Saturday, October 31, 2009

Spineless in Washington, DC

Today's WSJ editorial on Obama, the "Chicago" politician who chose the "pragmatic" route.

US - A Third World Country?

Since WWII US has been a major exporter of technology to less developed countries often financed by US Export Import Bank.

How times have changed.

In today's Wall Street Journal (Oct 30, 2009) I cannot for some reasons access there is this story:
..."A Chinese wind turbine company, with financing help from Beijing, has struck a deal to be the exclusive supplier to one of the largest wind farm developments in the US.

The 36,000 acre development in West Texas would receive $1.5 billion in financing through Export-Import Bak of China."...
One tribesman [in Pakistan] bluntly told Mrs Clinton: "Your presence in the region is not good for peace."

Can Washington, DC please take a "hint" and leave and let Pakistan deal with whatever enemies they have? The drones are killing both enemies and innocent Pakistanis as "collateral damage". Any wonder locals are equating US fire power as their 9/11 as one Pakistani reporter tried to get across:

..."We are fighting a war that is imposed on us. It's not our war. It is your war," journalist Asma Shirazi told Clinton during the women's meeting. "You had one 9-11. We are having daily 9-11s in Pakistan."

The whole dispatch is here.

Peace with Honor. Leave now.

If it was not clear before, it should be clear now that the presence of US forces in NOT welcome in Pakistan and by extension in Afghanistan, however well-intentioned the original goal may have been. Just read the overwhelming negative vibes coming from those who had the opportunity to interview and talk to US Secretary of State, Hilary Clinton.

It can be safely assumed Mrs Clinton's handlers had already screened out those who never could be friends. So, those who managed to be sitting close to her had to be considered at least neutral if not friendly.

A cursory reading of this article here should tell you if these were friends, US didn't need enemies.

Since your friends want you to leave, then we should leave and by doing so with honor. We have done our bit. Now, over to your mis amigos Pakistanos.

Friday, October 30, 2009

Pakistan, the next Domino? 2

Latest news report:

..."LAHORE, Pakistan — Secretary of State Hillary Rodham Clinton, on a visit meant to improve relations with Pakistan, strongly suggested Thursday that some Pakistani officials bore responsibility for allowing Al Qaeda terrorists to operate from safe havens along this country’s frontier.

U.S. Secretary of State Hillary Clinton during her visit to the historical Badshahi Masjid in Lahore on Thursday.
“I find it hard to believe that nobody in your government knows where they are, and couldn’t get to them if they really wanted to,” she said to a group of Pakistani journalists on her second day here. “Maybe that’s the case; maybe they’re not gettable. I don’t know.”

Strong words. Harsh reality. Pakistan is failing as a state. And it is armed with nuclear weapons. This will be ugly. Unless Pakistan pulls itself together and root out its Al Qaeda/Taliban/Fundamentalist cells within its government, this is going to be one big explosive situation.

Anyone wants to bet one way or another? I bet on buying more gold.
The entire article from which the excerpts came is here.

Thursday, October 29, 2009

History Lesson in Afghanistan

“Our soldiers are not to blame. They’ve fought incredibly bravely in adverse conditions. But to occupy towns and villages temporarily has little value in such a vast land where the insurgents can just disappear into the hills.” He went on to request extra troops and equipment. “Without them, without a lot more men, this war will continue for a very, very long time,” he said.

The "he" was Sergei Akhromeyev, the commander of the Soviet armed forces who was addressing the Soviet Union’s Politburo on Nov. 13, 1986.

In USSR as in USA politicians in suits with no little or no military experience loved to wage wars.

The chief of the Soviet Defense Staff, Marshal Nikolai Ogarkov, raised doubts shortly before Soviet forces were dispatched on Christmas Day 1979. He told Dmitri Ustinov — the long-serving defense minister who had been a favorite of Stalin — that experience from the British and czarist armies in the 19th century should encourage caution. Ustinov replied: “Are the generals now making policy in the Soviet Union? Your job is to plan specific operations and carry them out ... . Shut up and obey orders.”

Ogarkov went further up the chain of command to the Communist Party boss, Leonid Brezhnev. He warned that an invasion “could mire us in unfamiliar, difficult conditions and would align the entire Islamic East against us.” He was cut off mid-sentence: “Focus on military matters,” Brezhnev ordered. “Leave the policymaking to us.”

The quotes in bold came from this article here.

Wednesday, October 28, 2009

How to get into elite schools

First off, getting into famous, highly ranked schools will only become more difficult in future years. Simple arithmetic: demand vastly outstrips supply.

Even at Princeton where "legacy" kids with a family name and fortune will find it difficult for the same reason as above. So what do parents do? Interesting report from Princeton here indicates an inevitable result. As in politics, donors hedge their bets by giving $$ to opposing political parties, now parents give money to a number of desirable colleges other than their own alma mater to increase the chances of admissions of their talented children.

Colleges, mostly strapped for money, will also find donations desirable and yet constraining. You cannot keep taking money from donors without taking care of their children.

This begs the obvious question: what are those colleges going to do with poor but talented students?

Prejudice at Princeton? Link repaired

In the original blog on Oct 23 the link to a Daily Princeotnian report did not work, for reasons I don't understand. Here is the missing report.

I thank a reader for pointing this out.

Why the Drug trade in Afghanistan is Big.

Who says American has learned any lessons from its failure in the Vietnam War?

The drug lord, brother of Prime Minster in Afghanistan, is a CIA protege. It's Vietnam all over again when the CIA even ran an airline, Air America, to move the narcotics for the drug traffickers in return for intelligence among the hill tribes. CIA also had to "please" the S Vietnam generals who demanded Air America service to move the merchandise of which they had a financial stake.

So, now it's Afghanistan.

Here is the NY Times report.

Whenever a country no longer cares about "ends" and "means", it loses any moral high ground and starts the descent to immorality losing the support of locals whom America went to war to "save".

And so, America lost the Vietnam War and will lose it in Afghanistan. Sad.

Why US Should Leave Afghanistan -- Yesterday

I am posting the 4 page resignation letter of Marine Captain Mathew Hoh. He details in remarkable clarity what he considers the fatal flaws of the US war thinking.

Anyone who does not want the US to waste further its own soldiers and resources at a time when the national economy is weak should read it in full here.

Afghanistan -- Where empires go to die

Just as US is debating how many additional troops to send to Afghanistan the enemy made its presence reverberate by successfully dealing a deadly blow to US troops -- on their own turf at their own timing.

It smells like a trap.

The enemy is goading the US to send more troops to "defend" its current force. The more US sends, the more the enemy can kill turning Afghanistan into the 21st century version of the "burial ground" of empires as that nation had done in the past Alexander the Great, the Persians, Moguls, Russia, England, the communist USSR and now most probably the US.

Read the news here.

Has anyone ever wondered why is it the ruling elite in the US never seems to have read history? It seems the senior political and military leadership does not seem aware of how all other empires had failed since ancient Greece? it raises questions as to what is the worth of a degree from Harvard, Yale, Princeton or West Point.

One possible explanation is how a "liberal arts" education has become a mish-mash of subjects without providing the students, the future elite, any sense of historical continuity. Back the days of the British empires, the ruling elite had to read all the Classics known as the "Greats". No university in the US except Columbia and St. Johns now enforce a "core" education onto their students.

The "core" at Harvard and others is still essentially a hodge podge of subjects.

Tuesday, October 27, 2009

Afghanistan - Albatross 2

One military resignation in protest against the war does not a "tsunami" make. However, this officer's argument strikes at the heart of why the war will fail. It's elementary:

..."But many Afghans, [Marine Captain Mathew Hoh] wrote in his resignation letter, are fighting the United States largely because its troops are there -- a growing military presence in villages and valleys where outsiders, including other Afghans, are not welcome and where the corrupt, U.S.-backed national government is rejected. While the Taliban is a malign presence, and Pakistan-based al-Qaeda needs to be confronted, he said, the United States is asking its troops to die in Afghanistan for what is essentially a far-off civil war"....

The entire Washington Post article is here.

Obama is reportedly going to send more troops to Afghanistan. The albatross can only get heavier and the quagmire deeper if the ABC News report here is correct.

Monday, October 26, 2009

Modernizing Afghanistan

I thank Mark, a Vietnam War historian, for alerting me about the folly of "modernizing" any nation if it is not ready. Read this here

US tried to "modernize" Afghanistan in the 1950's and utterly failed. Now, it is trying to "save" Afghanistan from backwardness all over again and at the same time waging a war that is doomed to fail.


Saturday, October 24, 2009

Pentagon vs Obama?

Seymour Hersh is a fearless reporter who made his reputation revealing the My Lai massacre in Vietnam that happened 40 years ago. He was a freelance reporter with far fewer resources than the major papers and networks had.

Hersh has yet to make any serious mistakes in his writing. It is with this background in mind that I read with a deep sense of concern his piece on the Pentagon here.

Insider Trading is "Good"!

George Mason University's Department of Economics is a well-know bastion of "laissez faire" thinking that at times would even make Chicago's "cathedral" of free market economics blush.

Here is a defense of "insider trading" by one of GMU's professors. The article is here.

Soros On Wall Street Bonuses

You can always count on George Soros for straight talk. He is intellectually honest. Without that integrity you cannot last as long as he has as one of the most successful investors in history. Honesty applies in particular to his own mistakes.

His view here on why Wall Street bonuses are not justified echoes many others, including me, who have spoken out on this issue.

What is not sufficiently stressed in this whole Wall Street pay and bonus scandal is:

1) Wall Street is able to do what it wants is a direct result of lax terms and conditions attached to the various rescue packages courtesy of taxpayers via the government. This negligence is either premeditated or a result of incompetence.

2) Shareholders of these firms paying huge bonuses are conspicuously silent for peculiar reasons.

3) The Boards of these firms with huge payouts who in theory represent the shareholders are conspicuously silent. In fact none of the board members of any failed firms have received any public reprimands. The boards are ultimately responsible for what the firms do.

Since Team Obama had dropped the ball, due to incompetence or otherwise, it is really too late to do a retroactive claw back of bonuses paid out according to contracts.

Those contracts should have been put on ice all done legally as a "sine qua non" of bailout BEFORE the rescue checks were delivered to Wall Street on a silver platter.

Friday, October 23, 2009

Prejudice at Princeton?

Rightly or wrongly Princeton has always been perceived as a welcoming campus for the rich, famous and "white". That does not include "Jews" who have had a long history of encountering anti-semitic sentiments on the famous campuses.

Columbia to its credit was the first IVY college to open its arms widely to accept talented students who were Jewish. Franklin D Roosevelt, yes that famous man, who once sat on Harvard Corporation that governed the university, was alarmed by the increasing number of Jewish students at Harvard. He said: "We cannot allow so many Jews to come to Harvard".

Since then Harvard and others have put that kind of mentality behind them. Princeton, the northern-most southern college in America, appears to be slow in adjusting. Or perhaps it has chosen to be where it is.

Read this article from the Daily Princetonian

The Most Expensive US Colleges

If you think going to Yale or Princeton will break your bank, think again. This list here will surprise you. Why this is so is another quiz!

Thursday, October 22, 2009

Afghanistan, the growing albatross

Nicholas Kristoff's excellent summary of the USA no win policy in Afghanistan still contains to my mind a vain hope. He thinks by holding US presence at the current level is the right way,. He is probably right. But the end result, contrary to Kristoff's prognosis remains the same. The US will have to leave Afghanistan humiliated one way or another. The article is here.

New York Times has been running a riveting series of "Held by the Taliban" by a reporter who managed to escape from a Taliban camp. The first installment is here.

One observation caught my attention in his Part 4 installment published yesterday because it confirms the unpleasant truth about the fundamental flaw of US Afghan war policy using brute and massive force as if it were fighting a conventional war even though it is called a counter-insurgency war.

Second, it confirms the mindless obsessions with "body count" in gauging the progress of the military campaign, the same mistake that plagued the Vietnam War mindset. The truth is for every Taliban or for that matter, Al Qaeda, fighter killed, two step forward to join. For every senior fighter killed, the depth of its rank is sufficient to provide "promotions" to take the place of the fallen.

Here is the tell-tale paragraph:

..."A stalemate between the United States and the Taliban seemed to unfold before me. The drones killed many senior commanders and hindered their operations. Yet the Taliban were able to garner recruits in their aftermath by exaggerating the number of civilian casualties...."

Monetary Economics 101 -- Quiz Answers

Ok folks. Here are my answers to the quiz I gave you yesterday. If you feel different, post your comments.

1) Why is China selling T Bills = quantitative easing of US money supply?

Answer: Selling T Bills by China to the US means Uncle Sam is buying them. Buying T bills means more US dollars are injected in the monetary system which is equivalent to quantitative easing as Paul Krugman stated.

No other countries except the US would a) take on the sizes of T Bills China wants to sell, and b) why would they buy more US T Bills when the currency is likely to go lower anyway. In other words, China can only sell the T Bills back into the US system. Either the US government buys them back immediately or they will end up buying them at some point as another buyer cashes in at maturity.

2) What "harm", if any, would that cause to Japan and Europe?

Answer: Krugman assumes China would use the sales proceeds from T Bills to buy non-US currencies such as Yen and Euro driving them higher hurting their exports.

2) In what way, if any, US has "nothing" to fear?

Answer: I believe Krugman assumes China would prefer to have a low US dollar to which the RMB is more or less tied. The dollar is also the universal unit of exchange in global trade.

In this logic while Beijing keeps bitching about the lower dollar that is diminishing the value of its $2.2T + reserves -- if translated into Euro or Yen, the Chinese government is also benefiting from a higher than otherwise rate of exports from a lower dollar.

Then there is the issue of liquidity. The dollar remains the most liquid global currency. China if it tries to diversify large amounts of its reserves into Euro or Yen will be chasing after higher Euro or Yen caused by its own buying.

Once the currency market knows China is buying Euro or Yen, these 2 currencies will go through the roof as traders will front run Chinese purchases forcing Beijing to pay higher and higher for non US currencies. Don't forget the market for Euro and Yen are much smaller than US$. Very quickly China will be overpaying.

3) In what way, if any, China selling US dollars massively could be negative?

Answer: I will still let you think this through. Until I post my own view, have fun.

The Dollar Will Fall More!

The dollar, surprising most, strengthened at the height of the financial crisis last winer, because during times of extreme uncertainties the dollar was a "safe heaven".

"Better the devil you know than the one you don't" was driving the currency market. Liquidity is also important. The easy with which you can trade large volumes is at a premium when you want to sell.

Now, the world is a lot less unstable than a year ago. The dollar is no longer the currency of "safe haven". When one looks at the massive amount of liquidity the Fed has injected into helping Wall Street and secondarily Main Street, the world is expecting a larger than desirable amount of dollar sloshing through the global system.

On top it appears the Fed will maintain a zero interest rate policy. Any wonder the dollar will continue to fall?

The FT article here keeps us updated on the dollar malaise.

Tuesday, October 20, 2009

Monetary Economics 101 -- Quiz

Paul Krugman wrote this on his blog:

..."what would the effect be if China decided to sell a chunk of its Treasury bill holdings and put them in other currencies? The answer is that China would, in effect, be engaging in quantitative easing on behalf of the Fed. The Chinese would be doing us a favor! (And doing the Europeans and Japanese a lot of harm.)...

...The point is that right now the United States has nothing to fear from Chinese threats to diversify out of the dollar. On the contrary, if the Chinese do decide to start selling dollars, Tim Geithner and Ben Bernanke should send them a nice thank-you note"...


1) Why is China selling T Bills = quantitative easing of US money supply?
2) What "harm", if any, would that cause to Japan and Europe -- as Krugman claims?
2) In what way, if any, US has "nothing" to fear?
3) In what way, if any, China selling US dollars massively could be negative?
4) Define "negative".

Have fun.

All Quiet on the Afghanistan Front?

...Or is it the lull before the storm?

Read this intriguing article here re the "disappearance" of Richard Holbrooke, Obama's "point man" in charge of the rapidly unraveling Afghan front.

Pakistan, the next Domino?

Pakistan is reaping what it has sowed. After years of not so secretly cavorting with the Taliban and Al Qaeda terrorists, the country is facing a serious threat to its internal stability.

That threat did not come from the Hindi India, Pakistan's "idee fixe" as its implacable enemy. It did not come from the Christian West -- United States has been played a sucker with billion dollar aids for years plus weapon sales while Pakistan has deeply mixed feelings about the West due to its Islamic fundamentalist sentiments.

Washington on the other hand had always favored Pakistan and shunned India especially during the Nixon/Kissinger years when a "tilt" in favor of Pakistan was the official policy. Washington, too, had an "idee fixe" about "Socialist India".

Now the threat to Pakistan is coming from its not so secret bedmates: the Al Qaeda and Taliban.

You can tell things are not going well from this excerpt in today's NY Times:

..."ISLAMABAD, Pakistan — The Pakistani Army said Monday that it was progressing in its push into the Taliban stronghold of South Waziristan, but it acknowledged that it was meeting strong resistance.

The military began the much anticipated offensive against Taliban militants over the weekend, with about 28,000 troops backed by artillery and fighter jets moving into the region from three directions"...

Italics and bold face added.

Furthermore, you can tell the scale of fighting is not a small skirmish:

..."Meanwhile, local residents continued to trickle out as heavy fighting raged. A statement issued by the United Nations estimated that more than 170,000 people would be displaced as a result of the military operation, which started Saturday.

However, Pakistani officials said that they did not expect a humanitarian crisis to erupt as a result of the offensive."...

170,000 refugees is "not a humanitarian crisis" the officials say?

Pakistan has an intrinsically unstable internal problem: it has Islamic fundamentalist tendencies. Schools are poorly funded. Hence, the young find religious schools an easy substitute. These religious madras schools are funded by mosques which also receive generous supports from oil rich Arab countries. Madras schools have been an important breeding ground of suicide bombers.

Pakistan also tries to be a modern secular state. It has a nominally democratic political structure. Yet, Its political leadership is deeply corrupt over many years. It was once the principal exporter of nuclear technology to rogue states such as North Korea and Iran.

Yet Nixon/Kissinger turned the other way. George Bush treated Pakistan as an ally while its leaders denied they were ignoring Al Qaeda and Taliban activities in their own backyard.

Now, we are now faced with a royal mess.

The entire news report is here.

Speechless in Washington DC?

Elizabeth Warren at the US Congress was "speechless" over what Wall Street is doing, and she put the blame on those who run Wall Street. Watch this here.

But Ms Warren, why blame Wall Street?

Ask Geithner and Summers, those 2 geniuses as to why they designed the rescue package so.

Ask Hank Paulson who either didn't know what he was doing or knew exactly what he was doing -- letting his pals on Wall Street get away with trillions. I don't know which is worse, ignorance or complicity.

White House PR -- Too Little Too Late

White House has launched a belated PR campaign playing catch-up after Goldman Sachs announced record bonuses to be paid out.

First Larry Summers' harsh words on Wall Street which, by the way, had paid him handsomely beyond any semblance of productivity. I posted that story earlier. Now this:

"The bonuses are offensive," Obama senior adviser David Axelrod said Sunday on ABC's "This Week," adding that banks must do more to support lending across the country and should stop their lobbying efforts aimed at blocking the passage of new financial regulations that are being prepared in Congress.

Source: Washington Post.

Then Obama's alter ego:

White House Chief of Staff Rahm Emanuel chided Wall Street firms for neglecting their responsibilities "in the short period of time where they have a level of normalcy because of what the government did to help them."

"Not only do they come for a bailout . . . they're now back trying to fight a consumer office and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and financial market," he said on CNN's "State of the Union."

The article from which these 2 quotes came from is here.

Any reader of my blog over the past bunch of months or the public writings of Paul Volcker, Paul Krugman (NY Times and Princeton), Simon Johnson (MIT) and the to-your-face article in Rolling Stones here on Goldman Sachs could only be surprised or dismayed or angered or just simply pissed off that these hifaluting officials are only now showing their displeasure.

I don't even know whether this is genuine anger or just PR. Surely these folks couldn't have been so stupid as not to know their policy had allowed those guys to bolt from the gates. They are way ahead of Washington's ability to rein them in.

So, the DC types are now publicly fuming just to placate an angry Main Street and all those that live on Off-Main-Street Streets -- all of us that is.

Unless GOP continues with their current folly of playing ignorant fools, The Democrats are going to take a huge beating at the next by-elections. That's my bet.

Monday, October 19, 2009


A senior US government official said this: "...There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.”

Well, a good point. We who do read the news and can put 1 and 1 together to get 2 outside of Washington had figured that out awhile back, thank you. So what else is new?

By the way we have been mad as hell for sometime that we, the taxpayers, did not get much out of our trillion dollar rescue while the rescued bankers are cleaning up and crying all the way to the bank, crying of manic laughter of course.

But who was this "thundering bank critic", Paul Krugman is his NY Times column asked rhetorically?

"None other than Lawrence Summers, the Obama administration’s chief economist — and one of the architects of the administration’s bank policy, which up until now has been to go easy on financial institutions and hope that they mend themselves....Indeed: Goldman has made a lot of money in its trading operations, but it was only able to stay in that game thanks to policies that put vast amounts of public money at risk, from the bailout of A.I.G. to the guarantees extended to many of Goldman’s bonds."

Krugman's entire column is here.

So, is calling Summers a 2-face hypocrite too harsh? You decide.

Sunday, October 18, 2009

Goldman Sachs, the "Magician"?

Yesterday I posted the view of a conservative economist's analysis of Goldman Sachs.

Here is another, this time, from the Main Street media commentator, Dylan Ratigan, an ABC Radio host, who correctly analyzed how Goldman Sachs made its money.

Read here.

The math is straightforward: US taxpayers lent Goldman Sachs a lot of zero cost money with which Goldman Sachs speculated at little risk to themselves and made billions. Without US public help, the firm would have gone under. So the question remains as always: how come taxpayers didn't get the sort of returns on THEIR investment Goldman Sachs partners and senior executives are now getting theirs? Goldman Sachs reports record earnings AND will hand out record bonuses!

Here is another "get Goldman" view from Frank Rich of the NY Times, who represents a "left of center" view here.

Frank Rich complained about Tim Geithner being tone deaf. What is even more amazing is how tone deaf Obama is!

Ex Czech president Vaclav Havel, writer and prisoner under the former communist regime, who many believe should have received a Nobel Peace Prize long ago, recently was asked by Maureen Dowd about his views of Obama, the Nobel Peace winner. Obama had just declined to meet the Dalai Lama, another Nobel Peace winner. It is the first time any US president has done so under pressure from Beijing -- the single largest creditor to the US economy holding US IOU papers. Here is what Havel said:

...“It is only a minor compromise,...But exactly with these minor compromises start the big and dangerous ones, the real problems.” ...

The whole article is here.

The time is long due to reconsider Obama's famous saying: "Yes We Can!". Perhaps it should read: "Yes We Bend!"

Even Conservatives are mad at Goldman Sachs!

If Russell Roberts, a well-known conservative economist at George Mason University, is crying foul at Goldman Sachs' "I am always going to win" attitude, you know something is really going down badly on Main and on all other Side Streets regarding how Washington DC got taken to the cleaners by the "Prince".

Well, maybe that is not exactly true. Obama's economic advisors knew perfectly well they were "taking care" of Goldman Sachs. So, they were really not taken. But US taxpayers have been.

Roberts' article is here . It is a damn good read. You may safely assume I agree with his thoughts. I have been writing in a similar vein for sometime now.

Saturday, October 17, 2009

No Sex Please! We are Princetonians!

So Princes and Princesses are going to live in separate bedrooms until they are officially wed? Read about this incredible development at Princeton here. Maybe they should revert back to an all-male college. Ah but then it would not mean no sex, either.

Wall Street 4.0

Is Wall Street really very smart?

In one sense it is. It knows how to identify risks and rewards and then take advantage of over-priced risks. That takes guts and talents. Former not so rare. Latter si!

However, what if I told you the money with which they used to take risks is mostly risk free meaning a) cost of it is near zero and b) a lot of it is in fact guaranteed by the government, ie you and me?

Guarantee, how? It means if speculation had gone bad, government would compensate them in whole or part. But if it had gone right, Wall Street gets to keep the rewards.

You don't believe me? Read this:

..."Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them.

Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing."...

The excerpt is from this article here.

OK. You might ask how come given all the Federal (ie our) help extended to the good folks over at Goldman Sachs, Morgan Stanley et al, we didn't get any of the upside of the $$ they made with our money?

Excellent question. You must ask Geithner, Summers and ultimately President Obama why they did not put in that condition when they, as our representatives, were writing multi billion dollar checks to prevent these good folks from going under. That was a real possibility back in late 2008, remember?

So, can you blame Main Street getting mad as hell over this blatantly unfair treatment? After all the Feds did take a major share in GM in that bailout while the bluest chips on Wall Street got special treatment?

You might also remember during the financial crisis, Hank Paulson, ex Goldman Sachs and later Geithner talked to Goldman Sachs more frequently than any other financial institutions.

Yes, of course they must talk to Wall Street honchos to keep their fingers on the pulse, so to speak. It's their job. But no one has yet to explain why Goldman had the ears of our top reps more than others though many do have a theory about that...!

Harvard, Larry Summers and Interest Rate Swaps

Everything you ever wanted to know (or not to know) but afraid to ask about interest rate swaps, a derivative product, is here.

If you need a tutorial, write to Larry Summers at the White House. He lost a bundle, almost $1 billion, on behalf of Harvard playing with this. I am posting the Bloomberg story again here.

Harvard under Summers

Summers bet big on interest rate trends and lost big.

Here is an excerpt from a long piece in Boston magazine here:

...Further squeezing Harvard was a transaction Summers had pushed it into in 2004, when he successfully argued that the university should engage in a multibillion-dollar interest rate swap with Goldman Sachs and other large banks. Under the terms of the deal, Harvard would pay Goldman a long-term fixed rate while Goldman paid Harvard the Federal Reserve rate. The main goal was to lock in a low rate for future debt, and if the Fed had raised rates, Harvard would have made hundreds of millions. But when the Fed slashed rates to historic lows to try to goose stalled credit markets, the deal turned equally sour for Harvard: By last November, the value of the swaps had fallen to negative $570 million. The university found itself needing to post more collateral to guarantee those swaps, and would ultimately buy its way out of them at an undisclosed cost.

HMC "took the university right to the edge of the abyss," one alumnus, a financier who is privy to details of the university's balance sheet, told me. I asked what he meant. "Meaning, you're out of cash.

"That," he added, "is the definition of insolvency."...

The Best and the Brightest - Larry Summers?

We have read in the fawning American press and heard from various TV commentators, almost ad nauseum, have we not, that Larry Summers, ex Harvard President, is one of the smartest, sharpest economists of his generation.

The story here should, I hope, put an end to that kind of thinking. It was under his administration (2001-06) and with his approval that large bets were placed on interest rate trends using derivatives. Thanks largely to him, Harvard has taken a huge loss.

Here is an excerpt from Harvard Magazine, December 2008

...According the annual financial reports, Harvard has entered into various “interest-rate exchange agreements” at least since the early 1990s.

Their magnitude, though not their structure, is reported in the footnotes describing bonds and notes payable and the University’s overall investments.

Depending on their structure, on the volume of such agreements outstanding (which relates to the University’s aggregate financing activity), and on prevailing interest rates, the “fair value” of the agreements—how much Harvard would receive, or would have to pay, to terminate the agreements as of the date of its financial statements—is shown each year.

During the current decade, these are the reported figures for the fiscal year ended June 30, showing the “notional” amount of the agreements, and then the fair value the University would have received or (paid) to terminate the agreements on that date (dollars in millions):

2000 $ 443.1 $ 3.7
2001 341.1 ( 20.8)
2002 619.2 ( 41.4)
2003 720.5 (120.0)
2004 1,376.6 ( 58.4)
2005 3,723.8 (461.2)
2006 3,542.6 ( 17.9)
2007 3,533.9 ( 13.3)
2008 3,524.7 (330.4)

Summers was paid millions by a hedge fund, DE Shaw, to advise on financial matters. There could be only one purpose for a handsome consulting fee: how to make a profit for DE Shaw's funds.

Surely interest rate as an economic topic should have been right up Larry's alley? He being a professional economist, ex Secretary of Treasury, the youngest tenured Harvard professor in that famous department of economics and, again, we are told, one of the "brightest in his generation".

It has always been a source of mystery to many economists in the United States and abroad why President Obama is so captivated by the "brilliance" of Larry Summers.

"Barbarians", oops, Women at the Gate

For many old Princetonians, accepting women to their beloved Princeton was and remains an invasion by the "barbarians" not dissimilar to the uncouth, uncivilized corporate raiders that inspired that book title "Barbarians At the Gate".

The book documents the famous takeover battle that made famous (or infamous) the recently deceased investment banker Bruce Wasserstein, the still thriving private equity firm KKR and a number of others who have long gone into obscurity.

This series of interviews here put together by a Princetonian commemorates the 40th anniversary of Princeton becoming coed. The first year women entered as freshmen was 1969.

To many less emotional alumni and others interested in higher education, 1969 was as good as any other watershed year marking Princeton taking a giant step towards becoming a first rate university that it is today. Accepting women was one of several other "game changing" moves Princeton made in the sixties, and probably the most difficult one emotionally and institutionally for the fourth oldest in America founded in 1746.

The university has always been most solicitous of the views of its well-heeled and loyal alumni who have over nearly three centuries given generously to their alma mater. Back then accepting women did not go down well with its all male alumni. But Princeton to its credit pushed ahead.

Princeton has the highest alumni giving rate at close to 70% that is a couple of thousand basis points above Harvard and Yale, two of its fiercest collegiate rivals.

The move was not entirely made on grounds of higher values.

The sixties were years of great changes in cultural morales in America, and indeed, around the world. Sex, a long taboo subject, was being flaunted by the young. "Make Love Not War" was a battle cry. The Age of Aquarius. LSD. Hippies.

Not being coed was putting Princeton at a disadvantage when its applicants could opt for say Harvard that had gone coed in 1968. Princeton wanted to fight for the same applicant pool to one day join the nation's ruling elite.

Two Princeton graduates in particular have shown that Old Nassau was wise in that fateful decision: First Lady Michelle Obama and Supreme Court Justice Sonia Sotomayor both hail from Old Nassau.

Historically being the northern-most southern college, Princeton was primarily a gentleman's "finishing" school for the privileged, especially from the south, to prepare for a professional career in law or business, mostly the latter. In those days of "Gone with the Wind", young Princeton gentlemen brought their slaves from their vast family cotton fields to make their 4 years at Princeton more comfortable.

Princeton, the small town, had a separate area for those slaves. At commencement some of the matriculated would free one or two of their favorite slaves to mark their newly gained enlightenment.

Historically it was the only university that prepared more graduates to enter the military than any other in the Ivy League. Princeton was sometimes described by its collegiate rivals, somewhat condescendingly as a war college for its military orientation. The South is also the single largest breeding ground for America's military leadership and its lower ranks.

And so Princeton, the coed college for the past 40 years, has good reasons to commemorate. It also has the reputation of having more pretty coeds than any other Ivies.

This blog plus the recent postings on Harvard mark the beginning of a series on elite education in the US.

Friday, October 16, 2009

Paul Volcker at Harvard

Mr Volcker, frozen out of Obama's inner circle of economic advisors by Larry Summers, ex President of Harvard, spoke at Harvard the other day. He urged students to forgo "making a million dollars" doing financial engineerin. Instead, they should do something "real". Larry Summers collected over $5 million for doing part time consulting for a hedge fund. About what I wonder? Did the fund sell short before the deluge? I doubt. Otherwise DE Shaw funds figures would have shown sterling performance during the bust.

Do you think Volcker might have succeeded in changing minds when their ex president was raking it in selling financial "wisdom" even if it didn't pan out? Harvard's own endowment tanked due to a lot of derivatives which Larry Summers approved of during his reign. Just asking.

Read the report here.

Afghan War Math 101

We are told US is spending $3.6 billion a month in Afghanistan for its war effort. A Month! Read the report here.

Population size in Afghanistan is about 33 million based on CIA estimate. So help me out with the math. $3.6 billion divided by 33 million = $109,100 a MONTH! Per capita GDP is put at $800 a YEAR. So, let's say it is an underestimate and we put the GDP at $1000 a YEAR.

Imagine if Uncle Sam did the same in Afghanistan as in Iraq bringing cash in a fleet of 747s and give it away to every Afghan in that country even at $1000 a month, do you think it might make better sense? $1000/month giveaway = 12x annual GDP/capita = 99% savings for Uncle Sam.

Where did my math go wrong?

If my $ "policy" were to be implemented, do you think Afghans would still want to shoot at US soldiers or would they rather leave their AK47s at home and instead line up at month end to collect their $1000?

"Freshwater" economists would love this, right? A market solution in which peace is traded for $ on a voluntary basis.

EVen if the Afghan were to up their price for peace, say at $3000 a month, there should still be a huge savings since USA is spending $109,100 a month there. More than money, lives will be saved. US budget deficit would be done. Lots of beneficial "externalities" in this policy.

My idea would never happen, of course. I would be naive to think otherwise. Merely asking whether it is more (or less) mindless that what is going on out there.

Army Officer Against the War

There is a difference between the Vietnam War and this one. Back then military personnel on active duty did not speak out if their views were not in line with official policy. That was understandable. This war is different in this respect. Read this for a most cautious assessment of how the war should or should not be fought. Here.

Smart Guys and Wall Street

I am thankful to Paul Krugman's blog bearing that title. He was referring to Calvin Trillin's nifty description of a chance meeting with a stranger. Read here.

Krugman related Trillin's piece to his own graduate school experience whereby the top PhD's became professors while the bottom layer went to Wall Street.

Actually I had a similar experience back in those days. The top of my college class would want to get a PhD to become professors while the bottom of the class would go get an MBA. The big middle would become medical doctors, lawyers, high school teachers, social workers or become public servants. Quite a few died in Vietnam.

By the way there is a traditional saying at a place like Harvard Law School. The top 5% of their class would become professors. The next 5 become Supreme Courts Justices and the rest make all the money.

In any event, MBAs and law graduates actually have the biggest laugh than those PhDs working on Wall Street even though a PhD was then and is now infinitely more difficult to obtain.

MBA's and lawyers run Wall Street firms and take home fortunes and build chateaus in Connecticut. The PhD's are the geeks who design products for the MBA's to sell.

Adding insults to injury, PhDs typically have to report to the MBA's who don't really understand the math. Nor frankly do they care as long as selling, in essence, mathematical abstractions can generate profits for the firms and for themselves.

Wall Street in the past 20 years have been run by MBAs and JDs. Back in my days JDs were just LLB's. Lawyers' powerful lobby managed to get universities to grant law graduates JDs so that they could call themselves Doctor!

Bob Rubin ex Citi and Goldman is a Yale JD. Current Goldman chairman, Lloyd Blankfein is a Harvard JD. Hank Paulson is a Harvard MBA. Doubt any of them could take apart a Black-Scholes options model to explain stochastic volatility.

But hey they didn't have to. They hire PhDs and consulting professors, among them famously Larry Summers, to do that.

Krugman maybe brilliant, but he only "knows" how to write books and to win a prize that brought him less than $1.5 million bucks. That's peanuts compared to what Wall Street honchos with MBAs and JDs make in less than 1 month in a good year. What irony.

Getting into Elite Universities in the US - 2

Daily Princetonian was referring to this book here

Getting into Elite Universities in the US

Daily Princetonian, the student paper at Princeton, is doing us a favor by printing two articles, here and here.

The issue of Affirmative Action to favor the "discriminated" in the US is not new. Arguments for and against such action are well-rehearsed by now.

In the context of America's racial past, those arguments have been mainly about African-Americans who the whole world knew had a most unfortunately history in the past, putting it mildly. What is new is whether Asian-Americans are being discriminated against.

These two articles I am posting provide a useful backdrop to think about the challenges of getting into desirable elite colleges in a growing multiracial society. At the same point it poses a serious problem for the elite colleges themselves who are facing a growing discrepancy between their public image as institutions who value excellence above all and what they have to do to put together a "balanced and diverse" student body.

This has become an issue not just among private colleges who only really need to answer to their respective boards of trustees. It is affecting such public institutions as University of California at Berkeley, one of the world's premium universities.

It has long been charged that there is a de facto upper limit put on how many Asian Americans can get into Berkeley.

The current student mix is about 50% Asian Americans. IT is widely believed that unless a quota on Asian American students, they would constitute more than 50% of any year's entering class. If so, that would "unfairly" disadvantage other racial groups who could use a little "Affirmative Action'. Two such groups stand out: Native Americans and Hispanics.

The issue of Asians versus Non-Asian groups that will soon include Whites (!) will be increasingly contentious in years to come.

As I have pointed out in an earlier blog, the demand for quality education + a branded degree will vastly -- read my lips - VASTLY outstrip the supply.

Hence, be prepared for more recriminations, acrimonious polemics and, as a side consequence, more pressure on the kids to become super boys and girls.

A growth industry, not surprisingly, is private consultants for high school kids who want to own a branded degree. They are charging upwards of $40,000 a year to advise ambitious parents how to manage the lives of their kids so that by the time they apply to, say, Princeton, their CVs would look like something from Krypton. These consultants claim they can read the minds of Admissions officers at elite colleges.

Oh, once these consultants are hired, they must be kept on to manage the process of a 8th grader all the way to the 12th grade. Each year presents a challenge for the kid to build a new cv for the next year and the next.

I guess I have been in the wrong businesses, obviously!

BTW do scroll though some of the comments at the end of those 2 articles.

Thursday, October 15, 2009

Princeton vs Harvard

In an earlier blog I proposed parents use as a FIRST CUT the criterion of "endowment per student". A friend, Mark, who is an alumnus of both Princeton (AB) and Harvard (PhD) pointed out to me that Princeton has the highest alumni giving rate on this planet which to him explained why his Alma Mater has the largest endowment per student.

I disagreed with that causal equation. I think with a high endowment per capita the college can splurge on its students providing what i call TLC during the student's most likely the 4 most formative and critical years of his/her life. Students remember. The more TLC they received the more generous they give back to the college that took good care of them.

Princeton is particularly smart in its TLC management. Most likely the smartest.

It restricts its student body so as not to dilute its per capita $$ to allow it to provide the best care money can buy. I pointed out in an earlier blog, I had never seen or smelled so much money on any campus I had had the opportunity to have spent time: Harvard, Oxford, Columbia, NYU, Berkeley, Stanford. Stanford is close, but not quite.

There is much more to this story of college preference based solely on endowment/student of course. More on this later. A hint. Harvard remains the college to "beat". It retains a mythical place in the collective psyche of USA -- right or wrong. Yet, interestingly, its alumni giving rate is substantially below that of Princeton. US News has data on this. From memory, Princeton's Giving Rate is in the high 60% vs mid 40% at Harvard.

Where Should We Send Our Kids to School or College?

I have been asked goodness knows how often whether Yale is "better" than Princeton, or whether Harvard is "better" than "Yale". My standard and truthful answer is they are all really very good and that your kids will get the same quality education at any of those places.

Indeed, you kids will be so so very lucky to be able to get into any of these and many other high quality universities.

Getting into a branded college will be increasingly difficult as real income rises around the world. Families with high incomes would want their kids attend a "famous" university. Hence, demand for a Branded Name college would greatly outstrip supply.

The entire student body including graduate students at Princeton, for instance, is just a bit above 7000. At Harvard, about 20,000. These are small numbers considering students from all over the world all want to attend one of these schools. If you net out graduate students pursuing a Masters, PhD or a professional degree such as an MBA, the college student body size drops further. This means "supply capacity" of universities is quite limited.

Right now admissions rate at the top universities is in the high single digit. That means for every 100 applicants, mostly already self-selected as qualified, fewer than 10 get in.

Before long, say in less than 20 years, that digit will be a low single digit. I suspect in not more than 50 years, the admissions rate would drop to below 1%.

The question still remains to the privileged few who must choose between or among several colleges who have admitted them. How should they choose.

My first cut is to look at the ranking of endowment per students. This applies to junior and senior high schools as well. Before I show you the ranking, I must also say that the rankings do NOT suggest you cannot get an equally good perhaps even better education at publicly funded schools or universities.

What the rankings suggest is that you are likely to get more TLC in hardware -- by way of quality and quantity of facilities -- and "software" - by way of individual attention, faculty access -- at those schools per dollar you spend on yourself. In other words, all other things being equal, you will be better pampered at a school with a higher endowment per student than at a school without that kind of money backing you up.

The list for colleges is here. Data are somewhat outdated, but I suspect the ranking has not changed that much in the past 4 years.

Here is the list for 9-12 graders.

In both lists some religious names are among the top. For those with a particular religious focus, these lists can be helpful.

Ranking Game

People love ranking. 10 Most Beautiful People. 500 Richest in the World. US News ranking of universities and so on. Here is another ranking. It is nice to see the richest, the most famous and very private universities do not at all mean public universities must take second place. Look at Berkeley and Max Planck in Germany.

Professor Michael Sandel of Harvard

You will benefit from listening to him, whether you agree with him or not. He provokes thoughts. Click here

A very complimentary editorial on Sandel by an English paper here.

Goldman Sachs Keeps Winning - 1

The FT article here failed to be clear on a very important point. Goldman Sachs could obtain near zero funding from the Fed by converting to a bank holding company. With zero cost money it could then "play" with the market when it was on its back. If it made mistakes, various Federal guarantees would take on its failure, but of course if it made money Goldman Sachs got to keep it. Goldman Sachs, the largest and the most privileged bank on Wall Street, has access to deals before you and I knew even existed.

This is yet another case of Joe Public helping out Wall Street without participating in the upside.

Joe Biden 3

This is the Newsweek cover story on Joe Biden. Here.

Joe Biden, the Dove 2

Should VP Biden resign as a true patriot given his "deep concerns" over the Afghanistan war? A most intriguing idea from Arianna Huffington, a woman of multiple giant size talents. Her latest article here on her famous blog also knocks down much of the mindless pro-war inertia that is driving the US deeper into the quagmire.

Mr. Wall Street Died at 61

Most of you may not have heard of Bruce Wasserstein. He just passed away at 61. NY Times' obit is here.

Wasserstein was a very big deal on Wall Street. He, more than most, turned "investment banking" into a monopoly game generating off-the-chart fees for himself and his partners. As the obit mentioned, one of his deals was to help a private equity firm to take over RJR Nabisco.

The deal inspired two journalists to write the gripping true story of the takeover process naming it "Barbarians at the Gate". The title captures the frenzy, the brazen, no holds-barred, rough to-your-face onslaught on corporations by "raiders".

Corporate mergers and acquisitions used to be done quietly behind doors and with decorum. Wasserstein was a master of public warfare was the best of that breed of investment bankers who wear the "I know more than you will ever know" attitude on their sleeves.

By the time RJR Nabisco was taken over by the private equity firm of KKR, the deal was worth $25 billions, the largest corporate takeover in the entire history up to that point and that deal was not surpassed by almost another 2 decades if I am correct with my memory

So what was Wasserstein's "contribution"?

He was smart and fanned the bidding frenzy as more bidders came out of nowhere all wanting to buy RJR Nabisco largely based on Wasserstein's reputation of finding "good" values and his persuasiveness that went with it.

The idea of a takeover was this: whoever bought the company would be able to sell it at an even higher price to make a profit -- after cleaning up the balance sheets by downsizing, by selling parts off. Money to buy RJR Nabisco was mostly borrowed from banks who were more than eager to lend to large borrowers.

As an investment advisor doing mainly talking, gaming, scheming or "strategizing" and some number crunching, Wasserstein walked away with a reported $100 million for his time and sweat.

Believe me few people could command that kind of respect in the business world. The question remains to be asked. What exactly did all that mean to the real economy?

Did the economy then and now benefit from takeovers and mergers and acquisitions?

Not much. The bubble that recently burst is yet another reminder that so much of Wall Street does for its clients then and now is all about greed and hot air supported by banks. And all of them except the sellers were playing with leverage based on debt. Bubbles happen because of leverage. Bursting of bubbles happens because at some point the greater fool game stops with the real fools holding the bucket.

RJR Nabisco made history not only because it was the hugest deal ever done but also the fool who owned it lost money on the deal. KKR was always known as the firm with the "golden touch".

Wednesday, October 14, 2009

Joe Biden, the Dove

Vice President Biden is not for adding troops to Afghanistan. That's good. He is reported to be the leading 'dove" in the White House. However, his thinking that training Afghan troops to replace US troops will do the trick is also not going to work: -

..."Mr. Biden does not favor abandoning Afghanistan, but his approach would reject the additional troops sought by Gen. Stanley A. McChrystal and leave the American force in Afghanistan roughly the same, 68,000 troops. Rather than emphasize protecting the Afghan population, he would accelerate training of Afghans to take over the fight while hunting Al Qaeda in Pakistan using drones and special forces. His view has caught on with many liberals in his party"... NY Times Oct 14, 2009.

That too will fail for the same reasons Vietnamization of South Vietnamese to fight the Vietcongs didn't work. The local troops knew they would be supporting a regime in their own capital the people despised. Then and now, the morale is not there. The incentive is not there.

Afghanistan -- Another Vietnam 3

Tom Friedman, America's most influential columnist, said this in his column today:

..."While visiting Afghanistan last July, I met a key provincial governor who every U.S. official told me was the best and most honest in Afghanistan — and then, they added, “We have to fight Karzai every day to keep him from being fired.” That is what happens to those who buck the Karzai system.

This is crazy. We have been way too polite, and too worried about looking like a colonial power, in dealing with Karzai. I would not add a single soldier there before this guy, if he does win the presidency, takes visible steps to clean up his government in ways that would be respected by the Afghan people.

If Karzai says no, then there is only one answer: “You’re on your own, pal. Have a nice life with the Taliban. We can’t and will not put more American blood and treasure behind a government that behaves like a Mafia family. If you don’t think we will leave — watch this.” (Cue the helicopters.)

So, please, spare me the lectures about how important Afghanistan and Pakistan are today. I get the stakes. But we can’t want a more decent Afghanistan than the country’s own president. If we do, we have no real local partner who will be able to hold the allegiance of the people, and we will not succeed — whether with more troops, more drones or more money...."

I say Amen.

If Friedman, a 3 time Pulitzer winner, is now backing a different strategy in Afghanistan, you would think the White House could be listening, right? Afterall, Obama once personally called him to ask for his opinion on the Middle East. So you might think Friedman carries weight?

If the Vietnam War was a guide, the occupant of the White House would be on a totally different wavelength despite at that time there was overwhelming opposition to that war by the country's most respected thinkers, not to mention daily protests against the war across the land. LBJ and later RMN still led the country further down the road to a bloody and disastrous ending.

Let's hope history will not repeat itself.

Tom Friedman's entire column is here.

Tuesday, October 13, 2009

2009 Economics Nobel Winners

This is a pretty good commentary on the latest Economics Nobelists - here.

Wall Street on Trial?

Two bankrupt Bear Stearns hedge fund managers are being tried right now in a New York Court for defrauding their clients If convicted these two men could go to jail for a very long time. Watch this space as the trial unfolds.

Based on a few allegations reported by the press, what they did in managing hedge funds may have been a not-so-rare practice on Wall Street.

As I have pointed out in the past so far this trillion dollar bust on Wall Street has only netted a few "down market" individuals at Bear Stearns and Magdoff, the ponzi swindler. Not one single person on Wall Street's blue chip firms such as Goldman Sachs or Morgan Stanley has been touched. Is it really possible that crooks only worked for Bear Sterns? Not even at the near bankrupt Merrill saved by BoA has been hauled into court.

In fact, Goldman has emerged ever more powerful than before.

If you had followed my blogs, you might agree "something" does not smell right right under our collective nose.

Mac Users, Beware

Please read this if you are thinking of upgrading to Snow Leopard on your Mac.

Escalation in Afghanistan

The surprise report here suggests Obama has embarked on the slippery road of escalation. More troops sent to Afghanistan can only lead to ever more to keep supporting those already on the ground.

Obama, the Nobel Winner

I forgot to post to my mind the best comedic satire of those Norwegians who handed Obama the Nobel Prize for Peace written by Professor of economics at Harvard: Greg Mankiw last Friday on his blog:

First-Year Grad Student Wins Nobel Prize in Economics!
From the Associated Press (with some light editing):

Pfuffnick's Nobel Economics Prize triumph hailed by many

LONDON — The surprise choice of first-year graduate student Quintus Pfuffnick for the Nobel Prize in Economics drew praise from much of the world Friday even as many pointed out the youthful economist has not yet published anything in scholarly journals.

The new PhD candidate was hailed for his willingness to tackle difficult problems, his commitment to improving the economic system, and his goal of bringing efficiency and equality into harmony.

Professor Paul Krugman of Princeton, who won the prize in 2008, said Pfuffnick's award shows great things are expected from him in the coming years.

"In a way, it's an award coming near the beginning of the first year in grad school of a relatively young economist that anticipates an even greater contribution towards making our economy a better place for all," he said. "It is an award that speaks to the promise of Mr Pfuffnick's message of hope."

He said the prize is a "wonderful recognition of Pfuffnick's essay in his grad school application."

Afghanistan vs Vietnam

It is gratifying that finally the comparison between Afghanistan and Vietnam is being taken seriously. Read this.

However, the focus at the White House is still a little off if the obsession is about "strategy" and "military pressure".

What the White House must focus on is whether the war is justifiable in the first place and second whether it is in fact "winnable" in any meaningful sense when the people and the government you want to "save" are in fact on your side for the same reasons you are.

Right now Kabul without US will fall in days because the people do not support it.

Monday, October 12, 2009

Celebs who are ex-teachers

Read this for teachers who can be something else. Source: Amber Johnson.

Reality Check, Checker, Checkiest

Evidence is not just trickling in showing that the Allied effort to "pacify" the Taliban and other tribal insurgency in Afghanistan is going from bad to worse. it is piling in at a speed that is not funny.

The latest report is here.

Interesting question!

"Eight years into the war against the Taliban in Afghanistan, do U.S. armed forces have the best guns money can buy?" asked a journalist reporting on frequent and fatal malfunction of basic weapons at critical moments.

Read the article here.

Goldman Sachs & Politicians

A wise DC hand once told me a lot of politicians go ga-ga in the presence of Wall Street tycoon types because politicians do not generally know how to make the kind of money Wall Streeters do seemingly without much effort.

Politicians equate these bankers as demi-gods because the money they earn is very much out-of-this-world.

It is easy to understand that attitude because indeed Wall Street salaries, bonuses and stock options are most unusual. Very often investment bankers can choose to retire in their forties with a couple of hundred millions in their pocket. A Senator makes nothing and would not know how to make that kind of money even if he were on the take. Lobbyists have a field day buying favors with very little money.

Read the latest on Goldman Sachs bonuses here.

Sunday, October 11, 2009

Where are they now, indeed?

Read this. Seems more UK bankers got the boot than those blue chip Wall Street counterparts who tend to get off easy. Hank Greenberg of AIG book cooking notoriety paid off his multibillion crime with only a $15 million fine. None of the Goldman Sachs folks were remotely touched by the law. In fact, "Government Sachs", as its current nickname indicates, is ever more powerful. None of the Board members had been called to the carpet. Lesser firms are less fortunate. The bankrupt Bear Sterns, never considered blue chip, will see some of their former staff hauled into court. Madoff is already in prison. You can be sure no Princeton, Yale, Harvard graduates will be in jail.

Fraudulent Democracy in Afghanistan

Finally the UN head in Afghanistan admitted there was fraud in the last general elections while denying a cover up. Read this.

his deputy, you recall, had quit in protest because this UN head insisted the votes were not in doubt. Now that he has effectively admitted voting irregularities, what do we make of the result "validating" the victory of the corrupt Karzai regime, dare I ask?

Soviet Union's Painful Experience in Afghanistan

"The Soviets had some at maximum 100,000 troops in Afghanistan but there were also some 300,000 more or less reliable Afghan forces available. In total they had the 400,000 soldiers the leaving NATO commander recently said were needed in Afghanistan. They still lost the war. The 'west' now has some 70,000 troops in Afghanistan and the Afghan army has about 80,000 soldiers". Source: Moon of Alabama Blog.

Oh, there is something else relevant: The Soviets could just march into Afghanistan because the two countries were contiguous sharing at that time a long border. US/West and Afghanistan are as connected as Alaska to Africa.

General McChrystal wants another 40,000 troops. That would bring the US troops strength to match the Soviets when they were trying to subdue Afghanistan. So, the US can win when the Soviets failed with a supply line across continents and seas?

If you still think so, read this latest report here.

This report does not even touch on those Al Qaeda guys living the caves beyond the deadly power of US airpower.

Fair Harvard - 2

My earlier "tearful" -- a la crocodiles -- posting on Harvard students not getting a warm breakfast and faculty not getting free cookies is finally getting like-minded reactions from other publications. Read this.

Why does the NY Times seem "obsessed" with Harvard, as this NY Magazine writer proposed? Well, let's be fair. NY Times is not the only institution in America obsessed with Harvard. The whole country has bought into the "mythology" of a Harvard education. Harvard has assumed a role like baptism in Catholicism. A Harvard degree validates your being somebody really special, indeed in the Catholic context, your very proximity to God!

Whether the original NY Times writer on the Harvard cookie story is a Harvard graduate or not, I don't know. However, it is, indeed, a fact that Harvard is on the "obsessed" list of 90% of all high school students who are in the top 1% of their class. It has also become a short handed expression for whatever is the best American colleges can offer. In short, Harvard stands for the best money can buy. I will deal with that issue in some time.

There was a survey done by the, yes, NY Times a few years ago on high school students who, if presented with a theoretical pair-wise choice, had to decide between Harvard and X where both had accepted the student, and where X was 6 of the top branded colleges in America, including Yale and Princeton, an overwhelming percentage in that survey chose Harvard.

That upset Princeton and Yale to no ends, because Yale, the second oldest university in America is to Harvard where in England, Cambridge is to Oxford.

In the mythology of US colleges, Harvard and Yale are like the perennial twin brothers who need to compete against one another. They are separate but equal.

Princeton, a late comer in the academic "excellence" game has been rated number 1 college by US News, a much "hated" magazine, for some years and in other years sharing the top ranked position with Harvard. Yale, in that "hated" survey, perennially ranks number 3!

Yet, presented with a choice, only about 25% would go to Princeton while 75% accepted by both would pick Harvard. A very slightly higher percentage chose Yale over Harvard. Of course Yale and Princeton would get upset.

Everyone who thinks he or she is a prima donna high school student, top of his/her class, wanted a validation by a Harvard acceptance letter.

Harvard is not the only difficult college to get in. Both Yale, Princeton and Columbia have single digit admissions rate. In other words, less than 10% of all applicants get accepted by all of those 4 colleges.

Yet, only Harvard occupies a mythical position. Hence, the Harvard envy. And that affects all the media writing about Harvard.

I will explore the "myth vs reality" issue in the future.

Friday, October 09, 2009

Here We go Again

You can count on the Fed to do something about the Federal Housing Administration if it is, as reported, on the verge of collapsing. And you can also count on the Congress to let the Fed do that. A further collapse in housing prices is highly political in nature. There are already plenty of angry voters "out there" upset over unemployment and how Washington bailed out Wall Street tycoons. So, if them, why not us? Politicians will not antagonize their voters anymore and will vote for bailing out FHA. Read this.

Nobel Prize and Afghanistan

A stunning surprise for Obama to get the Nobel Peace Prize. However, if this AP report is accurate about Obama's willingness to engineer a political settlement in Kabul with the Talibans to focus his anti-Al Qaeda effort, he may indeed deserve that prize AFTER he has done all that.

A political solution taking in the Talibans and in effect kicking out the corrupt Karzai administration will at least reduce dramatically the killings among non-Al Qaeda folks. As long as we can ensure the Talibans do not brutalize Afghan women, stop the drug trade, allow secular schools to continue and do not cooperate with Al Qaeda terrorists which they never liked anyway, frankly why should we care what Talibans believe in their spare time?

Colossal Mistake in Iraq

So, we didn't find WMD as promised. OK, we changed our objective and kidded ourselves saying we went in to topple a particularly inhumane dictatorship. And by so doing, we could turn the entire Middle East into a giant democracy. That was the neo-con bottom line.

Never mind that logic would lead the US into war with at least half a dozen countries that would similarly qualify as inhumane dictatorship starting with N Korea who actually is close to having or already has WMD.

But wait, this report says there are insurgents in Iraq who keep killing US soldiers. That's not supposed to have happened or continue to happen, right? US went in as liberators, right?

So we are not perceived as "saviors" and "liberators"?? Read this. That's really interesting?

Harvard IS Special -- At Least to the NY Times

Harvard and a host of other universities, elite or not, have lost a lot of money in the recent market bust. So what else is new?

On Main Street unemployment is the over-riding concern and it continues to rise. Folks who have worked all their lives have lost their homes or their jobs.

However, students at Harvard are no longer getting a warm breakfast made the news at New York Times, the paper of record in America. Imagine that! Read the article here.

Well, of course, Harvard is Fair Harvard, like no others. It has graduated more US Presidents than any other university. It is the oldest and the richest, even with a near 30% decline in its endowment.

But wait, are not Harvard professors and their students the best and the brightest?

How come these brains didn't anticipate the bursting of the financial bubble? Indeed, Harvard Business School, nation's premier business institution should have put out so many wise investment ideas that Harvard's money managers should have shorted the market ahead of everyone else!

Instead of suffering a 30% decline in its endowment that has now deprived its so privileged students a warm breakfast, the endowment should have increased by at least 50-100% taking advantage of the dramatic fall by properly positioning its portfolios, no?

Oh, by the way it was none other than Larry Summers, Obama's economic advisor and Harvard's president during the bubble who was most sanguine about using financial derivates and was the driving force to expand Harvard's budget on the mistaken and costly belief that he could count on an ever increasing endowment to finance its ambitious expansion plans. Summers is a Harvard PhD in economics. Media always describe him as one of the smartest economists in all of America.

Well, forgoing a warm breakfast may not be Dickensian, as the Times reporter put it, but being deprived of it was deemed important enough for the paper of records to put it on as news.

How about a report on Howard, the "black" Harvard? Nah! These "people" are not important for the future of the country. Didn't Obama go to Harvard Law School?

Oh, he went to Columbia University as an undergraduate, but you can always count on the NY Times, indeed, all US papers, to write he is Harvard-educated. In America, no other counts as much as Harvard.

Yes, Harvard holds a very special place in the collective psyche of USA. And that's why we have to read about disappearing warm breakfasts at Harvard.

Economy Not Out of the Woods

Economic data continue to indicate US is by now means bottoming despite a roaring stock market. Yes, it is said the market anticipates events 6 months out. Well, yes and no. It depends. Frankly no one can really tell from what the market is doing. Otherwise, we would not have had such a surprise "party" waiting for us last year when the market just collapsed surprising everyone.

Consumers are down and out. Of course, many are in negative equity position from declined values of their own homes.

Read here.

Thursday, October 08, 2009

Obama = Falling $?

You will be hearing a lot from the Republicans in the US that Obama is the cause of the falling dollar. This is another sad fact about the pathetic state of the royal opposition. The falling dollar -- and it will keep falling -- started under the Bush administration.

Remember he wanted to fight wars in faraway countries without asking the people to make a sacrifice? He not only did not raise taxes to finance his wars, he refused to slap a hefty gasoline tax to save energy and to reduce revenue to the oil rich enemies of the US? He didn't do it because he thought the people wouldn't accept any sacrifice.

So Obama had to pump trillions to save the economy. Of course the dollar is tanking. The world is flooded with dollars.

So, when you read yet another article that Obama is the cause of the falling dollar, perhaps you should wonder whether Bush was right about the people who elected him to cut taxes, come rain or shine.

"Why are we here"?

Excellent question asked by US soldiers in Afghanistan. Here is an excerpt from a London Times report:

..."Many feel that they are risking their lives — and that colleagues have died — for a futile mission and an Afghan population that does nothing to help them, the chaplains told The Times in their makeshift chapel on this fortress-like base in a dusty, brown valley southwest of Kabul.

“The many soldiers who come to see us have a sense of futility and anger about being here. They are really in a state of depression and despair and just want to get back to their families,” said Captain Jeff Masengale, of the 10th Mountain Division’s 2-87 Infantry Battalion"...

The full sobering but depressing report is here.

There is no such thing as an "honorable" withdrawal when the original strategy itself was wrong: search and destroy when searching is near impossible; fight and hold territory when you cannot possibly hold vast "territory" when most folks are hostile to you; winning hearts and minds when few were on your side to begin with and fewer still when you are supporting a corrupt regime everyone hates....and so on.

There is only a disastrous withdrawal and a cut-loss-before-it's-too-late withdrawal. Ask anyone with any experience in Las Vegas.

Why is it so difficult to understand? One word: pride.

Wednesday, October 07, 2009

Double Dip?

Stock markets around the world suggest investors believe the worst is over. New data from this article suggest otherwise.

The credit securitization market would have been brain dead if the US government had not been pumping $$ into it. If Uncle Sam were to withdraw tomorrow, we would see a further collapse in housing and other sectors throughout the economy that rely on debt to stay alive, which is practically everyone.

2 graphs tell the same story. The collapse in private demand for debt and the role federal $$ plays to support the entire credit market. I am reproducing the first one below that shows he share of public money in total credit securitization market. The second one in the article (I failed to upload) shows the total decline in all loans

Couldn't Have Said It Better Myself, Doc

John Holdren, Presidential Science Advisor, courtesy of Tom Friedman. NY Times:

Friedman: "...We also need to act. If we don’t, we will be leaving our children to the tender mercies of the Market and Mother Nature alone to shape their futures. This moment reminds me of an image John Holdren, the president’s science adviser, uses when discussing the threat of climate change, but it also applies to the dollar:

“We’re driving in a car with bad brakes in a fog and heading for a cliff. We know for sure that cliff is out there. We just don’t know exactly where it is. Prudence would suggest that we should start putting on the brakes.”

Friedman's entire article is here.

Another Bush Disaster

Remember Gitmo or the Guantanamo Bay Detention Camps? The US shipped almost 775 "prisoners" to that naval base. Bush lawyers told Bush they could be held indefinitely and not eligible for the normal due process prisoners of war are entitled to from the Geneva Conventions. Lots of horror stories about torture and abuses reported and documented over the recent years. A real black mark on US moral standing around the world.

So far over half have been released without charge. Less than 300 are still in the camps. Some no doubt are Al Qaeda terrorists. Many are likely to be innocents in the wrong place, wrong time.

Obama to his credit wanted to close the camps. Ah, that seemed simple. Problem is NO country wants to take them back. They have acquired the stigma of being a terrorist when he may not be one, and if he is a terrorist, but the US government has failed to prove him so, then no one wants to take a chance with him either, for sure.

So, the only solution was to release them to the US since it was the US government that brought them to a US naval base in the first place. Right? Wrong, say the US Congress. We don't want them in the US either. No one wants to have a possible terrorist in his backyard -- understandably -- even if in fact they are innocents.

So, GITMO stays. Read this here. So now the US has to live with yet another Bush legacy of folly. It will keep a prison forever with inmates deprived of due process for crimes they may not have committed since the US couldn't prove it so. Great.

Folly in Afghanistan

Two articles in today's NY Times capture the dangerous if not mindless geo-military thinking in the US.

Robert Kaplan's article describes how the US is preserving stability in that region appreciated by Afghan's big neighbors: China and India. In particular American troops are protecting a big Chinese mining company. That otherwise interesting article did not draw the obvious question. How come China and India are not asked to contribute to the war effort by sending a few divisions of their own troops to help out Uncle Sam and in that process protect their own national interests? Why is Uncle Sam protecting China's geo-economic position?

Then the next article (here) says (towards the end) that General Petraeus believes the war effort requires a "sustained, substantial commitment" by the US while Obama has refused to reduce its troops size.

Obama is on the verge of making the same mistakes his predecessors made before they escalated in Vietnam. All it takes is a couple of setbacks to push US to send more troops to protect its current troops. And then the logic of escalation will kick in.

If you cannot withdraw when you have 70,000 troops, you are not going to withdraw when you have 100,000 there...and so on -- until disaster strikes.

Holding troops size constant at this point is the worst of all worlds. War is not like the stock market when "buy and hold" is often the best strategy, if your portfolio consists of blue chips when the market is going against you and your stocks are tanking.

In War, your "stocks" are soldiers. They get killed and will not come back. Obama should be talking to the Talibans, China, India, Russia to exit. It is "normal" to think US can stick hack it in Afghanistan forgetting it has a very long history of burying foreign imperial invaders even if US is not after its territory.

Yet, in fact, a holding position there is the equivalent to territorial designs -- in the eyes of the insurgents -- because as General Petraeus says correctly, the effort will have to be sustained and substantial. It has to be that since the effort is also protecting a government the people distrust and hate! They are drug traffickers for goodness sake and corrupt. These Kabul allies will sell out US in a heart beat.

Princeton and $$$

Princeton is Money. It smells money wherever you go on that gorgeous campus.

I have spent time at such places as Oxford, Stanford, Harvard and Columbia. But Princeton where I was recently a Guest of its Asia Studies Department is something else. None of them come close. You see serious money at Princeton everywhere you turn.

Though the total size of its 2009 June-end endowment ($12.6 billions) is not as big as Harvard ($27.3 billions) or Yale ($24.6 billions), but on a per student basis, it is way ahead of everyone else on this entire planet.

The student body is puny at 7000+ compared to 20,000 at Harvard, 11,400 at Yale and 24,000 at Columbia. You walk into any of its libraries, you see wall to wall brand new computers. More supply than demand. Libraries are like country club libraries. Squeaky clean.

Princetonians know they are being spoiled rotten and they reciprocate by giving generously to Alma Mater. It has the highest alumni giving rate of any university on earth.

Its students? Of course they smell of money and have a clean nose for it as well. Not surprisingly, if you read this article here, you can tell these kids are also obsessed with $$$.

40% of recent graduates went straight to Wall Street, more than medicine, law, and a few other professions combined.

In the seventies, Princeton decided to compete with its peers to capture its shares of accomplished alumni other than being an incubator of future brokers or a Wall Street investment banker. And so it started to accept talented students, especially "people of color" -- an unique American euphemism.

First Lady Michelle Obama and Supreme Court Justice Sonia Sotomayor, both Princetonians, are among those talented ones Princeton accepted in the 1980's. Princeton, however, remains a welcoming home for the priveleged WASPs. You have a high percentage of Princeton "legacy" students going back several generations.

Historically it was the northern-most southern school. There was a quarter for slaves brought to Princeton by the sons of landowning class in the south. At commencement a few of those young southern gentlemen graduates would free one or two of their favorite slaves to show their "enlightenment".

Have fun reading Daily Princetonian. I hope these students are aware that in fact most of the rich and famous in America -- or the world -- did not go to Princeton or to any Ivy League colleges. Not a few are even college dropouts. Some didn't even finish high school.

Tuesday, October 06, 2009

Pax Americana Ending

The American Century is ending. Not something to break a bottle of champagne for, but it is something to ponder its consequences.

For all the stupid, arrogant, awful things Pax Americana has done, Plan B, believe me, is infinitely worse. Pax Russia? Pax Sinica? Pax Al Qaeda?

How do we know it is ending. Focus on just 2 areas. Balance sheets of the country. Simply put, its financial resources have depleted. Second: its moral balance sheets have deteriorated.

Too much national debt. Too much reliance on foreign largesse to keep lending money to allow US to keep its non-junk bond status. However, look at the micro levels, even California is going bust. Any wonder theb President Obama has decided not to receive Dalai Lama, a man of peace and spirituality? Obama does not want to offend its single largest lender to the United States -- Communist Party of China.

Moral compass? After 8 years of Bush where government regulators looked the other way while Wall Street gambled with our money, after regulators looked the other way while rating agencies and accounting firms faked their certifications, and then after all that torture going on in Quantanano camps, US has lost its moral high grounds. As a French foreign minister once said, "The magic is gone".

The Dollar. The anchor of 20th century global growth and prosperity is about to enter intensive care. Read this and ponderr.

21st Century is going to be rough riding for your kids.

Localization of the Iraqi War

A perennial problem for the US during the Vietnam War was to turn the South Vietnamese Army into a real army so that US troops could leave. Why did it fail with all that $$$ and hardware handed to Saigon?

The North Vietnamese and the Vietcong would salivate at gaining access to all that supply of resources.

Yet with all the help handed to the South, it was futile. The South Vietnamese soldiers didn't really want to stand up and fight because they knew they didn't have the people supporting them. Their own proverbial brothers-in-law were mostly on the "other side". In this case, at least not on their side.

Read this article from Stars and Stripes here and you see the similarities between the Iraqi and the Vietnamese wars. Not two wars are the same, but one thing stood out.

The Iraqi security forces ain't worth didley without US troops and the latter are more feared than loved for they have clearly produced a lot of "collateral damage". Would you welcome US troops if you were an innocent Iraqi in their ways?

No Option?

Something is wrong with this argument by the White House Press Secretary:

"...The White House also tried to make it clear on Monday that Mr. Obama did not envision actually pulling out of Afghanistan no matter how he rules on General McChrystal’s request. “I don’t think we have the option to leave,” said Robert Gibbs, the White House press secretary..."

So "surgical' operations are a huge success, says this report here. The allied forces have eliminated 1/2 of its top targets. Swell. So why do we need more troops then? Stupid question. Top targets killed are replaced by new recruits and "promotions" from within the ranks. That's why.

Clearly the war is not going well. Hence, General McChrystal's request for more troops. He is not wrong if "winning" conventionally defined is the goal. The real issue is the same as in the Vietnam War. Is this kind of war winnable when the people are not 98% behind you? And for every Taliban/Al Qaeda killed, 1-1/2 show up to join Uncle Mohammed? What you gonna do? Burn down the village to save it?

Strategic operations are not a solution either. Afghanistan, unlike Vietnam, is sparsely populated and mountainous. If you can't even find Osama bin Laden in all those years spending $$$$ and many surgical operations, are you going to kill them all using the same tactics?

Why is withdrawal not an "option"? That was too the rationale of staying put and then escalate in Vietnam! And to a disastrous result.

It's been pointed out many times, "losing" Afghanistan, which was never "ours" would not be a global disaster. After all Taliban is a stationary target while Al Qaeda is already all over the world. Surely, we are not going to burn down 1/2 of Africa, Syria, and maybe Iran not the mention maybe the entire Afghanistan to eliminate Al Qaeda? Even then, you think you can get them all?

Obama and the Dalai Lama

See what happens when you owe someone mucho dinero? Say north of $800 billions?

Worse, you need to borrow more from the same lender to feed your habits. Well, this could and did happen. Read this.

Soon, your creditor will start telling you whom you can or cannot come to your Thanksgiving dinner. Just watch.

USA = 3rd World Country?

In so many third world countries, the military hold a powerful position in shaping foreign policies. Thailand, for instance, even relies on the military often as the final arbiter of domestic politics.

The last time the top brass tried in the US to influence foreign policy was when General MacArthur wanted to invade China in a High Noon confrontation with President Harry Truman. The General thought Truman was chicken shit, or a coward. Truman sacked him.

Now, amazingly we are again witnessing the military taking an aggressive and public position for more troops in Afghanistan putting Obama on the spot. This scene has not been seen for a lot of years.

Some one better get sacked soon before US slides down that slippery road where the military gain more political power.

Read this here.