Trump and Syria: First World Problems Reconsidered

As an economist, relative prices are my bread and butter. I would like to suggest that when we think that we are all going to hell in a hand basket, we should have a measure of relative problems. Given the tragedies in the world, sometimes we should learn to separate a hiccup from a problem; a problem from a crisis; a crisis from a catastrophe; and a catastrophe from Armageddon.

Donald Trump has dominated the news for quite some time now. Some folks I know, and some of them I even respect, have said things which would suggest that his election is as bad as things can get. As much as I would have preferred that he was not elected President (my candidate came a distant third, or, was it fourth!) I would like to suggest that given the tragedies in Syria the election of Trump is a walk in the park.

If you want to proclaim the end of the world, you should point to Syria, not the U.S. This blog is a plea to be able to differentiate between a hiccup, a problem, a crisis, a catastrophe, Armageddon.

Syria is a catastrophe. At its worst, even for the most ardent anti-Trumper, the U.S.  election outcome is a problem.

How bad is Syria? Please tune away from the Trump tamasha and pay attention to what is happening in Syria. And by the way, how long has this been going on? If interested please read this blog piece I wrote more than four and a half years ago titled, ENOUGH – Never Again Should We Say, “NEVER AGAIN”.

And for those of you who think that you can walk and chew gum at the same time, that you can bemoan Syria and Trump at the same time, the point of this blog piece is, Syria is a catastrophe; Trump at worst is a problem.

P.S. I want to be clear that I do not share the sentiment that Trump’s election is as bad as things can get. I’d like to write more about how I feel and think about Trump’s election. That is a piece for another day. Today, Syria and Aleppo is on my mind.

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A Theory About Christie’s Trump Endorsement – Opportunism Meets the Art of the Deal

I am a lousy political prognosticator. Folks remind me that if things went as I predicted then we’d have President Romney. I don’t remember predicting Romney would beat President Obama in 2012. I am grateful for my less than stellar memory when it comes to faulty predictions!

A few months ago I was pretty sure and predicted with little doubt that neither Hillary nor Trump would gain their respective parties’ nominations. Both those predictions were based on my understanding of American politics. While I can rationalize and make sense of a Hillary nomination, the Trump thing still baffles me. I still maintain that he won’t get the Republican nomination. But I will not bet any money against him at this point.

The recent Christie endorsement of Trump is what moves me from the ‘surely Trump will not get the nomination’ column, to the ‘I’m saying he won’t get it because I don’t want him to get it’ column. In fact many people seem completely surprised at Christie’s open backing of Trump. Why, What, How?  I have a theory about the attack and the reward.

 

The Attack – Trump’s Benefit

As it is fashionable to say now, he is an opportunist. And a necessary condition to be an opportunist is to develop opportunities. My sense is that even before the New Hampshire primary Chrisitie figured out that he was not in the running. But he was still good enough to be on stage in the pre-New Hampshire Republican debate. Given Rubio’s strong showing in Iowa he won in spite of coming third – only in American politics), a strong Rubio showing in New Hampshire would have made it a two person race (Trump, Rubio) and an eventual Rubio nomination. That was Christie’s opportunity. And this is where the Donald struck a deal.

The deal was Christie would go after Rubio in the debate using a Donald technique – get personal and belittle the opponent. It made sense for someone other than Donald to do it. If Donald had gone after Rubio the way he went after Bush it would be entertaining, but not effective. Folks would have said, “Donald is being Donald,” not “Rubio is weak and programmed.” But if the straight shooting Christie went after Rubio, then it may stick.

And seven minutes of the debate was all that Christie needed. When Rubio said what he said about Obama and Christie was part of the conversation the New York-New Jersey deal bore fruit. Click here and see minutes 13.00 to 19.50 of the debate to see the damage being done. Rubio helped the Christie-Trump effort by repeating the line, “This notion that Barack Obama doesn’t know what he’s doing ….”

The irony is that while Christie rightly accused Rubio of delivering the “memorized 25 second speech,” listening to the tape now it seems that Chrisite himself had rehearsed a number of his lines. But Christie was smart enough to rehearse being extemporaneous as part of his preparation.

 

And Justice – Christie’s Reward

So what does Christie get in return? Whatever one thinks of Christie or not, it seems clear that he has political ambitions beyond New Jersey. If Trump goes on to win the Presidency I predict that Chris Christie will be the Attorney General of the United States. A pretty straight forward deal for a pretty ‘straight shooter’. And if it happens he will be the first New Jerseyian in over a hundred years to head the Justice department.

 

In Conclusion

Clearly I have no evidence to back any of this stuff. It is clearly speculative. But it seems like a plausible theory. I just hope that events do not so unfold that I will be right with my Christie Attorney General prediction. I sincerely hope that the premise of which the prediction is made (Trump wins) never comes to a pass.

Let me predict – “It will not come to pass. Trump will not be President.” For everybody’s sake, I hope I am right

Trumped Up – attempts at humor and a prediction – Nothing Top About This Ten List

It’s been a while since I wrote anything on this blog. With 2016 born, maybe I will try to get a little more regular!

I restart my blogging with a piece on the man who this Time was trumped by Merkel! And my take on the Donald is, Donald Trump:

  • #1 – Makes the case for the teleprompter.
  • # 2 – Is the first candidate running for the Presidency who caricatures Saturday Night Live.
  • # 3 – Wants to build a mini ‘Wall of China’ on the U.S.-Mexico border because someone told him that it was THE GGRREEAATT WALL!
  • # 4 – Moved many a man from their children’s ‘my dad is the biggest joke in the world’ list.
  • # 5 – Is right about not being politically correct. In fact he is politically wrong, socially wrong, culturally wrong … or as he would say it, HHUUGGEELLYY WRONG!
  • # 6 – May by his anti-Muslim words unite the Shias and Sunnis.
  • # 7 – Makes many folks at UPenn not want one of their grads to become President in 2016.
  • # 8 – Should get credit for (successfully) arguing that he will not take a bribe, because he has given one!
  • # 9 – May move to Warsaw because the polls say everybody LLOOVVEESS him.
  • # 10 – Will in all probability not be elected president! Though, while three months ago I would have given him a one in a hundred thousandth chance of being elected, now I will give him a 1% chance!

 

On Technology, Twitter and Tripathi

There is an old saying – opinions are like anal orifices, everybody has one. Technology has made the act of public flatulence easy and costless. And we have a number of twits who seem to be constantly stinking up the place.

As children some of us played the game of telephone, where a message started with person ‘A’ and got passed from child to child till the mangled message was announced by person ‘B’. The point of the game was to teach kids to listen carefully before passing on rumors. As adults we play the game of twitter. In this game we take our unconfirmed, yet ‘reported’ pieces of news, punctuate them with our opinions and pass them along. Doesn’t matter if what’s being passed along is true; doesn’t matter who it hurts. All that matters is us using our digits to pass on the word and some judgment. As I said, technology has made the act of public flatulence easy and costless.

I got up rather early this morning and as I do on most mornings, I logged on. I was informed that Mike Muguleta and Sunil Tripathi were the Boston marathon bombers. Word spread. I hadn’t heard of Muguleta, but was familiar with Tripathi. I normally don’t get on to Twitter, but today I thought it was worth seeing what the search ‘Tripathi’ would bring up. On Twitter, as elsewhere, a large number of folks condemned the young man based on no evidence. Amongst the ‘let’s pass on the word’ players on Twitter was Michelle Malkin. The lady is irritating …, but the less said about her and others who helped spread the word that Tripathi was the man, the better.

The people who were in my thoughts rather immediately were Sunil’s immediate family – especially his mother and sister. I know nothing about them except that Sunil has been missing for about a month and his sister has been in the forefront of searching for him. As someone with a son in college when I first heard about Sunil’s disappearance I quietly said, “There but for the grace of God, go I!” And I’m not even a believer.

This morning those sentiments came back. My wife and I tried to imagine what Sunil’s family was going through. How were they reacting to the reports? Were they thinking, “My God, it all seems so much worse than the worst that we could imagine?” They had sent their kid off to a wonderful college, the way a whole bunch of people I know have done. He got into Brown – they must have done something right. Did they believe what was being said about their son? Were they blaming themselves?

The sad part is that Sunil is still missing. How unfortunate must your circumstance be if you get comfort knowing that your son was not the guy who was responsible for the bombings? His family has just gone from being miserable, to being incredibly miserable, to being miserable again. It is at times like this I hope I was a believer. Then in good conscience I could say a prayer for them and hope it would help. Now I can only think about them, and…

Unfortunately many of those who helped spread the rumor will rationalize it, if they give it another thought. And sometime in the future, once again many of us will use technology to indulge in another act of easy and costless public flatulence.

Hope someone uses that same technology to pass a word to Sunil’s family. You are all owed an apology. Somebody should say sorry to you all. For what it’s worth – I am deeply sorry for the what ‘we’ have done to worsen you already tragic circumstances.

And an apology goes out to the Muguleta family. Though I know absolutely nothing about them, the apology is in order. Because, somebody should say sorry!

ENOUGH – Never Again Should We Say, “NEVER AGAIN”

I wanted to write a blog similar to this one about a year ago. I did not because I reasoned that when the situation became really bad enough, of course the international community would intervene. It won’t be the last time that I did not get it right.

Add to America, Armenia, Germany, India, Chile, Argentina, Syria 1982 (Hama), Rwanda, Bosnia, Iraq, Chechnya, and scores of other tragedies, Syria 2011-12. Give or take it has been about 15 months since Assad Junior’s regime has been involved in a reign of violence, with the massacre at Houla earlier this week becoming par for the course. Call it genocide, call it quelling terrorists, call it a civil war, call it sectarian violence, call it what you will, the violence that the Syrian government and forces have unleashed should be unacceptable. But we’ve accepted it for long enough. ‘Unacceptable’ is just a badly misused word. And announcing something as unacceptable, while accepting it, seems to make us feel that angels are on our side. They are not.

Besides the Syrian regime, many individuals and institutions bear responsibility for this tragic state of affairs. Three of them stand out for special mention – the U.S., Russia, and the U.N. The U.S. is responsible for encouraging the start of the crisis, and then backing away when the proverbial ‘poop’ hit the ceiling. The manifestation of the Syrian version of the Arab Spring has transformed itself into some season quite unrecognizable and different from that which helps liberal democracy bloom. The Russians have played a not so covert role of encouraging the regime in its brutality – when you arm and feed a killing machine, you are complicit. And the U.N. has once again shown itself to be impotent when the compassionate use of power could make a difference.

Let me focus on U.N. impotence, for its actions or inaction are the best proxy for what is euphemistically called the will of the international community. The last decade has seen a reasonable consensus develop amongst the members of the U.N. to move away from non-interference as a policy pillar to the Responsibility to Protect (RtoP). The policy and attitudinal shift permit the international community to confront governments who indulge in mass killings of their subjects. They legitimize the show and use of force in the service of stopping death machines, even if such an act does not resolve the underlying causes. In principle, the concept of RtoP has been embraced by most governments across the world, and it has also been endorsed by a number of well meaning NGOs. In fact, recently, it was under the aegis of RtoP that the international community stepped into Libya and displaced Gaddafi.

So what has happened in Syria? The players who matter have violated both the framework of non-interference and RtoP. The Americans and Russians have been fueling the fighting by funding and arming the anti-Assad and government forces respectively – so much for non-interference. And in spite of the U.N. sending in an observer team into Syria, which just today ‘warned of a civil war’ after the most recent ‘tragic and brutal’ massacre, the U.N. refuses to step in to stop the killing – so much for the Responsibility to Protect.

One can explain the action of nation states by appealing to narrow parochial interests, and spinning logic with the yarn provided by realpolitik and national self-interest. It is harder to understand how an institution which was decent enough to codify RtoP, can stand by and watch as thousands are brutally killed, without any end in sight. In a speech at the U.N. on January 31, Britain’s Foreign Secretary William Hague asked, “How many people need to die before the consciences of world capitals are stirred?” If the British Foreign Secretary can ask the question in such stark terms and nothing meaningful happens for four more months, then the answer to the Foreign Secretary must be, “We do not act out of the stirrings of our consciences, even if they do get stirred.” The critics of RtoP are right when they contend that it is nothing more than a cynical framework that can be used to justify interference when the interests of the powerful dictate that they should interfere.

Rather than pretend that humanity has evolved over the last century to a place where collectively we will accept the responsibility to protect those who will otherwise become helpless victims of tyrants and butchers, let us accept the constraints that interfere with us rising to levels of decency that the best within us suggests we should scale. Let us be a lot more humble and pray that we may be in a position to protect, rather than claim that we will protect.
Let us stop lying not just to others, but to ourselves. ENOUGH – Never Again Should We Say, “NEVER AGAIN.”

In all humility let us say, “HOPEFULLY NOT NEXT TIME.” And when we fail, let us be ashamed of, rather than explain our failure. For the explanation is clear – we refuse to pay the price that decency demands.

What Did JPM Do?

In the just concluded Spring 2012 semester I coordinated the Senior Seminar for Economics. In one of our sessions we read some stuff on Global Warming and what to do about it. For this session I invited the Environmental Studies Senior Seminar class to join us – to expose students who have different world views engage in some healthy inter-disciplinary conversations seemed worth the organizational trouble.  About a minute into the discussion, Econ. majors got into a spirited discussion about what the appropriate discount rate should be in the climate change policy arena. One of my Econ. students took it upon himself to educate everybody by dropping terms like Internal Rate of Return, and Risk Free Return, and… you get the picture… His lack of knowledge was masked by the level of confidence with which he misinformed the class. The Environmental Studies majors all seemed impressed with this student’s technical knowledge, and requested that we not get so technical. I’m not sure how they felt when I informed them that what they heard wasn’t technical or right, it only sounded technical. It was my opportunity to tell my students that if someone’s first line of explanation is peppered with jargon, and said quickly and with a dismissive flourish, then they should be careful. Methinks the past explanations about Wall Street fiascoes and the present problem with what happened at JPM are being explained the way my student explained the discount rate. It can be done more simply.

The Search

I have an advanced degree (given the amount of time I took to get it, you can call it a Very Advanced degree) in Economics. While I might not have the intelligence and ability to concoct synthetic financial instruments to hedge against risk, and certainly do not have the inclination, time, or motivation to do so, I shed modesty aside and claim that if someone tells me what these instruments do, I am capable of understanding what they do, and can explain what they do in simple terms. When I heard about the JPM $2 billion losses, I wanted to know what happened.

I first turned to sources at my immediate disposal. Trust me, the folks at the New York Times either don’t know how to explain what JPM did, or if they do know, they are working real hard at keeping it a secret from us. So I turned to my friend Google and made two queries of it – ‘what were the trades where JP Morgan lost money’, ‘and explain the JP Morgan hedge’.

After ploughing through a bunch of sites with much gobbledegook, I hit upon two sites which shed some light on what JPM did. (http://www.marketplace.org/topics/business/easy-street/jp-morgans-loss-explainer AND http://ftalphaville.ft.com/blog/2012/04/06/951941/hedge-funds-and-the-whale-credit-index-edition/). Thank you Heidi Moore and NPR.

So What Happened?

Let’s cut to the chase. Let’s begin with some key terms. For our purposes four terms matter.

  • Companies who want to raise money in the market sell bonds. A bond simply says, you give $ X today, and sometime in the future I will return $Y to you. Clearly $Y must be greater than $X, and with your basic high school compound interest formula you can find the interest rate that you will be receiving on the money you lent said company.
  • Now it is possible that a company will default on a bond – default meaning that they just don’t pay you back.
  • An index is essentially an aggregate score of performance of a basket of assets. The Dow Jones Industrial Average is an index of the stock values of 30 leading companies. A student’s GPA is an index of his performance in the courses he has taken. Markit CDX.NA.IG.9 (it’s just the name of an index – see below why I chose this one) is an index of a number of corporate bonds – note, Markit is the company which made up the Index, and the rest are the details (NA – North America, IG – Investment Grade, etc.) on the index. For more on Markit click here). In the simplest sense, the value of the Index will go down if companies default (just as your GPA falls if you do badly in a class), and the Index will rise if the companies do not default.
  • A Credit Default Swap (CDS) is a financial instrument which lets you bet whether companies who borrowed money from you will default. Buying a CDS is betting that a company will default on its obligations to pay. If the companies default and you bought a CDS you get paid. Now you can bet either way – you can either bet that companies will default (buy a CDS) or they won’t (sell a CDS), and depending on what happens, one guy wins and the other loses. It is just like betting that your local sports team will win or lose – depending on what happens and how you bet, you will win or lose.

So much for the terms.

JP Morgan, through a fellow by the name of Bruno Iksil bet that the companies in Markit CDX.NA.IG.9 would not default. He sold CDS, and lost – plain and simple. Put simply he took a bet on the direction of the Markit CDX.NA.IG.9 index, and it didn’t go his way, and the paper losses piled up. It is at this point that the sophistication and gobbledegook can be introduced to obfuscate the crux of what happened – he speculated, he bet, he gambled, … and he lost. To describe it in any other way is simply complicating the story in ways that are unnecessary.  It’s what you do when you do not know, and/or want to obfuscate.

 Calling A Spade A Spade

When the press reports on this they call these ‘sophisticated trades’ – poppycock! In future, read sophistication as “I don’t know what the hell the guy is doing, and individual traders think they know more than the next guy and can manipulate the difference in knowledge to make a fortune and so come up with financial instruments which blow up in their face”.

Another word that has been used to explain these transactions is the word hedge. Simply put, a hedge is what we all understand a hedge to be – finding a way to soften the blow in case a bet you took goes wrong. I am amazed at how often in the last five years I have heard about folks who have lost their shirts after they hedged. I know I’m no financial wizard, but it seems to me that to lose big because of a hedge is a contradiction in terms – you hedge to avoid losing big. It seems to me that there is a simple way you can hedge against any bet you take – buy an insurance policy. And if someone is not willing to sell you an insurance policy based on the risk you are taking, then you are just assuming too much risk and must stop. Nothing sophisticated about insurance – so there must be something wrong with it. What do I know?!

Remembering Appa

It’s been altogether a different last three weeks to a month. My father passed away on Feb. 21, 2012. His last few months were far from pleasant, and so we really believe the family line that “while we will no doubt miss him, we are relieved that his suffering came to an end.”  That sentence captures the essence of the event – the tension between the head and the heart.

I hope to reflect on this tension in the near future, but for now I would like to remember the man who I was very close to, especially over the last decade or so. Anybody who knew him would agree that at his core he was a kind, good, and decent man. And he was well rewarded with a wonderful life – not without problems, not without missteps – but yet a wonderful life. I was always proud that he was my father.

After working for Binnys and Caltex, in 1970 he and a couple of his colleagues pioneered the polythene woven sacks industry in India (he was the Secretary, the first one I think, of the still functioning All India Flat Tape Manufacturers Association). In a world of guile and cynicism at times his inherent decency translated into a naivety, for which he paid a price. Or maybe it wasn’t naivety – he simply was willing to pay the price that goodness demands. Or maybe he didn’t see it as paying a price. Whatever it was, work and his colleagues were no longer fun, and a combination of having made enough, and having had enough made him stop ‘working’.  He retired at about 54, and turned his life to family and bridge, maybe not in that order.

When we were growing up, he was more or less a hands-off parent. He did the required minimum and kept out of the way. I am not sure that he really knew how well or badly we were doing in our academics or other extra-curricular activities. The responsibility of seeing the principal when one of us kids messed up, or making sure that we got our school uniforms, or signing report cards fell to my mother. On that last one we were lucky, since Amma’s signature was so much easier to reproduce than his, a signature which can best be described as a scribble which no one could forge.

The above description should not be interpreted to mean he did not do stuff with the family. He cared deeply for Amma and his children, and did plenty with us. This included long road trips, cricket matches (including the First Test match played in Bangalore – India vs. Clive Lloyd’s W. Indies), playing cards, tombola at the Bangalore and Century Clubs and eating out. Eating out most often was either at one of the Clubs, Woodlands or MTR. These are worth mentioning because he rarely ate at any of these places (except for Rasa Vadai and Bagala Bath at Century) – he just accompanied us. He liked his Dosai-molagapodi every night, and that is what he would have at home after we returned with our bellies full. Yes, he would take us out to eat, and would sit at the head of the table without eating, but making sure that the rest of us were doing justice to the gastronomic outing.  Strange, but…

This was simply an example of his sense of dharma – his duty. He did many things because that was the way things should be. I am not sure what determined the directions his dharmic compass commanded that he travel, but there was something authentic about his adherence to these commandments. I can say this with some confidence, because often what he did was inconvenient and uncomfortable. He did not expect others to follow his sense of dharma, though I think he was disappointed at times when he thought people dropped the ball.

He was generous and did not expect anything in return. He was responsible for funding the educational aspirations of many folks – some related, others unknown. He rarely spoke about these acts of generosity, and in fact went so far as to wear a ‘turn the other cheek’ attitude when some of them were simply ungrateful. One such case was a young man who got into the IIT Madras in 1973 but came from a family which was poor enough that they could not even afford the dorm fees (if memory serves me right, the young man did well enough to qualify for academic scholarships which met his tuition). My father was staying at the house of his friends Rajam and Albert Sargunar in Chennai. Rajam Aunty knew this young man and she told my father that it was a pity that the Church would not help him since he wasn’t Christian. My father asked the young man to come and meet him, and after hearing his life story, simply said that as long as he studied well and maintained good grades he did not have to worry about his fees. After first doing a shastanga namaskaram to my dad, the young man assured my father that he would repay the amount once he finished his studies and started working. My father simply told him that there was no need to repay the money. Simply do for a couple of people what I’ve done for you, was his request. I have no idea whether this now not so young man fulfilled my father’s request. After finishing at IIT, he emigrated to the U.S. and simply didn’t keep in touch! I remember saying something not so pleasant about this fellow, and while I do not remember my father’s exact words, it was on the lines of, “Stop it. We don’t know why he didn’t keep in touch!”

He rarely doled out advice, but what he told me about his attitude to money is worth repeating. Money is like a servant – very helpful if you have it. Respect it, and use it carefully and you will be happy. Abuse it and become too dependent on it, and it will hurt you. Fortunately he never had bad financial times – just great, good or decent ones. And it didn’t matter what the times were, his attitude to money and consumption was exactly the same – he led a comfortable life without flashing his wealth.

While all of this is well and good, what made him happiest was playing Bridge (for a touching tribute to him see http://games.groups.yahoo.com/group/indianbridgecontacts/message/3324 written by Manoj, someone whom Appa was very fond of).  He won many a national title in India, including the Holkar Trophy, the Guru Dutt, and the Ruia. He represented India in the World Bridge Olympiad, was the non-playing captain and coach of the Indian Women’s team, and worked to promote Bridge at the state (Karnataka) and national level.  He was a senior office bearer in the state and national bridge federations, and he was particularly proud of bringing international bridge to India. He organized (and represented India as a member of the team) India’s first international bridge tournament – the 1981 Bridge Federation of Asia and Middle East Tournament (the winner of which represented the Zone at the Bermuda Bowl).  India lost to Pakistan in the finals (the famous bridge player Zia Mahmood was on the Pakistani team, and that team came second in the Bermuda Bowl) in what from an Indian perspective was a tough loss snatched from the jaws of victory. I think about four hours after that difficult defeat as a player, the organizer Krishnan was hosting all those who had come to Bangalore at a party in his house. I never thought about it then (I was 18), but looking back it was amazing how he was a generous and gracious host having just missed out on playing at the Bermuda Bowl. And to my mother’s credit, it was one swell party.

We had the good fortune to celebrate his life on the occasion of his Sadabhishekham (approximately 80th birthday, when one has lived long enough to see a thousand full moons) on July 4, 2010. It was a glorious event where plenty of his near and dear ones came to celebrate his and Amma’s life. Shortly afterward his already weak body became weaker and the last two years were simply difficult.

While we will no doubt miss him, we are relieved that his suffering came to an end. I already miss him in ways I did not imagine I would.  I would have never guessed that I would write a piece like this about my father. Hopefully I will get to the piece on the tension between the heart and the head that such an event precipitates. That’s a piece I could always see myself writing.