There are other factors as well. But I thought there was merit in the Enron loophole argument. So it was with no little interest that the open letter to president elect Barack Obama by the Commodities Market Oversight Coalition caught my eye. The entire letter can be found at http://accidentalhuntbrothers.com/ The committee calls for more oversight into the overseas markets, the so called dark markets and more transparency in the transactions within the United States. There are sixteen signers of this letter including such varied interests as the Consumer Watchdog group, The Air Transport Association, the Illinois Petroleum Marketers Association and the Independent Oil Merchants of New York. When there is a cry from a particular industry imploring the government to add regulation to their own industry, it tends to make more of an impression on me. Their letter is a cry for stability in what has been a particularly volatile commodities market.
I suspect the president-elect gets a few hundred of these things a day, but this one, I think deserves his attention.
And by the way, there are those who feel the price of oil is no where near bottom. Reuters reports that crude oil prices could drop as low as $20 a barrel in 2009. That sounds outlandish, but so did the July 2008 prediction by the same people of $50 a barrel when it was trading at three times that level at the time. www.guardian.co.uk/business/feedarticle/8119626
Just another thing to watch as this new administration begins its already historic reign. Who needs reality tv with all this real life drama?
By Myron Gushlak
an economic crisis of historical proportionsObama is quickly moving into the fray even before his inauguration. Lest anyone be alarmed at the current state of the union, the public has been filled in on the impressive credentials of all economic team members.
Lawrence Summers is nominated for director of the National Economic Counsel. Summers was Treasury Secretary to President Clinton, and as been quoted numerous times in this series of blogs. Mr. Summers is an unusually gifted man having enrolled at MIT at age 16 and at age 28, he became one of Harvards youngest ever tenured professors. His personal kryptonite is women, environmentalists and civil rights activists who he continually alienated during his five years as Harvard University President. Though he can neither fly, nor see through walls, it is believed he can breathe underwater, making him the ideal candidate in this current flood of debt.
Timothy Geitner is nominated for Treasury secretary. He is the former president of the Federal Reserve Bank of New York and has been working alongside of Henry Paulson trying to fix the country’s credit markets. He is bulletproof. He operates from a cave and drives a specially built car that can cause the market to fluctuate three hundred points with the push of a button. His known enemies on both sides of the aisle are all easy to spot because of their various eccentric outfits or nicknames. He works best at night, for some reason.
Melody Barnes was chosen to lead the White House Domestic Policy Council, and has been an advocate for the progressive policies of the Democratic Party. According to the Dallas Morning News, she looks particularly good in a cape, and has a golden magical lasso that can do things that unambiguously aid the general population, though no one could specifically say exactly what it is that she does with her powers.
And finally, Christina Romer will chair the White House Council of Economic Advisors. She is a student of the Great Depression, and an economic professor at the University of California at Berkeley. She believes in the idea that tax increases restrain economic output, and in truth, justice and the American way. It is not yet clear whether she will generally wear tights and a cape, but assures the American people that in the very least, she will carry around a green lantern. Her spokes people would not say why.
Both Marvel and DC Comics are currently negotiating long term deals with all economic members. Fear not America! Help is on the way!
By Myron Gushlak
The difference between playing the stock market and the horses is that one of the horses must win.This was the lament of a BlueWaters lunch last week. Some of the most humorous things Ive ever heard were about money. Perhaps it is because, as Voltaire said,
when it comes to money, everybody is of the same religion.Perhaps it is because sometimes all a man can do is laugh. The stock market, as the experts tell us, is still trying to find a bottom. Meanwhile, the government announced last week that it would sell $55 billion in bonds next week as part of the massive borrowing plan to pay for its financial rescue packages. Some say that figure might have to expand to over $300 billion by the first quarter of 2009. And that does not include any possible life preserver thrown to the US auto industry. Clearly the bottom has not yet been reached.
Ive given my opinion several times over the past year about the possible dangers of other countries buying our bonds as part of their Sovereign Wealth Funds, and using the influence that investment provides as political leverage in the future. Id feel a little bit better about the proposed sale of stocks if the US government released some sort of statement that might indicate that they are at least aware of the possibility of such a conflict of interests in the future. I havent heard a word about it. And maybe that is to be expected. A drowning man doesnt much care who is throwing him a rope. I (still) would like to think that someone at the upper levels of government has their eye on this sort of thing, and a contingency plan for the future exists should the United States suddenly find itself leveraged into decisions it would not otherwise make.
I admit to being snowed under by all the negative economic news on the heels of the exhaustive (and exhausting) presidential campaign. I look back nostalgically to the pre-crisis and pre-election days when Janet Jacksons exposed breast might be the most compelling story of the day. Today she could run naked through the stock market and all anyone would want to know was what she was buying or selling.
By Myron Gushlak
equal opportunity for allcrap. Who knew? The cartoonist, Sidney Harris described a cynic as
not merely one who reads bitter lessons from the past, he is one who is prematurely disappointed in the future.Yesterdays election struck a blow against cynicism throughout the world. The election of a black man was bad enough, but when one factors in the fact that Barack Obama is extremely intelligent, stereotypes about the American electorate are disappearing faster than Christmas party invitations to Lehman Brothers executives. What about the Adlai Stevenson rule of politics that proved on more than one occasion that the American public will not vote for anyone they perceive as being more intelligent than themselves? What about the George W Bush rule (see above)?
Already this morning, Ive heard the word
Cameloton two different American networks. Im reminded of the puzzles in the childrens Highlights Magazine when I was a child. Theres a picture of the White House with little children chasing a puppy under the Oval Office desk.
Whats wrong with this picture?the caption asks.
Ah, but maybe this one time its a trick question. Maybe theres nothing wrong with this picture. What’s a cynic to do? Perhaps a donation to the Dorothy Parker Foundation would be in order.
What happens when a quarter of the population no longer feels disenfranchised? The words
potentialand
possibilityare creeping into my writing this morning. My personalized spell check is underlining them in green, uncertain from past experience what Im trying to say.
By Myron Gushlak
This week a study was released about the cost of diabetic care in the United States. In 2001, the cost of diabetic health care was $6.1. In 2008, that cost rose to over $12 billion, based largely on the rising costs of new drugs introduced over the past ten years. The most shocking thing about the report was not the doubling of the cost in such a short period of time, but the revelation that there is no evidence that the additional cost has improved the health of any of the patients. Several months ago, another story in the New York Times reported that there was a move toward a specific drug cancer treatment that cost the patient between $45,000 and $60,000 per year. The average patient lived an additional two years if they opted for this new treatment. If the average was two years, it is safe to assume that some patients lived four years longer, and some didn’t live any longer at all.
During the financial collapse of the past couple of months, a lot has been written and said about “mark it to market”. It was a way of describing the problem financial institutions that held these failed mortgage backed securities had in trying to determine the actual value of what they held. To explain as briefly as possible, if a trader sold a hundred shares of IBM stock, for example, at ten dollars a share, he would know that he could mark the value of that stock at ten dollars. What happened in the crash was that Lehman Brothers, again for example, may have held some mortgage backed securities that had a marked value of hundred dollars. Bear Stearns might have had a very similar, but not exact product, which they marked at eighty dollars. Goldman may have had a similar product that they valued at forty dollars. What is the value of that asset? The answer, and the reason for the collapse, was that the market could not be established. The products could not be “marked to market”.
If you find that confusing or contentious when talking about real estate, imagine the upcoming furor when someone tries to mark medical care for market. Human lives and not 401ks will be at stake. What is the value of diabetic health care? Is it based on the $6.1 billion number of 2001, or the $12 billion number today. There will be an almost infinite number of similar examples. What is the value of medical care? How can one mark it to market? And most importantly, who will decide?
By Myron Gushlak
dark matterdoes exist as theorized as well as giving us further information on the nature of anti-matter. They collision might also cause several black holes, though scientists expect them to have a life of less than a second, and not swallow the earth as some doomsday internet pundits have predicted.
I cant profess that I know all or even many of the ramifications of this discovery. The idea of curved space still eludes me, but I think it is a phenomenal achievement by other human beings. Not the least of which is the tenacity to finance and move forward with this project for over thirty years. As a financial man, I can tell you that is no mean achievement. Perhaps never before in history has so much empirical information been so close at hand. I personally cannot get enough of this seemingly science-fiction fodder, and I could fill pages with the fractions of information I do have about the upcoming test.
But I was amused at the juxtaposition of this story in my local newspaper with a story about the United States vice-presidential nominee, Sarah Palin- same day, a couple of pages apart. It seems that Mrs. Palin, possibly the future next in line
ruler of the free world.It seems she is a Creationist. Does anyone else see the humor in this? All right, if I was an American, I might not see it as being so funny. But really, if I made this up, no one would believe me.
By Myron Gushlak
I dont know what made me think of that. Maybe it was George Bushs speech the other day where he condemned Russia for invading Georgia. No one seemed to be bothered by the incongruity of a President with an invading army in Iraq lecturing another country about an invasion. Everyone just seemed to nod in silent agreement. Not that there is any shortage of examples of mass insanity. Maybe a hundred years from now, scientists will discover that the people of the early decades of the twenty-first century were all victims of
"artificial coloring insanity"or some similar thing. It would certainly explain a lot of what is considered to be
"normal behavior."
By Myron Gushlak
Freddie Mac is a government sponsored enterprise, created in 1970 to help the average American citizen purchase homes. What Freddie Mac does is to buy mortgages on the secondary market, and then sell them as mortgage backed securities. Their securities declined by $1 billion, it was announced today. Freddie Mac has a total worth of $4.2 billion. To start their recovery, they hope to raise $5.5 billion in new securities. Investment banker Myron Gushlak, for one, believes that the investor must believe that an end is in sight before Freddie Mac becomes an appealing investment option again. That end was not announced today despite new funds pledged by the federal government and a new law passed this week to shore up the struggling company.
According to a National Public Radio report, when Freddie Mac was established, the government pledged to keep it in operation with no end date to that pledge. Freddie Mac will, therefore, continue to exist no matter what losses might still be announced. It might not be recognizable, but it will weather this storm in one form or another. That guarantee sounds almost naive to me. Idyllic. Optimistic. I guess that is one definition of hard times – when other times seem so desirable by comparison.
By Myron Gushlak
Batman,The Dark Knight, let me be brief so you can go out and buy your ticket. Okay, maybe there are more than eleven of you out there, but according to Reuters this morning, Batman became the fastest movie to make $300 million, and it has only been out for ten days.
Every now and then, a movie comes along that resonates in the viewers mind.
Certainly Heath Ledgers brilliant portrayal of The Joker is a huge part of the success, Christian Bale is convincing and the special effects are sterling. But that doesnt explain why it resonates. With apologies, then, let me point out a couple of my observations. In this movie, Batman is not quite as squeaky clean as he had been portrayed in past incarnations. He is conflicted, often coming right up to the very edge of the line that separates good from evil; right from wrong; perhaps he even crosses that line. There is no consensus of whether what he is doing (his vigilante-ism) is good for the residents of Gotham or not. The population is split, some calling
the batmana criminal himself. Even visually, the city of Gotham itself is darker than past portrayals. Is any of this starting to sound familiar, say, perhaps, when compared to certain political leaders or situations?
But
The Joker(Heath Ledger) steals this show. He is evil incarnate. Unlike previous villains, this Joker does not want money, or power. Those are things we have grown accustomed to. They no longer frighten us. In fact, they seem, in these early days of the twenty-first century, almost normal. In one scene, the Joker sets fire to a pile of money, the ultimate crime to most Americans. What the Joker wants is to bring down Gotham, to throw it into chaos. Americans are just coming to grips with this notion. People understand the motivations of Napoleans and Hitlers who want to take over the world. But this idea of declaring war on somebody for the sole purpose of destroying them is a relatively new one to most, say something they have had to get used to since 2001. The Joker does not want to rule Gotham, or to steal all of its money. It simply wants it destroyed.
Am I reading too much into this? Perhaps. My friends have accused me of worse. But besides the fact that it is a good movie on its own merit, The Dark Knight has managed to encapsulate our darkest fears. This movie is set in a world where good overlaps evil, and motives have changed. I wonder if a movie goer in 1950 would even get it. Sixty years ago it would have seemed preposterous that a villain would not want to take over the world. Ledgers Joker would have seemed farcical, in fact, unbelievable. That is why this movie resonates. On some level, we are confronted with this sort of Joker every day. He fills us with terror. He is truly frightening. More than any other movie I can think of, this movie is about the world in 2008.
By Myron Gushlak
The administration considered this a very real threat. The possibility was intolerable to the Bush/Cheney brain trust. They predicted, logically enough, that other sellers of oil would follow suit and it would cause the value of the dollar to plummet throughout the world, and would adversely affect our economy for many years. It is unknown if this conclusion was an integral part of the United States energy policy because that policy remains a secret. It has never been spelled out by anyone involved in its formulation. We know only that Dick Cheney met before 9-11 with unnamed leaders of the oil industry and formulated the strategy that dictates our policies to this day.
Dont look now, but the price of a barrel of oil is about the same as it was nine months ago if you convert the price to Euros. In fact, its a little cheaper. We are paying for gasoline in Euros. Were not calling it that, of course. That would be intolerable. But do the math. The people who sell the oil are still getting about $100 a barrel. Its just that theyre getting it in Euros. If the price of oil stabilizes at about a hundred Euros a barrel, which I predict it will, what does that tell you about the ability of this administration to protect US interests abroad? It would be so refreshing to hear Barack Obama or John McCain address this. It would be nice to think that either might have a strategy. Or perhaps they both feel there is nothing to be done.
By Myron Gushlak
]]>It was far from obvious to me that this {maximizing value of shares} will be over time the only motivation of governments as shareholders.He was essentially questioning what impact these investments would have on future government policy. His concern was theoretical. No country had ever used such leverage to mandate policy in another country.
The future is here sooner than we thought. In this weeks Sunday New York Times, David Rieff, author of
At the Point of a Gun:Democratic Dreams and Armed Interventionwas writing about the Myanmar governments refusal to allow aid after the recent cyclone, and other areas of global need. Although the article was not about sovereign wealth funds, one seemingly innocuous sentence caught my eye. In explaining the lack of meaningful response to the situation in Darfur, Rieff explains that one of the reasons for inaction was, and I quote,
Part of the reason is that China opposes such a move, and it is a lot harder for the US in 2008 to go against a country that holds so much of its government paper….Is anybody else paying attention here? I see movie possibilities. Im seeing a 21st century Frankenstein, one who was created in a haunted house on Wall Street by massive debt and who is ultimately able to rule the world. The villagers (debted countries) will be powerless! What horror! What terror! What a mess!
By Myron Gushlak
a few acres of snowIt is that sort of dismissive comment that has made us Canadians particularly proud of our musical heritage. Joni Mitchell, Leonard Cohen and Neil Young, all rock icons, hail from Canada. You might be asking yourself, what does Myron Gushlak know about music? and why should I be listening to an investment banker about what is any good? While my association with the formation of EMusic has given me cache in the financial world, it is probably not enough to get a job at Rolling Stone. So it was with no little skepticism that I listened to the Canadian group The Arcade Fire.
Though not a particularly new group, (they have been around for almost five years with two best selling CDs under their belt) they are relatively unknown outside of the Indie music scene. This is unfortunate. Not for them. Theyre doing quite well thank you, but for the masses of people who have yet to hear them. Led by Win Butler and his wife Regine Chassagine they are a vibrant tour de force of music. Besides the usual drums, guitar and bass, they incorporate such un-rock-like instruments as the accordion and the harp. Their music fills a room. I was fortunate enough to see them at Radio City Music Hall in New York, so obviously they are not unknown. Their stage act seems to incorporate a small army of versatile musicians. Violins, brass, percussion, fantastic harmonies and stunning lyrics make them a banquet both audibly and visually. I did not necessarily intend this to be a commercial for the band, but once you see them, youll understand why Im so enthusiastic about them. Their 2008 tour is over after 122 shows in 75 cities in 19 countries, so your best bet at seeing them is U-Tube. Check out the one where they’re all playing in an elevator.
And to make it all too sweet for words, theyre Canadian!!!
http://www.youtube.com/watch?v=NNfWC4Sgkcs
By Myron Gushlak
Chinas recent investment (I hesitate to use the word “bailout”) in the struggling US companies, Morgan Stanley and Blackstone Group has raised more than a few eyebrows. And Chinas SWF investments are less than a quarter of what the Abu Dhabi Investment Authority currently holds. Most sovereign funds do not disclose exactly where their money is being invested. The obvious big issue is whether these investing countries will continue to use Sovereign Wealth Funds solely as financial investments, or will they begin to use their power as political muscle. According to Lawrence Sommers, the former United States Treasury Secretary, right now the goal of these funds is
to maximize the value of their shares.But, he cautions,
It is far from obvious that this will over time be the only motivation of governments as shareholders.
For a financial guy, this makes me giddy. This is as exciting as human g-nome developments to biologists. I wish I could fast forward a few years to see how this all plays out. The trenches of the next world war may be on the stock market floor, and the soldiers may all be wearing suits, pardon the hyperbole. Just thinking about this is like chugging a can of Red Bull. Now Ill never get to sleep.
By Myron Gushlak
Mr. Cleanbeing tied to a prostitute, no pun intended.
You can consider it a flaw in my personality if youd like. I have no defense. I also laugh when evangelist preachers are implicated in fraud or sex scandals…Priests with young boys? Yeah, I snickered a few times. I dont know why. I dont laugh when people trip and fall on the street, but I probably would if they first bragged to everyone that they were such great walkers. I agree with George Orwell who said
saints should always be judged guilty until they are proven innocent.Ill stop smiling soon. Really. Sorry to hear of your news, Mr. Spitzer. Really. I mean it.
By Myron Gushlak
Philanthropy is a slippery slope. It invites criticism. No matter how well intentioned, it makes people uneasy. It sometimes makes the giver look foolish. No one wants to be like John Rockefeller who became a living caricature by handing out dimes to everyone he met on the streets. The nicest thing I could find written about it was uttered by Oscar Wilde who called philanthropy
"the refuge of rich people who wish to annoy their fellow creatures."While I admit to smiling at the quote, I embark on my new endeavor with great optimism and enthusiasm. I know what Im in for, but Im going to do it anyway.
Check out the new website at: www.myrongushlakfoundation.com
By Myron Gushlak