Happy Reagan Day!

Ronald Reagan, our 40th president was born on this day in 1911. In this election year, whatever one's positions or parties, what's clearly needed of the next Prez is back-to-basics leadership. Understand your values deeply. Believe in them steadfastly, but not blindly. Follow them courageously. Communicate them tirelessly. Engage (or re-engage) your fellow Americans ... and the rest of the world. Make it clear that they are responsible for themselves first and foremost. The next president, no less than every other American, needs to live and act with dignity as the best way of communicating their values. Rather than spending your their breath telling us how Reaganesque they are or aren't, I wish the candidates would just quiet down and listen to him... "Management is doing things right. Leadership is doing the right things." "There are no easy answers but there are simple answers. We must have the courage to do what we know is morally right" "when people have the right to make decisions as close to home as possible, they usually make the right decisions." "We must reject the idea that every time a law's broken, society is guilty rather than the lawbreaker. It is time to restore the American precept that each individual is accountable for his actions" "If we love our country, we should also love our countrymen." "Freedom is something that cannot be passed on in the blood stream, or genetically. And it's never more than one generation away from extinction. Every generation has to learn how to protect and defend it" "I know in my heart that man is good. That what is right will always eventually triumph. And there's purpose and worth to each and every life" And, if you happen to be philosophically aligned with him, you might remind yourself: "Government is not the solution to our problem. Government is the problem … Government does not solve problems; it subsidizes them ... I don't believe in a government that protects us from ourselves ... Concentrated power has always been the enemy of liberty" "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'" "Sometimes I think that government fits that old-fashioned definition of a baby: An alimentary canal with an appetite at one end and no sense of responsibility at the other" "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." "growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down" "Millions of individuals making their own decisions in the marketplace will always allocate resources better than any centralized government planning process" "there has been a fourth branch added to the traditional three: a vast federal bureaucracy that's now being imitated in too many states and too many cities, a bureaucracy of enormous power which determines policy to a greater extent than any of us realize, very possibly to a greater extent than our own elected representatives. And it can't be removed from office by our votes" "Government always finds a need for whatever money it gets"

Is there a leader in the house?

Representative Democracy Doesn’t mean poll-based management; we elect leaders and then delegate to them the responsibility for making decisions

Follow up: Yabba Dhabi Doo

Here are some stats for ya:

Poor Hill

Poor lil' Hill - always a step behind.

• She opposed the Iraq invasion at a time when it was wildly popular among Americans.
• She voted for the war just in time for it to turn sour.
• She opposed the surge just in time for it to work (saying the initial reports of success
  "require the willing suspension of disbelief")

Today she says "there is no american military solution." By that litmus test, I assume she would have voted against US involvement in both world wars. They both were far more difficult undertakings than our current one. Thankfully, our leaders back then had back bone. Schlechte Ahnung, Frau Clinton. Wo wuerden wir Heute stehen? Hoffentlich, wuerde Deutschland America nicht gestoert haben, aber wuerden wir noch England haben? Italien? Jueden?

That most of us need not speak enough German to understand the above is a testament to the success of our past military (alongside diplomatic and economic) engagements. The notion that we should surrender at the first sign of resistance or adversity appears to be a prevailing underpin of her choices across issues. It's clearly the strategy she has used to formulate her own congressional votes.

Dream Team?

Victory lies in the center for the Presidential candidates this year. The dream team:

McCain - Lieberman

Woulda Could Shoulda Rudy

I give Rudy an "A" for effort. He'll go down as the "woulda shoulda coulda" candidate on the Republican side. Too many weaknesses. Too little experience. Too narrow platforms. Too weak a PR campaign. It left us Rudy fans with little more than his general tenacity to bank on. If only he could have answered a single question without squeaking in 9/11.

Consider how it coulda been:

The year is 2000 and Rudy is beating Hill by a few points for a Senate seat. He's riding high on a wildly successful mayorality in NYC, having turned the city around against all odds. He finds out he has prostate cancer. His wife finds out he's been cheating on her. She files for divorce and (the nerve!) forces him to move out of the mayor's official residence (Gracie Mansion). The news vultures have a feeding frenzy and he has to drop out of the race. Hill waltzes to victory, the first time she is actually elected (or hired for that matter) to a job representing anyone. She learns how Congress actually works. She weasels her way onto a few influential committes. She builds a legislative record. She gains some international affairs experience.

That coulda been Rudy. Had he not dropped out, he would have won the race, taken the seat, learned the Washington ropes, gotten the necessary experience in foreign affairs, and build his own legislative record. Fast forward to 2008: he'd actually be a viable candidate for president. Those weaknesses I opened this blog with ... presto! gone! Every single one. Hillary would never have been legitimized by a vote. Instead, she'd still be flitting around the world on Bill's coattails pretending she was someone. Had she played her cards right, she might have become another Gore ... or not. Do we really need another hanger-on who can only talk, not act? True, Rudy wouldn't have had those wonderful PR coup soundbites on 9/11. But being at the locus of NYC and Washington, how could he have avoided personifying the moment just as he, in fact, did? Were he "lucky" enough, he might have been in the City on that day and gotten his photo-op anyway.

In short, for Prez, he'd be in and she'd be out.

Econopsychology

A good friend recently asked me "why does cutting the interest rate avoid recession" ....

Cutting interest rates decreases the cost of borrowing for people, businesses, banks, and the government. Banks can "fund" (=borrorow in order to re-lend) themselves cheaper and thus are willing to grant more loans or lower interest loans. Companies can borrow more cheaply to fund new projects which, in general, return a profit. Similarly, people feel more comfortable borrowing money to buy "stuff" (cars, clothes, dinners out, houses) since they know they'll pay less in interest than before. Even if they don't borrow MORE, it still means that the % of their payments which goes to interest decreases, meaning they have more spending money to buy more stuff. In either case, it means companies get busier and make more money. Those companies hire people, give raises, buy "stuff", and pay higher dividends. Their stock price goes up. Both these eventually put money back in people's pockets, and the cycle repeats itself.

Supposedly, the cycle repeats 7 times ... meaning every dollar not spent on interest creates 7 dollars of "wealth" for the country. Part of this increase is due to the fact that, as the economy gets better, loan default rates decrease. This causes banks' "risk appetite" to increase. We see this in two ways:

1. They lower the percentage of assets they hold in reserve. This means they can lend more money without increasing funding or interest rates. Economists call this "increasing the velocity of money" and it has the same effect on the economy as literally printing Ben Franklins.
2. Especially recently with the implementation of Basel II, the become willing to lend to riskier people/projects who previously couldn't get ahold of any bucks. As an aside (to be followed up in a later blog post) this statement goes a long way toward explaining the sub-prime mortgage boom and bust we're currently witnessing.

Another way of answering my friend's question is to put it like this: Any person or company has X amount of income. They have 3 options: save, invest, or spend and they're constantly adjusting the percent of income they allocate to each. Lowering the interest rate DIScourages saving (since it pays less interest), ENcourages spending and investment (since it costs less to borrow). All of these things are good ... as long as they don't cause inflation.

Inflation is a complicated animal. You have to think of it like Sting's message in a bottle. To predict where it will end up, you'd need to know all the tides and storms, winds, currents, boat paths. And even then you'd still be subject to chance and randomness. Its an equation of a billion plusses and minuses which ultimately sums to nearly zero. Figuring out that "nearly" part is what keeps economists up at night. Greenspan is one of the best ever at figuring it out, but the biggest complexity is that, in the time it takes to add it all up, the numbers will have all changed on ya.... Having said that ... yes, too much money in the economy causes inflation ... but so does irresponsible lending, asset scarcity (think of the price of a superbowl ticket the day before the game),

Economics is a social science, not a quantitative one. Literally the only way economists can make their equations bear any resemblance to reality is to always include "plus E" like (1/y)*p = ( i*s / l*m) +E ..... where "E" means the general expectations of the population.

Corporate Newspeak 2

Take-away: (n) A marginally insightful observation which will only have relevance at some unknown future date, often used as a passive-aggressive method of delivering criticism. The verbal equivalent of that chinese food that's been in the back of your fridge for a month. Also: Lessons Learned.
Usage: "Hmm ... so you called our client a monkey in clowns clothing and he fired us ... hmm ... well, the takeaway is don't do that. I'll shoot out a lessons learned e."

Vet: (v) Review somebody else's work so they'll take responsibility for it. The lazy man's critical thinking
Usage: "Hey, I just shot you an E with a draft of some asks. Can you and John vet it before we send it out?"

Gap: (v) Figure out what's fucked up and who to blame, often used with "versus"
Usage: "Hey! Where's my diet Snapple? Jeannie, did you order my diet Snapple? Timmy, it looks like we need to gap our order versus what the caterer sent."

Administrivia: (n) Repetitive often menial bookkeeping work necessary for a large buraucratic organization to function, but outside of what you perceive to be your 'real job'
Usage: "I spent half my day buried in administrivia, so I didn't have time to make us any money."

Outsource: (v) Get someone else to do the work your laziess and ego won't permit you to do
Usage: "I'm going to outsource this administrivia to Mike so I can spend more time brainstorming."

Circle Back: (v) Discuss again as though the topic is new; often used to diplomatically end a discussion where the participants are not infomed, empowered, or cognitive enough to make a decision and everyone's attention span has been exhausted.
Usage: "Listen, you go have a cigarette with Sammy, and I'll read my emails and we'll circle back on this after lunch."

Think On: (v) Ponder; often used as an exuse for not being able to answer a question or to deliver work on time.
Usage: "That's a tough call. I'm going to have to think on it tonight. Let's circle back in the A.M."

Brainstorm: (v) Get in a room with other people and a list of issues with no solution. Then hope that solutions accidentally fall out of someone's mouth while they're arguing about the minutae of how to define the issues.
Usage: "Yes, sir, I know I'm a week late solving that problem. I asked Bob and Harry to think on it so we can brainstorm tomorrow."

Yabba Dhabi Doo

From the press this week, news that investment funds in the United Arab Emirates have taken MAJOR equity holdings in two of the largest global companies: Citigroup ($7.5 billion / 5%) and Sony ("substantial). This atop several other recent SWF investments in AMD (8%), Apollo Management (9%), and Airbus.

Worldwide, something north of $2.5 trillion sits in sovereign wealth funds. Abu Dhabi's fund is purported to be the largest, at $625 billion, but by no means are the Oily Arabs the only ones throwing their government cash around private markets. The second largest fund is purported to be Norway's at $330 billion. And in asia, Singapore has well over $200 billion in various funds. Even communist China owns stocks -- Blackstone Group is now 10% held by the Chinese government. France and Germany don't have specific funds ... that would create perhaps too much trancparency for them. Make no mistake - they're deeply invested in companies in their own countries. Airbus, for example, would not even exist did it not receive a steady "reverse dividend" from it's shareholders, the European governments.

While dollar markets are deep and wide enough to absorb these purchases without lurching overall, outsized SWF investments in other national markets have caused significant trauma ... and they've only begun to dip their toes in the water. Just wait 'till one of 'em tries to get a seat on the board of an American company or otherwise flex their ownership muscle.

Ya can't blame 'em really. All these emerging market countries are flush with cash (mostly in Dollars) from exports, primarily those of commodities, and those primarily of oil. Holding all that money in treasuries which (of late) don't even keep up with the rate of Dollar depreciation, just doesn't make sense. Think about it in domestic terms -- if Congress found out they could add a new massive revenue stream from investments, how long would they be able to keep from doing that? The money'd be spent before the investments had even been made. They might even lower taxes if faced with enough pressure.

Corporate Newspeak

I feel it necessary to do my little part to bust the current ridiculous TV writers' strike.

Here, from the front lines of corporate America's battlefields, are some phrase-isms which are too bizarre to be made up. Unfortunately, they call to mind Orwell's Newspeak and clearly achieve the same goal of dumbing down the populace.

Cover off on: (v) To get someone (else) to resolve or get someone to respond to
Usage: "It's great that you've been able to cover off on that issue so quickly."

Ask: (n) a question
Usage: "Good feedback on your ask when you covered off on it."

E: (n) an e-mail
Usage: "Please shoot me an E with your ask."

Shoot: (v) to send or submit. Also: get
Usage: "As soon as you get me your E, I'll shoot it back."

Learning (n) lesson
Usage: "In summary, here are the learnings from this week's sessions."

Out of Pocket (n) incommunicato
Usage: "I'm flying to New York in the morning, so I'll be out of pocket most of the day."

Dilbert (n) a conformist employee of a corporation
Usage: "Stay tuned, ye writer-less producers. I'll continue to report back with new jewels on this blog whenever my fellow Dilberts drop these non-speak jewels"