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Archive for the ‘Stock Market’ Category

Eudaimonia Versus Existing in a Childproofed Society

10 Aug

We live within a culture where negative feedback is purposefully avoided.  You can’t “dislike” on Facebook, you can only “+1″ on Google+.  Yelp was rumored to have strong-armed companies into paying to get rid of bad reviews.  Online sites like Consumerist are attacked by businesses who claim they’re unfair.  Most companies purposefully hide their contact numbers on their sites so you can’t easily call them (because if you’re calling, you probably have a problem with them!), you can’t cancel service on a web site and usually have to call, people avoid conflict and argument, companies set up complex levels of firewalls to prevent angry customers from getting anywhere, etc.

It goes further.  The world’s standard for measuring national improvement is Gross Domestic Product, which only tracks consumption in a very crude way.  Simon Kuznets, one of the architects of the GNP metric, admitted, “The welfare of a nation can scarcely be inferred from a measurement of national income… Goals for “more” growth should specify of what and for what.”  But this forewarning was ignored.  If someone gets cancer and has to purchase a bunch of equipment and pills and spend money in the hospital, this is counted as a net positive for society because of the purchases, even if all these resources are being spent on one person who is unable to contribute to society while sick.  The U.S. government (!) is protesting credit rating agencies’ assessment of its indebtedness, where both the U.S. government has been profligate and the agencies have been corrupt in currying favor with the U.S. one moment and then trashing it the next.

The stock market, currently in shambles within the last few weeks, has scared nations yet again after a shock only three years ago.  Predictably, the Greek government, which has watched its economy grind to a halt and reach almost-default levels, has decided to ban short-selling of stocks for two months.  This is essentially an ideological move.  Short-selling, where you make money by betting on a stock going DOWN, not up, has always been seen by non-market people as, in varying degrees, dastardly, unpatriotic, illegal, and even dangerous.  It’s that last point regulators focus on.  They believe that short sales by people who hate a company can drive a stock to zero.  Meanwhile, market folks know that short selling actually adds more transparency, information, and support to stock prices, because there will be pressures pushing the stocks both up AND down, and not just up.  The problem in a market without short sellers is that without them, when buyers disappear, prices collapse completely.  No short sellers would be covering their positions.

And this says something else about markets.  Very few people actually understand how they work.  Virtually all the mainstream articles being written about the latest downturn are just flat out WRONG.  You’ll get guys like this, who tell you to stay in the market so you don’t risk the upside (again, it’s always about things going up).  He goes on in another piece to say that Wall Street is irrelevant!  The Daily Beast, usually a pretty savvy digest of the most important stories, has turned to mush when it comes to the markets.  Otherwise very intelligent people I follow online also have very flawed notions of how the markets work.  The lack of economic understanding is frightening when you consider that these people probably know a little bit more than the politicians elected to vote on policy for government role in the economy.

I’d prefer to read people like George Friedman, who emphasizes that it is not just economy, but political economy, that we must talk about.  Politics and the relations between power groups affects most of the dynamics in our lives, and we cannot act like the economy is some neutral entity that is impervious to human mistakes and designs.  The “economy” is intimately wrapped within the designs of men.

I had to quit watching the daytrading IRC channels because even those high-frequency traders had what was basically a cynical Ayn Rand-ish slash Gordon Gekko slash Snake Plissken view of the world where you’re only successful if you cut others’ throats to get to where you are.  Their adaptability to changing market conditions was highly questionable.  Basic economic principles were ignored.  But hey, they made good money so I can’t complain too much.

I would agree with Richard Florida (PDF), Umair Haque, Tim O’Reilly, and some others that we are in the very early, ugly stages of a transition to an eudaimonia society, from a purely consumerist society.  I believe that we need to be able to take an honest look at how our society is structured and allow for more negativity in our metrics.  We need to develop the capacity to take criticism, to be voted down, to be shamed when we do things that are wrong (a concept crudely and devastatingly wielded mostly by religion), to take a more holistic look at everything impacting our lives.  Pure revenue should mean less if it comes at the cost of environmental degradation, pollution, lack of time at home raising families, lack of sleep, abuse from employers or manipulation from unions, etc.

Eudaimonia is a term fit only for us classicists, but @'s concept of the economics of the good life is spot on http://bit.ly/l25koR
@timoreilly
Tim O'Reilly

Umair Haque:

“I believe the quantum leap from opulence to eudaimonia is going to be the biggest, most significant economic shift of the next decade, and perhaps beyond: of our lifetimes. We’re not just on the cusp of, but smack in the middle of nothing less than a series of revolutions, aimed squarely at the trembling status quo (financial, political, social): new values, mindsets, and behaviors, fundamentally redesigned political, social, economic, and financial institutions; nothing less than reweaving the warp and weft of not just the way we live–but why we live, work, and play.”

The goal is for people to be able to pursue middle-class professions in fields that they are talented at, to unlock their creative potential, instead of shoe-horning people into certain professions if they want to live any kind of decent lives for themselves.  The goal is for people to have a successful career but also a family to raise, a community to participate in, and a healthy life.  The way society is constructed now, as I’ve said before, is a zero-sum kind of get-rich-or-die-tryin’ mentality where everyone is incentivized to fuck everyone else over, at least until one becomes wealthy enough to think about maybe working on philantropy for others.

My "EUDAIMONIA" Tattoo

Instead of just Gross Domestic Product, people like Mark Anielski (“The Economics of Happiness: Building Genuine Wealth”) recommend the Genuine Progress Index, or the GPIAtlantic.  The GPIAtlantic was broken down into these indicators:

  • Time Use
    Value of Civic and Voluntary Work, Value of Unpaid Housework and Child Care, Value of Leisure Time, Paid Work Hours
  • Living Standards
    Income and its Distribution, Financial Security – Debt and Assets, Economic Security Index
  • Natural Capital
    Soils & Agriculture, Forests, Fisheries and Marine Resources, Energy, Air, Water
  • Human Impact on the Environment
    Solid Waste, Ecological Footprint, Greenhouse Gas Emissions, Transportation
  • Human and Social Capital
    Population Health, Costs of Crime, Educational Attainment

These indicators are far more in line with how we actually consider the world subjectively.  They capture our concerns, worries, and understanding of how much we feel safe living in our communities.  But all of the factors are ignored in the top-line metrics that we use.

Which is sad because we live in an era now of big data.  The top quants in the nation are working in finance, insurance, computer science, crypto.  Yet the metrics we use for our own well-being and happiness are crude “neutral” measurements from another century.

The above chart shows the disparity between how the U.S. economy is measured through GDP versus how it is in actuality.  In short, we have hit a plateau in our quality of life for almost 60 years, while our GDP measurement seems to indicate we’re much “richer” per capita.  It coincides with increasing income inequality, measured through the Gini coefficient:

They show that our society as a whole probably peaked in overall access to happiness somewhere in 1968.

In short, we have insulated ourselves from seeing the negative aspects of our society.  Amartya Sen calls this phenomenon “hedonic opulence”, Anielski calls it “chrematistics”, Clive Hamilton calls it “affluenza”.  We believe that we can grow our way out of poverty, that if we have enough positives in a society, that we can just overwhelm the negatives.  But the truth is that the negatives impact the bottom line of growth and positivity.  A community full of pollution and crime will stop creative processes from flourishing there.  A sick populace will be less productive at work, impacting overall economic success.

Said Robert Kennedy on March 18, 1968, at the University of Kansas:

“Too much and too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product [GNP]… – if we should judge America by that – …counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities…. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”

This is why I want to work on Galapag.us as my life project.  It is an ecosystem for reputation.  All the things you’ve worked on in your life are aggregated into metrics of your own design.  The most popular metrics (say, success at being a contributor to your community, looking at data such as your volunteer work, church life, money donated, time spent tutoring other people or children, household income, trustworthiness, crime record, etc.) would be voted up to the top.  We would not be constrained to just GDP.  We could build our own metrics.  Then those local, individual metrics could be aggregated for county level, state level, all the way up to national level.  The data is anonymized as it is grouped, or, if you choose, fully identifiable and open if you are an open person.

The imperative, though, must be on more transparency and accountability.  If we as individuals can’t handle being criticized publicly, then we can’t expect things to improve at higher levels of organization.  Being criticized is not always a bad thing.  If the criticism is fair, you should improve yourself with it.  If it is unfair, your detractor should be penalized for making false statements.  We do not have this kind of global feedback system in place.  We are victim to flash mobs, anonymous attackers, stalkers, people who suffer no negative feedback from their actions.  Galapag.us would fill this hole in the internet’s identity layer while still providing degrees of anonymity, pseudonymity, and identity.

Daniel Suarez’s seminal but overlooked books, Daemon and Freedom (TM), suggest deprogramming the “Non-Player Character”/NPC dynamic of being trapped within a world of simplistic metrics (the quotes below are from Freedom (TM):

“What do we look like to a computer algorithm, Sergeant? Because it will be computer algorithms that make life-changing decisions about these people based on this data. How about credit worthiness—as decided by some arbitrary algorithm no one has a right to question?”

“Imagine how easily you could change the course of someone’s life by changing this data? But that’s control, isn’t it? In fact, you don’t even need to be human to exert power over these people. That’s why the Daemon spread so fast.”

Suarez’s books propose that darknet hacker communities will spring up in the rural areas, away from legal restraints and the encroachment of lawyers, corporations, and other barriers to entry, creating more balanced, sustainable, networked communities for people to be rewarded at their individual trades by leveling up in the darknet world and then using darknet credits to earn a reputation and a living.

“Holons are the geographic structure of the darknet. Any darknet community lies at the center of an economic radius of one hundred miles for its key inputs and outputs—food, energy, health care, and building materials. Balancing inputs and outputs within that circle is the goal. A local economy that’s as self-sufficient as possible while still being part of a cultural whole—a holon—thus creating a resilient civilization that has no central points of failure. And which through its very structure promotes democracy. That’s what we’re doing here, Sergeant.”

“The Daemon financed this.” Sebeck turned to her. “Didn’t it?” “The Daemon’s economy is powered by darknet credits, Sergeant. Imaginary credits are all that money is.” “But there’s a theft at the heart of it.” She thought about it and nodded slightly. “Yes, the darknet economy was seeded by real world wealth. Wealth that was questionable in origin to begin with. Here, it’s being invested in people and projects that have begun to return value—not in dollars, but in things of intrinsic human worth. Energy, information, food, shelter.”

There are ways out of the messes we’re in, but most people see them as unconnected issues.  But personally I see it as symptomatic of an entire society’s failure to examine itself.  Gnowthi seauton.  Jared Diamond-type stuff.  Granted, it would be a LOT to expect humankind to be able to look at itself honestly, for humans always hope to avoid the negative and only see the good in the things they believe in, but this would be one of those points where one would hope that our civic leaders and politicians would be required to study — and therefore detect — such policy/societal failures and properly diagnose them.

Unfortunately, that is not the ruling class that we have, and we are not likely to correct these systems until an alternative system is built.  Those who make money under the current system will resist, but even politicians go along with something when it’s shown to be successful.  Hopefully for me it would be something like Galapag.us, but I would accept any attempts.

The only way to change our systematic problems is to build our own alternative.

 

Wall Street & Trading

29 Nov

I just finished Karen Ho’s “Liquidated:  An Ethnography of Wall Street”.  It tied together various experiences I had daytrading from 1998-2002 and 2006-2007 and the recruitment sessions that big banks and consulting companies would have for Georgetown Master’s students.

Some things the book helped to confirm:

1) Time differentials.  Wall Street works very often 100-120 hours a week.  This doubles the minimum hours worked by corporate America.  So that affects time scales; Wall Street is constantly trying to create profit through liquidity and exchange and deals.  Corporate America works on a much slower timeline, to create products or services.  It is a more human scale.  Wall Street works not for salary but for bonuses, which are created through quantity and size of deals.  It doesn’t get compensated for long-term corporate success.

2) A large number of students from Ivy League Plus schools chase the money into finance.  They get paid a fortune if they can cut it.  But the net loss is to society — these brilliant minds do not seem to be employing their money back into philanthropic pursuits, ambitious programs, or bettering the world.  The money is put into unsustainable, wasteful lifestyles which the east coast thrives off of. (read the Washington Post’s article about Rhodes Scholars herding into finance)

3) CEOs and executives care about “shareholder value” and the stock price, but these things are no longer linked to the internal health or long-term success of a firm.  It is corporate raiding.

4) Wall Street is transferring wealth away from those who create it, by facilitating “deals” which leak commissions to the banks.  How many deals have you seen executed by public companies lately which actually make any sense?  Remember AOL and Time Warner?  That was the pinnacle.

5) Wall Street wasn’t destroyed in 2007 — it did what it always does; quickly it reinvented itself, laid people off, and adapted.  No other sector is able to reconstitute itself so quickly. It does this by pursuing talent at any cost.  It recruits the best, unattached minds in the nation from the top universities, and promotes a cult of personality of “smartness” — you will be among the best people if you go to work on Wall Street.  I saw the degree to which Wall Street pursues talent; one of my classmates at Georgetown had a standing job offer even throughout the 2007-2008 financial crisis!

6) Downsizing is good to Wall Street. If a company lays off workers, this means the company is reducing its overhead.  Wall Street does not care about Main Street.  It pulls from the elite, and the job does not care about how Main Street is doing or whether workers are suffering.  Wall Street enjoys higher unemployment as long as productivity increases and costs are reduced — and as Professor Ho points out, this job insecurity mirrors what Wall Street is constantly under the threat of.

7) Even within Wall Street, there is segregation. Cost center people, like support staff, take different elevators within buildings than the people who make the profits for the banks.

8) Investing in the stock market is a sucker’s game.  Owning stock in a company is not worthwhile, because common stock is so diluted that it doesn’t constitute any sort of ownership in the firm (and Professor Ho points out it never did).  The stock market is its own entity and should be treated as a quick trading vehicle:  volatility and liquidity are the only things that matter.

9) Neo-liberal economic theory permeates Wall Street, but it is unsustainable for most people.  While Wall Street is made up of the best and brightest who easily transition from job to job, Main Street would not be able to withstand this “creative destruction”.

This is a sobering book, but also a fascinating move for anthropology:  I think most people associate anthropology with studying small, backwards, tribal groups.  But this studies incredibly modern, adaptive Wall Street tribes.

As a citizen I’m deeply concerned about how easily the finance sector controls what happens in this country, and even President Obama has succumbed to a lot of the banks’ demands.  What’s worst is that finance is intellectual magic to create new ideas and derivatives and “products” while the actual economic base of development in the US has taken a back seat.  How long can that last, with our greatest minds essentially creating nothing but instability, instead of new technologies, theories, and breakthroughs?

 

State of the Nation After 9/11/09

14 Sep

Oh man, where to begin.  I think I’ve been a little frustrated lately because I haven’t written in a while.  So let’s get it out there so I can move on.

National Tea Party, 9/12

This last Saturday was the National Tea Party Day in DC.  The Tea Party is a rallying cry for essentially Jeffersonian anti-big government, anti-taxation, anti-socialism, anti-public option Americans.

I live in DC.  I went to meet some friends at the St. Regis hotel for drinks, since one of our friends was attending a wedding reception there for her friends.  I think there were three weddings in the area because there were people dressed to the nines everywhere.  But interspersed among them along 15th Street, since the St. Regis is due north from the White House, were tons of Tea Party out-of-towners.  They wore the typical uniform of the red-blooded American patriot from the midwest and south.  So imagine little black wedding party dresses and heels and tuxedos mixed in with American flag t-shirts, Don’t Tread on Me flags, large homemade posters decrying socialism, and 13 Colonies flags.  It was quite a scene.  Read this post for an idea of the iconography and symbology they use.  Heavily Confederate, heavily Jeffersonian.

Inside the Tea Party

I am being generous in my description of the Tea Party because here’s what it really is:  despite claims to the contrary (they say they are inclusionist) by those orchestrating it (Dick Armey, FreedomWorks, FOXNews, Glenn Beck), the Tea Party is almost exclusively old, white, fat Americans from the midwest and south (watch the videos, about the only minorities you see are the police, ironically…DC at least in the workplace is diverse, although not so much socially).

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This panoply lends itself to legitimate elements of conservatism, as well as attracting isolationism, racism, and antiquated rhetoric, because they want to be left alone by the government, prefer Jeffersonian federalism, and couch their political rhetoric loosely around racist anti-Obama, obstructionist anti-Keynesianism, and anti-national anti-public school/health care/anything that takes money out of their pockets.  As with any movement, the fringe elements make up a lot of the headlines.

medicare

The thing is, their political ideology has a strong historical foundation.  The American debate has long focused around Hamiltonians and Jeffersonians arguing about central government vs. limited government, diplomacy vs. isolationism.  The Tea Party certainly has legitimate doubts about the encroaching danger of a growing government, the problem of being taxed too heavily by hungry and wasteful federal programs, the desire to own guns vs. the fear of the government seeking to seize them, etc.  They are the accountants of American domestic and foreign policy.  Their first instinct is always to say no.  And we need this.

Today’s American Policy Schools of Thought

One significant limitation with solely following this school, though, is that the world has become far more complex than these classic debates (fought out when America was not yet the superpower), and so has American history.  Walter Russell Mead, author of Special Providence:  American Foreign Policy and How It Changed the World, adds two more schools of American thought, the Wilsonians and the Jacksonians.

The Wilsonians can be best described as the non-government organizations in Washington, DC who lobby for peace in Darfur or de-mining Cambodia or human rights in China.  They believe that the American freedoms we enjoy within successful democracy and human equality can be exported; we should spread those ideals abroad.

The Jacksonians are the belligerent, more realpolitik war-fighters who believe strongly in national security, honor, and individualism at any cost.

Naturally you can see that the Tea Party people take a lot from the Jacksonian movement, with their profession of faith for the 2nd Amendment, the vivid display of patriotism and love for the red, white, and blue, and resisting the “public option” of health care in favor of individualized, privatized health care.

But this is not what they choose to make the basis of their movement.  They know that preaching fiscal conservatism is where they will be the most inclusive to the conservative base, judging by their organizing web sites.  What’s interesting about that site in particular is that #tcot is a hashtag meaning Top Conservatives On Twitter (the libertarians’ is #tlot, the liberals are split up) and the site’s style is a direct knock-off of Drudge Report‘s site design (which I’ve since deleted as a bookmark despite it being a great place for a links, because it’s just become too much of a political EFP pushing anger at certain topics).  The Tea Party Patriots web site uses film footage from FreedomWorks, the lobbying group that (and I’m trying not to be too judgmental here, but the FW logo is on everything) is pushing the Tea Parties.

I would describe myself as mostly a Hamiltonian (having had a Keynesian economics grad school education, admittedly), but I also draw heavily from the other schools:  Jeffersonian appropriateness of levels of government and high requirements to declare war, Jacksonian desire for ferocity when war must be conducted and desire for militaristic honor in combat and argument, and Wilsonian dreams of universal human rights.  I share libertarian suspicion of Wall Street and the Federal Reserve (and any organization that is not transparent and accountable to the people).   I support companies in their mandates to earn as much money as possible, but I also think they must do it within the commonly-accepted range of American regulatory institutions protecting the public interest vigorously.  I grew up in a Jeffersonian, libertarian Texas as a kid, fought in a post-9/11 Jacksonian US Army, studied at the afore-mentioned Keynesian economics institution, concentrated in a Wilsonian international development concentration.

What’s Wrong With the Tea Party?

With all that said, I feel as though I am qualified as a well-rounded American to question the motivations behind the Tea Party movement.

First of all, it is exclusionary, in that it is made up of old white people who are afraid of having things taken away from them by illegals, blacks, government, etc.  As this recession becomes more severe, you can expect hatred to increase.  In the past, when the economy did worse, groups like the Ku Klux Klan enjoyed higher enrollment.

I also feel it is out of touch, even down to its name:  the Boston Tea Party desired representation for British taxation, in essence declaring that paying taxes was a way of expressing voting preferences.  The Tea Party is anti-federal government, and desires to pay much less taxes (if not any), and thus, losing voting rights.  This is a horrible distortion of the original meaning of a pretty significant declaration in favor of democracy by our forefathers.

For the Tea Party people to travel to a district (DC) that has no representation, down to the license plate (“taxation without representation”, to protest being over-taxed, seems ignorant.

The Tea Party also called itself teabaggers at first, until liberals informed them that teabagging was a lewd sexual act.  Another massive blunder.

The Tea Party also will not to admit to this, but it consorts with racists.  All-white crowds who bring firearms and yell down opponents?  This is intimidation in its rawest and most public form:  if you’re an illegal, a Latino, a black, a gay, then you better not attend.  Racists rarely come out and say they hate other people (at least the white supremacists are honest about it), but it is intellectually dishonest for the Tea Party to say it is not racist while it does not censor its own members for being racist.

Again I must emphasize that the Tea Party expresses legitimate fears, once you get past the overt lobbying effort at the top of it. It is not a baseless, stupid movement.  DC is a liberal town and most of the residents were unhappy to see the Tea Party show up in town.  But as Mead writes,

“Divided We Coast.  By the closing months of the Clinton administration, American foreign policy could have been compared to a car.  In the front seat the Wilsonian and Hamiltonian schools agreed that the car should go as fast as possible, but they disagreed on the best course.  Their feet were together in pressing on the accelerator, but they wrestled for the wheel.  Jeffersonians, meanwhile, sat in the back and exercised the classic privilege of the backseat driver:  They complained loudly and irritatingly that the car was going too fast, and that it was taking wrong turns.

“The three schools were so busy fighting that at first none of them noticed that the engine — the Jacksonians, whose support gave the car its real power and drive — were no longer responding.  Hamiltonians and Wilsonians pumped the accelerator, but to no avail:  The car continued to slow.”

For all the ill-informed bluster about death panels, socialism, big government, Nazi/Communist Obama Brownshirt Girl Scout Nazi Youths, the Tea Party engine is genuinely scared.  For Obama and liberals to ignore these peoples’ fears and desires would be political stupidity and lack of empathy for fellow Americans.

In fact, the progressives, underneath it all, share a lot in common with these protestors.  Both are deeply sensitive to the powerlessness they feel against elites and big government/business.  They both feel as though the system has been stacked to pay off the elites and not the common man.  Both fear a blow to the middle class.  Both seek reform.  If anything, both now benefit from the increasingly wise understanding of how money, politics, and influence can affect different organizations and legislation and externalities.  We live in the first days of rapidly increased transparency (but not yet accountability, except through smear campaigns).

CNBC is Involved

CNBC has strangely had some connections to today’s debate.  It perhaps began with Jim Cramer’s famous blow-up about how bad the crisis was (which Bush and Obama used stimulus money to prevent, successfully, I might add).

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It continued with Rick Santelli, a trader and commentator on the floor of the Chicago Mercantile Exchange, made a massively influential rant on CNBC about subsidizing losers using government money, to the cheers of fellow financial class traders.

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Santelli’s video was a rallying cry for the Tea Party before CNBC intervened and tried to have his name removed.

Another CNBC alumn, Dylan Ratigan, left for MSNBC and recently wrote an op-ed for Huffington Post about how the financial industry owns us and we haven’t done anything about it, because we are hostages.

So CNBC is intertwined in all these debates as well.  Those who make the most money in this country, the financial executives and the industries that support them, have a vested interest in stoking up capitalist-socialist fears and monopolistic/subsidized conditions for their profit.

As an aside, I was watching FOXNews and Tucker Carlson (the kid who got beat up in school and is taking it out on us now, and also got beat up verbally by Jon Stewart on TV and was then trashed by CNN) did a smear piece on “The Trouble with Textbooks”, where he’s arguing that progressives and intellectuals are secretly inserting their messages into your kids’ textbooks.  Better take your kids out of public schools.  Let me guess.  Are they going to Christian madrassas?

A Bad Summer

Obama clearly lost control of the message this brutal, brutal political summer during the Congressional lull.  Obviously he fouled up the entire health care debate, allowing FOXNews to dictate the terms of the debate through town hall ridiculousness.  He was not achieving the immediate success in jobs numbers he hoped from the stimulus.  He has not pleased his progressive base by advancing on any civil rights fronts (the easiest of which would be to allow gays in the military).

He needs to engage the Tea Party people and address their demands.  At the same time he should play the base off (Mead’s “engine”, made up of Jacksonians at their core) against the lobbyists and corporatists who are playing them like puppets.  These lobbyists are scaring up the disconnected gap of the midwest and southern states who are afraid of losing more and more during a brutal recession and transformation of the American economy to that of an information economy.  It is scary that lobbyists have convinced whites from the middle of the country to vote in favor of cutting taxes for the richest of the rich, disallowing better health care for those who can’t afford it, and in general voting to allow the most elite in this country to have less responsibility and compliance to the rest of us.

THAT is pretty disgusting.  But Obama could exploit this divide.  Keep in mind that it was Bush, an idealist but running as a conservative, who violated fiscal conservative policies.  It was he who exploded the national budget deficit and negative trade balance.  Just imagine if Obama cut back the anti-recession stimulus measures (which, I might add, he HAD to do, and which DID prevent a financial sector collapse) and ran as a fiscally responsible politician?  He would win away a lot of scared, hurting midwestern whites.

Racism Grows With Recession

I’ll be honest.  I’m getting a little worried.  It is true that Latinos will become a major power in this country, through pure demographics.  This will continue to exacerbate the divide between the cosmopolitan coastal cluster cities and the rural traditionalist interior.  The radical whites that the Republican party has been forced to rely on (i.e. Palin) will continue to be disconnected and feel that the rest of the country does not pay its fair share of respect and resources to them.

Look at this one video of a guy who definitely does not want the US government, law enforcement, or anyone to go near him:

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Now compare it to a jihadist video by Azzam al-Amriki, who, American interpretation aside, actually preaches on the face of it a message to the west to leave his people alone, get out of Muslim countries, and stop imposing foreign values on his people.  He is anti-globalization and anti-financial system.

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In both cases, they are in a private room, secluded, wearing the uniform of their people (cowboy hat vs. kuffia), listening to their music (country vs. jihadist), finger-waving that they will shoot to kill anyone who attempts to infiltrate.  I hate to compare the two, but the similarities are striking; they both complain of an attack on their strong sense of identity, and they are both reacting against what they see are great injustices against their people.

Their concerns should not be ignored.  They should be empathized with and understood properly.  We should get a good sense of this loss of trust.  When we ridicule Iran for rattling its sabre against Israel, we should remember that it is because Ahmadi-Nejad gets votes for being anti-Israeli.  The Republicans get votes for being pro-white, anti-federal government.  When we wonder why the Taliban has such a stranglehold in tribal AfPak, we should look at our own country and see the people who don’t want to live in the cities or be cosmopolitan or be around people who aren’t Christian, hetero, and white.

While fortunately our Americans are not militant, it is not a far cry to see that they one day may be.

A Call for Unity

Which is why it’s so crucial that we unite our nation.  Through manifest destiny and the belief we are a city upon a hill with special providence, we’ve been provided one way or another with a secure geostrategic position nestled between Canada, Mexico, and two oceans.  We are secure, if we are smart about what our vulnerabilities are and work to reduce them.  We have the largest economy in the world and we are the largest country that has the most unified populace.  We have naval, air, and space superiority over all the other nations.  The Russians are weak, the Europeans are wrestling with forming a union, and China is running into significant demographic and political instability risks.

I believe in taking bold steps necessary to maintain American superiority, but I also believe that we must push a more equitable international system, and I also believe that the only risk we have is if we break apart as a nation.  It was quite right of FDR to say that the only thing we have to fear is fear itselfOur position in the world is assured as long as we don’t screw it up.

“And finally, in our progress towards a resumption of work, we require two safeguards against a return of the evils of the old order. There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people’s money. And there must be provision for an adequate but sound currency.

“If I read the temper of our people correctly, we now realize, as we have never realized before, our interdependence on each other; that we can not merely take, but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress can be made, no leadership becomes effective.”

We face two domestic risks:  that the white base will turn itself against the USA and break apart from the coastal liberal city clusters that provide most of the economic clout (e.g. SF, LA, DC, NYC, Miami).  While they will manage to divide both coasts (which would give the breakaway states the ability to hamper coordination between the coasts), this would be even more destructive to national unity.

At the same time, the southwest continues to build dual loyalties:  those to the union and those to Latino heritage.  I do think that the southwestern states are strong contributors to the union, but if things disintegrated, the cultural, racial, and religious affinities might force them to create a sub-state, much like Kurds in Iraq.  The failed War on Drugs has turned Mexico into a weakened state amongst drug cartel lions whose resources eclipse those of the nations in which they exist.  This brings violence and drugs to our borders, which we can’t hope to guard effectively.  Mexico is a primary national security concern, as a result.  But we do very little to aid Mexico’s stability with our drug policies.

A Russian professor recently got a lot of press for proposing this break-up.  The details are ridiculous (even indicating lack of ground truth knowledge of the USA) but in my mind, it’s the US’s only real risk.

Texas, where I’m from, of course flirts periodically with the idea of seceding from the Union.  Its crazy governor, Rick Perry, is now joining up with Tim Pawlenty of Minnesota, asserting 10th Amendment state sovereignty rights.  This is fine, of course, but legal subtleties barely cover up a seething desire for separation from the Union.

The Tea Party was being sponsored partially by Glenn Beck’s 9/12 Project.  As this essay rightly states, the 9/12 Project is an attempt to commandeer a national event, 9/11, and commemorate it “their” own way.  It separates my 9/11 from your 9/11.  Having joined the Army after 9/11 to go fight terrorists, part of me wonders how many of the 9/12 Project answered their country’s call.  Part of me is offended that they try to co-opt the military as being part of them, when I wore the American flag every day for 5 years too.

Losing national unity is our greatest risk in the long-term.  Our success is so assured that it is almost as if we are doomed to ruin it if we are not vigilant about promoting equality and unity.

On PBS I was watching a documentary on some of the civil war leaders and presidents who tiptoed the line between these schools, in the midst of vicious civil war, America finding its place in the world, and ultimately Lincoln unleashing his generals to fight the Confederacy.  It of course was the bloodiest war the US has ever fought (most civil wars end up being that way).  Now, when political climates have turned poisonous, all these ancient resentments have re-surfaced.  Just like what we might see in Lebanon, or Sudan, or Russia, or China.

There are common threads among pissed off progressives, pissed off libertarians, and pissed off conservatives:  fiscal discipline, getting rid of corruption, re-evaluating our national interest based on risk-reward.  There is common ground that could form consensus, if used correctly.

The Butt of International Jokes

But what are we going to do about this?

What are we going to do?  We are fighting amongst ourselves, ridiculing each other, taking the high road while denigrating and minimizing the strength of our opponents.  Meanwhile, we are losing our competitiveness.  We are not educating our children sufficiently to compete in an increasingly global economy.  While we fight with each other, Chinese kids are working their asses off.  Indian kids are working their asses off.  It’s the same worldwide.  People are learning that they have to compete.  Other countries are laughing at us in disbelief over our fear of socialized health care systems and our inability to deal with border violence, health care, government spending, Afghanistan, Iraq, etc.

Meanwhile, we have strong elements in our country seeking just to preserve what they have.  All these lost jobs in the US will never return.  We have to keep educating ourselves so that we can fill the newly-created jobs.  It will never be the past again, in terms of comfortable blue-collar jobs.  It certainly won’t be that way if we radically privatize our country (no social safety nets, no government benefits for workers or citizens).

Jefferson, in his own inaugural address:

“During the contest of opinion through which we have passed the animation of discussions and of exertions has sometimes worn an aspect which might impose on strangers unused to think freely and to speak and to write what they think; but this being now decided by the voice of the nation, announced according to the rules of the Constitution, all will, of course, arrange themselves under the will of the law, and unite in common efforts for the common good. All, too, will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect, and to violate would be oppression. Let us, then, fellow-citizens, unite with one heart and one mind. Let us restore to social intercourse that harmony and affection without which liberty and even life itself are but dreary things. And let us reflect that, having banished from our land that religious intolerance under which mankind so long bled and suffered, we have yet gained little if we countenance a political intolerance as despotic, as wicked, and capable of as bitter and bloody persecutions. During the throes and convulsions of the ancient world, during the agonizing spasms of infuriated man, seeking through blood and slaughter his long-lost liberty, it was not wonderful that the agitation of the billows should reach even this distant and peaceful shore; that this should be more felt and feared by some and less by others, and should divide opinions as to measures of safety. But every difference of opinion is not a difference of principle. We have called by different names brethren of the same principle. We are all Republicans, we are all Federalists. If there be any among us who would wish to dissolve this Union or to change its republican form, let them stand undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it. I know, indeed, that some honest men fear that a republican government can not be strong, that this Government is not strong enough; but would the honest patriot, in the full tide of successful experiment, abandon a government which has so far kept us free and firm on the theoretic and visionary fear that this Government, the world’s best hope, may by possibility want energy to preserve itself? I trust not. I believe this, on the contrary, the strongest Government on earth. I believe it the only one where every man, at the call of the law, would fly to the standard of the law, and would meet invasions of the public order as his own personal concern. Sometimes it is said that man can not be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the forms of kings to govern him? Let history answer this question.”

Obviously Americans in Jeffersonian days still battled with the same balance between majority and minority, the Constitution and interpretation.  But are we being played off each other?

In short, and I have said this before, we have a battle between elites, who are seeking to preserve monopoly status and government preference, and citizens who realize that the only way to make it in today’s America is to get rich or die tryin’.  If you don’t get rich, you can’t feed your family.  You can’t pay for health care.  You can’t take any vacation.  You can’t live in a safe neighborhood.  It becomes a Hobbesian world where everyone is out to protect just their own families and maybe even their tribes.  Large corporations, seeking protection under freedom of speech as “individual” entities, throw money at issues affecting them so they can influence policy, while at the same time using Milton Friedmanomics and Reagonomics to deny unions, public NGOs, and government oversight, the only institutions that can match corporate lobbies in influence, purpose, and money.

The American Dream becomes not one of inclusion, where we take in your poor, your huddled masses, promising them a fair start and a chance to get rich.  The American Dream becomes “the greatest show on Earth” (thanks Bill Moyers) where you come to peddle your wares, make your money, and get out of the disgusting, violent market as soon as you can, to go live comfortably in a gated community where you’re safe from the violence and randomness that exists outside.

Choices

We as a country are going to have to make choices.  And they are not really choices at all.  Either we divide, and fall, or we unite, and fulfill what we consider our destiny.

We have to decide that we are true capitalists, who see firms as maximizing profit entities but working within the boundaries of a government that exists to protect the public interest and good.

We have to decide that yes, we are individuals who deserve our own rights, but those rights extend not only to us, but to those who are different than us, poorer than us, richer than us, from different countries, are here illegally, to every human on the planet.  The liberals have to clean up their house, and the conservatives have to stave off death.

We have to remove obstacles towards implementing better project design and implementation.  I don’t know how that will come about, except by the blunt force of inescapable technological advancement.

Mostly we have to decide that we’re going to do this together.   With that, I think I should close with MLK Jr.’s last speech before being assassinated:

YouTube Preview Image
 

Surpluses and Shortages

26 Jul

I’m moving out of my Georgetown rowhouse and just started my job, so I’ve been a little busy and haven’t been able to write much.  That’s one reason Twitter is so great — I’ve been able to just send some quick tweets (the other reason it’s so great is its generativity (see Jonathan Zittrain) — Twitter provides such a vast platform/ecosystem for other ideas to thrive in).

[edit:  I didn't know this until after I published the post, but apparently the Pop!Tech 2008 conference was focused on the subject of abundance and scarcity.  Fitting!  Here's the opening video presentation that the Pop!Tech conference began with.]

Anyway, since it’s been so long, I’m going to ramble a bit.  The blog is still great for that.

When I took all my money out of the market back in September/October of 2007, I did it because there were vapor bids on all the stocks out there.  Nothing was supporting any equities.  About two years later, the financial markets have stabilized quite a bit, with the TED spread finally dropping back to the levels before the markets got a whiff of collateralized debt obligations going sour.  Companies have shed a lot of jobs and have made a lot of cutbacks.

As an investor, I’m feeling a lot safer about putting my money back in.  I wanted to wait until at least this summer, when a lot of mortgage and housing resets hit the market.  Now is the dreaded velocity period of August-October, when the market is most likely to crash, historically.  But it can also rally pretty strongly in that time period — I think this has something to do with new fiscal years beginning and a lot of annual inflows/outflows taking place around that time.

I’m still only interested in Amazon ($AMZN) stock, but since it’s already pretty high I have to leave it alone.  There is no other stock out there worth holding right now, in my opinion.  I suspect the next big runner in tech will be a Facebook IPO or perhaps Yahoo! ($YHOO), if  they can ever find a moneymaker.

I went to the premiere of Barack Stars, a play showing at the Woolly Mammoth Theater in DC, done by the Second City Comedy Troupe (SCTV, some Saturday Night Live folks).  It’s a play lampooning the reverence for Obama and all the political scandals in DC lately.  One of the joke skits involved poor laid-off finance guys from NYC.

Funny to be sure (I highly recommend you go see this), but how accurate?  My suspicion is that while a lot of finance types in NYC lost their jobs, it wasn’t long before they found new ones.  All the smart money that didn’t vaporize probably went to the next unregulated market out there, or as some have hinted, towards carbon credit markets, the next bubble target according to Rolling Stone’s Matt TaibbiThe NYTimes just ran a story about how the big brokers were trading with a 3ms advantage on retail traders, racking up tons of money through arbitrage.   This just goes to show you that when you combine fierce NYC finance types with the new quant PhD players, every aspect of the market is a game that no layperson is going to win.  Back in the 90’s, daytrading was somewhat fair, but now the game is entirely stacked towards brokers.  Combine this with the scam that is now common stock:  common stock is worthless, effectively, since there’s now so many classes of preferred and private stock for the company insiders that no common stock holder is actually entitled to as much equity as he/she may have thought.

That really leaves the only effective vehicle for making money in the stock market picking solid companies that are undervalued.  Tech stocks are especially good for this; the thing about NYC types and PhD folks is that they’re not particularly good at identifying good companies.  Yes, they make money selling companies’ stock to their clients, but they come up with long bullshit reports that they charge over $100 for that just basically say how every company in a sector is worth buying.  However, if you know your tech, or you know the zeitgeist about a company, you can still stand to get a triple-bagger on a stock (triples from the price you bought at).  Long-term investing, in my opinion, is dead.  The market is set up to scam you unless there’s a major regulatory overhaul.

Anyway.  Surely there are many people who were working in NYC because of connections, hook-ups, etc. and they don’t have the goods to keep doing it.  But I bet many of the financial class either have merit-based wealth (good skills either in smooth-talking or in quant models) or status-based wealth (being born into east-coast privilege), a dichotomy discussed in John Clippinger‘s “A Crowd of One”.  In other words, they did not lose their money and leave town.  This wasn’t like the Great Depression, where people ended up leaving the cities and going back to their family farming traditions or joining the military.

Sadly, the military adventure continues.  Afghanistan now looks a lot like Iraq a few years ago.  Soldiers are still dying and money is being wasted.  To Obama’s credit, we are now pressing into the Taliban as we always should have been doing, and Robert Gates seems to be a responsible steward of the armed forces.  But the inertia of occupation still continues forth and it’s only those Americans who give a damn and enlist who seem to be paying the price.

The rest of America goes on as usual.  Unemployment is higher, for sure.  This could end up being a large problem, especially since I view those lost jobs as jobs that will never return — the high velocity of job destruction and creation requires adaptability, quick learning, and higher and higher levels of education…qualities that the American innovation and education systems are no longer producing in any citizens except wired kids, who are doing all that learning outside of the system anyway.

The fact that America and the rest of the world are still pumping away and doing okay must be because the world is just awash in money.  There are far too many people you or I or anyone can name who do not seem to have earned their money or their ease of life.  Deals that are completely nonsensical still seem to happen.  People make careers out of nothing more than proposing meetings that never happen.  Job hiring, as I’ve talked about a lot lately, is a complete farce of a system, an inane game that we all have to play.

My own impression of venture capital is that it’s become extremely risk averse and dumb money.  There are some cool angel firm ideas, seeding start-ups with a little money and lots of training.  But look at the trash they are producing.  Some incremental improvement on video watching.  Some tiny adjustment to file sharing.  Did Twitter come out of one of these programs?  No, and it never would:  it had no financial model (if you’re unimaginative, anyway, like most people) and it took a while to catch on.  As it turns out, Twitter is a massively open platform for innovation.  How do you put a valuation on that, exactly, using today’s financial models?  You can’t.  That’s why vencap and angel insistence on financial modeling is so retarded.

If the world is awash in money, why are there so many poor?  Amartya Sen intimates that there are no longer food shortages worldwide, just rationing.  More specifically, he says that no democracy has ever had a famine.  In other words, when food is allocated at least somewhat responsibly and with a conscience towards those who need it, there is enough of it.

The fact that people are poor, hungry, weak, sick, etc. has, in the past, been because of material shortages.  But now it seems as though poverty exists because of socio-political power structures.  Clientelism, warlordism, authoritarianism:  these are the systems that withhold from those who need resources to survive.

The American Republican party itself has become a curious modern system bordering on clientelism but within a democratic system.  Made up of a steeply declining older white male base of paternals, the Republicans have somehow convinced even the poor that cutting taxes, reducing responsibilities and ties to the government, and getting more privileges in society will somehow benefit everyone.  That Republicans immediately think of government as being 100% inept, refuse to pay more taxes to help out fellow Americans (even when more accountability and transparency has been promised, under Obama’s Gov2.0 plans), and yet still claim themselves to be the most patriotic Americans is absurd.  That poor, disenfranchised white people go along with it is even worse.  You have people who have never been rich before advocating that Goldman Sachs plunderers and profiteers MUST receive higher and higher bonuses in order for them to be sufficiently motivated to work at all.  What the heck?

The Republicans have successfully blended Friedman/Reagan trickle-down economics with moral conservatism — highly successful for recruiting, but only if you’re white, old, and usually rich.  No one takes them seriously in financial conservatism anymore, their having been responsible for ballooning the national deficit in the name of security.  Sadly, fiscal conservatism is probably one of their strongest platforms.  That they abandoned it gives you some idea of how defunct their party is.  Perhaps one of the biggest flaws was assuming that the “invisible hand” is naturally benevolent.  Incentives can, at some level, often be predictable, and that’s where economists and public policy people would be important for identifying where the market will exploit resources and prices to make a lot of money.  The proof of this most recently was in the financial crisis, which resulted from the market splendidly moving away from regulated areas into shadow pools through hedge funds, cascading collateralized debt obligations and packaged mortgages on top of each other.  The market did exactly what it was allowed to do.  But that impulse is not always used for good.  Does that not imply a need for government checks and balances upon ravenous capitalist incentive?

So the US needs a jumpstart to get its innovation pipeline going again.  China and India and other countries are hungrier than we are.  They want success more than we do.  And they are at least attempting to modify their education, technology, innovation, legal, and health care systems to get success.

We, meanwhile, are plodding along with a broken health care bill.  Health care is a massive taboo subject in the US and, as I’m interested in reading about lately, anywhere where there’s a taboo, there’s some deep-seated cultural issue that is a dangerous setback for that culture’s competitiveness and advancement within the international community.

Fortunately we have smart people assessing our national broadband plan (Obama has picked some great tech guys and has enlisted the Harvard Berkman Center to look at broadband).  Combined with a great secretary of education, a new CIO, et al, the US should start to pick up again in another 5 years after the investments in basic research and education start to kick in…or at least the promise of them.  The force multipliers of these basic investments will be greatly increased if Obama is elected to a second term.  I can only hope.

The Republicans see anyone in government as being inept and unable to control costs or execute even the most basic project (as David Brooks pointed out recently, this is partially true).  But what is the proposed solution?  Radical privatization?  Are we supposed to trust the “invisible hand” of the markets to manage complex human health care problems or educational pipelines?  The problem with the libertarian viewpoint is that it seems to not take much interest in HOW you actually make people healthier, or make people smarter.  You just let the market do it.  But SOMEONE has to know these things, whether it’s a government or a private company established to do that task.  In a democratic system, citizens are the deciders of how those things are done, so it is their responsibility to become better educated about their mission.  A private company’s sole task is to make money, and combined with profiteering hit-and-run executives, there is little incentive to act with accountability — unless government puts legal safeguards on it to keep it from running off the rails.  For all their talk of incentives, Republicans can be pretty selective in how they decide to employ them.

I see the US government in today’s massively complex world as being a gardener of a national ecosystem.  The libertarians are right that a government with no incentives to cut costs will use its bottomless pockets to buy influence.  But conservatives and libertarians are wrong that government cannot play a role.  It seems anti-competitive to suggest that only private companies should be the sole provider of all goods and services and public space.  The truth is that companies provide excellent goods and services, but only with intense competition.  The truth is that companies are HORRIBLE at providing public space, because giving something away is not part of their incentives.  As Naomi Klein points out, a public square lets you protest and assemble, whereas you can’t even run a camera at a shopping mall because it’s private property, let alone pass out flyers or collect petitions.

So it seems simple-minded now to not talk about an ecosystem where public companies, private companies, the government, non-government non-profits, unions, and community networks all work in the same space with and against each other.  The competitiveness imperative must be extended from not just providing good and services but to also providing public space, social capital, and public capital.

The only factor that has mitigated the lack of such space and capital has been the internet.  Its realm of free speech and free time/space has led to places for minorities and youths and fringe movements to experiment and organize.  It is no secret that social networking has exploded online, while a privatized “meatspace” has become deathly quiet in terms of social capital, as Robert Putnam’s famous “Bowling Alone” book described, with the death of American civic life.

The people who created the building blocks for the internet should be recognized for their massive contribution to society and for bringing an end to a pretty savage era of radical privatization.

The internet and computing have driven storage and connection costs down rapidly, killing many industries and incumbents except those with the power to lobby our old, white Congressmen (i.e. the telcos and “entertainment” labels).  One of the only correct things Tom Friedman wrote about was how the internet, combined with globalization, led to a massive networking of human effort worldwide.

If you are to look forward, it is getting to the point where there are not many shortages left in the world to limit human progress.  I already discussed money — I do not see money as something there’s a shortage of in the world anymore.  Aggregate time is no longer a shortage.  People can be more productive with better online tools, and they are also watching less TV.  As Clay Shirky hints at, this means there’s a lot of surplus time out there now, although it’s up to us to figure out how we want to distribute that time.  Food (energy) is no longer a shortage — while we do it incredibly wastefully and unsustainably, we have figured out how to have more obese people in the world than starving.  There is not exactly a shortage of energy inputs either — “peak oil” seems highly dubious compared to when we will drastically reduce petroleum consumption, while the sun provides easily enough power to provide to the entire world.  If we just knew how to harness it properly.

We can expect processing power and time and storage to continue to plummet.  The cloud online will allow us to build holy grids of collaborative supercomputers, eventually perhaps providing a platform in which we can upload ourselves, the digital singularity.  At that point, it will be interesting to see which people stay and which people “go”.  Who will maintain the systems that keep the internet going so that we may live digitally forever?  When will that question cease to be relevant?

There is, right now, a significant limitation in one area of electronics that has hindered all othes:  energy storage.  It affects what kinds of cellphones we can use (a G1 barely lasts a day with background apps and GPS on), the miniaturization we can achieve with smarter devices, the distance our devices can be from plugs, and so on.

I was using a lot of electronics gear while I was in the Army.  Our equipment could operate off standard power, but it could also run off batteries if we were in the field.  But these batteries seemed to weigh 1-2lbs each, and we needed to replace them maybe once a day.  So if we were on a mission, we might need to carry 7-14 extra lbs of batteries, plus spares.  On top of our other gear.  Batteries just haven’t miniaturized like everything else in an electronic gadget has.  This is holding us back tremendously.  At the very least, we are starting to use RFID chips that are activated briefly by being stimulated by electrical interfaces like at metro stations.

The good news is that Obama has put $2 billion into manufacturing and research for battery technologies.  Even that has a wrinkle, according to the “Breakthrough team”, quoted in a NYTimes blog post:  if money is diverted into deployment, it will take away from basic R&D:

“The Breakthrough team warns that while deployment of today’s technologies is vital, if money for deployment is included in the $150-billion pie, that dangerously reduces the amount of money for laboratories pursuing vital advances on photovoltaics or energy storage and for big tests of technologies that must be demonstrated at large scale — like capturing carbon dioxide from power plants.”

Our inability to localize energy storage has meant that concentrated power has been the name of the game — it is the same for wifi right now, but WiMAX will make that issue obsolete.

So eventually there will be at least one valuable resource which is always limited and finite and definitive of our cultures and personalities:  individual time.  We will only have 24 hours in a day.  If our brains can handle more than one task at a time, our bodies can’t.  We still require sleep, eating, drinking, education, socialization, play, etc.  What’s more, we love to take part in those things, even so far as to do it alone or with others, whichever we have the opportunity to take part in.

What becomes most valuable to us, on an individual level, is whatever we spend our time doing.  And the chances are that it will be interacting with each other, or building things, or being creative, or relaxing.  These, as they should be, will be the most valuable things we both seek and trade and sell and share.  Time will dominate as a currency.

To some degree this is already occurring.  There are a lot of poor people willing to work for next to nothing, and their active time is being used abusively to produce stuff so we don’t have to.  We develop a product and market it and then buy and sell it, but it’s the poor people who put in the hard labor.

I’m not sure this human tendency to exploit the weak and poor will change on its own — certainly not under capitalist impulses.  Perhaps robots could take their place, ultimately becoming more productive than humans, who require food and water and sleep.  This is why some scifi people dwell so much on what happens when the robots decide they’ve had enough with us treating them like slaves.  Less a Terminator outcome than an I, Robot outcome.

The Pope released an encyclical which discussed globalization and economics at length.  I think his emphasis on helping the poor makes a great deal of sense; only through humanity’s constant effort will the number of poor be reduced.  We’re obviously not sure how that is to be done yet — but I think the development economists on the cutting edge who suggest that it has to do with leadership in government and power mainly, but then reinforced by all the other stuff:  human capital, good governance, nutrition and health, girl’s education, non-intervention, etc., are going to figure it out.

I’m not pushing for paternalistic top-down programs by any means, even if I’m talking about strong government leaders and a Catholic papacy.  Certainly I feel I’m as entrepreneurial as they come, wanting to build a massive reputation and identity platform and make big bucks from it, along with fame.  But it has a not-for-profit data-protecting component as well, and I am after all a product of mostly public institutions (public high school, UT Austin, the Army) until I went to a private institution (which is heavily influenced by Catholic Jesuit values).  I have benefited from a healthy blend of so many different structures and organizations, to include a multi-racial lineage and multiple nationalities among my family and friends, that I can hardly avoid seeing the world as REQUIRING a flourishing ecosystem of diversity and intense competition that also provides for learning and apprenticing and mentoring and teaching.

So at some point I’m looking to bring the international development component of my studies back in to my career.  But more and more this is looking like I’ll have to apply development theory to my own country, as it struggles to balance its technological and entrepreneurial bents along with entrenched and powerful radical corporatism, along with a declining propensity to seek bold policy overhauls where it needs it (education, health care).

To me, the economics of our world system demand that the most important future input will be education from low-level grade school all the way to advanced studies.  The effects of technology upon society and economics have been pervasive and profound, and in order for us to continue making breakthroughs, we’re going to need more and more advanced understanding to reach even basic levels of academic research in tomorrow’s future areas:  solar, nano, genetic modification, quantum-level, as well as reputation and forgetting/forgiving, identity, cultural anthropology, ecosystem gardening/curating, gift economics, happiness economics, etc.

The US, being so heavily reliant on its entrepreneurial technology, should be even more concerned in building up its education pipeline than any other country on the planet, because technology and risk is the US lifeblood.  So I feel as though any efforts I make in the future will have to incorporate policy and private incentives towards education.

These are my first few stabs at understanding what my career will ultimately look like, but I see them in line with the needs of the country, the trends of technology, and the progress of social demographics.  It’s kind of exciting, don’t you think?

 

Casualties of Stock Market Warfare

11 Jan

A friend of mine linked to a blog post from Ivan Krsti? about a massive short squeeze on Volkswagen stock back in October of 2008. Ivan does a great job of explaining what happened (so read that first), but I wanted to build upon the story.

Porsche vs. Traders

Basically, a bunch of hedge funds were betting on Volkswagen’s stock price being too high for Porsche to buy it out. So they added short positions on Volkswagen in anticipation of the price falling. At the same time, Porsche was buying up Volkswagen shares, purportedly up to 75% of them, almost the entire available float. This caused a short squeeze, and the price of the stock skyrocketed from its normal trading range of €200-450 or so to over €1k on October 28th.

volkswagen

Certain investors got creamed by this manipulation — part of me wonders how stuff like this is legal for businesses to engage in aggressive trading — but Porsche must’ve made a bundle from it. The price has since then floated back to its normal range.

But since any short trade is selling borrowed stock, it is classified as a margin trade (i.e. you borrow money from your broker in order to buy/short stock, usually at 2x your cash level but in some cases up to 10x, which caused the massive speculative bubble burst among some of the big banks last year).

Therefore, if the price increases and you don’t have the margin to cover the shares, your broker can force you to cover or add more capital. That is why some players couldn’t just ride out the short squeeze until it was over.

Said Ivan Krsti?:

“On paper, Porsche made between €30-40 billion in the affair. Once all is said and done, the actual profit is closer to some €6-12 billion. To put those numbers in perspective, Porsche’s revenue for the whole year of 2006 was a bit over €7 billion.”

I remember reading a headline about this and wondered how it could have happened…but the EU has some weird relationships between different same-country companies. I didn’t look further into it.

Ugly Americans

I remember reading a similar story in Ben Mezrich’s “Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions”, a fine re-telling of American finance guys traveling to Japan to play the markets there in the 1990’s.  I don’t remember all the details but basically everyone in town thought a deal between two organizations was going to happen on a specific date, so everyone traded the same way on it.  The subject of the story, however, reasoned that since he couldn’t actually find anyone involved in the deal, then it must not exist.  He changed his firm’s position on it and made a ton of money when no deal happened on that date.

Warfare, stock market-style.

Suicide

The Volkswagen story came back last week when one of the speculative traders, Adolf Merckle, tossed himself under a train in an apparent suicide. Merckle himself lost about €500mil on the Volkswagen trade, reportedly, while his family’s holding company owed €5bil to banks. Obviously Merckle’s financial story was spiraling out of control and he couldn’t take it anymore.

This is what makes investing, speculative trading, gambling, playing poker, anything involving rapid changes in cash levels so dangerous and oftentimes deleterious to one’s psychological health.

Most people might now think of the recent Madoff scandal reflexively.  But that wasn’t trading or addiction to gambling; such a Ponzi scheme is a one-off affair and people got burned, but it was a consensual affair with some degree of complicity, and it’s doubtful that you’ll see much more than some sheepishness as a result of the investigation.  As my girlfriend pointed out to me, Madoff doesn’t even feel remorse after the fact.  More of an “oops” than an admittance of personal failure.

Jesse Livermore

It’s not entirely clear what caused Merckle to commit suicide (it might not have been the Volkswagen trade at all, as his “empire was falling apart”), but certainly there’s a parallel between the lives and deaths of Merckle and a famous trader, Jesse Livermore.

Jesse Livermore was a stock trader back at the turn of the 20th century. He famously shorted the market in 1907 and in 1929 and made millions of dollars (good in today’s terms but phenomenal back then). He has turned into a trading legend and Edwin Lefevre’s pseudo-biography of him, “Reminiscences of a Stock Operator”, is considered a must-read in the trading canon.

He went bankrupt a few times.  He also ended up losing big on a cotton trade gone wrong.  Eventually he blew his brains out.

Psychology

Merckle and Livermore were individual men, trading fantastic amounts of capital. It is one thing to lose a hundred dollars in Vegas, but quite another to lose what would be a massive setback ($500mil) for an entire company, let alone one person.  What I think compounds the psychological damage is to place a trade, which is usually an expression of your opinion on a matter, and then have it go against you.  Not only was Merckle wrong, he was also $500mil wrong.  The market told him in no uncertain terms that he made a bad decision.

Traders often deal with this by justifying their trades.  “Oh it’s going down, and my shares are losing money, but I know eventually it will go up.”  And they ride it all the way down.  Eventually the price plunges quickly, causing traders to panic and sell…at which point a bottom comes in, at least temporarily.  But the traders got swept out because of emotion and fear.

It is almost impossible to rewire one’s brain to not react this way — which is why good traders are so hard to find.

So at some level, for many traders, successful trades are not just making money for them, they are also verification of traders’ sense of worth and identity.  If you make a bad trade and lose a lot of money off it, not only are you poorer but you also question your own worth.  I know this because I felt the same way on some trades I made.

Which is one reason I don’t trade anymore…  I’m a lousy trader.  But I’m a somewhat decent investor, and I try to stick just to that.

Conclusions

Scale is a consistent theme within these narratives.  That is, small traders tried to play a game against a large firm on the basis of the firm’s decision-making, and so the firm held all the cards (and all the shares).  The small traders got burned.

But another phenomenon has caught my interest:  there’s so much capital out there that individuals can retire overnight.  We are all just one NYTimes best-seller or Billboard album or accidental event away from being a multi-millionaire who can coast for the rest of his life on the winnings.  Trillions of dollars float around the world, and we need only capture a million or two of that to be “rich”.

This is great for those who are keen enough to go out and grab it, but it also doesn’t scale well because individuals cannot handle much of the pressure that comes with the large swings of capital.  We are used to paying $5-15 for a meal, and we may forego that extra $1 for bacon on our burger.  But we might at the same time be in a business like poker or trading where we regularly win and lose $50k in a few minutes, and rarely think about what that $50k actually represents in terms of actual worth.  I don’t know if most human brains and nerves can deal with the swings, as Matt Damon’s character in Rounders points out (forward to 4:36 or use this link to go right there).

YouTube Preview Image

Now individuals (with 100% liability) are competing with large firms who have limited liability.  This provides huge opportunity and huge risk.  Will individuals encounter psychological problems with scaling in, competing against an integrated economy, and dealing with the fallout?

Some manage it well; celebrities like Britney and Lindsey handle it poorly.  And people like Livermore and Merckle end up in grizzly failure piles of suicidal detritus.

In the future, we will all be empowered as individuals, but with that comes a lot of accountability and responsibility.  If we can’t deal with it individually (or build in social safety nets and cultural/social communities), then it will consume us.

 

Interesting Economic Datapoints

12 Dec

So I’m done with this semester and I was just watching C-SPAN2, which was covering the Senate vote on the automaker bailout.  The vote failed 52-35 or so.  Dow futures were down -325 around the time of the vote.

I am still cash but am getting a bit more antsy to buy than I was before.  I have an “I know it when I see it” approach to bottoms and tops, so I’m waiting for that feeling again.

But it’s clear that the economic outlook is not good, with record unemployment numbers, commodity and energy shocks, and real bloodshed within the old American industries like media, auto, and finance.  Tech and internet has not been immune, but their companies are still announcing improvements and new products…

AMZN

I bought AMZN at 36.5 one day but got shaken out at the end of the day by climax selling.  Since then, AMZN rallied and touched 54-55 as the market bounced off fresh lows a few weeks ago.  What a pain that was to watch.  The rally came off Obama’s announcement of the next economic team, but it’s unclear whether there’s correlation there.

AMZN should announce the next Kindle soon, and it has been opening up its web services platform up even more.  The next generation of Kindle will suck people like me in to buying digital books (and probably be the last time I buy actual books en masse) and any increase in consumer demand will grease all of AMZN’s cloudy wheels.

TED Spread

The TED spread tracks the spread between inter-bank loans and US treasury bills and is a measure of liquidity in the credit markets — if there’s a high spread, then banks aren’t lending because it costs too much to do so.  Here’s the chart:

08_12_11_ted

After the initial credit shock when Bear Stearns folded in Augustish, 2007, you can see that the spread spiked up to about 200 basis points.  From then, the market stabilized until Septemberish of this year, when all the Fannie, Freddie, Lehman, AIG, etc. crap happened.

The market was on the brink of collapse until the Fed and Treasury decided to do whatever it took along with a massive finance bailout.  Until the public money was sure to flow in, the TED spread spiked up to 450 basis points — essentially no money was flowing anywhere within the private banking sector.

The spread then fell and has stabilized as the market’s continued to sink.  Now 200 basis points seems to be an agreed-upon number, but note that it is only back to where we were after the first credit shocks.  The normal TED spread was well below 100 basis points up until 2007.

In other words, there’s still substantial risk and unwillingness to lend.

[Note:  On Tuesday, Dec. 17th, the Fed cut rates essentially to 0%, which should reduce the usefulness of looking at the TED spread since the Fed is essentially acting like another lender...]

Treasury Bills

On Tuesday, for the first time ever, three-month treasury bill interest rates went negative!  This means that, for a brief period, people were willing to PAY the government to hold their money instead of seeking a return elsewhere.  That is, people didn’t even want a return ON their money; they just wanted a return OF their money!

Later, the government managed to sell $30bil worth of T-bills at 0% interest.  Which is still ridiculous.  Here’s the chart:

08_12_11_tbills

From The Sun's Financial Diary

These are rare times…we keep seeing records being broken, aberrances being observed for the first time, red-flag indicators going off everywhere.

Iceland

Iceland’s finance-dominated stock market completely collapsed.  Here’s the chart:

08_12_11_iceland

Icelanders are devastated.  There’s pretty much nothing left.  But to add insult to injury, the index, which had been hovering in the 600’s, just plunged down to the 300’s this week after another major bank failed.

Oil

Here’s the thing about oil.  Everyone who’s been predicting peak oil soon and all these ridiculously paranoid and apocalyptic scenarios were made to look like experts over the summer when oil prices spiked to the $140’s and gas hit $4/gallon.  A lot of financial risk management and analysis reports were written up until now, assuming continued high oil prices.

Of course, oil has since crashed.

08_12_11_oil

In other words, these knuckleheads don’t know what they’re talking about, or where oil prices are going next.  The term “black swan”, I should add, really pisses me off.  Geez.  Enough with Taleb!

Certainly the shock of oil prices has everyone rattled.  The instability of prices along with Obama being elected will hopefully be enough to spur long-term energy innovations to get us out of this fucking mess.  The time for US energy independence is now.  Especially if we really believe in protecting national security, not to mention national (and global) stability.

My position on oil is that its days are numbered as the major energy source, but it will still be needed for many products and as one of many sources of energy, even after we’ve converted heavily away from petroleum.

I also do not believe peak oil is soon.  I believe oil bedevils much of our foreign policy and is tied to our adventures with Israel and the Middle East and South America.  I believe we have in our own hands the ability to rid ourselves of these albatrosses.

I believe the chart above correlates extremely well with the “war” in Iraq, starting in 2003.  I am not sure what happened this summer in 2008.  I know that the Status of Forces agreement started hitting Iraqi politics around the same time but the massive oil spike could have been a climax of worldwide fear.  I don’t know.  The Iraq “war” seems to be all but over now that the SOFA passed and Obama is in, and I think oil is pricing that news in.  Oil has always correlated well with foreign wars.

What Next?

It’s amazing what we as Americans are willing to inflict upon ourselves.  All of this is solvable, and we know approximately what the causes are.  Until Obama got elected, we refused to acknowledge it.  Here’s hoping that Obama can translate a good plan into action. But it will be hard to generate political action when so many interests are set against it, even if it means saving our economy.

In the meantime, the economy and financial markets are still a mess, even after a bunch of layoffs have helped companies streamline.  Will those frictionally unemployed turn into structurally unemployed?  With little emphasis on job re-training, and a prolonged recession, one might think so.

Something does not feel right at all out there in my gut, making me suspicious to put my money forth, and we have yet to deal with the next big financial bomb:  consumer credit.  What happens when people, many of whom have lost jobs and have lost a safety net because of Republican idiocy, run out of money to pay back creditors?

[60 Minutes just did a report on the upcoming 2nd mortgage shock:  option arms resets.  They will balloon homeowners' monthly expenses and look to be as bad as the first shock.  Watch the entire video for more.

07-10-24d_mortgage-resets-comprehensive

The light-green reflects the damage we've dealt with already, and the light-yellow and yellow are what's still to come.  Sobering.]

 

Optimism

12 Oct

So the G7 is meeting up with Dubya this weekend and so far nothing substantial has been announced. These people are useless. Dubya gets wheeled out to give a clueless speech that inspires no confidence. If anything, it encourages fear. Fear that we have no leadership to help us fix these problems. McCain for his part offers this fucking stupid platitude that Americans are the hardest-working people in the world, EVER. How banal.

Last week’s stock market action was unlike anything I’ve ever seen — relentless selling every day for the last few months. This made 2001 look like a cakewalk.

This in turn caused the web crowd to froth itself into a tizzy talking about the coming Silicon Valley slowdown. Led by Sequoia Capital, the clarion call is for cutting costs, firing employees, reducing burn rate, and trying to extend runway.

I guess my question is: if you’re a start-up, you’re already concerned about bootstrapping every nickel. Why wouldn’t you be relentlessly cutting costs before this crisis even started? Doesn’t this suggest there’s some bloat in the web space right now, a lot of people who are just dragging down companies with salary, ideas that don’t add value to the value chain, etc.?

So isn’t this a good thing?

I tend to be optimistic about this downturn, personally. Then again, I’m a wannabe entrepreneur who is still safe within the confines of grad school. I have less than a year now before I’ll be looking for a job so this will directly impact me.

There’s reason to be optimistic. Check out what Gary Vaynerchuk says about advertising, for example, in this totally awesome video:

“ROI. I am talking about Return on the Investment of your advertising dollar. Traditional media advertising is incredibly expensive and doesn’t provide nearly the rate of return you can derive from intelligent web-based marketing campaigns in 2008 and beyond.”

His point is that those who will be truly hurt by the downturn will be newspaper, magazine, and TV advertisers. Smart advertisers will move more and more towards Google Adsense and online marketing. It’s a lot cheaper and you’ll get a lot more bang for your buck.

The underlying point is that there’s still a lot going on on the internet. There’s projects created by love and collaboration that will continue to grow while the economy reorients itself towards the internet model. The shakeup in the workforce will reorient workers towards better ideas, letting bad ideas die. I still think good ideas will be funded by angels since the startup costs are so low.

Even if the good ideas aren’t profitable, they’ll still thrive through word of mouth and love online. At least in this way, the downturn will resemble 2001’s bubble burst: the internet will continue to evolve.

The good news for me I think is that layoffs might make it easier for me to find coders who want to help me build a reputation management platform for persistent identities. So far I haven’t had much luck.

The only thing I’m really looking for in terms of something negative looking forward is policy or legislative change. In the same way that we need structural changes worldwide to fix the financial system, Congress or the EU or the incoming president (doubtful if it’s Obama since he has a great tech policy lined up) could pass laws that fuck things up for the internet.

 

Amazon as an Investment

05 Oct

Back in 1999 I bought a lot of AMD on the basis of their developing a chip, popular among overclockers and DIY builders, that would be superior to Intel’s. The market hadn’t picked up on this superior product yet. Later, when the market finally got wise, AMD stock went from something like $10 to $60, before the bubble popped; eventually of course Intel’s superior warchest of resources punished AMD again, and almost a decade later, AMD stock is under $5.

In 2006 I invested my Iraq blood money into Nintendo on the basis of the new Wii being a sleeper hit with gamers. I was right. Its stock went from the low teens to $77, so I made a killing.

After I sold my Nintendo, I looked for another stock to invest in and couldn’t find anything. Apple had already made its run, and Google’s stock had been stagnating for a year.

The IPO market is pretty dry and there’s not really any web companies that are currently private that would be screamers if they IPO’d. I mean, would Facebook be able to justify a high valuation?

That should have been a sign to me that a bull market was taking a break…   I love to study tech and web stuff and I couldn’t find a single stock worth investing in with expectation of a large gain. There are great tech companies of course but they’ve matured to the point where they won’t have screaming stock prices.

The closest contender I can find is Amazon. Even the daytraders right now are not clued in to what Amazon is doing these days. Most think Amazon is just selling books and CDs online still. But they’re doing so much more.

It’s not just the Kindle, which is the first of the gadgets that will end up turning books into nostalgia purchases. It’s also the massive cloud of computers Amazon, using Amazon Web Services, built in order to handle their order processing and database calls so that you get pages of books displayed on your screen.

Now they are letting other companies buy time on their cloud or grid to borrow process time for their own web sites, database queries, and sales. Imagine you have an online retail company: you can use Mechanical Turk to get bored programmers to construct parts of your site for you. You can use Amazon’s database format to save some of your inventory list of stock. You can use Amazon’s front-end order processing system so that people can easily buy your goods.

In other words, Amazon is making money multiple times off the same hardware and software that it runs to manage its own inventory system. They make money off you vacuuming up books and magazines into your Kindle (since it’s so easy for you to acquire new reading through the Kindle now).

And there is a perception gap: most people do not know Amazon is doing this, even though they are by far the leaders in providing cloud services. Most people doubt the Kindle will succeed also, even though the paper book is doomed once e-readers can add more utility like pull out your favorite quotes and publish them online, fully search books on the fly, etc.

An e-reader will be a killer app one day. (but probably as part of a multi-use device)  The Kindle will take off in its next iteration or two, if Amazon can improve the look and versatility of the device (although this potential re-design for Kindle 2.0 isn’t what I was hoping for…).

I’m not naive enough to think Amazon will do well in the current environment. Both weakness in retail (consumer confidence is low and there’s less perception of disposable income) and stock market pressure on tech stocks will drive (and have driven) AMZN down. Here’s a chart:

Costs are also dropping so fast that margins will decrease on sales of media as well as on processor time.

But if I had to bet on any stock out there to be low risk, high reward, I think Amazon is the play. I haven’t bought it yet, for full disclosure.  Given that the market is in danger of crashing, AMZN’s stock could very well get crushed as well.  If macroeconomic factors take precedence, stock price means nothing.  So I’m watching, but wary.

Amazon is one of the nimblest companies out there right now and Jeff Bezos knows how to manage his resources. He’s at the forefront of the companies exploring the future of the Internet.  He has a good architecture in place; certainly we do not know what the future will look like, but the companies with the smartest people and the best tools will be the ones who will recognize it before the rest.

That’s my best bet right now.  What do you think?

 

Sept. 29, 2008

29 Sep

Today there was a crowd of people watching the TV screen in the library lobby watching the market panic plummet while the vote failed.

I missed most of the good trades because I had class today.  I traded a little later, made some money on GOOG and AAPL (long and short).

But it’s just really tragic to see the opinions expressed and actions taken today.  How long will it take to put together another deal while world markets crash and credit spreads go even higher?

We’ve dumbed ourselves down so much that we have no hope of getting ourselves out of this mess.

It’s a repeat of 1929.

Good luck to us all.  As for me, there’s lots of liquidity to daytrade this garbage.  But this is nothing like the 2001 bubble burst.

[Addendum:  Found an excellent additional read.  Will piggyback off of it in a post later.]

[Addendum 2: Is Morgan next? And then a massive bank-run collapsing the system? Nouriel Roubini speculates.]

 

Still Waiting on the Bailout Deal

28 Sep

It’s Saturday night and I think the political leaders are currently meeting right now in DC regarding the bailout proposals.  I’m guessing that tomorrow night (Sunday) is the key time to see if any deal will be announced.  I can’t see how it won’t be passed.  I think it would be taken as a major negative for the markets if no deal was made by Monday’s market open.

But I am not sure if this bailout will actually work.  It just might indeed be a literal bailout — just more money pumped (after the billions already injected) into the banks so that they can hoard their cash.  The TED spread, which tracks the spreads between different periods of interest rates, and therefore the cost of borrowing and lending, shows that credit markets are locked.  Credit right now is worse than it was after 9/11.

Meanwhile world markets have been drifting lower but holding up from collapse.  This suggests that people are waiting to see the results of the bailout negotiations.  The locked credit market suggests that the finance sector doesn’t want to lend out money right now and is trying to re-capitalize itself so it can fight off further market selling and takeover attempts.

This means that businesses are not getting capital.  They can’t invest and will have problems doing business with each other.  It’s been like that for about two weeks now.  This should bomb the GDP numbers in the future.

So if we give all this money to banks, will that make everything better?  Will getting the bad mortgages off their books fix things?  Clearly it would help straighten some books, but what’s unclear is what the banks will do with the money they get.  They have to date simply held on to the money and not released it again.  Also, money is being destroyed with deleveraging going on at a massive rate.  This forces the sale of stocks, which has depressed stock prices at the end of the day most days of last week.

Also unclear is whether there will be a reinstatement of previous regulations that did a fairly good job of preventing junk debt speculation.  NYTimes had a great op-ed pointing this out.  Without some vision of what proper regulation will look like, we will fix nothing with this bailout and it will end up sinking us.

There’s really no options left if this bailout saga doesn’t go through…  Though, I’m hoping for a bit more clarity and transparency on how the money will be deployed; sadly I don’t think it will come.  We’ll have to deal with a lot of pain, unemployment, and recession either way, I think.

Chances are that we’ll be on our own as citizens and taxpayers, while kleptocrats continue to raid the government coffers.  On this, Naomi Klein puts the events within the “shock doctrine” model in a recent interview.  And contrary to foreign nations’ beliefs, this will sink the world’s economy too, even if it doesn’t have as much bad debt.