Monday 28 January 2008

Squirrel a la Huckabee

The real value of the interest rate cut is....

.....lower interest rates!

Last week, I predicted it would be an interesting week for the markets. And so it was. Today, Monday, Asian markets opened lower, and so far today European markets are all down. While this may be part of the classic Monday gloom, there are indications that we are not near the end of the bad news:

Over the next month, some major banks and financial institutions will be announcing full-year and fourth-quarter earnings results. Expect losses.

My prediction last Tuesday on hedge fund losses were partially borne out by SocGen’s EUR 4.9 million fraud. As Bloomberg reports today:

The bank handed investigators information about Kerviel on the evening of Jan. 25 as part of the probe into the losses, the biggest in banking history, that occurred when Kerviel set up positions in futures linked to European stock indexes and then hedged them with fictitious trades.

Expect future losses. SocGen isn’t the only one affected by the downturn in the last 35 trading days. I expect further trading positions to unwind in the next 10-15 business days, possibly leading to some grim headlines.

The Fed has, in my opinion, acted correctly with the 75 basis point interest rate cut, but for reasons the headlines are overlooking. I don’t consider this cut will affect consumer spending at all: as I posted earlier, consumer spending has been driven in recent years by re-mortgaging and housing values.

However, the interest rate cut should make it easier for all those families with sub-prime mortgages to pay their monthly instalments. This may cushion the impact of foreclosures related to the sub-prime and the potential ALT-A crisis, together with the FHA Secure Plan. In this respect, there is an economic benefit to the interest rate cut. A further 50 basis-point cut would accellerate the short-term benefit, despite the longer-term inflationary and macroeconomic impact this might have.

I’d be very interested in seeing some projections of how many sub-prime and ALT-A borrowers will be affected by an interest rate cut. Any data, anyone?


The BBC published some interesting stats on the sub-prime loan volume last November: it would be great if they could update this:

Mike Larson published some stats on market size in his December 9th column on Market Oracle:

Clive Crook discussed the principles behind the Paulson Plan in on December 9th:

The Federal Housing Administration details the FHA Secure plan on,717234&_dad=portal&_schema=PORTAL

Thoughts on the Seattle to Brussels Network

Hi Karen,

Greetings from Athens. Thank you for forwarding to me the Statement of the Seattle-to-Brussels Network. There are a number of major conceptual and experiential problems with this statement and the noble sentiments it represents. I'd like to address of a few of these here, and I'd appreciate it if you could post my statement on the HELADA List Serve as well, in the interests of a balanced debate.

Very briefly, one of the largest problems facing living standards in the ACP region is not EU-South free trade, but South-South free trade. If we take the ACP region, which I have worked in extensively, most entrepreneurs and managers from that region are relatively happy with the trade agreements they get under Lome and its follow-up conventions. Where they cannot compete is with Chinese and Indian exports, which are simply too price-competitive. What they need is protection from WTO regional agreements, not EU-ACP conventions. Unless the statement is addressing food aid in the form of US and EU food products, which I agree is bad practise: it's better to use the money to buy local or regional products, with the goal of price equilibrium, rather than price-destruction through an external, cost-free increase in supply.

On the issue of "huge financial transfers from the EU to the South" and related development assistance: I'm honestly not convinced that this is the answer. There have been generations of bilateral assistance to the ACP region, yet the record of development is actually negative in inflation-adjusted terms. This means that if you took real GDP in 1960 and compared it to inflation-adjusted real GDP in 2007 in either market rate or PPP terms, you'd have a negative growth rate. Even if you remove factors such as the AIDS crisis and demographic change, the growth is well below comparative growth rates in other regions.

I'm also not convinced that the practise of direct transfers to ACP government budgets - as the British government has pioneered - is the answer. The record of corruption and instability is simply too high, and the risk of losing these transfers is a real threat. (We have examples closer to home that illustrate the dangers of pumping EU money into national accounts).

Having seen this first hand, as well as having read research on the issue, I believe that development aid and financial transfers will not solve the problem of living standards and basic food, health and hygienic needs in the ACP population. One of the main problems with such aid is that between 50-80% of the budget is usually tied to procurement of donor country or region expertise or products. Another problem is that the solutions promoted are usually "first world", rather than "third world".

I remember working on the state-owned Kafue Textile Mill privatisation in Zambia in 1993-1994: several donors had provided aid, resulting in a modern textiles mill, which for various reasons couldn't be maintained, and for which the stable outputs (markets) and inputs (ginned cotton) did not exist. Privatisation was decided as the only option for survival.

In Ethiopia, the World Bank, EU and several governments spent tens of millions developing national champions in the textiles sector. When we did an [unrelated] investment verification for UNIDO in Ethiopia in 1997, we found that used and new Chinese clothing was for sale in Addis Ababa at cheaper prices than Ethiopian inputs (cotton yarn and fabric) were. The donors had built another white elephant project, yet even if Ethiopia had achieved 100% self-sufficiency in textiles (i.e. buying only Ethiopian textiles), the national ouput that had been developed was still far too high. Donor-funded aid had developed over-capacity, with the result that competition was reduced due to excessive supply. As a result, the 10-odd companies in this sector faced major financial problems.

On the issue of agricultural competitiveness: the main factor to declining competitiveness in the ACP region besides trade barriers in developed markets (which free trade is supposed to address under WTO Doha), is local, endogenous factors: national taxation, investment in human resources (agricultural colleges and extension services), a reliance on low value-added products with a high spoilage rate, lack of transport, unreliable energy sources, a lack of regional markets, high corruption, desertification, lack of capital....the list goes on. Throwing open the gates of European agricultural markets are not a panacea. In fact, the ACP region should start focussing on exports and commercial partnerships with China and India, which are transforming the markets for agricultural products due to much higher demand. This leads to higher prices, which is the best solution for farmers in the ACP region.

The Lisbon Agenda is one of the most profoundly egalitarian treaties the EU has passed. We've done numerous analyses on this issue - I attach the Executive Summary of one of them on vocational education and training (I think I've already sent you this material). There is nothing sinister there. Don't forget that one point of the EU is the free movement of goods and people within the EU. Given that we are living in a global economy, where mobility of capital, labour and ideas is a given fact of life, I see nothing wrong with enhancing competitiveness of all EU citizens and companies. The non-governmental share of GDP in the EU is over 60% of the total, so promoting international competitiveness and a knowledge-based economy is a worthwhile goal.

Another contradiction in this platform is about free trade: we can't be selective about it. If we don't believe in the "neoliberal" EU trade policies, that means trade barriers against Chinese and Indian imports, and therefore barriers against all imports (including ACP imports). This will result in higher prices for EU consumers. What happens if the price of your airline ticket to the US doubles, or the price of your petroleum doubles, or the price of your iPod triples, or you can't shop at Zara anymore because the price of cotton fabric has quadrupled, or the price of gauze bandages in hospitals quintiples? The EU is merely seeking reciprocality in trade relations, which is not a bad thing. In the agricultural sector, it's true that this reciprocality favours the EU at present, but this is in the process of being negotiated, and the ACP producers already have quite a few exemptions.

Overall, I find this platform to be naive and ill-informed. We can all claim to want a better world, but we are all responsible for understanding the means we want to achieve such a world. I'm not convinced that what is written in this statement is the way to achieve this. Every single HELADA member is a beneficiary and exemplary of globalisation and free trade and the EU, and there are so many examples in daily life to prove this. It seems rather simplistic to say that we're going to turn our backs on generations of progress since 1958. It would be far better to make the incremental and policy-based changes needed to improve things, first of all based on a real understanding of what has been done.

I could go on to develop these ideas, but I'm afraid I'm out of time at present. It would be interesting to debate this in a proper context.

Best regards,


Statement of the Seattle to Brussels Network

Find attached the Statement of the Seattle to Brussels Network for the World Social Forum's Global Day of Action - 26th January 2008; please circulate it widely and distribute it in the actions and local forums tomorrow.

Alexandra Strickner
Institute for Agriculture and Trade Policy (IATP)
Berggasse 7
1090 Vienna/Austria
Tel: +43 1 3174014
Fax: +43 1 3174015

*No to Corporate Europe - Yes to Global Justice!*

As members of the Seattle to Brussels Network (S2B), we are calling for concerted efforts to roll back the strategy of the European Union called "Global Europe: Competing in the World", the EU's unfair bilateral trade agreements and corporate power. We also reject the false solution of unfair multilateralism and the EU's proposals at the WTO, and a revival of the Doha Round in the exclusive premises of the World Economic Forum in Davos.

We, civil society activists engaged in a wide range of peoples'movements and organisations in Europe express our opposition and resistance to the neoliberal trade and investment policies that the EU governments and European Commission are implementing in our countries and worldwide. Simultaneously, we are also building the alternatives.

Global Europe: Serving European corporationsIn 2006, the European Commission (EC) unveiled its new Communication entitled "Global Europe: Competing in the World" which outlines how the EU will pursue bilateral trade agreements with major emerging economies in order to secure new and profitable markets for EU companies. While pushing for even more business-friendly 'domestic reforms', the EU sets out an aggressive so-called 'external competitiveness' strategy. As the EU Trade Commissioner puts it: "What do we mean by external aspects of competitiveness? We mean ensuring that competitive European companies, supported by the right internal policies, must be enabled to gain access to, and to operate securely in, world markets. That is our agenda.

"The core elements of this strategy are:

· Access to resources (from agricultural commodities to energy)
· New and better market access for European products
· Rules securing European investments and intellectual property rights

In addition to the ongoing multilateral WTO negotiations, the EU seeks these objectives by negotiating bilateral free trade agreements with the so-called emerging economies such as India, South Korea, the ASEAN states, and also Central America and the Andean Region. Russia, the MERCOSUR countries and the Gulf Cooperation Council are also on the priority list of the EU. The goal of these bilateral or bi-regional free trade agreements is to open and deregulate developing country markets for European companies, to increase their access to natural resources, particularly to energy reserves, and to secure their profits by enforcing intellectual property rights and other trade defence mechanisms.

This strategy not only undermines regulation in target countries. It also clearly links EU internal deregulation to this agenda. It says, for example, that future directives on social, labour or environmental issues for instance, should not be threatening the global competitiveness of European corporations. In this way, Global Europe poses a serious threat to social justice, gender equality and sustainable development not only outside the EU, but also within. The erosion of workers' rights, the worsening of the quality of jobs within the EU, the destruction of a sustainable model of farming is also intrinsically linked to the external EU trade agenda. With trade liberalisation across all sectors - agriculture, industry and services - the beneficiaries are a handful of corporations but millions lose their jobs.

Stop EPA campaign needed more than ever
Recently we met in Lisbon from 7-9 December 2007 to express our opposition to the "Africa-EU Strategic Partnership" and the so-called "Economic Partnership Agreements" (EPAs). These unfair trade deals based on an ultra-liberal perspective, threaten the livelihoods of millions of farmers and workers of both the African, Caribbean and Pacific (ACP) and European countries. We noted the historical and contemporary role of European governments and corporations in Africa, and stressed that Europe constitutes a direct source of threats and pressures on the peoples and the environment of Africa. During the last years ACP countries have been confronted with the reinforcement of policies through the EU's proposed EPAs such as trade liberalisation, the promotion of export-oriented economies, the liberalisation of capital markets, the promotion of foreign investment, and the privatisation of public services. These agreements are also motivated by the aspiration of the EU to secure or re-gain geo-political and economic influence in its former colonies.

In the last few months the EU and the EC have abused the expiration date of the Cotonou Treaty to apply pressure and push 20 ACP countries into signing very unfavourable "interim agreements". ACP Ministers, meeting in Brussels on 13th December 2007, have stated that the "European Union's mercantilist interests have taken precedence over the ACP's developmental and regional integration interests". The interim agreement on the liberalisation of goods trade have been rushed through in the last weeks on the basis of draft texts proposed by the EC that ACP negotiators have not been able to examine or amend properly. The result is devastating agreements, that contain onerous commitments on the side of the ACP countries and, among other things, do not offer adequate protection for Food Sovereignty and emergent industry. It is clear that the EC has deliberately crippled the interim agreements to maintain leverage to force the ACP countries to accept negotiations on the infamous liberalization of services and the 'Singapore issues' next year.

The Stop EPA Campaign must continue to undo these interim agreements and ward of further damaging EU demands.The EU's new external trade strategy is destroying our jobs, rights and environment.

EU policies based on so-called "competitiveness" and increasingly open and deregulated markets, have failed to deliver on sustainable development and social justice. Instead, tougher and tougher competition and trade liberalisation have lead to more insecurity, precarity, deteriorating salaries and working conditions, deepening inequalities between countries, regions and between women and men. This strategy also puts under threat environmental and health regulations.

For poor countries, market opening means the collapse of farming and industry in the face of unfair competition from European corporations - threatening the livelihoods of millions. Rural communities, often still a majority of the population in the targeted countries, will be particularly harmed as cheap, processed and subsidized agricultural goods flood developing countries' markets. Farmers, and particularly small-scale women farmers, who simply cannot compete with powerful European agribusinesses, will be driven off their land.

Trade chiefs from the EU and the United States warned recently that tackling climate change should not become an excuse for throwing up new barriers to foreign trade. Trade Ministers, whose decisions are perpetuating unsustainable modes of production, consumption and trade, are directly responsible for climate change. Global warming shows the failure of a development model based on unfettered economic growth, the irrational exploitation of fossil fuels, over-production, over-consumption and trade liberalisation.While the society has never been as conscious about the social and environmental crisis of the planet as today, the political class is still promoting "development-as-usual". Instead, we need a real paradigm shift.

We demand Climate Justice Now, with solutions including:

· Reduced consumption in the EU
· Huge financial transfers from EU to the South based on historicalresponsibility and ecological debt in order to support adaptation and mitigation costs
· Financing provided by redirecting military budgets, innovative taxesand debt cancellation
· Leaving fossil fuels in the ground
· Investing in appropriate energy-efficiency and safe, clean andcommunity-led renewable energy
· Rights-based resource conservation that enforces indigenous landrights and promotes peoples' sovereignty over energy, forests, land and water
· Sustainable family farming and peoples' food sovereignty

The Lisbon Treaty: the wrong solution to an undemocratic and unsocial Europe
We condemn the so-called EU Reform Treaty (Lisbon Treaty) which reinforces the power of the EC in matters of trade and development and further reduces the capacity of citizens to influence democratically its policies. The new treaty is deepening the neoliberal policies and the democratic deficit of the EU, perpetuating the power of transnational corporations and serving the interests of European capital, increasing the militarisation of Europe, strengthening "fortress Europe" and bringing no substantive protection to European citizens against the downward spiral in social and environmental standards.

The main substance of the antisocial character of the "Constitution"which was rejected in France and Holland, remains. The new Treaty will surely deepen the crisis of legitimacy. The Europe that is being built is a Europe of capital, that tries to defend the interests of its main economic and financial actors worldwide (entailing both alliances and tensions with the United States), guaranteeing also the same interests at home, over and above those of its peoples and the environment. And to do so, Europe needs a growing internal authoritarian structure, which will operate as a "fortress" for the migrants, based and coordinated on its reinforced nation states, and a "unified" and structured military might to project its economic and monetary-financial power worldwide.

We reject the externalization of borders policy of the European Union, the policy of detention, expulsion and deportation and the readmission agreements, the Frontex Program, which represents a huge investment in the militarization of borders control creating the basis for direct interventions in African countries and represents a real declaration of war against migrants.

Another vision for Europe: peace, sustainability, solidarity
Our purpose is to construct a world based on the concepts of peace, participatory democracy, social justice, human rights, sustainability, food sovereignty and peoples' rights to self-determination.

We aim at creating spaces to link current struggles, emerging grassroots resistance movements and alternative visions, and articulating social movements, NGOs, women organisations, trade unions, human rights organisations, farmers, ecological and indigenous movements, migrant and refugee organisations towards joint action and reflection.

We are calling for joint strategies to halt current negotiations seeking to implement "Free" Trade Agreements (FTAs) between Europe and the rest of the world; and consolidating the struggles against European transnational corporations, and deepening the process of constructing alternatives, to reclaim the right to food, education, health and other basic services.

We commit ourselves to strengthen interregional solidarity and cooperation among our social movements and organisations from all over the world against corporate power and all unfair bilateral trade and investment agreements. We commit ourselves to joint resistance against neoliberal policies and to build people-centred alternatives.In particular we continue to campaign together to

§ Stop the Economic Partnership Agreements (EPAs)
§ Stop the Global Europe Strategy
§ Stop all bilateral trade agreements
§ Suspend WTO negotiations and reconsider the multilateral tradingsystem as a whole
§ Support the Moratorium on Agrofuels and the fight against globalwarming and the energy crisis
§ Achieve freedom of movement for all peopleIn order to dismantle the power of transnational corporations (TNCs), we aim to:

§ Strengthen resistance against the operations of TNCs violating humanrights and playing a key role in the construction of the neoliberal global system

§ Expose the legal-political system and dominant institutions that serveand protect the interests of TNCs, including the FTAs and Bilateral Investment Treaties (BITS) that allow transnational corporations to operate with impunity§ Demand compliance to existing rules, the elimination of unfair laws,and progress on international regulations that respect the rights of people and the environment, with which TNCs and governments are required to comply

§ Provide tools to enhance the strategies of communities, socialmovements and organisations confronting TNCs and promoting alternatives that strive to dismantle their presence and judge their crimes.We will support policies in favour of solidarity, peace, the realisation of all human rights and the harmony between people and the planet.In the next months, we will use moments in the political calendar to link with the global justice movement:

§ The Global Day of Action of the World Social Forum on 26 January 2008
§ The UNCTAD XII meeting in Accra, Ghana (April 2008)
§ The Action Week on Global Europe and the EU-FTAs in Brussels and different European countries (April 2008)
§ The Peoples summit "Enlazando Alternativas 3" and the Permanent Peoples Tribunal Session on the occasion of the EU-LAC summit and the proposed "free trade zone" (Lima, Peru, 15-18 May 2008)
§ The Migration WSF in Madrid (11-13 September 2008)
§ The 5th European Social Forum in Malmö (17-21 September 2008)
§ The campaigns calling for referendums on (or against) the Lisbon Treaty

Saturday 26 January 2008

CNN: What Should be Reported

Since we're on the subject of how to make things better at CNN, here's what I would like to watch, much more than Golfing Minute or Mainsail or The Screening Room or Art of Life or Inside Africa:

1. A real analysis of the US sub-prime crisis
CNN is airing views of various experts and commentators, but we really don't see many hard statistics on the sub-prime mortgage market and the impending ALT-A market, which will be of much larger magnitude than the sub-prime market. I'd like to see a 5-10 minute segment with actual statistics, dealing with the following:

- Approximate loan volume of the sub-prime market
- This loan volume compared to the total mortgage loan market
- Examples of relative interest rate rises after the sub-prime market re-adjusts
- An explanation of loan securitisation and why it's important
- What role the Federal Reserve actually has in regulating bank lending
- Why nothing was done about this, since the problem has been visible for years
- What we should expect with the ALT-A market
- Statistics on the housing market: the Case-Shiller index, the National Association of Realtors statistics on the number of houses sold, new housing starts, number of foreclosures, etc.

All this can be fit into a quick and easy 10-minute segment, with a few slides showing numbers, not just commentary. This information readily available in the Financial Times or the websites of the Case-Schiller Index, the Realtors Association the Federal Reserve, and a few otthers.

We spend hours on the election, but nothing substantial on the economic disaster unfolding before our eyes, which affects millions of American families. Compare Katrina coverage to the real estate crisis. Why the difference?

2. A real analysis of consumer spending and GDP growth in 2008-2009
CNNi has been going wild about Davos, with arguments between CNN anchors and reporters on whether GDP growth in China and India can support world economy growth in the face of a US recession. Of course, no statistics are provided, but this is remarkably easy to compare. Check GDP sizes and growth estimates in 2008 and compare US, Chinese, Indian, and other regional statistics and growth. You can do this in either market rates or Purchasing Power Parity (PPP). Data is available on the World Bank and IMF sites.

You will quickly see that Chinese/Indian consumer spending is not enough to absorb surplus US output, which means trouble for the US and world economy. Given that US companies cannot export enough to China and India (remember the trade deficit?) it's difficult to see how consumer spending in these countries would make up for the US decline in the best case scenario.

Why isn’t this being reported in detail, on the basis of numbers? Why take the risk of potentially misleading the public through totally vague comments?

3. The impacts on the Fed's interest rate drop and the Administration's “stimulus package”
As usual, CNN focuses on the immediate effects of the interest rate drop: stock exchanges stabilise. It does not discuss potential (and probable) longer-term effects of this move:

a. Fewer foreclosures because mortgage rates must go down, since they are linked to the Fed rate. This will likely be the most positive result of the interest rate reduction, not a resumption of consumer spending;

b. A further decline in the US dollar, with lower international purchases of US Treasuries, leading to a worsening problem with funding the $ 7.5 trillion debt as the Treasury will have to offer a higher interest rate to offset declining currency values;

c. An impending shift of Asian and Middle Eastern central banks of their reserves from USD to EUR and other currencies. This will lead to further declines in the USD, and a rise in the EUR. In turn, this will make the EUR less competitive as a currency and damage European economies, which are export-dependent to a much greater extent than the American economy.

4. A real analysis of Republican and Democratic Candidate Health Care & Social Security Plans
Or, for that matter, a serious analysis of any platforms, such as Iraq, the economy, education, the environment, energy security, renewable energy…. anything instead of the campaign soundbites we are currently getting.

5. A serious look at what’s going on internationally
This week, there was a major bomb attack in Lebanon; a pre-announcement about Kosovo’s declaration of independence; a major Russian deal to buy out Serbia’s oil refineries and pipeline complex; major bombing attacks in Iraq (why isn’t Iraq being reported, by the way?); more Turkish incursions into northern Iraq; the resumption of Iranian gas exports via Turkey; Sudan has attacked a UN aid convoy in Darfur….

A lot has happened which is totally off the CNN radar screen. If Kosovo declares independence next week, before the Serbian election, you can bet this will be major news. Yet right now it is ignored, in favour of sensationalist reporting, mainly on the US election, or the Monte Carlo casino fire. This is supposed to be CNN International.

Friday 25 January 2008

NYT endorses Hillary Clinton and John McCain

The New York Times today endorsed Hillary Clinton and John McCain as the respective candidates for the Democratic and Republican parties in the 2008 Election.

While the NYT is hardly the bellweather of the chattering classes of America, its endorsement does agree with how I think the campaign will shape up. Senatory Clinton is widely perceived as the best Democratic candidate in terms of having a national campaign organisation and the ability to quickly set up a working administration as soon as possible after winning. As long as the national media and, apparently, the voters themselves care more about personalities and picking a winner than the issues themselves, this counts for a lot.

Senator McCain is probably the only member of the Rational Wing of the Republican Party, i.e. the one which still believes in modern theories of biology and, it is rumoured, the role of the state and civil liberties. I happen to think he is one of the few honourable people with a national following left in the GOP, with consistent views and a record of service, although I'm sure the readers of this blog will be able to find hundreds of examples to disprove this.

What interests me extremely is the next step: the build-up and eventual result of November 4th election. At present, I expect John McCain to win a national election by a clear margin. Although both he and Hillary have a fabled electability problem, I believe the GOP and a good many independents will rally around him as the "independent" candidate, particularly if Hillary is the opponent. Hillary will be widely reviled as the "insider" candidate (see my blog entry of January 21st), and I'm afraid that if her speaking skills and demeanor don't improve, she will alienate too many voters.

I also believe that if the Democratic campaign continues at its present rate, the party will be demoralised and fractured come November, and there is not enough money in the world to win an American election on these terms.

I accept that this scenario is shaky and may change. John McCain has never really been tested in the national debate. I predict, however, that a number of weapons in the Democratic arsenal - like Iraq - won't be enough to sway public opinion far enough to elect Hillary. I'm also waiting to see specific policy proposals - and a solution how to pay for them - besides the vague bromides that both sides are putting out.

Maybe I shouldn't wait for too long.

We live in interesting times.

Ssshhh!!! No criticism aloud

Bill Clinton is rapidly breaking one political tradition after another. In running to become the "First Lad," the gloves have come off. We had indications of this in New Hampshire in the dark days after the Iowa defeat, but the accusations are becoming shriller and shriller - and being reported by the national media.

Maureen Dowd's Two Against One Op-Ed in the NY Times on 23/01 puts it really well: "If Bill Clinton has to trash his legacy to protect his legacy, so be it. If he has to put a dagger through the heart of hope to give Hillary hope, so be it." Daniel Fears ran a piece in the Washington Post today: Black America Feels the Sting of Ex-President's Comments picking up on some reactions to his latest round of comments.

More than anything, this reflects that we've arrived at the really competitive stage of the Democratic primaries. The attack culture of national politics has become reflex action, for this first time deployed to this extent against by members of the Democratic party against each other. This does not bode well for the real campaign, which will eventually require the entire Democratic Party to unite behind a single candidate. We can easily see that this will be the most caustic, and most expensive, campaign in modern history.

I'm also wondering if the Clintons aren't a bit behind the curve on civil rights politics marketing (sorry for this cynical term) and the whole "who did more" thing? Log onto Hillary Clinton's campaign website, and tell me if you can find anything about civil rights on her Issues page. As of today, there's nothing, but maybe that will change. In contrast, Barack Obama's website has Civil Rights displayed as the first item on his Issues page, with enough practical ideas, detail and background to be plausible. Senator Clinton, it's time to update your site.

As for Bill, who knows what to think? I haven't seen actual transcripts, only secondary reports of what people heard or think they've heard. If he had said the same things about George Bush or John McCain, would this be an issue? Hard to tell. How the Democratic candidates got from Martin Luther King to LBJ to the current competition to see who is more pro-civil rights is beyond me: you only see this kind of thing in politics.

But, the impression is clear. As I said in a previous post, Bill is looking less and less like the grey-haired former statesman and more and more like a "nasty daddy." If I were him, I would focus on the positive reasons why Hillary should be elected, and leave rebuttals to a campaign member. As Caesar said at the divorce proceedings of his wife, Calpurnia, in 61 BC "Caesar's wife must be above suspicion."

Bill, that would be you in this simile. Take the weekend off, go fishing, catch up on sleep, and come back to work on Monday, ready to solve the world's problems. Sleep is good, exhaustion is bad, and the truth will out in time.

And remember, no criticism aloud! (allowed)

Wednesday 23 January 2008

CNN: Certainly Not News

Mr. Jim Walton
CNN Worldwide
Turner House
16 Great Marlborough Street
London W1F 7HS
United Kingdom

23 January 2007

CNN: Certainly Not News

Dear Mr. Walton,

A confession: I'm a bit of a CNN junkie. When at home in Athens, I usually catch up with news over lunch, and right after dinner. When on the road, it’s usually the last thing I watch on TV. I got to it before the first Gulf War. In those years, it was fresh, innovative, and new.

But then Ted Turner sold out, and Time Warner bought the network, and ever since then it’s been a long downhill slide. Don’t get me wrong: your anchor line-up is still the most fascinating in the business. [Richard Quest? Where did you find this guy?] And it’s still one of the most accessible networks, available on terrestrial channels in most European countries, and satellite channels in Central & Eastern Europe, Russia, and Central Asia. You've got real world-wide coverage, great technology and a strong brand name.

The only problem is, CNN today is all about entertainment, not news. And of the entertainment part, 50% of this is pure narcissism: promoting CNN, and nothing else.

What do you need to do to get back on track, regain credibility with your international audience, and regain your ratings?

Cut the Crap

Golfing Minute, Mainsail, the Screening Room, the Art of Life, Inside Africa, iReport, International Correspondents, Business Traveller, Paging Dr. Gupta, Inside the Middle East, Your World Today, etc. may be lucrative, sponsorship vehicles or vanity programmes, but we don’t care. The only thing that should be kept is standard, plain-vanilla news: Politics, business, current affairs, the economy. Keep the rest on your website, or on the Disney Channel.

End the Weather

Get off this perverse fascination with weather. It seems like every time an anchor needs to take a piss, you put on 5 minutes of weather. Hello? The weather is not news, unless there’s a flood or a hurricane. Didn’t they teach this in journalist school?

Stop the Narcissism

We are sick of Wolf Blitzer going on about “The best political team in business.” We are tired of the constant self-promotion. Your network is not the news.

Get Serious

Tell your anchors to stop smiling and bobbing their heads inanely, especially when they’re reporting human tragedies. Colleen Edwards looks happier than a goose on Prozac, and more power to her, but you shouldn’t be smiling when you’re reporting a car bomb in Baghdad.

Cut Advertising, or be more Selective

Honestly speaking, your advertising stinks. The Artoc Group? The Azerbaijani Tourism Authority? Do you honestly think we care? And stop advertising yourselves all the time. It's pathetic.

Focus on News, Not Glamour

Guys, what happens at Davos is not news. We don’t care, and if we do, we’ll check their website.

Focus on Content, not Style

We’re in the middle of the US primary season, and CNN hasn’t said a single word about the platform of the candidates running for office. Instead, it’s all about appearances: who fell asleep, who burped, who farted, who said what about Martin Luther King. Hello? You call this journalism? I call it a waste of my time and an insult to my intelligence. Why spend so much money on election coverage when you don’t cover the issues? Don't be surprised that CNN is losing ratings.

Retire Larry King

I admire that old goat as much as the next person, but honestly speaking, I’m living in Europe, and I don’t care about Paula Abdul’s career or OJ’s stamp collection or who won American Idol. I still can't get over Larry’s interview of Poppy Bush, who announced that Prescott had gone “straight to heaven”, while Dorothy Bush promoted her hagiography. Wake up, please. We’re not in Kansas anymore.

Stop Repeating Yourselves

Repeating the headlines during your business programmes is not news. You need enough news content to full in a two-hour news cycle. You shouldn’t be airing each recorded piece more than 4 times every 24-hours, and certainly not on each prime time broadcast, unless it’s shocking, sit-up-in-your-seats footage.

The New News Programme

Keep in Simple: Here’s a simple, recession-proof programme:

1. The standard segment should be 12 minutes of news; two minutes of advertising. The sequence should be two 12-minute segments of politics and current affairs; followed by one or two 12-minute segments of business and economy

2. Only four types of news programmes: Headline News, Business News, Election Coverage, Special Features. That's it!

3. Weather: 2 minutes every hour. Sport: 4 minutes every hour. No more!

Keeping it simple will also allow you, forgive me for saying this, to get rid of at least half your anchors, saving a lot of money and removing all this white noise from your programming. Focus on your core mission: reporting world news objectively, comprehensively and up-to-the-minute.

Anchor Advice

1. Get Todd Benjamin to trim his eyebrows: he’s always been the Dirty Harry of business news, but now we can't see his eyes anymore.

2. Get Adrian Finnigan out of the pub and into bed by 22:00 every night: his face is getting more pale and pinched with each broadcast.

3. Retire Ralitsa Vassileva, Brent Sadler, Fionoula Sweeney, and some other old warhorses: they’ve served honourably, dealt with their internal demons and need to get off the air.

I hope this helps. I'm still a captive audience, but if anything else better comes along, you'll lose me in a flash.


Tuesday 22 January 2008

Economics Strikes Back: Revenge of the [Hedge] Funds

Today, Tuesday 22 January, has seen wide-magnitude fluctuations on European stock exchanges, triggered in part due to larger drops in Asian overnight trading. Much of today's volatility (as I write, exchanges are still open) is probably attributed to computer batch trades, driven by pre-set sell/buy triggers (usually stock sales volumes and price benchmarks). The Washington Post reports that the S&P is expected to decline by 4.5% once trading starts today (US exchanges were closed yesterday due to Martin Luther King day).

I have no doubt that this will be a rough and exciting week. The fundamentals, however, are clear: certain benchmark stocks in the Dow Jones and S&P indeces are overvalued, and have been for years. Residential real estate is equally overvalued.It's time for a correction.

Much of US corporate profitability in recent years has been due to creative financial engineering and one-off gifts: the dollar's decline, tax breaks on repatriation of overseas income, etc. In contrast, order-of-magnitude changes to profitability, such as IT-driven productivity, lean manufacturing and outsourcing, are reaching the end of their run. Gravity is re-asserting itself: overseas competition and commoditisation is growing; WTO allows great access of merchandise imports into the US; other factors are contributing to the declining relative competitiveness of US enterprises.

We should, therefore, welcome a correction. Massaging interest rates to stimulate consumer or corporate spending will not work: the negative personal savings rate has for years been sustained by re-mortgaging during the real estate boom. Today, this tactic no longer works: lower interest rates today lead to higher credit debt, not higher property prices. Corporate opportunities for investment are therefore even less attractive, particularly given the consumer slow-down, property market collapse, and stock market turmoil.

A correction could easily last for 3 or 4 quarters, making this one of the longest in recent memory. I have no predictions for the depth of the slow-down, for reasons I will explain in the next paragraph.

The main threat I see at present (remember, this is Tuesday 22/01/2008 at 14:00 local time) is the impact of the recent stock market fall on hedge funds and the derivatives market. We have no visibility on the size of this market, which probably amounts to over $ 500 trillion at the end of 2007. Many contracts are pegged to relatively shallow stock or commodity price movements. We are currently in an extremely volatile situation, where I believe the magnitude of stock and commodity movements are much higher, perhaps with a magnitude of +/- 10-25% over a single trading session.

This magnitude may have a catastrophic impact on derivatives contracts. We face a critical lack of visibility brought on by securitisation, the absurdly high leverage ratio of most hedge funds, and the fact that there is no central, real-time registry of swaps or trades. The situation is much much worse than the sub-prime market. The failure of only a small number of funds could herald a system melt-down.

I believe this is what accounts for the unusual volatility among institutional trading today and last week. The sub-prime failure (together with the impending ALT-A failure) is only the tip of the iceberg. It is not, in my humble opinion, enough to account for the institutional panic we see right now.

The elephant in the room that no one is talking about is the fear of what might happen should another Long Term Capital Management - or two or ten - fail this week, or next.

Let's hope the storm passes without mishap. But then it will be back to business as usual, leaving the final reckoning for another day.

The Next Presidential Dream Team

Here's my Dream Team for the next Administration: the "Competence Cabinet"

Michael Bloomberg

Arnold Schwartzenegger

Dept. of the Treasury
Paul Krugman

Dept. of Defense
John McCain

Dept. of State
Richard Holbrooke

Dept. of Homeland Security
David Petraeus or Richard Clarke

Dept. of Education
Bill Gates

Dept. of Energy
Al Gore

Dept. of Veterans' Affairs
Colin Powell

I'm still working on the remaining Departments: any suggestions?

Dept. of Agriculture
Dept. of Commerce
Dept. of Health & Human Services
Dept. of Housing & Urban Development
Dept. of Interior
Dept. of Justice

Dept. of Labor
Dept. of Transport

Monday 21 January 2008

On November 5th, the winner will be....

John McCain

Hillary Clinton will win the Democratic nomination, pitting her against John McCain. In a Clinton-McCain contest, I believe McCain will win by a margin of 3-5% of the national vote. Why?

1. Arrogance: Although Hillary Clinton is a well-qualified candidate, she does not inspire trust in the American public. Her speaking style makes her appear arrogant and far too smart for the electorate - the Al Gore syndrome.

2. Bill's Baggage: Hillary is trailing far too much baggage, including her husband. Bill was a political genius, but has now lost his touch. Why? Because he's running for his wife, not for himself, and because of this he's off-message. He increasingly comes across as a nasty daddy rather than the silver-haired former statesman he should be.

3. Inheritance: Too much about the Hillary campaign is about inheritance. The claim that Hillary has the most experience, and therefore is the most suitable candidate, will backfire. Americans love underdogs and challengers, not royalty (at least not in domestic politics).

4. Bland Campaign: Hillary's campaign has failed to ignite imagination or emotion, a notable achievement for such a historic event: It's the first time a woman could win the presidency. It's also amazing, given the huge errors of the Bush Administration. America is locked into a war in Iraq; went through WMD, Katrina, Abu Ghraib and now the sub-prime crisis; and has an administration that lied to the public on repeated occasions. Yet Hillary's campaign is failing to catch fire: the real challenger is Barack Obama.

5. Insider Status: Many voters believe that Hillary is an "insider", and as such risk trading one dark horse for another. Since 1975, the public has awarded the Presidency to the outsider on a white horse, riding to Washington to clean up the mess. This was the case with the Carter, Reagan, Clinton and Bush Jr. narratives. Poppy Bush was another insider: VP under Reagan, elected President on his own, he lasted only a single term.

On the other hand, look at John McCain:

  • A decorated war hero who served in Vietnam
  • Dedicated his life to public service, 25 years in the Senate
  • Carries his wounds with pride
  • A consistent, no-bullshit, no-nonsense demeanour
  • The antithesis of the political correctness that pervades modern culture
  • The right call on a number of political issues
  • Independence
  • The challenger and underdog.

McCain is a tragic figure, the Coriolanus of our times. Once the white noise of the political dwarfs who surround him fades away, the country will rally round him in a way they could never rally around Hillary.

Some other scenarios:

Hillary vs. Mitt Romney.....................................Hillary

Barack vs. John McCain....................................50-50

Barack vs. Mitt Romney....................................Barack

The other scenario too close to call will be if Michael Bloomberg throws his hat in the ring, runs a good campaign promising an effective, non-partisan approach to governance and the end of special-interest politics. This would capture the imagination of a good many people - myself included - although how he would actually implement anything is beyond me.