Wednesday, June 30, 2010
By Laureano Stephen Márquez P
Publicado en el diario TalCual el viernes 18 de junio de 2010
En el reino de Aípotu, un país donde los sueños se arruinan y las esperanzas se desvanecen, desnudar al rey es algo que solo puede hacer quien no tenga miedo. Quien tenga la certeza de que no va a pasarle nada, de que no le va a sobrevenir demanda ni multa ni prisión. El rey de Aípotu ya no está acostumbrado a que nadie disienta de él en público. Se siente muy incomodo cuando alguien lo hace. Ya no puede dirigirse a nadie sin que el correlato sea la lisonja y el aplauso forzado.
En Aípotu, cada vez es más difícil expresarse sin recibir sanciones directas o indirectas, al punto de que mucha gente utiliza el lenguaje metafórico para referirse al que gobierna el reino. Usan nombres diferentes para nombrar las cosas a fin de no tomar riesgos. Por ello, cuando aparece alguien que puede hablar desde la certeza de que no será perseguido y habla claro, la gente de Aípotu se asombra y el monarca se inquieta. Pone en marcha su arsenal. Voltea hacia los lados buscando el apoyo incondicional al que está acostumbrado, porque ya no sabe ver sino asentimiento en los rostros, lo requiere para armar sus ideas y se burla de las preguntas de quien le entrevista. Lo descalifica llamándolo ignorante, que es el recurso que siempre usa cuando alguien se atreve a preguntar algo fuera de libreto, porque en el reino de Aípotu la disidencia solo puede tener tres motivaciones: ignorancia, locura o traición apátrida.
El lenguaje corporal del rey de Aípotu da debida cuenta de su incomodidad frente a quien se atreve a discrepar de sus puntos de vista ante él. Mucha gente en Aípotu piensa que si así se indispone teniendo una cámara en frente, cómo será en privado cuando no lo observa ningún lente. Quién de los que está a su lado se atreverá a decirle verdades amargas o a manifestarle críticas.
La gente de Aípotu sabe que el reino cada vez hay más miedo de hablar. Por eso cuando alguien viene de fuera y lo hace, asombra a todos.
De todas maneras para quien no ha tenido la oportunidad de abrir la mirada al horizonte, quiero que sepan que youtube la oportunidad de verlo, claro que hay que bebece algo, un escocés, por ejemplo.
Página Oficial del Humorista Venezolano Laureano Marquez
Friday, June 25, 2010
Analysts Question a Threat by Fannie
Experts wondered what Fannie Mae, the mortgage finance giant, hoped to achieve by announcing it would punish owners who strategically defaulted.
Get The New York Times on your iPhone for free by visiting http://itunes.com/apps/nytimes
Sent from my iPad
Thursday, June 24, 2010
José María Aznar: Supporting Israel
by José María Aznar <http://www.aish.com/search/?author=96745754>
If Israel goes down, we all go down.
Anger over Gaza is a distraction. We cannot forget that Israel is the West’s best ally in a turbulent region
For far too long now it has been unfashionable in Europe to speak up for Israel. In the wake of the recent incident on board a ship full of anti-Israeli activists in the Mediterranean, it is hard to think of a more unpopular cause to champion.
In an ideal world, the assault by Israeli commandos on the Mavi Marmara would not have ended up with nine dead and a score wounded. In an ideal world, the soldiers would have been peacefully welcomed on to the ship. In an ideal world, no state, let alone a recent ally of Israel such as Turkey, would have sponsored and organized a flotilla whose sole purpose was to create an impossible situation for Israel: making it choose between giving up its security policy and the naval blockade, or risking the wrath of the world.
In our dealings with Israel, we must blow away the red mists of anger that too often cloud our judgment. A reasonable and balanced approach should encapsulate the following realities: first, the state of Israel was created by a decision of the UN. Its legitimacy, therefore, should not be in question. Israel is a nation with deeply rooted democratic institutions. It is a dynamic and open society that has repeatedly excelled in culture, science and technology.
Second, owing to its roots, history, and values, Israel is a fully fledged Western nation. Indeed, it is a normal Western nation, but one confronted by abnormal circumstances.
Uniquely in the West, it is the only democracy whose very existence has been questioned since its inception. In the first instance, it was attacked by its neighbors using the conventional weapons of war. Then it faced terrorism culminating in wave after wave of suicide attacks. Now, at the behest of radical Islamists and their sympathizers, it faces a campaign of delegitimization through international law and diplomacy.
Sixty-two years after its creation, Israel is still fighting for its very survival.Sixty-two years after its creation, Israel is still fighting for its very survival. Punished with missiles raining from north and south, threatened with destruction by an Iran aiming to acquire nuclear weapons and pressed upon by friend and foe, Israel, it seems, is never to have a moment’s peace.
For years, the focus of Western attention has understandably been on the peace process between Israelis and Palestinians. But if Israel is in danger today and the whole region is slipping towards a worryingly problematic future, it is not due to the lack of understanding between the parties on how to solve this conflict. The parameters of any prospective peace agreement are clear, however difficult it may seem for the two sides to make the final push for a settlement.
The real threats to regional stability, however, are to be found in the rise of a radical Islamism which sees Israel’s destruction as the fulfillment of its religious destiny and, simultaneously in the case of Iran, as an expression of its ambitions for regional hegemony. Both phenomena are threats that affect not only Israel, but also the wider West and the world at large.
The core of the problem lies in the ambiguous and often erroneous manner in which too many Western countries are now reacting to this situation. It is easy to blame Israel for all the evils in the Middle East. Some even act and talk as if a new understanding with the Muslim world could be achieved if only we were prepared to sacrifice the Jewish state on the altar. This would be folly.
Israel is our first line of defense in a turbulent region that is constantly at risk of descending into chaos.Israel is our first line of defense in a turbulent region that is constantly at risk of descending into chaos; a region vital to our energy security owing to our overdependence on Middle Eastern oil; a region that forms the front line in the fight against extremism. If Israel goes down, we all go down.
To defend Israel’s right to exist in peace, within secure borders, requires a degree of moral and strategic clarity that too often seems to have disappeared in Europe. The United States shows worrying signs of heading in the same direction.
The West is going through a period of confusion over the shape of the world’s future. To a great extent, this confusion is caused by a kind of masochistic self-doubt over our own identity; by the rule of political correctness; by a multiculturalism that forces us to our knees before others; and by a secularism which, irony of ironies, blinds us even when we are confronted by jihadis promoting the most fanatical incarnation of their faith. To abandon Israel to its fate, at this moment of all moments, would merely serve to illustrate how far we have sunk and how inexorable our decline now appears.
This cannot be allowed to happen. Motivated by the need to rebuild our own Western values, expressing deep concern about the wave of aggression against Israel, and mindful that Israel’s strength is our strength and Israel’s weakness is our weakness, I have decided to promote a new Friends of Israel initiative with the help of some prominent people, including David Trimble, Andrew Roberts, John Bolton, Alejandro Toledo (the former President of Peru), Marcello Pera (philosopher and former President of the Italian Senate), Fiamma Nirenstein (the Italian author and politician), the financier Robert Agostinelli and the Catholic intellectual George Weigel.
It is not our intention to defend any specific policy or any particular Israeli government. The sponsors of this initiative are certain to disagree at times with decisions taken by Jerusalem. We are democrats, and we believe in diversity.
What binds us, however, is our unyielding support for Israel’s right to exist and to defend itself. For Western countries to side with those who question Israel’s legitimacy, for them to play games in international bodies with Israel’s vital security issues, for them to appease those who oppose Western values rather than robustly to stand up in defense of those values, is not only a grave moral mistake, but a strategic error of the first magnitude.
Israel is a fundamental part of the West. The West is what it is thanks to its Judeo-Christian roots. If the Jewish element of those roots is upturned and Israel is lost, then we are lost too. Whether we like it or not, our fate is inextricably intertwined.
To learn more, see FriendsOfIsraelInitiative.org <http://www.friendsofisraelinitiative.org>
Ten hours and counting in Wimbledon's longest match
By Charles Morris
Anyone who has ever dismissed tennis as a game for wimps was forced to recant late Wednesday afternoon – and to go on recanting until darkness fell
Read the full article at: http://www.ft.com/cms/s/0/06d24390-7f1b-11df-84a3-00144feabdc0.html
Wednesday, June 23, 2010
Sarkozy intervenes in French football saga
ByBen Hall in Paris
France's disastrous World Cup campaign has become an affair of state after the president summoned his prime minister to review the events that led to a humiliating strike by players at the weekend
Read the full article at: http://www.ft.com/cms/s/0/e704d8a6-7ead-11df-ac9b-00144feabdc0.html
Friday, June 18, 2010
By DAN MOLINSKI AND JOSé DE CóRDOBA
CARACAS, Venezuela&lsqauo;The principal owner of Venezuela's last remaining
opposition television station has fled the country, as President Hugo Chávez
continues to ratchet up the pressure on his rivals months ahead of crucial
September legislative elections.
Guillermo Zuloaga fled Venezuela after a warrant was issued for his arrest
last week, a station representative confirmed.
"He's no longer in Venezuela," said Edith Ruiz, director of institutional
relations at Mr. Zuloaga's Globovision television station Wednesday. She
said his exact whereabouts outside of Venezuela were unknown.
Venezuelan authorities issued an arrest warrant for Mr. Zuloaga on Friday on
charges that a car dealership his family owns had hoarded automobiles. Mr.
Zuloaga denies the allegation.
In a call to Globovision earlier in the week, Mr. Zuloaga said the
government's accusation against him was trumped up for the sole purpose of
shutting down the station.
Officials at the president's office and the Attorney General's office
weren't available to comment Wednesday on the news of Mr. Zuloaga's
In March, Mr. Zuloaga was briefly arrested for saying on a television show
that the nation lacked freedom of expression. But he was released after an
Over the years, Mr. Chávez has moved to take over the airwaves, opening a
plethora of state-run channels that give the president fawning coverage.
In 2007, the government went after private broadcasters, ordering that the
license of the biggest and most outspoken broadcaster, RCTV, not be renewed.
The move forced it off the airwaves. The government then later forced the
channel off cable television as well.
Other TV broadcasters, cowed by the government, softened their coverage of
the government. But Globovision has remained the exception, infuriating
Mr. Zuloaga is the second major shareholder and director of the station to
flee or refuse to return to the country in the last few days. Globovision
director Nelson Mezerhane, who is also president of Banco Federal, a midsize
bank seized by Venezuelan authorities Monday, said earlier this week he
wouldn't go back to Venezuela because he feared judicial persecution.
Venezuelan authorities said the bank wasn't meeting liquidity requirements,
an allegation Mr. Mezerhane says is false.
"This is part of a political agenda," said Mr. Mezerhane in an interview. He
was outside Venezuela when the bank was seized. "The president wants to bend
Globovision to its will and put it at the service of the state."
During recent days, Mr. Chávez has taken to the airwaves to urge both
Messrs. Mezerhane and Zuloaga to turn themselves in. He has denied that
their legal problems stem from their association with Globovision. "That's a
lie," said Mr. Chávez in an address. "They are running for some reason. ...
He who hasn't done anything wrong, doesn't fear anything."
Some analysts say Mr. Chávez's apparent attack on Globovision is an attempt
to distract Venezuelans from growing economic problems and spreading
Venezuela's economy contracted nearly 6% in the first quarter of the year.
Inflation, meanwhile, is running at about 30%. While shortages of basic
foods have proliferated, so have corruption scandals in the government's
multibillion-dollar food purchasing program. Thousands of tons of imported
food, bought by the government's main purchasing arm, have been found
rotting in Venezuela's main port&lsqauo;creating a public outcry.
Given that bleak landscape, a number of analysts wonder if Mr. Chávez will
force Caracas-based Globovision off the air now that its principal owner,
Mr. Zuluaga, is an international fugitive. Others say Mr. Chavez won't go as
far as to shut down the station&lsqauo;which would bring international
condemnation&lsqauo;but will pile on further pressure to muzzle the station.
"I don't think the president wants to shut down the channel," said Alberto
Federico Ravell, a shareholder and former editor in chief of Globovision who
stepped down from his post under pressure earlier this year. "He just wants
to strangle it with measures against its owners, tax audits and other
The latest arrest warrant issued for Mr. Zuloaga has raised an outcry from
governments and international human-rights groups. In Washington, the U.S.
State Department said earlier this week the arrest warrant was "the latest
example of the government of Venezuela's continuing assault on the freedom
of the press."
Other international groups have also come out in recent days to protest the
latest arrest warrant for Mr. Zuloaga. "If the government is using Zuloaga's
prosecution as a pretext to silence and intimidate the only remaining
critical broadcaster, the rights of citizens to be informed will be
seriously restricted and Venezuela's democracy will suffer yet another
blow," the New York-based Committee to Protect Journalists said Monday on
During his 11 years in power, Mr. Chávez has frequently been accused of
trying to silence his critics by trumping up charges against them so he can
have them arrested and put in jail.
A former state governor, Oswaldo Álvarez Paz, was arrested in March for
saying on a television show that Venezuela has become a haven for drug
traffickers. Mr. Chávez said such statements break a law that prohibits
"spreading false information" or making any incendiary comments deemed
threatening to peace and stability.
Write to Dan Molinski at Dan.Molinski@dowjones.com
Tuesday, June 15, 2010
by Dylan Grice
The eurozone's fiscal farce offers a revealing glimpse of the future: sovereign crisis begets banking crisis begets central bank nose-holding while the printing presses roll!! More immediately though, it's making equities look interesting again. Markets overall merely look less overvalued than they did. But undervaluation is emerging in some areas. And the VIX recently traded at 40. Selling out-of-the money puts at such levels (or higher), on companies you're happy to own anyway is a good way to be paid for your patience.
* The chart below shows the UK RPI from year 1300. From it, we can see that there have been inflationary episodes - the 16th century influx of new world gold and silver, the 18th century timber shortages, the early 19th century Napoleonic Wars - but that systematic CPI inflation is relatively new, and only started in earnest after WW2. This structural break coincides with the attainment of a voice in politics by ordinary people in developed economies: since voters rarely opt for economic pain, their elected representatives soon found they had to avoid it at all costs. Hence the relatively modern inflationary bias of "macroeconomic policy."
* When that inflationary bias dictated lowering rates in the face of a threatened recession more quickly than you raised them in a recovery, it seemed harmless enough. But the crash of 2008 and its sovereign debt aftermath have changed everything. It's difficult to exaggerate just how dirty the phrase deficit monetisation was when I studied economics at university: loaded with evil images of political irresponsibility and short-sightedness, it evoked the haunting spectre of catastrophic and ruinous hyperinflation. It's what they did in Weimar Germany; it helped cause WW2; to say it had an image problem would be a grotesque understatement. No wonder it's been rebranded as quantitative easing.
When faced with the prospect of a financial crash causing a nasty recession - or worse, a depression - few doubted that Anglo-Saxon central banks would do whatever was necessary, including breaking the taboo of deficit monetisation ... sorry, engaging in quantitative easing. But the ECB was supposed to be different. The ECB was supposed to be genuinely independent. The ECB was modelled on the Bundesbank - itself forged in the white hot furnace of Weimar's hyperinflationary trauma ... So it was always going to be an interesting collision: what would happen when the unstoppable force of threatened financial wipeout met the immoveable object of the ECB's hard-money dogma?
Well, the force stopped and the object moved ... sort of. The market's panic over eurozone debt subsided ... for a while, and the ECB began quantitatively easing ... kind of. The EU's "shock and awe" $1trillion rescue was certainly a big number and reflected European governments going all in. But going all in is risky if you don't have a strong hand, and the EU's seems weak. Two-thirds of the rescue money comes from the EU itself, which means that the distressed eurozone borrowers are to be saved by more borrowing by ... er ... the distressed eurozone borrowers.
So there is virtually no new money coming into the European financial system. If a small bank goes down, the problem is solved when it is taken over by a bigger bank which injects new capital into it. If a bigger bank goes down, its problem is solved when it is taken over by the government, which injects new capital into it. If a government goes down ... well, then we're stuck. Where does the new capital come from now?
Enter central banks. In 2009, the BoE printed £200bn, thus completely financing the UK government deficit. It can't have felt good about doing it but since the alternative scenario was so scary - financial meltdown and possibly IMF support - it held its nose and did it anyway. It said it was going to sterilise the intervention, but on discovering that such was the financial system distress it was unable to, it just carried on regardless. In the US, the Fed printed $1.25 trillion to monetise the problematic mortgage market. It also said it was going to sterilise the intervention, but like the BoE it soon found it couldn't, and like the BoE continued anyway because the alternative financial meltdown scenario was too scary to contemplate.
Today, the ECB is buying insolvent eurozone government debt which it is promising to sterilise. Yet they face the same stark calculus faced by their Anglo-Saxon cousins in 2008. You can only worry about the economy's ?price stability' if the economy hasn't already melted down! So here's my prediction: they won't sterilise, and the program will expand.
Since banks are typically stuffed full of government bonds (the first chart below shows eurozone financial institutions' holdings of government securities as a share of capital), instability in government debt markets implies instability in bank balance sheets. So sovereign crises and financial crises are joined at the hip (second chart below). And since financial crises affect banks' ability to lend, which poses obvious risks to the rate of employment, the need for a central bank response to the threat of financial collapse is clear:
- Print money
- Keep printing until the financial system stabilises
- Worry about removing liquidity later (and if removing liquidity stresses the financial system, go back to step 1)
What's interesting is that central banks feel they have no choice. It's not that they're unaware of the risks (although there are profound behavioural biases working against them in their assessment of those risks). They're printing money because they're scared of what might happen if they don't. This very real political dilemma is what is missing from the simplistic understanding of inflation as "always and everywhere a monetary phenomenon." It's like they're on a train which they know to be heading for a crash, but it is accelerating so rapidly they're scared to jump off.
Incidentally, this is exactly the train Rudolf von Havenstein found himself on as President of the Reichsbank during the German hyperinflation. According to Liaquat Ahamed's work on von Havenstein's dilemma, in his majestic book ‘Lords of Finance' " ... were he to refuse to print the money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis, which in Germany's [then] fragile state might precipitate a real political convulsion."
Most economists seem to think that QE puts us in uncharted waters. It doesn't. Printing money to finance government expenditure is a very well trodden path which is as old as money itself: persistent monetisation causes inflation. Of course the current monetisation need not be persistent. Central banks can theoretically just stop it at any time.
But with government balance sheets in such a mess across the developed world (even with yields at historically unprecedentedly low levels), government funding crises are likely to be a recurring theme in the future. Since banks hold so much "risk free" government debt, those funding crises point towards more banking crises which point towards more money printing. When do they stop? When can they stop?
But what does it all mean? The question to my mind isn't whether or not inflation will accelerate from here. If government balance sheets are in as big a mess as I think they are, inflation is inevitable. The more interesting question is what kind of inflation can we expect?
I hope to explore this properly in another note soon, but suffice to say for the time being that the typical framework economists use to think about inflation - which they proxy by changes in the CPI - is narrow, incomplete and fails to do justice to the richness of inflation as a concept. Asset markets (e.g. real estate, equities, etc.) are as prone to inflationist policy as product markets (indeed, in recent decades they have been far more prone to inflation than product markets), so one way of buying inflation - at least in its early stages - is to buy riskassets.
Of course, buying expensive risk assets on the view that they're going to become more expensive is a dangerous game to play, but since government funding crises hammer risk assets while printing money inflates them, such funding crises should present decent value opportunities to buy into beaten up assets before the inflation ride.
Does today represent such an opportunity? We're still nowhere near the distressed "all in" valuation levels I suspect the eurozone crisis merits (let alone the weakness in leading indicators Albert has been pointing out - what will a cyclical downturn do to government budgets?), but value is emerging and there are more stocks worth nibbling on than there have been for a while. The following chart shows the percentage of ‘bargain issues'1 in the nonfinancial FTSE World index has risen to just over 2% from under 1% a few months ago.
Regular readers know that I estimate intrinsic equity values for each of the stocks in my universe (I now use the FTSE World index and include emerging markets) which I compare to the stock prices. An intrinsic value to price ratio (IVP ratio) greater than one implies intrinsic value is higher than market prices and so equities are undervalued. The first chart below shows the average IVP ratio for France, Germany, Italy and Spain at 0.85 is more attractive than it's been for some time, without being outright undervalued as it became during, say, the ERM crisis in 1992.
The next chart shows the cross section of valuations across all markets. It can be seen that the key European markets that are attractive remain the UK, Italy, and just about Norway.
The table at the end of the document shows stocks with estimated intrinsic values that are higher than current market prices (IVP>1) and these stocks deserve a closer look. I've constructed the intrinsic value model (a version of Steve Penman's residual income model) on the assumption that I want a minimum 10% return. This is quite exacting, but the stocks in the table are all currently valued at levels consistent with such performance.
Finally, the one asset class unambiguously cheap right now is volatility. The VIX and the VStoxx are trading well above their long run averages. That doesn't mean they can't trade higher still but, whether you like my IVP approach or not, you'll probably have a watch list of stocks with a clear price at which those stocks are cheap enough to buy. With the VIX above 40 - as it was earlier this week -- it's might be worth considering writing out-of-the money puts on those stocks. If you want to own them at those out-of-the money levels anyway, by writing generously priced options you're being paid well for your patience.
1. I define a bargain issue as a stock with an estimated intrinsic value (see below) at least one-third higher than its market price (IVP>1.33), positive five year trailing EPS growth and positive expected residual income growth. These stocks have a backtested annualised return of 23% (list available on request).
Saturday, June 12, 2010
After a decade of conspicuous consumption — a town house here, a private jet there — Mayor Michael R. Bloomberg seemed to slam on the brakes in 2008 during the recession. He bought no new property, rented out space in a vacation home and — horrors! — cut back on household staff.
Mayor Bloomberg Spent More as Market Bounced Back
June 11, 2010
To Save Africa, Reject Its Nations
THE World Cup, which began on Friday, is bringing deserved appreciation of South Africa as a nation that transitioned from white minority domination to a vibrant pluralist democracy. Yet its achievements stand largely alone on the continent. Of the 17 African nations that are commemorating their 50th anniversaries of independence this year — the Democratic Republic of Congo and Somalia will both do so in the coming weeks — few have anything to truly celebrate.
Five decades ago, African independence was worth rejoicing over: these newly created states signaled an end to the violent, humiliating Western domination of the continent, and they were quickly recognized by the international community. Sovereignty gave fledgling elites the shield to protect their weak states against continued colonial subjugation and the policy instruments to promote economic development.
Yet because these countries were recognized by the international community before they even really existed, because the gift of sovereignty was granted from outside rather than earned from within, it came without the benefit of popular accountability, or even a social contract between rulers and citizens.
Buttressed by the legality and impunity that international sovereignty conferred upon their actions, too many of Africa’s politicians and officials twisted the normal activities of a state beyond recognition, transforming mundane tasks like policing, lawmaking and taxation into weapons of extortion.
So, for the past five decades, most Africans have suffered predation of colonial proportions by the very states that were supposed to bring them freedom. And most of these nations, broke from their own thievery, are now unable to provide their citizens with basic services like security, roads, hospitals and schools. What can be done?
The first and most urgent task is that the donor countries that keep these nations afloat should cease sheltering African elites from accountability. To do so, the international community must move swiftly to derecognize the worst-performing African states, forcing their rulers — for the very first time in their checkered histories — to search for support and legitimacy at home.
Radical as this idea may sound, it is not without precedent. Undemocratic Taiwan was derecognized by most of the world in the 1970s (as the corollary of recognizing Beijing). This loss of recognition led the ruling Kuomintang party to adopt new policies in search of domestic support. The regime liberalized the economy, legalized opposition groups, abolished martial law, organized elections and even issued an apology to the Taiwanese people for past misrule, eventually turning the country into a fast-growing, vibrant democracy.
In Africa, similarly, the unrecognized, breakaway state of Somaliland provides its citizens with relative peace and democracy, offering a striking counterpoint to the violence and misery of neighboring sovereign Somalia. It was in part the absence of recognition that forced the leaders of the Somali National Movement in the early ’90s to strike a bargain with local clan elders and create legitimate participatory institutions in Somaliland.
What does this mean in practice? Donor governments would tell the rulers of places like Chad, Congo, Equatorial Guinea or Sudan — all nightmares to much of their populations — that they no longer recognize them as sovereign states. Instead, they would agree to recognize only African states that provide their citizens with a minimum of safety and basic rights.
The logistics of derecognition would no doubt be complicated. Embassies would be withdrawn on both sides. These states would be expelled from the United Nations and other international organizations. All macroeconomic, budget-supporting and post-conflict reconstruction aid programs would be canceled. (Nongovernmental groups and local charities would continue to receive money.)
If this were to happen, relatively benevolent states like South Africa and a handful of others would go on as before. But in the continent’s most troubled countries, politicians would suddenly lose the legal foundations of their authority. Some of these repressive leaders, deprived of their sovereign tools of domination and the international aid that underwrites their regimes, might soon find themselves overthrown.
African states that begin to provide their citizens with basic rights and services, that curb violence and that once again commit resources to development projects, would be rewarded with re-recognition by the international community. Aid would return. More important, these states would finally have acquired some degree of popular accountability and domestic legitimacy.
Like any experiment, de- and re-recognition is risky. Some fear it could promote conflict, that warlords would simply seize certain mineral-rich areas and run violent, lawless quasi states. But Africa is already rife with violence, and warlordism is already a widespread phenomenon. While unrecognized countries might still mistreat their people, history shows that weak, isolated regimes have rarely been able to survive without making significant concessions to segments of their populations.
For many Africans, 50 years of sovereignty has been an abject failure, reproducing the horrors of colonial-era domination under the guise of freedom. International derecognition of abusive states would be a first step toward real liberation.
Pierre Englebert, a professor of African politics at Pomona College, is the author, most recently, of “Africa: Unity, Sovereignty and Sorrow.”
Wednesday, June 9, 2010
ESSAYJUNE 5, 2010
Cartoonist Scott Adams's personal road to riches: Put your money on the companies that you hate the most
By SCOTT ADAMS
When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week.
People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How's it feel to be a disgruntled victim?
I have a theory that you should invest in the companies that you hate the most. The usual reason for hating a company is that the company is so powerful it can make you balance your wallet on your nose while you beg for their product. Oil companies such as BP don't actually make you beg for oil, but I think we all realize that they could. It's implied in the price of gas.
I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers. I remember the day I learned that BP was using a submarine…with a web cam…a mile under the sea…to feed live video of their disaster to the world. My mind screamed "STOP TRYING TO MAKE ME LOVE YOU! MUST…THINK…OF DEAD BIRDS TO MAINTAIN ANGER!" The geeky side of me has a bit of a crush on them, but I still hate them for turning Florida into a dip stick.
Apparently BP has its own navy, a small air force, and enough money to build floating cities on the sea, most of which are still upright. If there's oil on the moon, BP will be the first to send a hose into space and suck on the moon until it's the size of a grapefruit. As an investor, that's the side I want to be on, with BP, not the loser moon.
I'd like to see a movie in which James Bond tries to defeat BP, but in the end they run Bond through a machine that turns him into "junk shot" debris to seal a leaky well. I'm just saying you don't always have to root for Bond. Be flexible.
Perhaps you think it's absurd to invest in companies just because you hate them. But let's compare my method to all of the other ways you could decide where to invest.
Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.
Investing in Well-Managed Companies
When companies make money, we assume they are well-managed. That perception is reinforced by the CEOs of those companies who are happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish.
Perhaps you can safely invest in companies that have a long track record of being profitable. That sounds safe and reasonable, right? The problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance. 2) You need to consider a company's track record.
Right, yes, those are opposites. And it's pretty much all that anyone knows about investing. An investment professional can argue for any sort of investment decision by selectively ignoring either point 1 or 2. And for that you will pay the investment professional 1% to 2% of your portfolio value annually, no matter the performance.
Invest in Companies You Love
Instead of investing in companies you hate, as I have suggested, perhaps you could invest in companies you love. I once hired professional money managers at Wells Fargo to do essentially that for me. As part of their service they promised to listen to the dopey-happy hallucinations of professional liars (CEOs) and be gullible on my behalf. The pros at Wells Fargo bought for my portfolio Enron, WorldCom, and a number of other much-loved companies that soon went out of business. For that, I hate Wells Fargo. But I sure wish I had bought stock in Wells Fargo at the time I hated them the most, because Wells Fargo itself performed great. See how this works?
Do Your Own Research
I didn't let Wells Fargo manage my entire portfolio, thanks to my native distrust of all humanity. For the other half of my portfolio I did my own research. (Imagine a field of red flags, all wildly waving. I didn't notice them.) My favorite investment was in a company I absolutely loved. I loved their business model. I loved their mission. I loved how they planned to make our daily lives easier. They were simply adorable as they struggled to change an entrenched industry. Their leaders reported that the company had finally turned cash positive in one key area, thus validating their business model, and proving that the future was rosy. I doubled down. The company was Webvan, may it rest in peace.
(This would be a good time to remind you not to make investment decisions based on the wisdom of cartoonists.)
But What About Warren Buffett?
The argument goes that if Warren Buffett can buy quality companies at reasonable prices, hold them for the long term and become a billionaire, then so can you. Do you know who would be the first person to tell you that you aren't smart enough or well-informed enough to pull that off? His name is Warren Buffett. OK, he's probably too nice to say that, but I'm pretty sure he's thinking it. However, he might tell you that he makes his money by knowing things that other people don't know, and buying things that other people can't buy, such as entire companies.
People Love Berkshire Hathaway And That Has Done Great
I'm not saying that the companies you love are automatically bad investments. I'm saying that investing in companies you love is riskier than investing in companies you hate.
Second, take a look at Berkshire Hathaway's holdings. It's a rogue's gallery of junk food purveyors, banks, insurance companies and yes, Goldman Sachs and Moody's. The second largest holding of Berkshire Hathaway is…wait for it…Wells Fargo.
(Disclosure: I own stock in Berkshire Hathaway for the very reasons I'm describing. And my first job out of college was at Crocker National Bank, later swallowed by Wells Fargo.)
Let's talk about morality. Can you justify owning stock in companies that are treating the Earth like a prison pillow with a crayon face? Of course you can, but it takes some mental gymnastics. I'm here to help.
If you buy stock in a despicable company, it means some of the previous owners of that company sold it to you. If the stock then rises more than the market average, you successfully screwed the previous owners of the hated company. That's exactly like justice, only better because you made a profit. Then you can sell your stocks for a gain and donate all of your earnings to good causes, such as education for your own kids.
Having absorbed all of the wisdom I have presented here so far, you are naturally wondering if I have any additional investment tips. Yes, and I will put my tips in the form of a true story. Recently I bought something called an iPhone. It drops calls so often that I no longer use it for audio conversations. It's too frustrating. And unlike my old BlackBerry days, I don't send e-mail on the iPhone because the on-screen keyboard is, as far as I can tell, an elaborate practical joke. I am, however, willing to respond to incoming text messages a long as they are in the form of yes-no questions and my answer are in the affirmative. In those cases I can simply type "k," the shorthand for OK, and I have trained my friends and family to accept L, J, O, or comma as meaning the same thing.
The other day I was in the Apple Store, asking how to repair a defective Apple laptop, and decided, irrationally, that I needed to have Apple's new iPad. The smiling Apple employee said she would be willing to put me on a list so I could wait an indefinite amount of time to maybe someday have one. I instinctively put my wallet on my nose and started barking like a seal, thinking it might reduce the wait time, but they're so used to seeing that maneuver that it didn't help.
My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs's black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I'll probably buy some shares.
Again, I remind you to ignore me.
—Scott Adams is the creator of "Dilbert."
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Wednesday, June 2, 2010
Assumptions Go Asunder as Gores Split
Al and Tipper Gore's decision to separate underscores a truism about marriages, especially political ones: You never know.
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Sent from my iPad