The unfortunate consequences with these theories in the event of some type of random highly unlikely events or what is commonly referred to as a Black Swan event thanks to one of my favorite authors/thinkers Nassim Taleb, has the consequence of creating moral hazards and costs to the society that are so high that it is best to have some government oversight.

Depending on the outcome of the election we could either have a scenario where a McCain administration may do some piecemeal reforms but given his continuing belief in deregulated markets we will only have some piecemeal reforms. Or a scenario of gradual and moderate shift to the middle under an Obama administration by instituting policies that will include proper government intervention and regulation to create an optimal setting for the 21st century economy.

A valid critic that some on the right are making is that given the havoc we’ve seen the natural reaction of some policymakers could be to shift the pendulum to the extreme opposite. This is why regardless of the outcome on November 4th it is important for both sides to work together to continue making their side's logical rational. Hoping that with these exchanges in the free and democratic marketplace of idea American can once again unite to rebuild the economy.

Financial Dilemma

2008-09-05T09:14:00.012-04:00

I’m having a dilemma in showing the fierce urgency in persuading this family to change the financial course that they are taking their whole family on.

The household income for this family is roughly $256,000 yet they are spending $273,000 a year! This trend in spending more than what they are making and living on credit is one that has been going on for quite awhile but has really gotten worse in the past 7 years.

To further make it complicated they already have a $950,000 in debt which is as a result of both big purchases they've made by borrowing as well as the ongoing yearly deficit.

The household which consists of a large and extended family is currently headed by an older man, and a younger woman. When discussing their situation I’ve gotten a sense that they think or try to persuade their children and grandchildren that if they just cut spending in small discretionary expenses areas like eating out once a week or cancelling their cable they will be able to improve their situation so that in 5 or so year the $950,000 debt (and growing) will be gone.

When I recommended to this person that he should not only cut both discretionary as well as non-discretionary expenses but more importantly find an 'immediate' way of increasing his income right now, rather than later on he and about 50% of the household felt uncomfortable with making such a sacrifice. They wanted to take the chance that if the economy grows their income will grow at a much faster rate were it could reduce their debt in 5 or 10 years.

Clearly complicated situation -- especially since in actuality there are several more zeros in front of the figures mentioned above.

So what do you suggest they should do?

To help you understand their situation here is an in-depth slide show (click here) explaining everything in detail (be sure to click next on the bottom to view all slide) – also here is what their former advisor has told them about their plans (click here), and a more common sense approach (click here). In fact the family’s situation has gotten so famous a new documentary has been made about them (click here).

Country First?

2008-09-03T14:42:00.008-04:00

Since in my last post here I was quick to criticize McCain for his VP selection, it is only right to also admit that from a purely political sense his strategy has worked-- at least 'so far'. .

I say so far because we still have ~60 days to go to see if he would become another George H. Bush that overcame and won in light of a poor VP selection or will he have the same faith as George McGovern.

What is certain is for now his pick has clearly galvanized the Christian right (albeit as well as the Dems -- Obama raised $8 million in the day after Palin's speech vs. McCain at $1 million), it has given another reason to get the vote of those who elect their presidents based on the pure fantasy of which person they like to hang out and have a beer with -- the supposed blue collar independent voters, as well helping him to be able to play the gender card to get more of the women vote, and I also assume by having discussion about Palin's experience highlight Obama's at the same time.

Weeks prior to the convention and even after Palin's pick during the RNC his campaign continued their theme were he always puts country first -- while suggesting that Obama puts politics and winning election first. A silly argument which tends to work on some voters even though Palin's pick clearly should show that her selection had more to do with winning the election and politics rather than what is good for the country.

After all if she was good enough to be second in line to the presidency then how come no one outside of Alaska had heard about her, and more importantly how come she never ran as a presidential candidate during the 08 primaries. To think that the Republican Party was so drained of talent to pick her is an insult to all the prominent republicans out there. I may have disagreement with some of their positions but he surely could have find more experience nominee than a 44 year old person with a year and half in big time political experience.

So the move was purely based on politics were the priority of getting elected was more important than the hypothetical of her one day becoming commander in chief.

Of course whenever the subject of questioning Palin's experience comes up one of the counter arguments republicans make is that she has both more years of experience (counting her time as city councilwoman) as well as more years of executive experience than the Democratic nominee for the number one spot. What this silly comparison forgets is that Obama was able to garner the support of 18 million people during a year and half presidential primaries for his nomination, and most likely an additional 43 million more on Nov. Whereas up to now the only vote she has gotten for becoming the nominee has been one and that was by John McCain.

They also ridicule Obama's community organizing effort while at the same time preaching about McCain's motto of 'serving a cause greater than yourself' but also skipping over the fact that the volunteerism he did was over 20 years ago and since then he has many years of experience in a legislative position. When they do mention his legislative experience in Illinois senate they do point to many times he voted present vs. a yes or no on certain bills -- a valid critic of his politicking tactic which is not uncommon among many legislators but a critic that is unrealistic as he can not and would not act the same way in an executive role. Another narrative that they conveniently skip is given Obama’s educational legal background and his time teaching constitutional law, which should make him more familiar to the real duty of each President which would be upholding the constitution.

John McCain's VP choice: Sarah Palin

2008-08-29T22:20:00.011-04:00

What was John McCain thinking … or I should say what were his strategists thinking?

I remember when I was asked about Joe Biden VP selection a week ago, my reply was that given how well run Obama’s campaign has been; it certainly is not my place to question his and his advisors analysis behind his decision. Which undoubtedly was and will be the most important decision any presidential candidate has to make before taking office, and one with obvious future implications if elected.

However given McCain’s up and down campaign during primaries I’m not sure if the same benefit of doubt can be given to his selection of Sarah Palin. I’m saying this because setting aside her attractive look which even Rush Limbaugh was quick to point out -- her resume is not only light from an educational and big time decision making experience standpoint and world affairs knowledge (she has admitted she doesn't know much about Iraq), but also apparently during her vetting process McCain had only met with her once or twice!

Looking at Palin’s resume it is obvious that she has done a lot with the card that she had been dealt. She has only a bachelor degree in journalism albeit and thank god if she is elected with at least a minor in Political Science. After a brief stint as a sport reporter she became a city councilwoman in 1992 were she had to deal with issues such as dealing with the town’s library and hiring and firing the police chief. In 1996 she ran for and became the mayor of her small town (9000 people) and in 2006 she ran for and became the governor of Alaska, and now only a year and half into that term she has been selected by McCain to be a VP candidate for USA.

She makes Obama’s ascension from his state senatorial position in 1997 and US senate post in 2004 look average at best. Moreover her selection will make any critic of Obama’s “years” of experience invalid because the number one criteria for selecting any VP is or at least should be that s/he is capable of being a President from day one.

Ironically I had learned about her about 4 weeks ago when I was learning about Down syndrome. It is now well publicized and even touted by many evangelicals her decision to give birth to a son who has Down syndrome.

Although I personally commend the sacrifice a parent is willing to make for deciding to give birth to a child with a life altering disease like Down’s but at the same time I can't help but question their judgment given the hardship they are willing that child to go through not only when they are there for their child but also when they themseleves are dead and are no longer to support their adult child.

Now in her case I’m sure her personal sacrifice was a bit easier given she is married to apparently a supportive husband and they more than likely are doing well financially to pay for any medical bills. However I wonder given her role as a VP of USA and not Governor of Alaska is she really able to devote the same time and same care for that child?

Giving birth is the easy part – raising a special kid which I’m sure all parents who have raised such kids can vouch for requires a lot of time. Which is why I personally not only question her judgment for giving life to a child with such a disease, but now that she has done it I can't help but to question her judgment for accepting such a daunting job that only a fool would think that it wouldn’t conflict with her family time.

Moreover I also question her decision to seemingly use this 4 month old infant as a political tool given her decision to bring him on today into a gathering of 15000 roaring people with music blasting all to show I guess how faithful she is to Jesus.

Maybe this was her and John McCain’s way of letting Americans and more importantly all women know that if they are elected they will make sure our laws recognize that life truly starts when a sperm and egg are met – and if you do anything with this combination you will be charged with murder and will not only be prosecuted to the fullest extent of the law but will also be punished by god by being burned in hell over and over.

WE DID IT

2008-06-03T23:17:00.004-04:00

Although I for one didn't do nearly as much as many other volunteers for this campaign but still as a small contributor it sure was great to see the work of this grassroots movement actually paying off.

Of course getting the nomination is great, but there is still much work to be done. Not only on making sure Barack Obama wins the general election, but also and more importantly making sure that he does not veer away from the principles that he touted, and holding him accountable to what he promised everyone.

In the interim much work needs to be done starting with trying to bring on board Hillary Clinton supporters to unify the party and register new voters. In my opinion based on the exit polls from the primaries in March it does seem as the 20-30% of Hillary Clinton's supporters may not 'at this time' be open to supporting Obama. This amounts to roughly 5 million voters. Ideally you would want to unify the party by having these disheartened voters on board, and given Obama's speech tonight and the way he has been running the campaign it is clear he is trying his best to unify the party.

Of course realistically short of including Hillary Clinton as a VP, no matter what he and others will do and say some of those voters will either stay home or vote for either McCain or Barr. Which is why I am sure David Plouffe (campaign's number cruncher) is at work guessing in which states these voters are residing. Whether they are mostly in battleground states or states that the electoral outcome will not be dependent on their support.

Embracing or Appeasing w/ Ahmadinejad

2008-05-17T07:40:00.010-04:00

Two important points that are not being mentioned in all of the rhetorics about Obama embracing and now appeasing with the 'Hitler du jour' Ahmadinejad is that first he is not the commander in chief or as the Iranian regime refers to it as the Supreme Leader (title held by Khamenei). More importantly even if he does have a significant role in Iranian foreign policies then if in fact Obama is elected and takes office, only 4 months later Iran will have its own presidential (s)election. Where given all the economic and social turmoils there and more importantly the strife among the insiders the odds of Ahmadinejad getting re-elected is very low. Thus he may not even be around for this supposed embracement!

My guess would be that in 2009 Iranians will not only not be boycotting but instead may turnout heavily for the presidential (s)elections as both they and the insiders running the show will be motivated by the possibility of improving relations with a U.S. administration that is led by someone who is not so fixated in attacking them -- like Obama. So when it is all said and done if Obama is elected his visit with an Iranian president in mid to late 2009 will be with a more pragmatic person like Larijani.

Personal Judgment

2008-05-02T23:27:00.015-04:00

Question: How has Barack Obama's association with Rev. Wright effected you physically, financially or even emotionally?

I know a silly question but bare with me.

Over a month has gone by since the emergence of Rev. Jeremiah Wright into our mainstream political discourse and another week since his ‘grand media coverage’. Yet the after shock of this matter is still being excessively covered in various media outlets especially talk radio and cable news networks with no signs of abating. In light of the fact that in various occasions Sen. Obama has tried to point out the differences between his beliefs and those of his pastor. The latest attempt came this week as he genuinely and passionately opened up by stating:

"I have spent my entire adult life trying to bridge the gap between different kinds of people. That's in my DNA, trying to promote mutual understanding to insist that we all share common hopes and common dreams as Americans and as human beings. That's who I am. That's what I believe. That's what this campaign has been about."

Since this grand tour our political discourse has been hijacked by Rev. Wright and his accomplice the media; all at the expense of everyday Americans. It has overwhelmingly drowned out so many other issues that is ‘really’ important to majority of Americans. This has also been costly to Obama’s vision in bridging the gap he has been striving to do.

With all the media coverage, especially from biased media outlets this matter of which church Obama had attended and with what pastor; which perhaps for some voters could be one of the factors in evaluating his values and/or character has turned into a spectacle. A tool for those opposing Obama to define him solely based on "Rev. Wright's views and comments". The ferocity and politicking of this matter is why even after numerous occasions were he clearly explained his view on this matter, many are still continuing to define his core values and even patriotism based on Rev. Wright's views and comments.

The biased pundits in the media are trying to insinuate that Rev. Wright has shaped Obama’s political ideologies, without one factual evidence such as a legislation, a speech or an action that he has proposed or made in the past. Of course in order for this to happen you have to also believe that Obama has been naive and impressionable when he joined the church and continues to be now for him to be easily influenced by a man who was just his pastor.

Those that want him to fail keep bringing up the questions why did he join this church, and why did he stay there for so long. As if all Americans including those running for political office are suppose to put their church and pastor through some type of a vetting process.

To me the reason why he initially joined had more to do with a combination of learning more about his black roots and getting to know the black community, as well as filling up the type of spiritual holes that young people his age may experience. The church and its charismatic pastor was also helpful for his professional goals as a community organizer and activist. After all as a bi-racial (half white) man who had just graduated from Harvard, and was new to Chicago, he needed the black community and the support of black leaders in the community.

My guess is that after being done with his grassroots and community organizing activities and upon his decision to enter Illinois politics he viewed Trinity Church congregates as more a good source of creating a base in the black community, which undoubtedly from then made his decision to stay to be one based on politic. Of course with Trinity came Rev. Wright, which he must have figured out would outweigh the potential problems it could have. Assuming that even if it comes in the forefront voters can distinguish between his beliefs and that of his pastor. Perhaps no different than other politicians who had attended or sided with controversial preachers.

So basically all he is has done has been to make a bad ‘personal’ judgment for not really understanding the 'political' implication of his association with his pastor. A pastor who in the eyes of people like me is not racist or anti-American, but since he is a bit rough on the edges he is seen that way to others.

Now is it fair game in politics to use this decision against him? Yes, especially if you are a politician that wants to win at any cost. However what is important for us as voters is that will we and America benefit by allowing him to pay for this mistake, thus perhaps lose the nomination or the election? In my opinion NO! Reason why is because I do think that his candidacy and more importantly the movement he has created has a higher likelihood of better addressing more of the ‘real’ challenges facing this country.

Yet in order to give him this chance we as citizens need to either forget or at least forgive, and instead look at other factors in evaluating his character, leadership, and patriotism. After all supporters of other politicians have been able to forgive or forget their candidates’ previous shortcomings or poor judgments in other cases or on different issue. For instance in the case of Sen. McCain and Sen. Clinton their supporters have been able to forgive or forget their poor judgment on voting for the resolution to wage a preemptive war against a country with no threat to us – a war with much spilt blood, and nearly $1 trillion dollar in cost.

So it is time to weigh the significance of Obama’s decision in joining and staying in this church with how he would do as a President. Most objective minded individuals should realize neither Obama’s poor judgment in staying along with Rev. Wright's church or for that matter Rev. Wright’s sermons has hurt any Americans physically, or financially. I realize for some Americans Rev. Wright's comments have been insulting, however it is important to point out the obvious and that is those were Rev. Wright’s comments and not Obama’s. Comments or sermons he would’ve made regardless of Obama being a member of that church or not.

Related previous post: Jeremiah Wright Comments

Thoughts on PA Primary

2008-04-23T22:05:00.008-04:00

Well to say yesterday's PA primary results was disappointing is an understatement. The only thing positive about is was that at most Hillary Clinton only netted an additional 12 delegates, and Barack Obama's lead of about 160 pledge delegate is still mathematically tough to surpass.

Although Obama's supporter were able close the 20 point lead Clinton had in the polls from 6 weeks ago to only a 10 point lost- the disappointment came mainly to how we lost rather than the lost itself. As the kitchen sink negative campaign that Hillary Clinton deployed actually worked - again!

Ironically Hillary Clinton’s hometown newspaper NY Times that had also endorsed her earlier in the campaign called her out on her negative campaign in a scathing editorial under “The Low Road”.

The Pennsylvania campaign, …was even meaner, more vacuous, more desperate, and more filled with pandering than the mean, vacuous, desperate, pander-filled contests that preceded it. … It is past time for Senator Hillary Rodham Clinton to acknowledge that the negativity, for which she is mostly responsible, does nothing but harm to her, her opponent, her party and the 2008 election.

Of course Hillary Clinton and her supporters would make all believe that this whole process is some how good for the party and especially for Obama. This is why you keep reading or hearing comments to to this effect:

“I firmly believe the Democratic candidate will be stronger because of this competition. We will be united and very strong going into November, regardless of who the nominee is.”

What they fail to consider is that this would be true only if she had operated a campaign debating the merits of her plans and policies and galvanizing voters. However what we've had is that one of the candidates of course being Hillary Clinton -- basically doing the work of partisan republicans. By brining up silly non-policy issue matters which should be the job of FOX network she has not only not made the party stronger but she has simply divided it. After all how can comments like this be helpful to a fellow Democrat:

“I think you'll be able to imagine many things Senator McCain will be able to say. He’s never been the president, but he will put forth his lifetime of experience. I will put forth my lifetime of experience. Senator Obama will put forth a speech he made in 2002.”

or:

"I think that since we now know Sen. McCain will be the nominee for the Republican Party, national security will be front and center in this election. We all know that. And I think it's imperative that each of us be able to demonstrate we can cross the commander-in-chief threshold. I believe that I've done that. Certainly, Sen. McCain has done that and you'll have to ask Sen. Obama with respect to his candidacy”

On another note - the exit polls clearly showed Obama’s race played a major role in peoples voting decision – which again is unfortunate. This made me think of Geraldine Ferraro and her comment on Obama's candidacy. When Obama was winning the white votes the likes of her inside Clinton's campaign suggested that the whites were supporting him in some type of affirmative action exercise or to repent for America's Original Sin. I wonder how she or those inside Clinton's campaign define the PA outcome, given that this time white folks didn’t voted for him! Of course we all know what they will do -- they will now spin it to suggest that he simply can not win the white votes.

By the way for those of you who watched Hillary Clinton’s victory speech last night, did you notice the chants by her supporters? They were chanting YES 'SHE' CAN. Two comments … first on originality -- they would get a big zero as they clearly copied it from Obama’s campaign and its general theme of YES 'WE' CAN. But more importantly albeit on a superficial level it does show how the supporters of the two candidates view their candidate and view the underlying theme of each campaign.

It seems as that Hillary Clinton’s supporters look up to her and expect her to solve her problems vs. Obama’s supporter who although are appreciative of his work but put a higher value in this movement. As the general belief and as suggested by Obama himself is that they believe that real change starts with them and so they view Obama at par and as just the facilitator of this change. The irony behind this chant is that those same ardent Clinton supporters probably think that Obama’s supporters are some young wobbly eyed delusional fools that are infatuated with their candidate - whereas they are the ones that should be looking in the mirror!

Finally, have you noticed how the media especially Hillary Clinton’s supporters are criticizing Obama in his inability to close this prolonged ordeal. Suggesting that his inability to close the deal or another word get the votes of Clinton’s supporters is a sign of his weakness in the general election. However what they fail to mention is that flip side of this matter is also true. After all it was Hillary Clinton who was suppose to had this nomination locked up by Super Tuesday in February – so one can also question Clinton’s ability or inability in the general election given her performance up to now especially considering her campaign’s name recognition.

In reality what this suggestion doesn’t consider is the Democratic Party’s nominating process were delegates are proportionally divided versus the Republican Party were in most states the winner takes all the delegates. So it is pretty tough to knock someone out in such a format especially if the trailing candidate is so persistence, or maybe so desperate. Perhaps if she was younger, or if her campaign wasn’t in debt so much she would’ve bowed out by now, but given that this may be her last chance in fulfilling her long ambition, and that she has lent at least $5M (did you notice the telethon pitch when she asked for donation last night) to her campaign so the longer she stays in the better it would be to HER politically and financially.

Someone needs to ask Hillary Clinton – why do you think fellow Democrats like Joe Biden, Chris Dodd, or John Edward dropped out of the race so early? Why the Republican Party and the likes of Mitt Romney who had the financial ability close ranks so early?

Paulson’s New Regulation Plan

2008-03-31T22:28:00.009-04:00

Now it seems why a Goldman Sachs executive who was used to making millions of dollars accepted to become a U.S. Treasury Secretary for a lame duck president not to mention in an unpopular administration.

In May 2006 when Hank Paulson was chosen to replace John Snow, many economists and pundits suggested that his selection was because of his previous dealing with Chinese as he would be able to do a better job in convincing them to address issues such as devaluing their currencies. Others also suggested that given the growing derivative market his selection was to have someone at the helm that could deal with any type of major financial crisis.

Until this weekend all of Paulson’s actions and policies supported the above mentioned theories. Then came his grand plan for the U.S. financial markets, a plan that has been under work for about a year.

Before I cite my main problem with what I know so far from his plan, I want to mention that I do agree with one of the premises behind his plan and that is America’s financial regulatory structure needed to be able to address the 21st century globalized and complicated financial markets. A fact that became obvious in the past several weeks with the fall of Bears Stearns.

In addition as a layman who doesn’t profess to be an expert in determining all the tradeoffs and benefits of various financial structures and regulations, I am not going to suggest that for example merging SEC and CFTC is beneficial or not, or giving more power to the Federal Reserve will reduce the likelihood of having another Bears Stearns.

However as much as I believe in the right balance of free markets, but given how ideologically driven this administration has been I can not help but wonder if this plan is yet another one of those plans that is meant to serve a few instead of what is best for both our current problems in the financial markets and what we could face going forward. In fact the apparent bias for the large investment banks on Wall Street was correctly pointed out over the weekend by Sen. Obama when he said:

“If I’m a commercial bank right now, I’m still not clear why it is that investment banks… are able to do things I can’t do, aren’t subject to the same capital requirements and liquidity requirements that I am and yet they’ve got the same fallback with the Fed as we do,”

However in the midst of all the current and I’m sure future debates on the various structural nuances, my main concern has to with the issue that may not get that much coverage. That would be the underlying legal theme behind Paulson’s plan which can be summarized by the somewhat esoteric concepts of “principles-based" vs. "rules-based”.

Last April in a conference on the implications of Sarbanes-Oxley Paulson said:

“Our goal should be better managed, more competitive corporations that earn investor confidence through sound leadership, thoughtful governance, and outstanding performance. In my judgment, we must rise above a rules-based mindset that asks, ‘Is this legal?’ and adopt a more principles-based approach that asks, ‘Is this right?’

As someone who hasn’t read (and most likely won’t read) the whole texts of his plan – the over arching question is which parts of his plan and by how much are based on his advocated ’principle-based’ approach.

Simply because it is too idealistic to believe that when posed with the dilemma of “Is this legal” vs. “Is this Right” all corporate executive including the greedy ‘rotten apple’ ones will address these question tangentially at the same time instead of sequentially – asking first what’s legal (what’s the minimum I have to do) followed by what’s right.

As our history has shown there has been and most likely will continue to be greedy business people who would try to game the system and in the event of a predominant ‘principle-based’ approach there will most likely be more of them given there will be no or little legal ramifications for their actions.

So given this plan was being prepared way before the current economic downturn and credit market crisis; lets hope and expect then that going forward our elected officials will not rush into approving these recommendations and instead put a bit more time in reviewing and debating Paulson's deregulation plans -- at least more time than what they put for when they were presented with the administration's proposals for say the Patriot Act or the invasion of Iraq -- which gives them a very low bar to shoot for!

Corporations & Free Markets

2007-04-08T00:14:00.000-04:00

During the past three days I've come across three separate but very much inter-related pieces of information which I found to be interesting.

It started with listening to an interview with the author of the newly released book written by Benjamin Barber titled: "Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole". The brunt of Barber's argument is that the youth is becoming obsessed with "EASY over HARD, SIMPLE over COMPLEX, and FAST over SLOW." But perhaps this review by Publisher Weekly best explains his work: "... expanding global culture of market forces he claims will destroy not only democracy but even capitalism, if left unchecked. He warns of a totalitarian "ethos of induced childishness" that not only seeks to turn the young into aggressive consumers but to arrest the psychological development of adults as well, "freeing" them to indulge in puerile and narcissistic purchases based on "stupid" brand loyalties."

The next day I listened to another interview with the WSJ reporter that wrote the article: Inside Wal-Mart's 'Threat Research' Operation which revealed that the company using cutting-edge monitoring systems made by a supplier to the Defense Department to snoop not only on employees e.g. personal emails sent via yahoo or gmail, but also on critics, stockholders and the consulting firm! During the interview I learned about an internal document labeled as "Susan Chambers memo" which was sent to the board of directors proposing ways to reduce their healthcare costs, by requiring employees to do more physical chores to essentially weed out those that were sickly, unhealthy, and therefore cut their healthcare costs.

Finally I ended up watching the movie The Corporation this Saturday which ironically I had placed it my Netflix queue a long time ago. The documentary highlights many of the side effects of the growing role of modern day corporation in our everyday lives, basically contending that these corporation are by law created to function like a psychopathic personality. As one of the guest suggest most corporations probably don't even realize the long term consequence of their actions for the generations that will follow us, and many of them are probably so greedy that they will be willing to hang themselves in the process as long as they can make money on the rope!

Fed's Inflation Puzzle

2007-03-29T09:07:00.000-04:00

Famous Fed watcher and Bloomberg writer John Berry wrote an OP/ED under the title Fed Powerless to Fix Part of Inflation Puzzle which goes over Ben Benanke's dilemma with core CPI inflation which has been up 2.7% over the 12 months ended in February vs. 2.1% a year earlier, mainly due to increased rents -- both market rent and owner's equivalent rent.

Now as I've written here before when it comes to the trickling "lag" effect of OER the Fed is not that powerless! After all it was the Fed who kept rates low for so long all on the grounds that the CPI was low during the periods between 2002 and 2004. When in fact any fool could've figured out that as house prices rise the way they were rising (which by the way the Fed was also complicit in) more people would be priced out and/or more people would demand more rent for their investment properties. This is yet another reason why OER is a horrible way of measuring the cost of having shelter for an economy that approximately over 70% of households do not rent!

Real Inflation Figures
CPI Calculation

Vipassana (Insight)

2007-02-10T08:10:00.014-05:00

This past month I finally got around to attending the Vipassana meditation workshop my brother had been recommending to me for the past 7 or so years.

Since there are wealth of information on the web (also see below) I am not going to go over the actual technique or what goes on during that 10 day workshop as there are abundant information about everything you need to know to learn more about this technique. Instead I thought the most important thing to write about is why I went, which would lead into why I think 'most' people could benefit substantially from learning meditation and more specifically from practicing Vipassana.

Before doing so let me first say to those of you that are skeptic and/or consider yourself to be and feel perfectly fine that I too up to about four months ago used to be like you. Perfectly fine with who I was, and my life. Until then I had glanced at some articles suggesting there are real scientific benefits in meditation, and although intellectually they were acceptable but I thought that such activities were really not for me -- and to be sarcastic suitable for tree hugging vegans who have no family and no job. Moreover I figured since I had done Yoga here and there, and about 15 or so years ago I went to couple of workshops like the Forum and had listened to tapes like those by Tony Robbins -- then why waste 10 days of my precious life!?

This all changed after I attended my mother’s funeral. Like many who attend funerals and/or have loved ones die, I too went through various moments of self introspection about my own life ... how I’ve lived so far, how I want to live, and how I want to be remembered. This thought process became even deeper on my flight back as once again my brother gave me the book Art of Living for the third time, where unlike the other times were I used to chuck the book aside I did end up reading it.

Reading it I noticed that although something’s were vague to me, but the overall general message and explanation of the technique were very logical. No hocus pocus magic stuff, or mentioning of any silly rituals, or dogmas. Which is why I was finally sold on the idea of attending the course, and ended up signing up for it online.

After I went I noticed that there was nothing wrong with giving 10 days of my life in learning more about myself, and as a result becoming better in how I interacted with my family, friends, clients, and others. Not to mention all the benefits from sharpening my mind.

Upon my return I mentioned to a friend that it was a somewhat life altering event. Of course many of us think that we go through many life altering events, but when we look back at those events really didn’t alter our life! One reason could be that when we said it we were caught up in the moment, but in my opinion the main reason has to do with the fact that we never put any effort in making sure that we stay the course. For example for many getting married or having a child is a life altering event, but if one chooses after marriage or having a child to continue living the a life of a swinging single person with no responsibilities, well clearly for that person those events were not life altering events. This is why after the 10 day workshop it is imperative to not only continue with a regular meditation routine, but also following the Eighfold Noble path that was recommended during the course.

As I mentioned earlier I'm not going to bore you with too much detail into what exactly I learned or experienced, however I do want to share just one of the concepts. What that it is what Buddha referred to as three kinds of wisdom: received wisdom like the ones you read or hear from wise people -- basically 'borrowed wisdom'. Then you have intellectual wisdom, which comes as a result of examining what you read or heard to figure out if it is rational, and practical. But when it comes to matters "within our mind" the real wisdom comes when it is experienced out of our own personal realization. This was something that I truly experienced first hand.

Introduction to Vipassana Technique

Excerpts from: Art of Living

A Simple Path
Can Thoughts and Action Change Our Brains?

Carter the Anti-Semite? (or a Realist)

2006-12-10T14:30:00.000-05:00

After doing away with John Mearsheimer and Stephen Walt, Israel’s character assassins are out again and their target now former U.S. President Jimmy Carter. Carter’s book Palestine Peace not Apartheid has clearly struck a nerve among not only Israeli’s who are Zionists but also Americans who unfortunately are “unconditionally” loyal to Israel.

Using various organizations like ADL, and pro Israel political pundits they are attacking Carter and his book from various angles. So far based on what I’ve noticed their main argument can be narrowed down mainly to his choice of the word apartheid, some maps that he has used, and his claim on the famous “generous offer” made by Israel in 2000 Camp David summit.

As usual their angle in discrediting their opposition is pretty clever. They are using the title to gain empathy especially I assume from black Americans on grounds that he is insulting South African blacks by suggesting what Palestinians have gone through since 1948 was really like living in Club Med in comparison to what blacks in S.A. went through from 1948-1989. They are also using an issue with “a” map in the book to leave an impression in the minds of Americans that his book is phony simply because he didn’t attribute the map to its original author.

Now I am not going to claim that Carter’s book is flawless after all I’ve neither read the whole book (book excerpts) or I’m by any sort of means an expert in this field, but based on my limited knowledge I did find the grounds used by his opponent for discrediting the book to be weak. Especially their logic on the grounds of his usage of word: apartheid. After all both in the book and interviews he has made after publishing it he has stated that by that word apartheid he is not suggesting that Arabs in Israel are under the same “racist” segregation as blacks in South Africa. Rather he just wanted to point to the similarity/degree of Palestinian’s misery who are living in “Palestine” (not Israel) and since 1967 have been under 40 years of occupation by Israel army, have had to deal with their lands taken away by Jewish settlers, and now deal with a wall that in some ways has imprisoned them – just to name a few which all makes it somewhat similar to the horrible ordeal that blacks went through in South Africa.

As Carter has mentioned in speeches and interviews following the release of the book the whole goal with this book is to awaken Americans to what is going on in Palestine, and hopefully starting an open, objective, and genuine dialogue on the subject. After all America is the only country that has any leverage with Israel, and until an American government doesn’t act as an impartial broker nothing will be resolved there, and until nothing is resolved America is continuing with giving one more reason to the Islamic world to believe Islamists suggestion that America doesn’t give a hoot about ideals of democracy and freedom.

The book ironically is coinciding with the release of the Iraq Study Group report, and not surprisingly they are also criticizing the findings and recommendations made by ISG on the grounds that there is no tie between their conflict with Palestinians and situation in Iraq which was cited in not only this study but also the report by 9/11 Commission. (I don’t know how many more commissions and reports we need for Americans to finally have the guts to stand up to the few powerful Americans who are putting America’s interest after Israel's!) They also criticized the idea of having a dialogue with Syria and Iran who are not only meddling in Iraq but also have strong influence there will be a worthless effort and appeasement, forgetting about that we spoke with Iranians for matters related to invading Afghanistan.

Now the way they are going about discrediting the finding of the group is also interesting. For example here is what Elliot Cohen wrote in an OP/ED piece “No Way to Win a War” in Wall Street Journal:

The commission members spent four days in Iraq, and with the exception of a
one-day foray by former Marine Chuck Robb, they stayed in the Green Zone, that
bubble of palaces and residences that has little to do with the real Iraq of
Basra, Kirkuk, Ramadi, Baquba and Mosul. At the end, they had breakfast with the president and a few hours later posted their conclusions on the Internet for all
the world to ponder.

Reading these two sentences the author is invoking the thought that how could anyone who has spend so little time in Iraq has not only the audacity but more importantly the ability to give a report suggesting what to do there. A valid criticism, yet as you may have already noticed such lack of experience has also not stopped all of the other pundits to offer their suggestions in media. But what was interesting and ironic was that in the end of his article Cohen who I gather has spent less time there and most likely hasn’t had access to the same intelligence and military report as the ISG turns around and gives his own solution and recommendations!

Finally and at the risk of going off tangent again I can’t help but to think about Steven Spielberg’s prologue before the beginning of his movie Munich which I just got around to watching. The movie which was intended to present the subject of moral equivalency was once again criticized by the pro Israeli factions in U.S., thus forcing Spielberg to add that prologue into the beginning of his movie. Another sign that they would even go after a famous Jewish director who after all has made movies like Schindler’s List!

The Agony of Alzheimer’s

2006-11-12T18:22:00.000-05:00

NY Times
Published: November 6, 2006

To the Editor:

Thanks to David Shenk for his article about Alzheimer’s disease (“The Memory Hole,” Op-Ed, Nov. 3). Society needs continual reminders of this disease that threatens so many of us.

My wife, now 69, received a diagnosis of Alzheimer’s seven years ago. For nearly two years, she has had to be fed, bathed and dressed by someone.

Five days ago, she stopped eating because her brain can no longer send a message to her throat to tell her how to swallow. Her death will come very soon, causing our family additional grief, but it will end the long, sad process of watching her deteriorate from a mentally and physically active woman to a person who merely exists.

We all wait for a cure or a means of preventing this horrible disease.

__________________________________________________________

Get Involved -- become an Alzheimer's Advocate.

How much is that home worth?

2006-09-26T20:56:00.001-04:00

These days in a much delayed but not too surprisingly reaction to the huge run up in real estate prices many people including some experts are beginning to wonder/predict the actual degree of pull back in real estate prices. Most of the experts who have a vested interest in this market suggest that everything will be fine and prices will only drop slightly. Some of them while acknowledging abnormality of price movements and speculating frenzy during the past 5 years seem to think that this asset bubble unlike other asset bubbles will also be abnormal as its pullback in prices will be quick and brief.

Of course in order to predict what an asset is worth in the future one must go through the process of calculating that assets real value. Which brings me to my point. Most realtors tend to use a very simple and elementary method of valuing homes for both their seller and buyer clients. They mainly utilize the widely used method of comparables which is based on recent last sale prices as a way to show the value of homes right now. This method is simple and easy to explain, but also sets up the buyer to be fooled into repeating the mistake of other buyers in that area who had paid too much.

However as we all know all assets (homes included -- that is if they are viewed as investments) in a multi year period should be valued based on how much cash flow they can generate. In the case of residential real estate this become difficult since most home are used for housing purposes but one can still estimate how much rent can be derived from that property had it been rented.

Worth mentioning that my critic of comparable price method, is not because that I believe the price set by the market is wrong, I just believe that in certain time frames even Mr. Market can be wrong. Moreover another problem with these comp prices is that they don't reflect all the other deals that may occur between the buyer and seller. For example if the house is sold for $700K -- it is my understanding that if the seller gives away any benefits ala the furniture, plasma TV, points etc ... the house will still be shown as if it was sold for $700K,and unless you have a realtor who knows that transaction you would be fooled into thinking that the last deal in that street for a house was for that amount!

Now back to the point of predicting the degree of drop in house prices. Since the current two residential indexes S&P/Case-Shiller Index, and OFHEO Housing Price Index will give a view of the national market and moreover OFHEO's numbers measures prices of houses financed with “conforming” loans, which does not include jumbo mortgages they not only could give conflicting results but given real estate prices are based on local envrionments they are not the best guage for valuing a particular home.

Anyways for those who are wondering how much a house is worth and do not want to go through the hassles of calculating the NPV (net present value) of the cash flow had the property been rented -- there is a simpler way of figuring out the approximate real value. To do so you have to first believe in the concept of mean reversion -- which to simply put is the belief that prices that have grown at abnormal rates have to eventually come to a level that is equivalent to the long term growth rate of that asset.

Now for real estate the average 'historical' annual growth rate is somewhere around inflation plus or minus couple of percents depending on the location and riskiness of that property. So considering that a fair growth rate estimate would be around 5%-6% compounded annually. Do keep in mind that historical growth rates for U.S. Stocks have been between 8%-12% (depending if you invested in large or small company stocks), and historically stocks even those in S&P 500 have outperformed real estate markets even in usual hot areas like NY (see the article below or check the OFHEO HPI index for your local state).

Now for argument sake lets assume we were, still are and more importantly will be in some type of goldilock era based on factors ranging from many immigrant buying homes and other arguments used by realtors. Assuming such rosy scenarios going forward let increase those 5-6% growth rates by about 30% to say average annual growth rate of between 6-8%. Which is almost comparable to what you could earn on U.S. large cap stocks -- investments that are more liquid and have lower transaction costs!

Anywys if you agree with these growth rates then all is needed next is to find a normal/real base number. For that some may suggest going back to as far back as early 90's when the last real estate downturn ended. Since that would be tough, I think a base number staring in 2001 is much more appropriate as that conicides with the beginning of what could be referred to as free money policy of Federal Reserve under Greenspan and the beginning of lose lending standards by many financial institutions.

By taking the average price of the home you are considering from pre-bubble period (say 2001) and then growing that number by anywhere from 6-8% compounded annually you should derive at what I think would be a price in line with historical trends in home prices. If you don't have a calculator this is basically equivalent to multiplying the house value from your base year by a factor of 1.33 assuming 6% or 1.47 assuming 8%. So a $300K home in 2001 should be worth somewhere around $450K now. Of course this calculation doesn't take into consideration any major improvements the house had gone under and in the case of newly build properties it requires some additional assumptions.

Related:

Bubbles
Real Estate or Stocks?
"The Biggest Slump in US Housing in the Last 40 Years"…or 53 Years?
'Irrational exuberance' -- again

What is a Just Reaction to an Unjust Action?

2006-09-10T11:06:00.000-04:00

In the supposed linear world presented by politicians -- for every unjust action there must be a reaction. Not only to stop future similar actions, but for revenge purposes as well. Most likely a frame of thinking taken from the Old Testament: An eye for an eye.

However what such thinking doesn't take into consideration is that in most cases the relationship between action & reaction in the world of politics tends to operate on a parabolic cycle rather than a linear path with a certain ending. Which then begs the question at what point does the reaction(s) of a nation against unjust and inhumane action of others justifiable? Justifiable not only from the usual moral & ethical perspectives but also from points pertaining to economic, political and even societal.To better explain let me go over two events, first the 9/11 attacks and then the 1979 Iranian Revolution.

As a result of the attacks on 9/11/01 by those men who were influenced by Al Qaeda ideologies approximately 2,973 people which by the way not all were Americans lost their lives. This event led citizens of the countries that were effected by this attack mainly U.S. and NATO countries to allow their governments to first invade Afghanistan, and then Iraq in a war that was meant to fight terrorism, but one that I presume meant to avenge the loss of those who lost their life on 9/11.

However the irony is that as this seemingly never ending war against terrorism is continuing more people (both innocent civilians & military service men & women) are dying in an effort to avenge the lives of those killed by those 19 men who already had died. In the first war in Afghanistan so far 330 US soldiers have died while 560 injured, and in the second war in Iraq another 2,662 US soldiers have given their life, while another 9,062 injured (Source: US Dept. of Defense). To these we need to add another ~70 death for the troops from NATO serving in Afghanistan, and another ~227 death by coalition forces in Iraq.

Now here I haven't even touched on the other victims of the war which are the Afghan and Iraqi civilians! Some studies put Iraqi civilian death toll to be around 100,000 to (655,000 updated)while others that only use reported deaths in the media put the estimate at ~40,000. President Bush himself conceded on the ~30,000 figure. As far as Afghan's well the casualty on their side is estimated to be ~15,000. So all in all as a whole somewhere around 48,000 to maybe 118,000 (I know pretty wide range) have died in the past 5 years as a result of 9/11. Moreover these figures don't even include the sudden spike in terrorism and casualties post 9/11 -- e.g. attacks in Bali, Madrid, London that caused the death of even more people.

Of course this is just looking at it from purely the perspective of those who lost their lives and not from all of the other consequences of such actions such as economic cost and economic trade-offs ($ on weapons vs. $ on education) of waging such a war, America's reputation in the world, social impacts of those that somehow have been touched by this war and etc ...

In the other example of challenges and dilemmas in reacting against inhumane actions I can't help but to think of the 1979 revolution in Iran. Recently I had an exchange of thoughts with a friend after I shared a 2003 revelation by an Iranian political activist Emad Baghi. In his book "A Survey Of Iran's Revolution" he devoted a brief section to a review of actual death toll pre 1979 revolution. His findings which were as a result of having access to Martyrs Foundation (Bonyad Shahid) data showed that during the year of 1963-1977 where opposition groups were accusing the Shah's regime of horrible atrocities a total of 383 people were killed by the regime. After the revolution started in 1977 and ended in 1979 an additional 2,781 people were killed for a total sum of 3,164. This is while many opposition leaders including Khomeini frequently throw around figures of ~60,000 for the same time period! In fact while in exile in an interview in 1972 Khomeini cleverly suggested that it had been told that in the 1963 uprising 15,000 were killed by the regime, whereas the actual figure was 32! Such exaggerations continued on and in fact were elevated during the period of 1977-79 after each account of friction between the regime and revolutionaries. For example in one of the supposed bloodiest days of revolution (17th Shahrivar) in 1977 actual data showed 64 people were killed, whereas many in the opposition, and foreign media sources put the numbers to be around 4,000 and some even 10,000!

In both the 9/11 attacks and 1979 Iranian Revolution the citizens in these countries had to make a choice in how to address such atrocities. Although the situations have hugely different circumstances and history behind them, but in as far as the over reaction of the citizens they do share some commonality. At what "end" does both the mean and the outcome justify the cause? Does killing 15,000 Afghan and another 40,000 Iraqi justify having 3000 killed by mainly Saudi men? Does killing 1000 Lebanese for having 2 soldiers taken prisoner, and 3 killed justify both the mean and outcome? Does having a revolution that was mainly inspired on the death of supposed 60,000 people (actually 383), and then having another 2,781 die during the revolution and an additional ~4,000 more executed afterward -- all justify the cause of having democracy? In fact in Iran's case one can also take it one hyothetical step further by wondering had it not been for the revolution and Iran's relation with U.S., Iraq probably would not have had attacked Iran, or at least the war would not have been as long as it was. Thus raising the possibility that had it not been for Iranians over reaction to the horrible atrocities done by the Shah's regime to the 383 people , just maybe -- maybe another approximate 450,000 - 1,000,000 Iranians wouldn't have died during the war with Iraq!

Now here I must explain that my comments are not meant to suggest that no fights are worth fighting for -- no that is not my position. I'm all for holding guilty people accountable, and punished, and I can see the rational for some nations to wage wars or even have revolutions. At what levels and what reactions it makes them justifiable -- well that has to be answered on an individual bases, as I don't have a formula for say the threshold of death on both the side of aggressor and victim in making it a just or an unjust reaction. Having said that I do think that if the reaction will cause the death of multiple more people, then maybe as much as killing one innocent person idealistically is equivalent to killing all innocent people, but since realistically it doesn't then it may be best to just accept what happened -- however tough it may be, and find an alternative approach.

Lastly my main point is that I think all responsible citizens must make sure that their political leaders have exhausted all peaceful means in trying to stop future unjust actions before allowing them to resort to war or say revolution -- which could lead to killing of many others. This of course requires accepting the responsibility of making sure we are informed enough so we are not manipulated into allowing those with their own agendas, and not so well thought out plans to change the course of our destiny.

Also see these related blogs:

How to STOP Terrorism?
Linearity versus the action-reaction cycle

Proportionality

2006-07-13T23:24:00.000-04:00

Can you imagine if US invaded or bombed the hell out of Mexico in response to bunch of idiot bandits kidnapping a border patrol officer!

Which is why with everything that I've been seeing in the past three weeks in reaction to the capture of the first Israeli soldier by Palestinians, and now another two by Lebanese I am reminded of the famous line/rule "proportionality should be a guideline in war" which Robert McNamara stated in the documentary The Fog of War. Here is how he explained it:

"Why was it necessary to drop the nuclear bomb if LeMay was burning up Japan? And he went on from Tokyo to firebomb other cities. 58% of Yokohama. Yokohama is roughly the size of Cleveland. 58% of Cleveland destroyed. Tokyo is roughly the size of New York. 51% percent of New York destroyed. 99% of the equivalent of Chattanooga, which was Toyama. 40% of the equivalent of Los Angeles, which was Nagoya. This was all done before the dropping of the nuclear bomb, which by the way was dropped by LeMay's command. Proportionality should be a guideline in war. Killing 50% to 90% of the people of 67 Japanese cities and then bombing them with two nuclear bombs is not proportional, in the minds of some people, to the objectives we were trying to achieve."

Now back to this Israeli soldier kidnapping. Here we have had one soldier taken by some faction of Palestinian or "maybe" bunch of idiots acting alone on their own vengeance, and then for three weeks the Israeli's bomb away the Gaza killing several innocent civilians, and do various inhumane acts like using sonic booms, or cutting off electricity to I guess teach those ignorant Palestinians a lessons to not mess with the Jews. Not thinking that such acts could anger other Arabs -- ala some Lebanese who probably saw what was happening and in anger and stupidity for their own country they also kidnapped two Israeli soldiers, which of course in return made Israeli's to bomb them ending up in more civilians death. Truly just like a game between bunch of toddlers, however with a much more serious consequence.

What is interesting is how those who have been waiting to put another blame on Iran for everything that is going on in Middle East and eventually the world are now formulating a theory by suggesting that the orders for these actions came from Iran. Today I even heard that some officials in Israel are suggesting that the two soldiers that were kidnapped by Lebanese Hezbollah have been transferred to Iran. Now since I don't doubt that Iran has once supported and/or maybe still supporting Hezbollah and/or Hamas I do agree with the possibility that they could have had something to do with all of this as a way to perhaps increase their barganing chips in front of G8, or just for the hell of it!. But oddly enough and not surprisingly no one is countering the Pro Israeli conspiracy theorist who are making such assertions by suggesting to them that what if Israel orchestrated or allowed all of this to happen once again bring Iran's case into the forefront -- thus making another case for a military solution to getting rid of the current regime in Iran.

Sharia Investing

2006-07-13T21:43:00.000-04:00

The Islamic prohibition against earning interest has largely stopped companies from selling bonds into the $750 billion pool of capital managed according to sharia, or Islamic law. But investment bankers are finding a way around the ban. On July 5 bankers from Merrill Lynch in London and Beirut-based Bemo Securitisation were wrapping up a $166 million sale of debt-like certificates for a Houston natural gas producer, East Cameron Gas. The certificates, believed to be the first sharia-compliant securitized market financing of U.S. assets, are structured so that Islamic investors effectively get a fixed rate of return (11.25% annually) while considering themselves owners of the underlying assets. An official sharia adviser issued a fatwa, or declaration, certifying that the instrument "will yield returns, Allah willing, that are lawful and wholesome."

After reading this piece earlier in the week on BW website the cynic in me thought that I know well that even with my formal training in finance I probably will have a difficult time understanding the details of that debt instrument issued by ML, which made me question the ability of someone who is supposed to be a religious expert to do the same. I know this isn't brain surgery so I'm sure there is someone who knows all of the prophet's hadiths and has a masters degree in finance, but how does one know if he does have such a background.

Anyways on the same line awhile back I had heard about Mario Gabelli the famous money manager announcement to launch a Sharia based hedge fund (news link). The article suggested the intention was to tap the oil rich wealthy Muslim markets -- hey good to see that once again money sees no color, ethnicity, or religion :-) the article noted that:

the fund won't invest in companies that sell pork, tobacco or alcohol. Also forbidden are casinos or other companies that engage in gambling and most media and entertainment businesses. Additionally, Sharia law does not allow one to make money through debt and interest payments, so all forms of bonds or loans are off limits as well as public companies in the banking and insurance sectors.

Now here are my thoughts on this whole sharia based investing, however as usual let me first dish out my disclaimer that I am not a religious scholar or a supposed sharia official adviser, thus having never studied the "original" religious decrees pertaining to this matter I'm expressing my opinion simply based on what I've casually read, and heard. Moreover before I go on expressing my point, let me also add that I obviously do believe that there is nothing wrong with making socially or morally conscious based decisions -- even ones as pertaining to investment decisions. Moreover lets not forget that such ethically based investment guidelines is not exclusive traits of Muslims, after all companies like Calvert Funds market their products mainly to Christians.

So for example if a loved one has died of lung cancer during when cigarette makers were hiding nicotine's effects it is then understandable to not want to invest in those companies. Or if you are anti war then it is understandable to not want to invest in companies that profit from having wars -- and on and on. However with all such ethical issue there is always that gray area that makes the decision much tougher to make. For example one could decide against not investing in stocks of defense companies, because from some people's perspective they are profiting from a war of aggression in Iraq, but what about the other side of the argument -- that had it not been for these companies America would not have the same power to protect herself from potential aggression of other countries or entities thus not having all the peace and side benefits that comes along with it?

Having said that in as far as the sharia laws the challenge gets even tougher given the many restrictions, especially the one involving receiving interest on debt instruments and apparently investing in companies that do so. Again not speaking as a religious scholar, but given how Islam has many similar laws as the other two Abrahamic religions (Judaism and Christianity), it seems to me that probably the original rational behind forbidding interest came from Christians view on extraction of 'usury' (exorbitant or illegally high interest rates). In fact it is my understanding that even in US a country that is supposed to be both a champion of free marketplace and a secular country we have some state laws that are basically equivalent to the Christians view on this matter. Worth noting here that I do agree with such laws or even moral codes that are against receiving exorbitant interest rates even as a proponent of free markets.

Having said that the issue with sharia's views on interest at least in the eyes of some Muslims is that all interests are forbidden, at least apparently until recently where Merrill Lynch could find that sharia adviser that has find a loophole in the original decree. I remember I once discussed this matter with a young Muslim lawyer. His position was that because you are not exposed to any risk in a debt instruments in god's eye you are not suppose to be granted any rewards ala interest.

My argument to him was as follows: If by risk we are referring to not losing any of your original principal then it could be said that if you invest in blue chip stocks like GE, Exxon, WalMart, Microsoft, Intel etc ... or in a diversified basket of stock likes S&P 500 in the long run -- say 10 years and more you will "most" likely not lose any of your principal either! On the other hand if by risk you are referring to the short term volatility of your original principal then that is something that is also present in debt instruments, after all bond prices go up and down as interest rates go down and up. Moreover it can be argued that you could technically lose all of your principal in a debt instrument. Just ask bondholders of Enron, Worldcom, Orange County CA, etc ...

Then I explained to him some of the gray area of such ethical decisions. For example if it wasn't for all of the tax free municipal bonds issued by local states and governments we would not have the privilege of the roads, and schools that both he and I and our children are using everyday. Also I explained to him my the intertwined complicated global marketplace, and how living in US or for that matter even many of the Muslim countries, it is tough to truly adhere to sharia laws. I presented him the dilemma of not investing in insurance companies because they invest in bonds, and yet going about getting car insurance all to supercede US state laws on mandatory car insurance over the one imposed by god!

Now one thing that I must say is that it does seem as that most of the Muslims who are strict advocates of sharia laws are Sunni's and not Shiites. Which is not surprising after all Sunni's follow the traditions and guidelines given 1400 years ago by the prophet, while Shiites for various reasons have evolved and changed their interpretation of those guidelines. In fact I know in Iran the supposed Islamic government has allowed banks to offer interest on deposits, and there are various municipal bonds issued by local states. Now apparently as a CYA they have changed the wording -- so instead of calling it interest they call it something else, but regardless of how they are doing it in my opinion it is better than nothing.

In conclusion I do realize that in a free society it is someone's own perogative to invest their money however they want, but since practically given today's world it can't be done consistently then I can't help but to think about something that has been discussed among various intellectuals lately and that is an Islamic Reformation. A reformation very similar to what Christianity went through, which I might add could be "one" of the contributing factors behind the advancement of Christian countries as compared to Muslim ones.

Global Warming

2006-07-04T07:40:00.000-04:00

By Daniel Gilbert

NO ONE seems to care about the upcoming attack on the World Trade Center site. Why? Because it won't involve villains with box cutters. Instead, it will involve melting ice sheets that swell the oceans and turn that particular block of lower Manhattan into an aquarium.

The odds of this happening in the next few decades are better than the odds that a disgruntled Saudi will sneak onto an airplane and detonate a shoe bomb. And yet our government will spend billions of dollars this year to prevent global terrorism and … well, essentially nothing to prevent global warming.

Why are we less worried about the more likely disaster? Because the human brain evolved to respond to threats that have four features — features that terrorism has and that global warming lacks.

First, global warming lacks a mustache. No, really. We are social mammals whose brains are highly specialized for thinking about others. Understanding what others are up to — what they know and want, what they are doing and planning — has been so crucial to the survival of our species that our brains have developed an obsession with all things human. We think about people and their intentions; talk about them; look for and remember them.

That's why we worry more about anthrax (with an annual death toll of roughly zero) than influenza (with an annual death toll of a quarter-million to a half-million people). Influenza is a natural accident, anthrax is an intentional action, and the smallest action captures our attention in a way that the largest accident doesn't. If two airplanes had been hit by lightning and crashed into a New York skyscraper, few of us would be able to name the date on which it happened.

Global warming isn't trying to kill us, and that's a shame. If climate change had been visited on us by a brutal dictator or an evil empire, the war on warming would be this nation's top priority.

The second reason why global warming doesn't put our brains on orange alert is that it doesn't violate our moral sensibilities. It doesn't cause our blood to boil (at least not figuratively) because it doesn't force us to entertain thoughts that we find indecent, impious or repulsive. When people feel insulted or disgusted, they generally do something about it, such as whacking each other over the head, or voting. Moral emotions are the brain's call to action.

Although all human societies have moral rules about food and sex, none has a moral rule about atmospheric chemistry. And so we are outraged about every breach of protocol except Kyoto. Yes, global warming is bad, but it doesn't make us feel nauseated or angry or disgraced, and thus we don't feel compelled to rail against it as we do against other momentous threats to our species, such as flag burning. The fact is that if climate change were caused by gay sex, or by the practice of eating kittens, millions of protesters would be massing in the streets.

The third reason why global warming doesn't trigger our concern is that we see it as a threat to our futures — not our afternoons. Like all animals, people are quick to respond to clear and present danger, which is why it takes us just a few milliseconds to duck when a wayward baseball comes speeding toward our eyes.

The brain is a beautifully engineered get-out-of-the-way machine that constantly scans the environment for things out of whose way it should right now get. That's what brains did for several hundred million years — and then, just a few million years ago, the mammalian brain learned a new trick: to predict the timing and location of dangers before they actually happened.

Our ability to duck that which is not yet coming is one of the brain's most stunning innovations, and we wouldn't have dental floss or 401(k) plans without it. But this innovation is in the early stages of development. The application that allows us to respond to visible baseballs is ancient and reliable, but the add-on utility that allows us to respond to threats that loom in an unseen future is still in beta testing.

We haven't quite gotten the knack of treating the future like the present it will soon become because we've only been practicing for a few million years. If global warming took out an eye every now and then, OSHA would regulate it into nonexistence.

There is a fourth reason why we just can't seem to get worked up about global warming. The human brain is exquisitely sensitive to changes in light, sound, temperature, pressure, size, weight and just about everything else. But if the rate of change is slow enough, the change will go undetected. If the low hum of a refrigerator were to increase in pitch over the course of several weeks, the appliance could be singing soprano by the end of the month and no one would be the wiser.

Because we barely notice changes that happen gradually, we accept gradual changes that we would reject if they happened abruptly. The density of Los Angeles traffic has increased dramatically in the last few decades, and citizens have tolerated it with only the obligatory grumbling. Had that change happened on a single day last summer, Angelenos would have shut down the city, called in the National Guard and lynched every politician they could get their hands on.

Environmentalists despair that global warming is happening so fast. In fact, it isn't happening fast enough. If President Bush could jump in a time machine and experience a single day in 2056, he'd return to the present shocked and awed, prepared to do anything it took to solve the problem..

The human brain is a remarkable device that was designed to rise to special occasions. We are the progeny of people who hunted and gathered, whose lives were brief and whose greatest threat was a man with a stick. When terrorists attack, we respond with crushing force and firm resolve, just as our ancestors would have. Global warming is a deadly threat precisely because it fails to trip the brain's alarm, leaving us soundly asleep in a burning bed.

It remains to be seen whether we can learn to rise to new occasions.

Hedge Fund Regulation

2006-06-28T15:31:00.000-04:00

As you may have read in my earlier post under the title "Does the Emperor Really ..." I wrote about this whole notion that some how "some" hedge fund managers are perceived as oracles, while going over the need for more regulation in this $1.2 trillion dollar industry.

Now here is where most of the supply siders aka leave it to the free market people will get pissed off and are most likely about to leave the site. After all we all know that less regulation is always better than more regulation. But lets not forget that in case of hedge funds they were starting at NO regulations. Also lets not kid ourselves the the financial service industry is one of the few industries that doesn't have many of the same entry prerequisites as say the other white collar professions be it law, or medicine. Basically you can set up a hedge fund if you are well connected with people with money & information, and if you have the latter then all you need is the basic knowledge of finance so you can understand what is written in WSJ and is said on CNBC. And up to last year the hot dog vendor probably got more scrutiny from regulators of its industry than a $1 billion hedge fund.

Anyways as I had mentioned a ruling last year required hedge funds with 30 million in assets and more than 15 clients to register with SEC. One refused and took the SEC to court, and yesterday in another blow to the cause for having more transparency in our capital market the hedge fund world benefited from the decision by the DC Circuit court in that case which was againts a $225 million hedge fund being managed by Philip Goldstein.

Unlike the 1200 or so hedge funds that did register as a result of the new law that had been passed, apparently Goldstein felt strongly against registering and/or disclosing compliance information to the SEC. He felt that running a business that probably generates about $4M a year with very high profit margin money management biz should come with the overhead cost such as registering and compliance standards like all the other money managers that are conducting the same task and are regulated under the 1940 Act!

I suppose his logic is that his "clients" -- oops I mean his "investors" do not need to be protected from him and the likes of him that are running hedge funds after all history has proven that all participants in capital markets are former saints.

Ironically after yesterday's ruling we had the Senate hearing today where numerous people testified on the whole issue of hedge fund regulation. One of them was the former SEC lawyer Gary Aguirre whose main focus was on a case involving allegations of insider trading in a very large hedge fund. Reading his testimony I did find the following point interesting:

"The first step in getting a handle on the risks posed by hedge funds is to separate and tag them. I believe there are three risks: (1) hedge fund conduct that cheats their own investors; (2) hedge fund conduct that randomly cheats everybody else, and (3) the systemic risks such as those that surfaced when Long Term Capital Management (“LTCM”) collapsed. I will not address the LTCM class of risks because it is beyond my expertise and its solution appears to involve multiple federal agencies."

It was good that he broke it down like this because most of the hedge fund supporters keep pointing to only the first risk. Suggesting that individuals who invest with these funds are sophisticated enough to make sure that they are not deceived, and suggesting by registering or having regulations you can't stop fraud. A hypothetical that for argument sake lets say that they are right. But as Aguirre pointed out the second risk is what is really at the heart of having tighter regulations or I should say even playing field for all individuals that are responsible for managing money -- be it clients or investors whatever you want to refer to them as. In explaining the impact on the second risk he went on to say:

"Hedge Fund Fraud against Other Market Participants: This species of fraud has an easier target and a far greater potential to disrupt the capital markets. Its victims have no connection with the hedge fund. They are random victims. Much like the victims of a sniper, they never knew what hit them. For example, the millions of mutual fund investors had no clue that billions of dollars were being siphoned from their investment accounts each year by hundreds of hedge funds, as it happened in the recent mutual fund scandal. Likewise, the value investor has no clue that an attractively priced small cap is on its way to bankruptcy via the naked shorting of an $8 billion hedge fund. Similarly, the most sophisticated institutional investor will not second guess the expensive computer model when it begins blinking sell on XYZ stock because it has become overpriced. How could that investor know several hedge funds are buying up XYZ stock because they have been tipped by an investment bank executive that Google will make a tender offer for XYZ at a 50% premium to its current stock price?"

Here is his full testimony.

CPI Calculation

2006-06-14T13:48:00.000-04:00

Two years ago in a post under the title Real Inflation Figures I wrote about the supposed low inflation figures that were being reported by BLS. A year ago in couple of emails that I exchanged with both BLS and Federal Reserve I also expressed my concern -- more specifically on using Owner Equivalent Rent (OER) vs. actual home sale prices in calculating cost of housing and shelter.

Well just in case you missed today's 0.3% increase in core CPI (see this good article) one of the major factors contributing to the upward pressure in the data was OER as it had an increase of 0.6%. So I figured what the heck let me write them again. Here are the emails that were exchanged last year as well as today:

Me:

Why is it that with majority of Americans buying or wanting to buy a home vs. renting it and with cost of housing being one of the largest component of the CPI the BLS is still using owner equiv. rent data from a sample of 50,000 people instead of using widely available home sale data points? With all the computing power why can't BLS use OER survey for calculating inflation for rent prices, and use actual sales prices for calculating inflation in home prices.

BLS:

... We use OER as a proxy for changes in the price of the shelter services provided by owner-occupied housing. Said another way, there is a consumption component of owning a home, and an investment component. We are trying only to measure the former.

Me:

... I do agree that the goal of the index should be to measure the cost of having a shelter (e.g. a home) vs. rate of growth in assets like real estate ... however as some of your other colleagues in SF will I'm sure agree with (see article) is that this methodology is clearly not doing a good job in measuring the actual cost of buying a home in at least the major metropolitan areas that actual sale prices have grown at a much faster rate than rental income.

So at the end of the day regardless of BLS's intention it does seem that the CPI is not really reflecting actual price increases in cost of owning a home, and just in 1983 when the bureau decided to change its methodology then perhaps it is time for another reevaluation of how to properly measure the cost of owning a home.

Me:

... with today's release of CPI data I thought of writing one more time to voice my opinion on the problems with using OER. It seems as that the real estate bubble/boom we have had in the past 5 years or so is now having a trickling "lag" effect on OER. Which makes lay people like me wonder had BLS used the readily available computing power to create an index that will be reflective of home prices then the CPI data will not have such a lag.

BLS:

You may well be right about the lag between house prices and OER. The upward pressure on rents may have been building up because of higher property taxes, and now even rising interest rates.

Does The Emperor Really Have No Clothes?

2006-04-22T10:54:00.000-04:00

No by emperor I’m not talking about GWB, I’m actually referring to SAC and others like him. Who is SAC? Steven A. Cohen the owner of SAC Capital one of the highest sought out hedge fund manager ‘so far’.

Why this subject -- well awhile back a friend asked me how is it that hedge funds have such phenomenal returns like 30, 40 or 50% per year when average mutual funds or major indicies are giving 10 or so percent? Now he was asking this because I'm sure he had only casually heard about some of these hedge funds performances, after all for most individual investors (even HNW ones) not only having access to investing in such top performing funds is a difficult and at times impossible task; but access to widely publicized analytical information about them is also difficult. Which is why for some given the lack of data available on them (vs. mutual funds) we usually end up hearing only the good news or the really bad news, and seldom about the mediocre performers that given their high fees (1-2% mgmt fee + 20-50% of profits), high promises, ended up closing down.

Having said that there are some hedge funds (e.g. SAC Capital) that 'apparently' until now neither have had the faith of the mediocre ones nor the once famous ones like Long Term Capital, or Tiger Fund and are producing phenomenal returns even when accounted on a risk adjusted basis. Begging the question of whether are the manager(s) that much smarter than the individuals who ran the previous hot funds like LTCM or Tiger or even the ones that are currently managing mutual funds at Fidelity, Capital, or TRowe or are we just being fools of random events again by thinking that they are geniuses.

Now when I ask this question I am not suggesting that those like yours truly that do believe in the concept of mean reversion must think that these folks are all bunch of idiots who are simply just getting lucky -- no of course not. Also worth mentioning that I also understand that given the leverage and multi discipline strategy that is used by many of these hedge funds it isn't too proper to compare them with their brethrens on the mutual fund side. An argument which I would say is valid when comparing a hedge fund that is beating similar funds and/or major indicies by couple of percents year and year out but perhaps a tough one to agree with when they are outperforming the broad indexes or similar mutual funds by 2 to 3 times annually!

I guess the best way to see is if they are geniuses or if something else can explain their phenomenal performance is if we analyze the one that we are talking about here and that is SAC -- of course the sheer attempt of analyzing them, is a moronic statement on its own, because detailed information about the funds were a big secret as they were exempt from the same registeration and filing requirement as other advisors who operate under the 1940 IA Act. Even now given a loophole that SEC has awarded the industry some funds get around the requirement of annual filing and I assume random audit simply on the grounds that they have been able to persuade their clients to agree to have their assets in effect be locked in the fund for two years. As a result so much of what we know about the firm is hearsay and rumors, and/or dependent on their filings with the SEC.

The main rumor on SAC is that they are responsible for about ~3% of daily trades on NYSE and ~1% of NASDAQ. A significant amount especially since he is only estimated to have about $10 billion under management (not a huge amount when compared to the assets that were once managed by previous famous hedge fund managers likes of Soros and Robertson). The other rumor about SAC is that unlike firms like mutual fund giant Fidelity they don’t haggle over commissions paid to their brokerage firms. In fact it is said, to endear themselves they are more than willing to pay a higher commission than a typical institutional investor. Anyways say if they are trading about 50 million shares of stock each day paying .01 cents a share, that will put their daily commissions to be around $500,000 a day. With ~250 trading days in a year SAC could be using client’s assets to pay anywhere around $125 million annually to various brokerage firms for handling their trades.

Now considering how in this business there are always a few bad apples who are motivated by money and greed it isn’t too far fetched to phantom the possibilities of having traders with the brokerage firms providing tips to good customers like SAC, or unethical and easily manipulated analysts being persuaded or cajoled into writing favorable or unfavorable reports about particular companies.

In fact this is what this post is all about. About a month or so ago a pharmaceutical company Biovail accused SAC Capital of market-manipulation. Allegedly they had "ghost written" negative reports written by Gradient Analytics an independent research report company and also influenced reports written by a Banc of America analyst which ultimately drove down the shares by 50% -- a position that needless to say they were short on.

Finally let me mention this potential similar case -- awhile back after noticing the trading activities of stocks recommended by a popular newsletter I tried researching to find their owner(s) and had no luck. In turn I wrote to the SEC and much to my surprise they didn't have any records as well! Now we have to wait for the courts to decide the final outcome and see if in fact hedge fund managers are really great investment pickers or "for some" their genius mainly lies in finding a way to take advantage and/or overpower the system -- thus suggesting that the emperor may really not have any clothes! But meanwhile, and regardless of the court ruling I do hope the SEC will find the courage and $ to find a way to enforce the much needed regulations on these funds not too mention doing a better job of enforcing the already existent regulations on analysts research reports.

Punk'd by ML

2006-04-01T10:27:00.000-05:00

I thought that this Washington Post column under the title "Punk'd: A Cautionary Tale" did a good job in pointing yet another incident of conflict of interest in the brokerage industry, which as always continues to be one of the industry's fundamental challenges going forward.

The reported incident was about a common and old concept in not only the brokerage industry but as the columnist also stated one that is present in all industries that operate with a sales staff, and that is "sales contests". These contests are ideal in motivating the sales team to generate more revenue for the firm, and in turn the sales team is motivated for not only their own monetary or enjoyment benefits of the rewards that they could win, but also to cozy up with their manager for various perks and future benefits (e.g. a better assistants, and of course a better office).

The only problem here is that it is one thing to know that the person who sold your last car, last mortgage, or last plasma TV was rewarded with a trip or some other sales award as a result of your purchase, and it is another to have your broker aka financial advisors whom you've hired to increase your wealth was motivated by even partially for any other reason but your financial interests.

The other point that was raised in the article was the trend in having smaller accounts serviced by different brokers in call centers (eventually overseas) vs. one broker who should know each clients individual situation much better. In the past senior brokers were recommended to pass these accounts to more junior newly minted brokers, however as it was mentioned in the article in the case of ML they have chosen to send them to a call center, which most likely is staffed with the same junior brokers who fell out of production (couldn't make it) and are now working mainly on salary + bonus vs. just straight commission like regular brokers. Now those who are above the $100K threshold stated in the article may find this as a moot point, however considering commission rates and asset based fees are dropping the dollar amount of an account that may one day be considered as "small change" or a waste of time is rising for an experienced broker.

To give you a better feel of this let me end this by boring you with some factoids about broker compensation which I would argue has a high correlation with the level of service one will get from the broker. Usually a typical broker at one of the larger firms will get about ~35% to ~45% of each dollar of total commissions/fees that they generate from a client depending on how much commissions/fees s/he generate. Which is why if the accounts they have generates on average 1.50% in commissions and/or fees then a $100,000 relationship will be worth about ~$300 after taxes to that broker for a whole year of service. This is why the more experienced and established brokers (those with $1M in production and ~$400K in income) prefer to spend their time looking for and servicing high net worth individuals with investable assets of around $1M or plus, and have no problem passing the small six figure accounts to either the junior brokers or call centers -- unless of course they can churn your account to generate more commissions.

Also See: What Your Broker Should Disclose

Israel Lobby & US Foreign Policy

2006-03-26T11:54:00.001-05:00

Since Pres. Truman's administration when Truman said "I am Cyrus"! (referring to Cyrus decree setting Jews free) the supposed secular American leaders in both executive and legislative branch have exhibited an unusual amount of unconditional support for Israel. Of course they justified it mainly on the grounds of strategic matters, whereas in fact it had to do with religious and theological grounds as well as these days for raising money to get elected. Now two professors at Harvard and Chicago (who I'm sure will be or have already been labeled as whacked conspiracy theorists and/or antisemites) are shedding more credence and factual argument behind the consequences of such a position.

"The US national interest should be the primary object of American foreign policy. For the past several decades, however, and especially since the Six Day War in 1967, the centerpiece of US Middle East policy has been its relationship with Israel. The combination of unwavering US support for Israel and the related effort to spread democracy throughout the region has inflamed Arab and Islamic opinion and jeopardized US security.
This situation has no equal in American political history. Why has the United States been willing to set aside its own security in order to advance the interests of another state. One might assume that the bond between the two countries is based on shared strategic interests or compelling moral imperatives. As we show below, however, neither of those explanations can account for the remarkable level of material and diplomatic support that the United States provides to Israel. "

by Emad Mekay

"Why has the United States been willing to set aside its own security and that of many of its allies in order to advance the interests of another state?" ask authors John Mearsheimer of the University of Chicago and Stephen Walt of the John F. Kennedy School of Government at Harvard University.

The answer, according to the paper, which is already stirring debate in academic circles and fury among pro-Israel groups, is the influence of the pro-Israel lobby.

These groups include the American Israel Public Affairs Committee (AIPAC), the Conference of Presidents of Major Jewish Organizations, the Jewish Institute for National Security Affairs, the Washington Institute for Near Eastern Policy, and more recently, Christian Zionist organizations.

A shorter version of the study was published in the London Review of Books on Mar. 10. The authors say their research is so strong that they doubt that any U.S. mainstream publication would dare publish it.

Based on sources that include Israeli scholars and journalists, international human rights organizations, and testimony from the lobby itself and politicians that support it, the study examines how the pro-Israel lobby built up its influence in Washington and says its intimidation of the press, think tanks and academia has led to a deceptive picture of Israel.

Since World War II, the United States has channeled 140 billion dollars in support to Israel, notes the study, which also challenges the notion that Israel is a "crucial ally in the war on terror, because its enemies are America's enemies".

"Saying that Israel and the United States are united by a shared terrorist threat has the causal relationship backwards: rather, the United States has a terrorism problem in good part because it is so closely allied with Israel, not the other way around," the authors argue.

"In short, treating Israel as America's most important ally in the campaign against terrorism and assorted Middle East dictatorships both exaggerates Israel's ability to help on these issues and ignores the ways that Israel's policies make U.S. efforts more difficult," they say.

According to the study, pro-Israel lobby groups have exploited the sensitivities of major media outlets and of U.S. politicians to campaign contributions to maintain their sympathy for Israel regardless of what it does in the region.

During AIPAC's annual conference earlier this month, which attracted top U.S. officials and Congressional leaders, the new Republican majority leader in the U.S. House of Representatives, John Boehner, vowed never to allow anti-Israel legislation come to the floor.

"As the new House majority leader, I can assure you that under my leadership, legislation that is in any way perceived as anti-Israel will not be considered in the House of Representatives," said Boehner.

The study also points to Washington's staunch support of Israel at the United Nations. Since 1982, it says, the United States has vetoed 32 Security Council resolutions critical of Israel -- a number greater than the combined total of vetoes cast by all the other Security Council members. And it has blocked Arab states' efforts to put Israel's nuclear arsenal on the agenda of the International Atomic Energy Agency.

At home, the lobby has worked hard to suppress its critics, something the authors say has not been good for democracy, especially one that now claims to be promoting freedom in the Arab world.

"Silencing skeptics by organizing blacklists and boycotts -- or by suggesting that critics are anti-Semites -- violates the principle of open debate upon which democracy depends," they say.

____________________________________________________

By Tom Regan / csmonitor.com

While mainstream media in the United States have been largely silent, media in Israel, and Jewish-community media in the United States, have been reporting on, and discussing a paper by two prominent political scientists who argue that the US's current relationship with Israel is not good for US security.

While much of the Israeli coverage has been very critical, some local commentators have argued that the paper, while flawed, is a wake-up call for both Israel and the US, and that avoiding a discussion of the relationship will neither advance Israeli interests nor improve the US-Israel relationship.

The New York Jewish weekly Forward writes that Jewish organizations in the US, while furious over the paper, are "holding fire in order to avoid generating publicity for their critics." American pro-Israel activists are also fuming, but have also decided to work behind the scenes to counteract the report.

What's another $50 Billion

2005-10-08T14:00:00.000-04:00

I have 50,000,000,000 ... I have 100,000,000,000 ... I have 200,000,000,000 ... I have 300,000,000,000 ... and now:

The Senate voted Friday to give President Bush $50 billion more for the wars in Iraq and Afghanistan and U.S. military efforts against terrorism, money that would push total spending for the operations beyond $350 billion.

With each spending bill approval I can't help but to think of Lawrence Lindsey the former White House economic advisor. It was he who was quoted in September 2002 of WSJ that the cost of war in Iraq would be around $100 to $200 billion. A figure considerably higher than a preliminary, private Pentagon estimate of about $50 billion (LOL). Of course the administration immediately dismissed Lindsey's estimate, and eventually Lindsey himself as he was politely fired. Hey had he kept his mouth shut maybe he could've probably become Alan Greenspan's replacement. Although it is worth noting that as the cost is going significantly north of $200 billion even his prediction is getting way off base.

Now I realize predicting cost of wars is a tough task but so is predicting anything and yet people both in business and in governement are paid to do that. In the business world most billion or for that matter million dollar projects are made based on various sensitivity and "what if " analysis. So with each additional funding request by this administration I can't help but wonder if the Iraq war planners were incompetent fools or dishonest policy makers.

Well enough gripping as that will be unpatriotic in a time of war and it would hurt our troops efforts in combatting terrorism :-) So lets change the tone to a more constructive discussion. Having said that I realize that this may not be the best time to cut and run from Iraq. First because of the chaos that it "could" create there but more importantly because it could be very similar to the Soviets withdrawal from Afghanistan which could be interpreted as the demise of America's military might. So I'm not for a cut and bait strategy right now, but at the same time I still don't think this administration's strategy is practical either.

At any rate this is becoming a true money pit project and we have no one to blame but those Americans who not only allowed this President to invade another country preemptively without a Formal Declaration of War approval from the Congress but in 2004 again choose not to hold him accountable by re-electing him for various twisted reasons none having to do for what is good for the nation as a whole.

Iraq's Climate of Violence

2005-09-29T22:04:00.000-04:00

"Poor planning, air strikes by coalition forces and a `climate of violence' have led to more than 100,000 extra deaths in Iraq, scientists claim," according to BBC News.

"A study published by the Lancet says the risk of death by violence for civilians in Iraq is now 58 times higher than before the US-led invasion. Unofficial estimates of civilian deaths had varied from 10,000 to over 37,000."

In Exiting Iraq, a special task force of scholars and policy experts directed by Cato's director of foreign policy studies Christopher Preble argue that the military occupation of Iraq must end. They assert that the presence of troops in Iraq distracts attention from fighting al-Qaeda and emboldens a new class of terrorists to take up arms against the United States. Moreover, the occupation is enormously costly for American taxpayers, exposes our men and women in uniform to unnecessary risks, and undermines attempts to foster political and economic reform in the region.

Effective Leadership

2005-09-05T21:12:00.000-04:00

A week has gone by since the gulf coast was hit by a hurricane. A hurricane that by no means was a surprise event to both the local government and more importantly the federal government, and all while the hardcore republicans are quick to indicate that any criticism of the actions or perhaps inactions of the federal government is once again nothing but politicizing the event and I guess equivalent to being an "un-American" act.

Now I realize that the general election is over and done with and although apparently no one back then cared about the administration's actual job performance and accountability of the President to the decisions he had made; and talking about it now is perhaps moot but even so I couldn't help to think how the events of past week once again shed more lights at the poor decision making of this administration and our President.

I'll admit that satisfying everyone during events like this is very difficult but in a rich country like US it is not too far fetched to say that how the federal authorities responded wasn't up to par especially in light of federal govt rhetoric's and supposed actions & spending post 9/11.

So what happened? Was it just another case of racial bias ... perhaps yes to a small degree but in my opinion the main culprit had to with again who was at the helm both in the administration but also who he had chosen to head the two federal government departments that were mainly responsible. Lets start with FEMA. FEMA's director Michael Brown primary career experience before nabbing a Federal Emergency Management Agency post was being an attorney, adjunct professor and according to one website (Knight Ridder) running an Arabian horse association! Michael Chertof who head the DHS was previously a district court "judge" who now has the mammoth task of managing a department with 180,000 employees that has merged 22 separate agencies while juggling domestic and international responsibilities. As you may remember he was chosen after the President's original choice Bernard Kerik who was just a police commissioner in NY had to withdraw because of problems with tax payment. Who said that you need to have experience to get good jobs! Perhaps off tangent but yet as another proof one can also take a look at the President's new nominee for Chief Justice. Roberts who I do think is a good nominee for an associate justice is most likely a stretch for being Chief justice given that he only served as a judge for couple of years on the district level and the only experience he has had from a perspective of a Chief Justice was when he was serving as a clerk.

What Your Broker Should Disclose

2005-04-17T16:11:00.000-04:00

Hopefully with more coverage through articles like the one below more investors will know the difference between the obligations of stockbrokers to their clients vs. obligations of investment advisors.

FYI a stockbroker is required to register with the National Association of Securities Dealers (NASD), while an investment advisor must be registered with the SEC. Under defined duties and regulations, stockbrokers or dealers are required to recommend “suitable” investments to clients and are not obligated to find the best investments for a client. Investment advisors, however, must uphold a “fiduciary” standard, which means they should always seek investments that are in the best interest of the client.

What Your Broker Should Disclose
SEC Is Expected to Require Firms to Inform Investors Their Interests May Diverge
By JEFF D. OPDYKE
THE WALL STREET JOURNAL
April 14, 2005

The Securities and Exchange Commission wants you to know the difference between a broker and an investment adviser.

So, in an effort to begin clearing up what has become an increasingly murky corner of Wall Street, the SEC is expected in the next week or so to publish newly drafted disclosure requirements that brokerage firms will begin including later this year in brochures, sales material, account-opening agreements and newspaper ads, among others. The plain-English disclosures will remind investors that brokerage-firm interests "may not always be the same as yours"; that investors should "ask us questions to make sure you understand your rights and our obligations"; and that investors should realize that "we are sometimes paid by you and by people who compensate us for what you buy."

The once clear line dividing brokers and investment advisers has increasingly grown blurry during the past decade as brokerage firms have shed their image as stock-market order takers and recast themselves as providers of big-picture financial planning and investment advice. That's a role once the domain of registered investment advisers, who have grown increasingly agitated that brokers don't have to abide by the same standards when dispensing advice that goes beyond the incidental advice tied to a particular investment transaction.

Last week, the SEC unanimously ruled brokers don't have to register as advisers, upholding an exemption Congress originally included in the Investment Advisers Act of 1940. While the commission didn't change the existing law, it moved to require greater disclosure, acknowledging that Wall Street has changed during the past six decades. The commission found in a series of recent focus groups that individual investors today are hard pressed to distinguish between a broker, a financial planner, an investment adviser or a financial adviser. Nor do they generally understand that they are afforded varying degrees of protection, depending on what type of account or relationship they have with a financial professional.

In response, the commission is now looking at whether legislation or other changes are necessary to clarify the rules for investors. Results of that study are expected in about 90 days.

Marketing contributes to the confusion. Today, about a quarter of the 661,000 brokers nationally are registered as both broker and adviser. Many others call themselves "financial advisers" or "investment planners."

In a television commercial for Morgan Stanley, a man and woman sit on a beach talking of finally being able to afford a beach house, thanks to astute financial planning. Only, the man is the couple's broker and the woman turns to her husband sitting nearby to gauge his reaction. Or consider the marketing for Total Merrill, a Merrill Lynch & Co. product that provides investors a broad spectrum of advisory services ranging from investment advice to estate and retirement planning -- what Merrill advertises as "a relationship that provides you with a lifetime of solutions based on your total financial picture." Though it seems advisory in nature, Total Merrill is a brokerage relationship.

The distinction between brokerage and advisory services can be important, particularly in the event of fraud or mismanagement in your portfolio.

The issue largely centers on the competing concepts of "suitability" and "fiduciary duty." A fiduciary duty, which advisers must adhere to, is rooted in law and obligates an adviser to put a client's best interest first. Suitability essentially mandates a broker "know the customer" and offer investments that are suitable to a client's needs. Selling an aggressive Internet mutual fund to an 80-year-old retiree, for instance, would likely violate suitability requirements.

Generally, fiduciary duties are considered stronger protections for investors, since a fiduciary has a legal duty to the client. Unless a transaction is egregious, suitability can be tougher to contest since what is and isn't suitable for a particular investor isn't always clear-cut. Some courts and arbitration panels have ruled in the past that brokers don't have the obligation to necessarily represent a customer's best interest, even if the customer relied on a broker's advice in buying or selling an investment.

But the Securities Industry Association, the National Association of Securities Dealers and brokerage firms like Merrill Lynch all say suitability rules are just as strong, if not stronger, than fiduciary duties. The reason, they say, is that brokers are obligated to deal fairly with the public, according to the NASD rules under which they operate. Moreover, they have the SEC, the NYSE and their own legal and compliance departments to contend with.

"There are a wide range of concrete and specific rules of how brokers must behave with clients," says Bob Glauber, chairman and chief executive officer of the NASD, the brokerage industry's watchdog, which last year brought 1,400 cases against brokers who violated various rules.

For investors, the best protection comes in knowing what type of relationship you have with an investment firm. Echoing the SEC's new disclosure requirement, Duane Thompson, group director of advocacy for the Financial Planning Association, says "basically, ask a lot of questions when you're interviewing someone to be your trusted financial pro."

Real Inflation Figures

2004-10-12T10:52:00.000-04:00

For the last couple of years I've been one of those who has wondered about the inflation numbers (CPI Index) put out by BLS each month. With the sharp rise in housing, energy, healthcare, college tuition, and food prices one might think that we would have much higher inflation rate vs. the 2-3% steady rate reported by the government. Especially when cost owning a home has gone up much faster than its historical normal rate, and oil prices are much higher than the normal mid $20's prices. Yet since I am not an economist or able to effectively analyze and question how the data was compiled and calculated I choose to leave that debate to those who can. Having said that one also doesn't have to be an economist to question BLS logic behind using mainly cost of renting a home vs. buying a home in the largest component of the CPI index which happens to be Housing considering that most Americans buy a home vs. just rent. So by using the rate of growth in rents vs. actual home prices in calculating inflation they are ignoring perhaps the "real housing cost inflation experience".

Now though Bill Gross who manages the largest bond portfolio is also critisizing how the data is calculated. In his October newsletter he has taken on the government's statisticians and Fed Chairman Alan Greenspan, accusing them of purposefully underestimating inflation to make the economy look stronger than it is and keep the Federal government costs in areas such as social security payment to seniors and inflation protected bonds (TIPS) interest payments artificially low.

According to Gross, the government is "fudging on inflation" by adjusting many of the prices that go into its calculation for improvements in quality (for example, a standard-issue corporate laptop computer has declined in price in the past five years, but it also has a lot more memory and capability overall). Gross also says the feds are adjusting for the fact that if the price of beef goes up, people eat more chicken. Therefore, it doesn't matter so much if a steak costs more. Economists call this phenomenon "substitution bias." Due to these adjustments, Gross figures inflation is really about a percentage point higher and gross domestic product about a percentage point lower than official statistics.

He makes a valid argument when saying: "If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn’t created any jobs over the past four years."

One might think he is suggesting some grand conspiracy but in his newsletter he writes: "The CPI as calculated may not be a conspiracy but it’s definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival."

Conspiracy Theories

2004-10-09T13:19:00.001-04:00

World history is filled with conspiracy theories. Individuals and at times groups in various countries for various different reasons have fed rumors of secret plots by say Priori of Scion, Freemasons, Jewish bankers, Catholics, Communists, etc ... for a long time, but now urban legends have become cyberlegends, and suspicions speed their way globally not over months and weeks but within days and hours on the Web, through uncorroborated emails and simple or elaborate websites, and at times books.

Conspiracy theories are common after shock events like September 11th, Oklahoma City bombing. assassination like President Kennedy's, or revolutions like the 1979 Iranian Revolution.

Michael Barkun, a political scientist at Syracuse University who has written a book on the Culture of Conspiracies, said contradictory and inconclusive eyewitness accounts often leave room for different interpretations of events. "Conspiracy theories are one way to make sense of what happened and regain a sense of control," Barkun said. "Of course, they're usually wrong, but they're psychologically reassuring. Because what they say is that everything is connected, nothing happens by accident, and that there is some kind of order in the world, even if it's produced by evil forces. I think psychologically, it's in a way consoling to a lot of people."

Daniel Pipe whom I must say I disagree with on most of his political beliefs has stated an interesting perspective in his book Hidden Hand on this matter especially as it relates to Middle Easterners. Another way of looking at this would be from the perspective that so many of us do become fools of random events when confronting various events such as all the shocked events mentioned earlier.

Of course this isn't meant to refute the covert works of agencies like CIA, MI6, KGB, Mossad, and their history of attempting and/or orchestrating various coups, assasinations, or simple disinformation campaigns. Or for that matter denying the existance of secret plans by groups that are based on idealogies that end with some "ism", or even greedy multinational companies. However, just because they may have such plans in place that doesn't mean the occurance of an event that is beneficial or seems beneficial is all as a result of their plans and not luck.

Having said that I also understand the frustration of those people who had correctly called the existance of various conspiracies. Those who called out many of the 1950's and 60's CIA backed coups and assasinations, all while they were being ridiculed and called as paranoid fools, and were not vidicated until years later after the release of secret documents or some confessions. However as I said the mere existance of such conspiracies doesn't mean that every or most of the major events in the world are as a result of a conspiracy or a grand plan.

Why -- well because having such plans is one thing and being able to implement it exactly as planned without any evidence behind the plan is another matter.

Just as in business the world of politics both domesticaly and internationally are filled with series of events that are planned and thought out by various people and groups for their own self serving reasons -- reasons which include fulfilling their egos, and/or pockets to name a few followed with serving their constituents/shareholders. Ideally they rather pursue actions that serve both but if they had to choose then you can imagine which one I think they would go for.

Now while these people or groups are pursuing their agenda, their counterpart which maybe the other candidate, party, or country is pursuing another agenda or plan some of it planned and some of it reactionary; and just like in the game of chess it will then becomes a game of wit and skills, with each player planning moves ahead of time while trying to force the other player to play into their planned moves.

Now although one could argue that the tactics and maneuvers of a skilled player vs. a novice one in the game of chess is almost like having a hidden hand in the game. Basically forcing the novice player to move in ways that are beyond his control. In the real world this is very similar to how a highly intelligent people and well funded organization(s) can do with counterparts that are not as intelligent and/or well funded, however with one major and obvious difference. In the game of chess the individual has to manipulate or outwit only one person in the format that is a game, whereas in the real world of politics or even business one has to deal with a much larger groups, but more importantly with each persons individual situation be it there intelligence level and thus how they will react to their moves, or to their financial, physical, and emotional situation to name a few. Moreover they have no way of sometimes predicting or at least controlling random events be it natural phenomena's or how large groups react to various situations.

So again yes I agree there are conspiracies in this world but many of the well name conspirators are not behind everything. More importantly just because conspiracies do exist that doesn't mean that one should give up on politics or following it, thus missing out on all the issues that are important with our society and the world.

Capping Lawsuits

2004-10-06T22:51:00.000-04:00

One of the important but frequently talked about issues in this year's election has been tort reform or as some like to refer to it as patients' rights. One of the reforms suggested by President Bush has been putting a cap on the amount of punitive damages awarded to individuals by $250,000. The premise of such reforms or regulations is that companies and doctors suffer from an excessive incidence of invalid claims, yet some research has shown that there is a far higher incidence of potentially valid claims that are not filed. This is something that I can attest to personally as last year my wife and I faced a situation where we could file and we didn't. Oh and as far as why capping damages at $250,000 well that comes from the cap that was placed in California back in 1975 -- a figure that if it is adjusted for inflation it will equal to around $70,000 today.

Anyways this is why for this and many other pocketbook reasons many physicians and major stakeholders in various product manufacturers have become staunch supporters of George Bush. For some they are also for Bush because they are staunchly against John Edwards as a VP nominee. Why some physicians are so focused on Edwards and not Kerry? Mainly because prior to entering politics Edwards was a trial attorney who represented clients wrongly injured by negligent corporate manufacturers and municipal entities, but mainly because one of his specialties during his career was in infant cerebral palsy cases, where scientific evidence has "recently" suggested that birth conditions only rarely cause the disorder.

Before I go any further let me give a quick explanation on punitive damages, also called exemplary awards. They are assessed in addition to compensatory damages (which are for any monetary losses) to punish the defendant for aggravated or outrageous misconduct and to deter the defendant and others from similar conduct in the future. In America, ever since punitive damages were assessed for the first time in 1784, there has been an outcry against these awards. Today, product manufacturers and physicians are among those lobbying for abolishment of exemplary awards. The argument that is used by both product manufactures and service providers like physicians are that such lawsuits come with an end result cost to the consumer, a point that seems logical on the surface. The Bush administration and American Medical Association keep pointing to the studies and apparently one in particular to make their case. Now I do agree that with time there has to be some changes thus I'm all for making some changes to the tort system but at the same time one has to be cautious of the intentions of those who are trying to reduce the rights and protections of US citizens with such tort reforms.

Take for example the current situation with Merck. Last week they pulled one of their top selling drugs Vioxx with annual sales of $2.5 billion from the shelf, caving in finally to all the data points that were showing the increased risk of heart attack for users of the drug. Today's WSJ had an article mentioning a study led by a Food and Drug Administration safety official showing that the widespread use of Vioxx may have led to more than 27,000 heart attacks and sudden cardiac deaths. The analysis specifically found that from Vioxx's approval in 1999, through 2003, an estimated 27,785 heart attacks and sudden cardiac deaths "would have been avoided" had Celebrex been used instead of Vioxx. Worth noting that those figures don't come from actual counts, but are projections based on findings from an analysis of a database of patients of Kaiser Permanente, a large HMO.

Not withstanding the exact count for now one can't ignore that there were at least some people who were misled into thinking the drug was safe and died as a result and if President Bush, product manufactures like Merck, and many American physicians have their ways the families of any of those 27,785 people (10 time more than the victims of 9/11) who died as a result of taking the drug, or victims of other companies or individuals that have shown such negligence will be that they can only be sued $250,000 by their vicitims.

Of course one of the talking points that advocates of capping punitive damages use is the increasing cost of healthcare. The Bush administration keeps pointing to effects of capping punitive damages on overall healthcare cost using a study that was conducted on only heart patients, but many other studies by various other nonpartisan organizations point to a different or at least inconclusive findings. Especially given the lack of comprehensive data at the national and state levels on insurers’ medical malpractice claims and the associated losses so far there hasn't been a full analysis on the composition and causes of those losses.

Now I realize there is a problem with some physicians malpractice insurance premium, but since studies have shown that the rise isn't as a result of just frivolous lawsuits so why not look at the other factors that are causing these sharp premium increases. Other factors such as for example during the low interest periods of 1998 through 2004, medical malpractice insurers experienced decreases in their investment income as interest rates fell on the bonds they own which generally make up around 80 percent of these insurers’ investment portfolios so one way to offset that was by increasing premiums.

Or that during the 1990s, insurers competed vigorously for medical malpractice business, and several factors, including high investment returns, permitted them to offer prices that, in hindsight, did not completely cover the ultimate losses some insurers experienced on that business. As a result, some companies became insolvent or voluntarily left the market, reducing the downward competitive pressure on premium rates that had existed through the 1990s.

All again pointing that the key to solving the current problems facing some physicians will not simply be answered by taking away one of the common law rights of American citizens. This article written by Joseph Newhouse and Paul Weiler presents some interesting methods in addressing the medical injury issue.

Where The Right Went Wrong

2004-09-08T21:39:00.000-04:00

Although I haven't had a chance yet to read Pat Buchanan's new book WHERE THE RIGHT WENT WRONG: How Neoconservatives Subverted The Reagan Revolution And Hijacked the Bush Presidency; but as a former subscriber to his magazine American Conservative I'm sure his book will include some interesting observations and opinions. For now here are some of the excerpts from his book which I thought was worth posting:

On Conservatives and Conservatism:

“Under the rubric of conservatism, the Republican party of Bush I and II has been reinventing itself into what conservatives would have once recognized as a Rockefeller party reciting Reaganite rhetoric.” (234)

On the Neoconservatives:

“Kristol’s warning that neoconservatives could go to Kerry was an admission of what many have long recognized. The neoconservatives are not really conservatives at all. They are impostors and opportunists.” (250)

“Nine days after an attack on the United States, this tiny clique of intellectuals was telling the President of the United States...that if he did not follow their war plans, he would be charged publicly with a ‘decisive surrender’ to terrorism.” (48)

On the Bush Doctrine:

“[A] prescription for permanent war for permanent peace, though wars are the death of republics.” (6)

The Bush National Security Strategy “is the imperial edict of a superpower out to exploit its present supremacy to make itself permanent Lord Protector of the universe.” (26)

“This is democratic imperialism. This will bleed, bankrupt and isolate this republic. This overthrows the wisdom of the Founding Fathers about what America should be all about.” (35)

On the War in Iraq:

“[L]istening to the neoconservatives, Bush invaded Iraq, united the Arab world against us, isolated us from Europe, and fulfilled to the letter bin Laden’s prophecy as to what we were about. We won the war in three weeks -- and we may have lost the Islamic world for a generation. (84) “

On the War on Terrorism:

“Terrorism is the price of empire. If we do not wish to pay it, we must give up the empire.” (237)

“America’s enemy in the Islamic world is not a state we can crush with sanctions or an enemy we can defeat with force of arms. The enemy is a cause, a movement, an idea.” (87)

“[T]errorism is not a nation, a regime, or an army. Terrorism is a tactic, a technique, a weapon fanatics, dictators and warriors have resorted to through history. If...war is the continuation of politics by other means, terrorism is the continuation of war by other means.” (89)

“We are not hated for who we are. We are hated for what we do. It is not our principles that have spawned pandemic hatred of America in the Islamic world. It is our policies.” (80)

“U.S. dominance of the Middle East is not the corrective to terror. It is a cause of terror. Were we not over there, the 9/11 terrorists would not have been over here.” (236)

“Often, terrorism succeeded in the 20th century, and, when it did, the ex-terrorists achieved power, glory and immortality, with streets, towns and cities named for them....America today recognizes every regime to come out of these wars where terrorism was a common tactic.” (123)

On Israel & the Middle East:

“The Sharon Plan is not a peace plan. It is a unilateral solution to be imposed by Israel....A Palestinian leader who signs on to this surrender of land and rights would be signing his death warrant.” (242)

On Bush-Republican Fiscal Policy:

“Bush has compiled a fiscal record of startling recklessness.” (175)

“There is no conservative party in Washington. There is a Democratic Party of tax-and-spend and a Republican Party of guns and butter and tax cuts, too. Washington is all accelerator, the brakes are gone.” (177)

“Like Thelma and Louise, Medicare and Social Security are headed for the cliff. And we are in the back seat.” (187)

Another War?

2004-09-02T21:00:00.000-04:00

Just as when prior to the US invasion of Iraq, Saddam's regime was threatening the Israeli's security (but not US), now days it seems as that the hardliners within the Israeli government are once again setting the stage for another war for America. Reason why is that just like during the pre Iraq war period they are now openly expressing their worries about Iran and I assume since they realize they cannot possibly wage a conventional war against the Iranian's without the America’s military prowess they are once again positiong US to do it for them. How well as always by continuing on with their undermining of US government policies through buying off Congress members using their various lobbying arms in Washington, influencing the American mainstream minds through various media reports, and of course working hard in re-electing George Bush who perhaps is the most pro-Israeli Republican president.

One of their methods in influencing American public opinion has been by exploiting the idealogy behind Christian Zionists—which is based on the belief that Israeli's policies are key to sometype of a fanatical biblical fantasies. They have worked tirelessly to subvert the highest reaches of the American government by installing or having close ties to the now obvious conniving Zionist neocons in the White House and Pentagon.

For a long time Neoconservatives like Michael Ledeen in America and Likudites in Israel have had an itch to attack or invade Iran, just as they did about Iraq. After all the Iranian regime who for a long time supported groups like Hezbollah were a big thorn on their back but not big enough to justify an attack. Until now -- now given Iran's nuclear weapon ambitions these groups may have a much more valid case (using the logic for Iraq war) as an Iranian regime with nuclear arsenal will become way too influential in the region. In fact the news of the spy investigation by a middle-level functionary working for and with some of the pro-Israeli individuals in the Pentagon like Wolfowitz, and Feith, indicates that we may be approaching a critical choice-point on the road to war with Iran, and towards a potential synthetic attack inside US or a more highly probable scenario where Iranians are instigated to attack either US occupied territories in the area or Israel itself so to create a pretext to start such a war.

Now I agree that like many other countries in the region the current Iranian regime isn't as democratic as we would like them to be, and given their ambitions for nuclear weapons they also aren't exactly helping our effort in stopping the proliferation of nuclear weapons, but at the same time I don't think that our policies in dealing with Iran should be like the one that we have had with stateless organizations like Al-Qaeda, or Iraq; but more like how we had dealt with previous threats and I might add much larger threats by countries like the former evil empire the Soviet's, or other forgotten commi evils like the Chinese who are now ironically our partners. Reason why is that I don't think that the real insiders for the current Iranian regime are as ideological driven as say fanatic Islamist's like Bin-Laden -- an idea that is being pushed by many who are advocating a hawkish stane toward Iran. Instead my guess which is based on the regime's actions in the past 25 years is that they are very pragmatic. They are very happy with their control of the country and unless given a dire situation they would not want to risk losing their control by say engaging in a preemptive attack on US or even a US ally like Israel.

So just as US and other countries in the world have accepted countries such as Israel, Pakistan, and India having nuclear weapons given the existence of NPT , then in light of both the moral ramification and financial cost of starting another war America should also find a way to deal with the Iranians nuclear ambitions just as we dealt with other former foes in the past. If a war with a country like Iraq whose army that was weakened and demoralized in over ten years of sanctions and occasional attacks end up costing American taxpayers over $200 billion and over 1000 lives of American soldiers all while we waltzed into their capital in just three weeks, then the cost with Iran would be much higher unless of course America would once again nuke another country making her the only country that has ever used nuclear weapons and has used it twice. Moreover I would suspect that although there are many Iranians inside Iran who are not happy with their regime, but just like many Iraqi's who have either joined the insurgency or have expressed their discontent after America's invasion, Iranians would also wouldn't be too fond of having another foreign country invading and/or occupying them for reasons such as so that the Israeli's can feel safe.

Israeli Spy Probe

2004-08-28T19:55:00.000-04:00

Associated Press - In a spy investigation that could strain U.S.-Israeli relations and muddy the Bush administration's Middle East policy, the FBI is investigating whether a Pentagon analyst fed to Israel secret materials about White House deliberations on Iran.

No arrests have been made, said two federal law enforcement officials, speaking on condition of anonymity because of the continuing investigation. A third law enforcement official, also speaking anonymously, said an arrest in the case could come as early as next week.

The officials refused to identify the Pentagon employee under investigation but said the person is an analyst in the office of Douglas J. Feith, undersecretary of defense for policy, the Pentagon's No. 3 official.The link to Feith's office also could prove politically sensitive for the Bush administration. Feith is an influential aide to Defense Secretary Donald H. Rumsfeld who works on sensitive policy issues including U.S. policy toward Iraq and Iran. Feith's office includes a cadre assigned specifically to wor on Iran. He also oversaw the Pentagon's defunct Office of Special Plans, which critics said fed policy-makers uncorroborated prewar intelligence on President Saddam Hussein's Iraq, especially involving purported ties with the al-Qaida terror network.

Pentagon officials have said the office was a small operation that provided fresh analysis on existing intelligence.The Pentagon said in a statement that the investigation involves an employee at "the desk officer level, who was not in a position to have significant influence over U.S. policy. Nor could a foreign power be in a position to influence U.S. policy through this individual."One of the law enforcement officials said the person was not in a policy-making position but had access to extremely sensitive information about U.S. policy toward Iran.

The investigation centers on whether the Pentagon analyst passed secrets about Bush administration policy on Iran to the main pro-Israeli lobbying group in Washington, the American Israel Public Affairs Committee, which then was said to have given the secrets to the Israeli government, one official said. Both AIPAC and Israel deny the allegations.In Israel, the chairman of the Knesset's Foreign Affairs and Defense Committee said Saturday that Israel worries about Iran's nuclear policies but he is confident the government has not abandoned a 20-year-old decision not to spy on the United States.

Israel, one of the United States' strongest allies, has worked behind its conservative prime minister, Ariel Sharon, to push the Bush administration toward more toughness against Iran. The Israeli tactics have raised questions whether inside information may have been used to try to influence U.S. policy.

Israel and Iran have been in an increasingly hostile war of words in recent months.In 1981, Israel destroyed a nuclear facility in Iraq after becoming suspicious that Saddam was developing a nuclear weapons capability.

Despite the close U.S.-Israeli relations, this is not the first allegation of spying on Israel's behalf. Jonathan Pollard, a former naval intelligence officer, was convicted of giving top-secret documents to Israel in the mid-1980s. He continues to be a point of contention in U.S.-Israeli relations. The Israeli government has repeatedly pressed for his release, but intelligence officials have called the information he passed to the Israelis highly damaging.Pollard was caught in Washington in November 1985, and was arrested after unsuccessfully seeking refuge at the Israeli Embassy.

Israeli lawmaker Steinitz said the Pollard case led to the decision to abandon spying activities against its most powerful ally."Following the Pollard crisis 20 years ago, there was a decision not to spy against the U.S. government or its subsidiaries," Steinitz said. "I am confident that this is the case."

Relatives Bragging About Real Estate Profits

2004-08-25T23:57:00.000-04:00

Wall Street Journal
By JONATHAN CLEMENTS
August 25, 2004; Page D1

Today's budding property magnates haven't yet suffered. But they're already insufferable.

Take your brother-in-law Bob. During the late 1990s, he was forever boasting about his stock-market successes. Amazon.com, JDS Uniphase, Yahoo, he owned them all -- and, unfortunately, still owned them at the market bottom.

But Bob no longer bothers to mention his stock-picking prowess, in part because he is too busy touting his real-estate smarts. How do you get the man to shut up? Here are a few questions to toss Bob's way.

How much did you pay for your home? This is an unfair question, because it pretty much begs Bob to wallow in self-delusion. If he is completely out of touch with reality, he will tell you how much he put down rather than how much he actually paid.
Let's say Bob made a $50,000 down payment in 1999. Five years later, the place is worth $360,000. As Bob notes with smug satisfaction, that is a 620% profit.

But how much did you really pay? When pressed, Bob admits that he actually paid $250,000, putting down $50,000 and borrowing the other $200,000.

Nonetheless, his home's value has climbed 44%, giving Bob a $110,000 gain on his $50,000 down payment. Meanwhile, as he points out, investors in the Standard & Poor's 500-stock index lost a cumulative 2.8% over the five years through year-end 2003. True enough, you concede. But because you are a little cruel, you note that the 44% is no great shakes. That is barely better than the average gain during the past five years for a single-family home, as calculated by home-finance corporation Freddie Mac.

What about borrowing costs? Now that Bob has mentioned his mortgage, you quiz him about that. He relates that, when he bought his house, he took out a 30-year fixed-rate mortgage at 7.5%. That was the average rate in 1999, according to Keith Gumbinger, a vice president at HSH Associates, a mortgage-information provider in Pompton Plains, N.J.

Run the numbers, and you find Bob laid out $84,000 in mortgage payments during the past five years. To be sure, $11,000 of that sum went toward paying down the $200,000 initially borrowed, so Bob's loan balance is now $189,000.

But the other $73,000 was interest. Many homeowners get little or no tax benefit from their mortgage interest, because they don't itemize their deductions or their itemized deductions are curtailed because of their high income.

But let's assume Bob can deduct his mortgage interest at his 25% federal income-tax rate, thus reducing his cost to $54,750. Tack on the $2,750 that Bob paid in closing costs, and his five-year borrowing tab would amount to $57,500.

As Mr. Gumbinger notes, Bob probably would have refinanced last year, when mortgage rates dropped below 6%, thereby trimming his monthly payment. At this point, however, that might not have lowered his total five-year tab, because refinancing would have meant coughing up another round of closing costs.

What annual expenses have you incurred? Bob looks puzzled. Annual expenses? You explain that you are referring to stuff like maintenance, property taxes and homeowner's insurance.
Chris Mayer, director of Columbia University's Milstein Center for Real Estate, says such expenses might run 3.5% a year of a property's value, and these costs will likely climb as a property's value rises.

At that rate, Bob would have forked over some $45,500 during the past five years. (This assumes property taxes account for 1.5 percentage points of the 3.5%, and that Bob can deduct them at his 25% tax rate.) In truth, this $45,500 estimate is probably too low, for two reasons. First, a lot of homeowners do a fair amount of maintenance themselves and yet they never put a dollar value on their sweat equity.

Second, there is a decent chance Bob undertook one or two major home improvements, and we aren't counting those. When homeowners sell, they almost never recoup the money involved, because potential buyers usually don't put a high value on the current owners' home improvements. "For many improvements, I would guess the return is 50 cents on the dollar if you sell soon after making the improvements," Prof. Mayer says.

Have you figured in selling costs? You take Bob's $360,000 home value and subtract the $45,500 annual expenses, $57,500 borrowing costs, $50,000 down payment and $189,000 loan balance. Result: Bob is left with just $18,000 -- and $11,000 of that came from loan repayments.

Bob is looking a little miffed. But before he gets whiny, you go for the kill. What if he sold the place and paid a 5% real-estate broker's commission? Knock off the resulting $18,000 commission, and suddenly Bob's brilliant home purchase doesn't look so brilliant.
At this juncture, Bob storms off to the kitchen, where he pours himself a stiff drink. That is a shame, because you never got around to telling Bob that his house was indeed a decent investment. After all, he got to live there for five years without paying any rent.
But Bob probably wouldn't have been interested. Buying a home so you have a place to live? In today's overheated real-estate market, that's way too radical a concept.

A Tax Cut Con

2004-08-16T20:39:00.000-04:00

Pete Peterson had an interesting point in his book "Running on Empty" suggesting something to the effect that these days it seems as that the Republican party (btw he is a registered Republican) seem to never come across any tax cuts that they don't like -- irregardless of its long term cost to the country, the period we are in such as two wars, a ballooning deficit or even what we will be entering in another couple of years with a large segment of population reaching retirement years. Keep in mind that he is no slouch when it comes to these matters as he was once a US Commerce Secretary, a former chairman of the New York Federal Reserve Bank, and now is a chairman of the Blackstone Group an investment bank.

Now last Friday when the nonpartisan Congressional Budget Office released its report on the effects of Bush tax cuts the administration seemed to have gotten a break (at least for now) as with the arrival of Hurricane Charley's last Friday the report didn't get that much coverage by the major news outlets. Which is why I thought about writing this post especially since the subject of President Bush tax cut policies is one of the main isses for some of the pro-Bush voters while also being the only reason for some other in deciding to reelect him in 2004.

Now it is tough to do much reasoning with those in the latter group as their intellect levels is way beyond me, but hopefully the following will be helpful for those in the former. As far as the CBO report well it was mainly about the effective tax rates of various segments of population. First it is important to mention that a person’s effective tax rate is his or her average rate—total taxes paid divided by total income. That rate generally differs from the marginal tax rate, which is the tax paid on the last, or marginal, dollar of income. When people decide how much of a taxed activity they will engage in, such as how many hours they will work, they are reacting to marginal rates, not average rates.

So next time you are getting your taxes done ask your tax preparer what were your different tax rates. At any rate like any data and statistics you can be sure that both Bush and Kerry will either put a spin or only show the points that prove their points. For example the democrats will undoubtedly point out that taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments actually increase, all while those that make over $1.2 million had theirs drop. They will point out that the top 1 percent, with incomes averaging $1.2 million per year, will receive an average tax cut of $78,460 this year, as their total tax burden fell roughly 2 percentage points to 20.1 percent. Again all while that households in the middle 20 percent, with incomes averaging $57,000 per year, receiving an average cut of $1,090 while their share of the tax burden would move to 10.5 percent from 10.4 percent instead of the 2 percentage point of the rich.

The Republicans will most likely counter that point by saying that the rich are paying a higher share of income taxes this year than they would have paid with no tax changes, and that so many low income people aren't even paying any taxes under the Bush plan. But what their spin can't ignore is that at the end of the day the tax rates for those middle class people making between $50-$76K did go up while for other it went down.

Moreover although they can point to that average working families were given couple hundred or even couple thousands in child, or dependent care tax credits, but those credits weren't even close when compared to say the $75,000 SUV tax credit that was given to all of these doctors, lawyers, realtors, and many other self employed people driving around in their Hummers. The idea originally was meant or at least sold to the public as a policy to give incentive to businesses to buy equipments to expand business, hire more employees etc ... instead it turned out to be a way to get these people to commit to say a two to five year contract with the oil companies to buy more gasoline than their normal level from them.

This is why the tax debate in this country is very interesting. As always nobody likes to pay taxes, but at the same time many of the same people who don't want to pay any taxes or pay what is needed for the quality of life we have here vs. other countries are also very demanding of their governments. They demand better local and federal police protection since they know that they or their loved ones are more likely to be hurt by a criminal than a religious fanatic from a foreign country, of course with all of these terror warnings they are now scared into demanding more fundings for fancier jets and tanks as if a simple machine gun can't do the job of a killing a mad man . They demand better schools, cheaper loans or more grants, less congested roads, cheaper gasoline, safe drugs, cars, airtravel, regulating cable, phone, utility rates, and on and on. All while wanting to have their taxes cut.

They never say to zero but they keep saying that taxes in US is high. High compared to which country ?? -- moreover isn't interesting that most countries want to model their tax system after ours while we are trying to model it after god knows who. Did you knew that ratio of taxes to gross domestic product, the total value of output produced in the country in US for all taxes -- federal, state and local -- reached a peak of 29.6 percent of GDP in 2000 (btw swollen because of taxes on capital gains during the stock-market bubble). By 2002, the tax take was down to 26.3 percent of GDP. Compared with almost every other advanced country the percentage for US is a low number. In 1999, Canada collected 38.2 percent of GDP in taxes, France collected 45.8 percent and Sweden, 52.2 percent. If you are interested in this subject you might want to read this article.

Finally although I do understand the need for tax cuts during certain economic periods, but at the same time considering the difference between marginal propensity to consume of a deca-millionaire or billionaire and a white or blue collar worker that is making high five digit salaries; I do think that tax cut policies that are determined based on stimulating growth must also be directed toward the segment of population that will have a higher multiplier effect. Tax cut policies that are intended to be fairer to the billionaires (another word heading toward a regressive tax system) should not be sold to the public for economic stimulus purposes especially during times of war -- they should be sold to the public simply for what they are a tax to please the haves, and the have-mores or as people like to call them the elite -- or as the President likes to call them his base.

House For Sale!

2004-08-12T22:42:00.000-04:00

Beautiful home built in late eighteenth century , distinct architectural style, located in the heart of DC on Pennsylvania avenue. Asking price $200 million.

Doesn't it seem as that the White House is becoming more than ever up for sale to whom ever that can raise the most money. First President Bush started the bidding and then Sen. Kerry followed suit when they both chose not to use federal campaign funding in their race for the White House. The reason why was of course because the funding comes with strict guidelines and limitations.

So how are they raising all of these millions and millions of dollars -- perhaps the best way to explain it is by first taking a look at the commonalities between Labor Secretary Elaine Chao, Homeland Security Chief Tom Ridge, Housing Secretary Alphonso Jackson and Commerce Secretary Don Evans? The obvious is that they are now all part of the Bush Administration but before being selected they all were Pioneers in 2000. Who were and are the Pioneers well they are a group of agents/middle men who have been labeled by the Bush campaign both in 2000 and now in 2004 to gather money for then Gov. Bush and now Pres. Bush using a system called bundling. Campaign finance laws restrict individuals from giving more than $2,000, but bundling allows these middle men or women to raise large sums of money.

The Bush campaign ranks its bundlers: Bush Pioneers $100,000; Rangers $200,000; Super Rangers, $200,000 for the Bush campaign and $300,000 for the Republican Party. Noticing the strong probability that the Bush and Republicans were about to raise and have $200 million to tout the president's records, the Dems and Kerry's campaign decided to on not being outdone by them so they began a somewhat similar system in 2003. Kerry's so called bundlers are ranked Chairs $50,000 and Vice Chairs $100,000 for their effort.

So what do these people want in return? Well of course not all contributors contribute just to have a post in an administration, but they mainly do it for pushing their own personal or financial agendas. A right that any of them who are US citizens do have, but the problem is at what cost. It does seem that at this rate our democratic system is up for the highest bidder. After all when a presidential candidate receives $100,000 or even $1M from a donor he will most likely be more understanding/loyal to the positions and wants of those donors vs. the needs of those who contribute smaller amounts like $100 or those that because of financial hardship can't event make a contribution for the election of their eventually compensated elected official.

A Commodity Chairman?

2004-08-11T12:25:00.000-04:00

Since we already have a Fed Chairman with a main mandate to create stable prices (fight inflation), then how about having a pseudo Commodity/Oil Chairman for controlling the oil market. In the world of interest rates and money supply the Fed Chairman main tool for controlling those two items is through establishing the overnight borrowing rates for finanical institutions and buying/selling of US Treasuries in the bond market. The Fed was established by Congress as an independent institution not only to monitor the country's banking system but also to make such decisions. One reason for creating an independent non-political body was that had the responsibility was given to say another branch of the government then undoubtedly any decision may have been looked as a political move rather than a sound economic policy.

Now although the Fed through its various means has some control on overall price levels in the economy, but given certain factors such as say the lag time effect after their decisions, they can't have as quick or direct impact on certain markets as they would like to have. So for example in certain market like the oil market they really don't have a control over the prices. So what if there was a supposed Commodity Chairman that had control over say the country's Strategic Petroleum Reserve (SPRo) who could make the same type of unbiased (hopefully) decisions in filling and releasing oil reserves to control the oil prices. This was an interesting idea that I heard for the first time from Tom McManus market strategist at BofA Securities last week.

Of course the whole idea is as a result of recent run up in oil prices to $45 a barrel from the already high levels of around $30. This run up has basically been a tax hike on the middle class and of course on the lower income households. It has had a great impact on the spending habits of this large segment of population (as evident by various retail and inventory data points) vs. the affluent segment of population who are making high six or seven digits a year representing of course a much smaller segment of the population.

The run up in oil prices during 2003 was mainly as a result of the inevitable rebound in US economy from the earlier low growth rate levels in 2001 & 2002, and also the strong Chinese economic growth. Now though the earlier run up in prices which was attributed to strong demand, has now been replaced by supply shortages as a result of events in Russia, Venezuela, Iraq, and to an extent Saudi Arabia. In addition sharp price run up in the oil market has also attracted many speculators to buy various oil contracts thus perhaps artificially pushing the prices up even higher.

So one way to combat this run up especially the portion that can be attributed to the portion caused by pure speculators can be quickly addressed by having an independent person or group making an intervention decision. However given the current administration's steadfast position against touching the SPR, and criticism of any politician that proposes it, but interestingly and not surprisingly not open critisicm of those who in the past had made such decisions (i.e. George H. Bush), the Bush administration who has had its own shares of flip flopping on policies such as nation builiding, or government spending, etc... doesn't want to flip flop on at least this one. In fact last week the Bush campaign, on its Web site, wrote that "using the SPR solely for political purposes to lower gasoline prices would reduce our protection and weaken our position" in countering terrorists. Now I have no idea what this has to with fighting Al Qaeda or other religious fanatics, unless of course they are all in the business of producing oil. Anyways the position was in response to John Kerry's simple and I think timely request to just stop filling the SPR (not a request to release any reserves). Interestingly the Bush administration last week also stated that they had lift the current reserve supply to 700 million barrels from 665.6 million barrels and also have given incentives to oil companies to continue filling the reservoir.

Bubbles

2004-07-23T22:56:00.000-04:00

There are various ways of defining or explaining an asset bubble , and I guess Alexander Ineichen's description is as good as any -- he explains that bubbles exist when investment horizons expand, expectations skyrocket, and everyone does the same thing at the same time. Or as he puts it bubbles occur when the consensus view with respect to expected returns increases and investors cuddle in the comfort of the consensus view and deemphasize sound research, due diligence, and logical economic reasoning. In all cases, expectations slowly diverged from fundamentals. The bubble bursts when expectations converge with reality.

In his book Absolute Returns Ineichen talks about a 1989 study by Camerer under the title "Bubbles and Fads in Asset Prices" where he distinguished bubbles into three groups: growing bubbles, fads, and information bubbles.

Growing bubbles are typically constant terms that arise in solutions to different equations that govern equilibrium prices. Such bubbles can occur even when market participants act rationally and have rational expectations. He stresses that "growing bubbles are consistent with rational expectations, and hence with the hypothesis that markets are informationally efficient, because current prices reflect the discounted price of the future inflated prices. So market participants cannot make excess profits by knowing prices will be too high next period, because the price is too high this period also." Tulip mania is an example of a growing bubble.

The second category is fads. "Fads are mean-reverting deviations from intrinsic value caused by social or psychological forces like those that cause fashions in political beliefs or consumption goods, or like Keynes's "animal spirit." Camerer categorizes the South Sea bubble as a fad because prices were driven by unrealistic beliefs about the prospects of English companies given exclusive rights to do business in those regions.

The third type informational bubbles according to him occur "when prices depart from intrinsic values based on all available information, because information is not perfectly aggregated by market prices, or because agents have different beliefs about how the economy works."

Why talk about a bubble -- well first because I don't think the prices of any category of assets is particularly immune from being irrationally inflated and while we may be aware of this fact some of us still get fooled by all the noise out there. These days the market that is the hot topic at every gathering is the real estate market. A market that has been artificially inflated as a result of the Federal Reserve cheap money policies. In fact the Fed chairman has even been on the record advocating various sophisticated adjustable rate mortgages like COFI or MTA loans all without ever warning that some areas could be in the midst of a real estate bubble.

So if you are one of those that was burned during the stock market crash of 1990's and are speculating in todays real estate market I hope you remember the old saying "Fool Me Once Shame On You; Fool Me Twice Shame On Me"

How to STOP Terrorism?

2004-07-22T21:48:00.000-04:00

Today after months of investigation and occasional hindrance by the White House and some Republicans the 9/11 Commission released its findings on the terrorist attacks. Well as one might imgaine given the balance breakdown of the Commission members they simply concluded that the so called "Bucks" stopped with Bin Laden :-) of course I'm being sarcastic here, but my point is that as some had expected and even hoped the commission didn't come out pointing the finger to either Clinton or Bush for what a handful of people did to America on that day. Since the report is as voluminous as the recent book by Clinton I would assume that most Americans would unfortunately skip reading it except for of course the families of the victims, and instead rely on their Fair and Balanced news sources to interpert and spin the information for them. Unless of course a cliff note version is written by some Fair and Balanced author and publisher.

For now since I had already watched pretty much all the live hearings I decided to skip to the end of their report to read the "What To Do" section. Skimming through the 38 pages I saw what I had expected by a Commission who wasn't going to be in charge of making policies. Suggestions that although as a whole were right on the mark but as expected somewhat vague in explaining in some cases as how and/or when to do their suggestions. Again that is understandable since that is the job of the lawmakers and our President, but still worth noting.

As one might had expected the core of their suggestion for combating terrorism was what this administration has been doing so far which is why I thought about writing this post. The Bush administration's policy is very similar to how our local and federal government combats crime, by that I mean by trying to either kill or capture all who are involved in these acts. Although worth noting that with the so called Bush Doctrine or the right to have preemptive wars there is a larger role that is being played by the military in how this administration is combatting terrorism -- but whether if it is by a cop or a marine the intention is the same and that is to kill or capture.

A method that at first glance seems to be logical, but above all sounds fair, especially if one believes in the gospel of "an eye for an eye". However like everything else in life things are not that simple and so is the case of combating terrorism. Although their acts especially to those whom have been effected directly seem very similar to a criminal act, however given all the various complexities that are involved in these acts with for instance one being the motives of a terrorist vs. the motives of a typical criminal; then arguably the methodology in combating these acts should or at least could be perhaps also different. In fact this is why many in the intelligence community when discussing this issue keep referring to the "drain the swamp" analogy, comparing the battle against terrorism to a battle against malaria. In a battle against malaria one wouldn't circle the swamp and simply start shooting at every mosquito flying around the swamp, or even worse spending the time to shoot only at the mosquitoes that carry the virus. They simply address the roots of the problem by draining the water (not mosquitoes) out of the swamp. Interestingly or unfortunately what has happened is that this analogy is being misunderstood and misused by many of today's elite armed chair soldiers and of course political pundits sitting in their air conditioned room (posting on their weblogs) as they think that draining the swamp simply means sending in the marines to kill the bad guys.

Anyways lets go back to the crime problem which I must add is a much larger problem in our country than terrorism both from an economic and humanity cost -- but that is another point. If we look back at the crime problem we see that many American administrations in addition to their usual emphasis on policing both federally and locally, have adopted various social and economic policies to also address the problem from a different angle. For example trying to find solutions in addressing criminal activities that are as a result of poverty levels and/or lack of education.

Such "indirect policies" (for the lack of better word) can be helpful in some situations. Of course some will correctly point out that just as most likely no particular indirect policy such as federal subsidized school loans, or work training programs can stop a deranged serial killer who is also poor and uneducated from going around killing people, no particular indirect policy can stop an ideologue fanatic from going around blowing up people.To some the only way to stop a serial killer is to find him and kill him, and the same solution holds true for a terrorist. However this solution fails to take into consideration one important difference between the two situations, and that is in the case of a serial killer when the police eventually captures the offender, and the courts eventually order his execution; afterward the society most likely does not have to deal with the possibility of his family members or friends continuing on with his mischievous ways. On the other hand this is something that is highly possible when one captures or kills an extremist ideologue who is known to his people as a "freedom fighter". By killing an extremist the problem will not go away because the ideology however ridiculous it may seem to us in America will continue to be transferred to others and more importantly the transfer rate tends to be in an exponential rate compounding on the perceived sacrifice of those whom were just eliminated.

Perhaps a good example would be the Israeli-Palestinian conflict for the past 40 years -- another proofs that such wars can't be won just by violence. Have you noticed how often we hear in the news that the Israeli's have killed a Hamas activist who was described by Israelis as ''a senior Hamas official'' or a ''key operative''? This has led me to wonder: How many senior Hamas officials could there be? By now Israel should have killed off the entire Hamas leadership twice. Unless what is happening is something else, something that Tom Friedman of NY Times called Palestinian math: Israel kills one Hamas operative and three others volunteer to take his place, in which case what Israel is doing is actually self-destructive. Ironically CIA's chief George Tenet in his report to the Senate Intelligence Committee earlier in 2004 also suggested that Al Qaeda will be a threat to US even if all their leaders are caught!If the US government continues to ignore the heart of the problem then unfortunately Americans will end up having to deal with the same type of problems that we have seen between the Israeli's & Palestinian, or the British & Irish Republican Army. What is needed in situation like this is an "out of box" way of thinking and approaching the problem. An approach that involves us to stop looking at these acts from a simplistic viewpoints such as the terrorists are attacking us because they hate our freedom or from a self-serving or ideologically driven point of views.

Now this doesn't mean that we shouldn't be vigilant in our effort to capture and punish anyone who has been involved in acts that involves the killing or injuring of innocent civilians, however at the same time America has to also become a more even handed and fairer country when it comes to our foreign policies. We can't support despotic and undemocratic regimes like the one in Saudi Arabia, but oppose the previous regime in Iraq. We can't be an honest broker in the Palestinian-Israeli conflicts when we are so blatantly in support of every Israeli policies even those that aren't fair or more importantly conducive for having a peaceful settlement.

To their credit the 9/11 Commission did also express the same opinion. They cited that "American foreign policy is part of the message. America’s policy choices have consequences. Right or wrong, it is simply a fact that American policy regarding the Israeli-Palestinian conflict and American actions in Iraq are dominant staples of popular commentary across the Arab and Muslim world." Of course they pussy footed by following this statement with the comment that: "That does not mean U.S. choices have been wrong." Another word although America has been the recipient of all this hatred mainly because of our regime change policies for at time democratic governments to our relentless & unconditional support (militarily, financially, politically) for a country size of NJ with a population of 6 million we still have done nothing wrong! Go figure!

They did also recommend the following "Economic openness is essential". But they miss the point when they follow the statement with the comment that "Terrorism is not caused by poverty. Indeed, many terrorists come from relatively well-off families." Now I am the first to admit that I haven't seen any of these terrorists W2 forms or their overall networth statements but what this comment fails to distinguish and thus miss is that most likely those who are well-off are those who are heading such movements or organizations, while those that are the foot soldiers of the movement are usually the ones that are not well-off!

Ironically the Commission in sentence following the last one comes out and agrees with my point by saying: "Yet when people lose hope, when societies break down, when countries fragment, the breeding grounds for terrorism are created."

The commission goes on to recommend that: "Backward economic policies and repressive political regimes slip into societies that are without hope, where ambition and passions have no constructive outlet. The policies that support economic development and reform also have political implications. Economic and political liberties tend to be linked. Commerce, especially international commerce, requires ongoing cooperation and compromise, the exchange of ideas across cultures, and the peaceful resolution of differences through negotiation or the rule of law. Economic growth expands the middle class, a constituency for further reform. Successful economies rely on vibrant private sectors, which have an interest in curbing indiscriminate government power. Those who develop the practice of controlling their own economic destiny soon desire a voice in their communities and political societies."

Couldn't have said it better myself. Again the whole point is that in addition to trying to round up those who have been involved in a terrorist attack America needs to have other solutions -- solutions that are as a result of an Out of Box style thinking and not the same old style that we've seen in the past.

Stem Cell Research

2004-07-18T22:28:00.000-04:00

I'm sure if one looks back at the various advancements that mankind has had whether in fields of medicine, technology etc ... one could easily find one group proposing those ideas and another debunking its possibilities. Ideas such as the earth being round, to flying to the moon. From curing plague to finding vaccines for what are now easily treated diseases.

Furthermore, I wouldn't be surprised that the intelligence trait was one that was exclusive to those that believed in such possibilities, as I'm sure that there were also some highly intelligent people who thought that for various reasonings such breakthroughs were impossible. Yet as someone whom I don't remember who it was once had said although both groups were highly intelligent the group or person(s) that ended up finding these major breakthroughs had probably one thing that the other group did not have and that to me was hope, or the belief in the concept of "what if " -- what if we could do this to have ....

Now lets fast forward and come to one of the hotly debated issues of our time and that is stem cell research, where we have two groups of scientific and religious activists who are well educated and/or at least well versed in this area arguing about it. Those for such research keep pointing to the possibilities while those against it are pointing to the moral cost and probabilities of no results.

Of course this debate has now made its way to the Presidential race as well. Last Thursday’s WSJ had an interesting article about President Bush track record on matters pertaining to science. The article stated that last month, 48 Nobel Prize winners publicly endorsed John Kerry's presidential bid, while thousands of researchers have signed a statement condemning Mr. Bush's science record. According to analyses by the American Association for the Advancement of Science, a nonprofit membership group, funding increases cited by the White House mostly have gone toward testing weapons systems and other industrial work.

Interestingly and perhaps not too surprisingly one of the speakers during the upcoming Democratic National Convention next week will be none other than Ronald Reagan Jr. the son of the late Republican president Ronald Reagan. He will be following the footsteps of his mother Nancy Reagan in a speech advocating more funding for stem cell research. On a side note as of today Mrs. Reagan has not agreed to attend the Republican National Convention.

Now back to the subject at hand, which let me first mention that I am not the most knowledgeable person on, but given its importance I’ve tried to formulate an educated opinion by following the issue. An issue that came to forefront for this administration on August 2001 when Mr. Bush in a nationally televised speech explained his position on the matter and while he allowed the past federal funding for research on the existing 60 genetically stem cell lines that already exist to continue, he made it clear that he didn’t see the need for more federal funding for research for other lines.

Now again based on my limited knowledge I’ve come to the conclusion that the argument that has been put forward by President Bush and America’s religious right isn't that logical or convincing especially in a secular country like America. After all imagine all the goods of finding treatments to cancer, diabetes, heart disease, Alzheimer’s, leukemia, lupus, muscular dystrophy, multiple sclerosis, Parkinson's, and stroke! Diseases that not only has a huge emotional toll on both the individuals stricken with the disease and their caregivers, but also an economic toll on the society. Those that are against such research tend to based their position on the same grounds that pro-life advocates use and that is such cells are humans and any research on them involves killing a human. Ironically many of the pro-lifers who are also against federal funding for additional stem cell research have a paradoxical position when it comes to the subject of in-vitro fertilization. Some not only have used such processes, but they have also turned a blind eye to the estimated 400,000 frozen embryonic persons in U.S. alone who are lying in stasis in liquid nitrogen tanks. Cells or according to the logic of pro-lifers humans who are frozen at extreme temperatures in case the couples that had successful IVF results would want to have more children at a later date.

The issue and its importance gets even more interesting when one takes a look at it from a financial perspective. For example in 2004 President Bush requested and was given permission to spend over $400 billion to buy more tanks, fighter planes, bombs, guns, and other military related items. While at the same time the budget that was allocated for the National Institute of Health was just $20 billion. $400 billion vs. $20 billion!!

According to statistics from the Alzheimer’s Association website it is estimated that 4.5 million Americans have the horrible Alzheimer's disease which by the way is a figure that has doubled since 1980. Moreover it is estimated that the national direct and indirect annual costs of caring for individuals with Alzheimer’s disease is at least $100 billion. Yet with all of these emotional and financial costs for the country; our federal government is estimated to have spent approximately $640 million for Alzheimer’s disease research in fiscal year 2003.

Now compare this figure or even the $20 billion set for NIH to the $100 billion dollars that was spent last year to save few thousand Iraqi’s from being raped and tortured. Go figure!

A government that is willing to sacrifice the lives of thousands of Americans soldiers, and Iraqi civilians for a greater cause isn’t willing to sacrifice few embryonic cells for a greater cause. Go figure!

What's In A Name?

2004-07-14T23:23:00.000-04:00

As I’ve mentioned to some of my friends: I thought making a child was difficult, but hell figuring out a name is even tougher:-) Of course a friend of mine had a good reply when I told him this same line, he in turn said something to the effect that if you think figuring out a name is tough then you haven’t seen nothing yet. Of course I know that he is right but what makes his perspective on the name dilemma easier than mine is that he is first of all a third or fourth generation Hungarian/Italian American, and not to mention a Christian. Whereas for me and many other first or second generation Iranian-Americans who are not Christians, or Jewish this is a challenging endeavor. I should add challenging if we want to be true to our culture by giving them a name that has some roots and usage in our culture, all while being one that won't end up getting the kid ridiculed or stereotyped later on in their life.

Before I write anymore let me first say that this isn’t a post about how to name a kid, or my way of asking for name suggestion (although any inputs is appreciated), but rather a post about another issue which I thought about as I was going through this process and that is the challenges of being a hyphenated American.

I guess before I get to this point a little preface is in order especially for those that may not be familiar with roots of Iranian names. Prior to the Arabs invading Iran 1400 some odd years ago and bringing on with themselves the religion of Islam, their culture, and of course their names, Iranians were Zoroastrians and their names where either Zoroastrian names or other ancient Iranian or as some like to say Persian names. Names like Cyrus, which in Farsi is Koroush, Darius, which in Farsi is Daryoush, or Xerxes, which in Farsi is Khashayar, are some of the common names where those of you who like history may remember. However after the Arabs invaded Iran, Iranians (some by force) began using Arabic/Islamic names like Ali, Hussein, Reza, Hassan, Mohammad, Mehdi, and all kinds of names ending with Allah. A quick fast forward -- after 1979 revolution many Iranians who for a lack of better word got turned off by how religion was used to ruin a country (kind of similar to what the religious right is currently doing in America) got turned off by anything Arabic and/or Islamic.

One of the first areas that you could see this change is in the increasing number of Iranians kids born after the revolution with names that many of their parents like to consider as pure Iranian or Aryan names. This was their way of showing their pride in Iran, and Iranian culture, and disassociating as much as possible with the Arabic culture. At any rate many Iranian parents began naming their children the pure Iranian names some where the common names that were used prior to the revolution such as Babak, Sassan, Arsalan, Ardalan, Koroush, Kamran, Arash, but some in their attempt to be different dived into various name books, history books, or famous Iranian fiction stories like the “Shahnameh” to come up with names like Surena, Artman, Abtin, Pedram, Tilman, Vista, Aryo-Barzan, Parsa, Kian, Apadana, Rodman, Nariman, Rayan, Aydeen, Arman, Arya etc … OK I think I rambled off pretty much all the names that we’ve been thinking about … any suggestions is appreciated.

You are probably asking yourself OK what is your point. Alright but beforehand let me say that by it or maybe I should say on it -- I don’t have a particular position or a solution or a whatever one may say I must have. Now the point: the point is as a hyphenated Iranian-American you want your son and/or your daughter to have the easiest time fitting into the society. You want them to be accepted for who they are, what they have done and can do, and not for silly things such as their name by for example getting singled out by say an HR manager who is going through 1000 names and is only considering the typical Bill, Joe, Bob names, or as we've seen lately dealing with being singled out and walked out of a plane while traveling simply because of their names -- so what one will do is what every good parent does I guess and that is you give them a good sounding Jewish or Christian name :-) You do that even though you don’t know the difference between Hanukah and Passover, and/or you still can’t figure out what does Chocolate and Easter bunny has to do with Jesus resurrection from the dead.

Or do you? Or I should say -- should you? I don’t know. As always each is own. But for some reasons I sometimes think of it as selling out. I guess one of the problems here is that most of the typical American names are Judeo-Christian names. A problem if you aren’t a Judeo-Christian. Heck a problem even if you aren’t a Muslim, or even a non practicing Muslim. Of course I could be creative like Kobe Bryant’s parents who I guess must’ve named him after the city Kobe in Japan, but the risk with such names may be even more than just naming them Mike or John, but heck one never knows. (Hmm a town -- definitely not Ardabil or Ghazvin).

Like many other parents we thought of naming him an Iranian name but one that when spelled cleverly it could be taken just like another American name. Then I thought whom am I fooling or whom am I hoping my son is going to fool. After all even though our last name does end in a vowel making it similar to some Italian sounding last names, but since it isn’t a common English, Irish, Italian or Yiddish root last name at the end of the day it is obvious that it isn’t none of those. So why bother?

So what is in a name? Well some say a whole lot -- I personally don't think its meaning is as important as how others may superficially judge their name based on its roots, and pronounciation, but I must say one of the reasons for why one of my favorite names for a son in the past ten years even before getting married has been Arya has to do exactly with its meaning. FYI the name has several meaning one is "of Aryan race" and also similiar characteristic description of someone that is noble, and chaste. Well I don't know what we will name him but I hope he at least knows that we gave it alot of time and consideration.

Fooled By Randomness

2004-07-08T20:38:00.001-04:00

This past month I decided to re-read Fooled by Randomness an excellent book written by Nasim Taleb. The book is a great read for anyone that hasn’t looked or isn’t used to looking at various events from a mathematical or statistical perspective.

As the title suggests the crux of the book is about the whole notion of being fools of random events; something that many of us fall victim to, including yours truly and even the author who as a mathematical trader is already aware of the subject. As the author himself puts it the book is about “luck disguised and perceived as non-luck (that is, skills) and, more generally, randomness disguised and perceived as non-randomness (that is, determinism). It manifests itself in the shape of lucky fool, defined as a person who benefited from a disproportionate share of luck but attributes his success to some other, generally very precise, reason.”

The reason why I thought this would be a good subject to start my first post here was that I also believe that many of us fall victim to associating many and at times all events around ourselves to our own or someone else's skills, instead of simply to luck. Now I'm not denying that skills can't be the sole or at least play a major role in an outcome of an event, but because we usually do not actually take the time to analyze the outcome of various events in our lives we can't also deny that it could have also been as a result of pure luck. As Taleb admitted in his book there is no way one can be sure that an action or an event is not due to luck, and although he knows that not every rich man is an idiot and every unsuccessful person unlucky, but in the absence of full information about the situation he rather reserves judgment.

In his book Taleb writes: “Such confusion crops up in the most unexpected areas, even science, though not in such an accentuated and obvious manner as it does in the world of business. It is endemic in politics, as it can be encountered in the shape of a country's president discounting on the jobs that "he" created, "his" recovery, and "his predecessor's" inflation. We are genetically still very close to our ancestors who roamed the savannah. The formation of our beliefs is fraught with superstitions - even today (I might say, especially today). Just as one day some primitive tribesman scratched his nose, saw rain falling, and developed an elaborate method of scratching his nose to bring on the much-needed rain, we link economic prosperity to some rate cut by the Federal Reserve Board, or the success of a company with the appointment of the new president at the helm”.

For example in the world of politics partisan Republicans seem to always use the economic growth during Pres. Reagan era to promote the idea that deregulated free markets and more importantly tax cuts would promote sustainable economic growth. On the other side partisan Democrats who attributes the 1990’s economic boom to President Clinton’s fiscal policies advocate positions that are more similar to that time frame. Policies such as having a balanced budget – how times have changed that now it is the Dems who are advocating fiscal discipline.

I’m not here to suggest that in the long run fiscal and monetary policies do not have any impact, because they do especially the extreme ones. However what gets lost in the political rhetoric made by the advocates of these policies is that --- by what factor these policies contributed to the end results they are promising to their constituents and what are the odds of it repeating itself.

Life is at times difficult for realists like myself who are mainly dependent on facts to make decisions, but it becomes even tougher when we add to our realism a dose of probabilistic skepticism. For example it is such probabilistic skepticism that could make people think and behave as that all assets have a specific fair value range, and when they go far above that value or below it then there is a high probability that the price will revert back to mean or another word an average fair value. So they don’t buy a home in this hot real estate market boom or perhaps bubble.

Having said that I also realize that being a realist and/or a probabilistic skeptic doesn't mean that we have a case of analysis paralysis, or forgo making any decisions such as voting in an election, or choosing a wife or husband until we have all the facts and have analyzed all the possible outcomes. No I realize the impossibility of such tasks in certain situation, but in some situations where it isn't as difficult or impossible we tend to choose the easy way out.

To wrap it up it is interesting that even after the collapse of the stock market in the three year period of 2000-2003 we still have some fools of randomness that believe that the current real estate market boom in certain areas of US is different than the stock market bubble or other real estate bubble or any other asset bubbles in the past. A subject that you can be sure I will touch on later on but meanwhile I thought this excerpt from the book regarding an interview by George Will with Robert Shiller is a great way to explain the difficulty of explaining ones probabilistic skepticism with someone that is a fool of randomness, and also to finish up this post.

“One illustration of a dangerous refusal to consider alternative histories is provided by the interview that media person George Will, a "commentator" of the extensively commenting variety, conducted with Professor Robert Shiller, a man known to the public for his best-selling book Irrational Exuberance, but known to the connoisseur for his remarkable insights about the structure of market randomness and volatility.

The interview is illustrative of the destructive aspect of the media, in catering to our heavily warped common sense and biases. I was told that George Will was very famous and extremely respected (that is, for a journalist). He might even be someone of utmost intellectual integrity; his profession, however, is merely to sound smart and intelligent to the hordes. Shiller, on the other hand, understands the ins and outs of randomness; he is trained to deal with rigorous argumentation, but does sound less smart in public because his subject matter is highly counterintuitive. Sheller had been pronouncing the stock market to be overpriced for a long time. George Will indicated to Shiller that had people listened to him in the past they would have lost money, as the market has more than doubled since he started pronouncing it overvalued. To such a journalistic and well sounding (but senseless) argument, Shiller was unable to respond expect to explain that the fact that he was wrong in one single market call should not carry undue significance. Shiller, as a scientist, did not claim being a prophet or one of the entertainers who comment on the markets on the evening news. Yogi Berra would have had a better time with his confident comment on the fat lady not having sung yet.

I could not understand what Shiller, untrained to compress his ideas into vapid sound-bites, was doing on such a TV show. Clearly, it is foolish to think that an irrational market cannot become even more irrational; Shiller's views on the rationality of the market are not invalidated by the argument that he was wrong in the past. Here I could not help seeing in the person of George Will the representative of so many nightmares in my career; my attempting to prevent someone from playing Russian roulette for $10 million and seeing journalist George Will humiliating me in public by saying that had the person listened to me it would have cost him a considerable fortune. In addition, Will's comment was not an off-the-cuff remark; he wrote an article on the matter discussing Shiller's bad "prophecy". Such tendency to make and unmake prophets based on the fate of the roulette wheel is symptomatic of our genetic inability to cope with the complex structure of randomness prevailing in the modern world. Mixing forecast and prophecy symptomatic of randomness foolishness.”

Hello & Welcome

2004-07-07T23:36:00.000-04:00

Hello and welcome to my weblog. A place meant to serve multiple purpose such as being my soap box for my rants and acting as an amateur op/ed writer :-) to saving my close friends from all the emails that I sometimes end up sending them :-) -- and never know a website with rants and/or viewpoint from others.

Seriously though the reason why I started this blog was because I've noticed how most of my conversations are mainly either related to business matters and/or on the usual small talk subjects we always have ... instead of meaningful in-depth conversations on issues that have a common impact on all of us. I assume this has to do with lack of time after all we don't even have time to have an in-depth conversations with our significant other, let alone our friends or colleagues; not to mention that in some settings it is now improper and politically correct to have an in-depth conversations about certain issues. Ironically given the information age we are in now we all know and in some cases are interested in knowing how Mr. Pundit on TV stands on various issues but we don't even know where our cousin or neighbor stands on those issues.

Anyways -- as far as what you can expect to read here ... well for those of you who have been fortunate enough to recv my emails ;-) the topics and frequency of my post will be kind of the same. At times I will simply post my own rants and raves about interesting and/or important things that I may hear or see, while at other times I may simply post links to various interesting articles or items. An obvious topic for me will be those that are related to the financial markets so you can be sure to see some posts pertaining to the market. But as you know at times I'm also somewhat opinionated about certain political and social issues, so you will obviously see various posts on these matters. Of course being opinionated doesn't always mean that one is also fully knowledgable or educated about a topic so should you come across any factual errors (not grammatical) in any of my opinions please take the time to correct me. Of course if you come across any ideological differences with what I've posted here feel free to also express your perspective as I am always happy to read and learn from an opposing point of view.

Finally as most of you know I'm about to enter a new and exciting and perhaps sleepless chapter in my life with the arrival of my first child, so you can be assured that you will read some of my first hand but I promise not too detailed or boring reporting from the frontline of parenthood. At any rate I hope you will enjoy this site -- and should anyone of you like to join in as a writer please let me know.