FM newswire, 13 November – links to old-fashioned journalism

Today’s broadsheet from the FM website pressroom.  There are 5 sections, all with hot news.

  1. Links to interesting news and analysis
  2. News, updates to posts past on the FM website
  3. Quote of the Day, advice from Talleyrand
  4. News about themes from posts past on the FM website
  5. Note from the past – about the French Foreign Legion
  6. Plus, an Afterword

(I)  Links to interesting news and analysis

(a)  A wake-up call for America“, David Weild and Edward Kim, Grant Thornton, November 2009 — Changes in the US financial system have damaged small-businesses, undermined job creation, and US competitiveness.

(b)  Beyond California: States in Peril“, Pew Center on the States, November 2009 — “California’s financial problems are in a league of their own. But the same pressures that drove the Golden State toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country.”

(c)  Air John Dillinger“, Fred Reed, at his website, 6 November 2009 — America’s commercial decline made manifest, a tangible example of what’s wrong with America’s big businesses.

(d)  US Envoy Urges Caution on Forces for Afghanistan“, New York Times, 12 Novembner 2009 — “The United States ambassador to Afghanistan, who once served as the top American military commander there, has expressed in writing his reservations about deploying additional troops to the country, 3 senior American officials said Wednesday.”

(e)  I never believed the letters I read in Penthouse until it happened to me“, Claire Berlinski (author, photo here), posted at Learning to Fight, 11 November 2009 — Yes, some magazines still do rigorous fact-checking.  Just not the ones you expect.  It’s worth reading!

(II)  Quote of the Day, advice from the past

One Does It Like This“, a review of Napoleon’s Master: A Life of Prince Talleyrand by David Lawday, reviwed by David A. Bell, London Review of Books, 16 November 2006 — Subscription only.

… Talleyrand developed very early on a cautious and consistent vision of international relations. It was grounded in the Enlightenment conviction that the age of war had given way to the age of commerce, making military conquest fundamentally counterproductive, even when waged for a just cause. In 1799, Talleyrand would tell the French parliament that ‘any system intended to bring liberty by open force to neighbouring nations can only make liberty hated and prevent its triumph.’

(III)  Updates from posts past on the FM website

(a)  There are still too many houses“, Fortune, 11 November 2009 — “House prices have pulled out of their free fall, but don’t expect them to recover until we work through a huge property glut.”  After 2 years, the mainstream media at last see the root of the problem!  For more about this topic see:

(b)  Tension grows between China and India as Asia slips into cold war“, The Times, 12 November 2009 — For more about this, China’s construction of a string of pearls around the world, see:

(IV)  Note from the past – about the French Foreign Legion

Short Cuts“, Daniel Soar, London Review of Books, 14 August 2008 — A brief, interesting history of the Legion.

(V)  Afterword

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10 thoughts on “FM newswire, 13 November – links to old-fashioned journalism”

  1. “But back when I was a youngster, you had to get your Penthouse by means of a character-fortifying and profoundly embarrassing trip to the porno shop. We’ve made everything too easy for the kids these days. They’re decadent, I tell you.”

    Time your approach so that the shop is almost empty. Never look the sales clerk in the eyes. Don’t make any sudden movements.

  2. Another issue: “As Shipping Slows, Banks and Carriers Fear Loan Defaults , New York Times, 11 November 2009 — Opening:

    When Eastwind Maritime, a medium-size carrier company, went bankrupt this summer, few banks in the United States took notice. But in Europe, where banks hold over $350 billion of increasingly dubious shipping industry loans, the inability of Eastwind, which is based in New York,to handle its debt of more than $300 million set off an anxiety attack on lending desks across the Continent.

    The collapse of Eastwind Maritime, analysts say, while small, could well be a harbinger of more carrier failures to come. And for Europe’s struggling banks, already plagued by a toothless economic recovery and continuing losses in real estate, the emergence of yet another questionable category of loans adds to fears that many of them are lagging their counterparts in the United States in overcoming the financial crisis.

    FM reply: This has little significance to the overall global economy, although might hurt some German banks. The shipping industry overbuilt container carriers, and is suffering as a result. The breaker yards of China and India have more business than they can handle. The best source of information about shipping is Transport Trackers in Hong Kong. Here is the “free stuff” section of their website.

  3. the “short cuts” link goes to an article on cell phone tracking, nothing about the Foreign Legion.
    FM reply: The link is formatted correctly, and works for me. Might your PC have a virus?

  4. The free stuff link worked for me, and the Big Mac vs. price of the Economist was a pretty cool quick article, with nice charts and good, brief explanation below.

    The Big Gov’t caused financial crises (of rich folk believing house prices could never come down, and investing/ speculating on that WRONG belief, but not wanting to pay for being wrong) is causing calls for more force and rapid solving of the problems, w/o pain — not possible.

    The result of increasing gov’t is possible, sad, and wrong.

    Tax cuts (and deficits) would do a far better job of assisting recovery; and better bankruptcy for the unneeded big banks would also help.

  5. Air John Dillinger. Ah yes most US airlines are completely dismal, I once made an off hand comment about this on a Delta flight to a fellow passenger and almost started a riot of disgruntled passengers it was hilarious.

    Firstly one must appreciate that Americans demand a much higher level of service in general than people in other western countries – often to a level that is considered obtrusive pandering in other places, and when they don’t get it they don’t suck it up like the Japanese they complain long and nosily about it. So one must take American complaints with a grain of salt – and consider whether the author’s food was inedible or they just didn’t get their favorite brand of pastrami on it.

    Even so by objective measures the US airlines are woeful. And they are not alone. Telecoms is another obvious big example all the way down to car rental firms.

    The conventional view of why this is, is because of cost cutting. But there are good lower cost airlines all over the world these days and nowhere are they as bad as the major carriers in the US. Indeed the low cost jet blue is one of the better ones.

    I think there are two things happening. Firstly US management is pretty bad. Which is surprising since the practically invented modern management. But it’s something that has been commented on by several colleagues in of various countries over the last 20 years often right out of the blue. This makes Us firms inflexible and not very competent and growing increasingly so as the management skill levels decline.

    But a much bigger influence has been the reengineering wave of the 80s has taught a new generation of workers to be completely narcissistic. I regularly see professionals who have to be essentially bribed to do their jobs properly. Fewer and fewer people are building a career in any sense – they are just doing what is necessary to make money.
    It takes 20 years (not necessarily or preferably in the same company) to really understand a profession and reach the peak of productivity and yet people are willing to throw away 10 years expertise in a field and change to another unrealated one to chase a better income. And of course that is the logical ting to do. But this is having a terrible effect on competencies across the board.

    Of course the correct way to think of these things is that people are being ‘incentivised’ and the US workforce is famously ‘flexible’.

    I tell my friends to work harder and longer because the same system is in place in China and the incentivisation of moving from a poor peasant village to the city, and the flexibility of doing anything required, anywhere required, 6 days a week for 20 years without more than a few days holiday a week anywhere required is going to be pretty tough to beat.

  6. Last time I was in Mumbai a delegation from a western Chinese province was there to assess investment opportunities. Some Chinese manufacturers were considering setting up a factory or a dozen to supply the South Asian market. It isn’t just walmart that is importing huge amounts of stuff from China, everywhere else including India is too.

    The praise that India had got from the US (playing their usual geopolitical games) had gone to their heads and they were talking about how they (along with China) were the future. Together it would be the Asian century !

    So it was with Indian horror when the delegation announced their findings: that India’s infrastructure wasn’t up to scratch in fact it was so bad that not even the underdeveloped boondocks of China thought they could make money investing in the place. India should maybe call them again in 20 years when they had left the stone age and meanwhile they were off to visit some promising sites in Nigeria.

    It’s notable that Indian feeling towards China went rapidly downhill after that time. Perhaps it’s completely unrelated but if the Indians love anything above all else it’s a melodrama.

  7. “A wake-up call for America“ is rather bizarre.

    I thought it was well known that IPOs have plummeted in the US but I haven’t seen such a complete summary.

    But the reasoning is very strange. If the basic problem is misallocation of capital in the economy by all those unwashed uninformed day traders then:
    1) isn’t it supposed to be self correcting – the day traders lose and the smart investors reap the rewards
    2) having seen behind the scenes of a couple of assessments done by name brand traders – I’m not impressed with their firm grip on reality particularly in that face of possible windfall profits.
    3) How many day traders or day trading brokerages have been bailed out recently – as opposed to say the smart well dressed people at Goldmans?
    4) The logic of drop in research into small cap companies is flawed – if Cassino Capitalism was in place then by definition nobody needs the research. Small companies should benefit as it lifts a competitive advantage large cap companies had due to more attention.
    5) The brain drain in market research is just hand waving, saying that customers are discarding the research because it was useless, is completely different to the “shattering of the record industries pricing model” – where the customers still value the product and if anything are consuming more of it, just not though the previous channels. If anything it would be better if the ‘napster effect’ had occurred there would be more research.
    6) Pointing at the peaks of the graphics as when deregulation occurred is mere coincidence. Bans started buying up financial firms in 1999 which wasn’t seen as big enough to mention ha ha ho ho – but that still has nothing to do with the peak of the market.

    One of the effects of all these bubbles is that not only are all companies forced to worry about short term valuations but they have to cook the books to just stay competitive with the fantastic returns that the bubble is creating in certain segments. After every bubble there is a crash not only from the drop in valuations but because all the shenanigans that people put in place just to keep up with the market are revealed. This is a big hit on the long term productivity of businesses.

    While there is an excellent summary of the state of the stock markets and some the effects on business of having a casino for a stock market the conclusions are very strange coming from a warped broker centric view of the overall economy, nostalgic and simply unworkable.

    The real solutions – none of which you see being put in place btw – are to manage the stock market realizing that there will always be some unproductive casino element but that the local bank manager shouldn’t be down there wagering away the deposits (put glass-steagall back in place), the house(s) shouldn’t be able to invent whatever games they like in their (quite natural) attempts to quietly screw their customers with sophisticated games that look much better then they are (directly regulate derivatives).

  8. Oblat.
    Totally agree. Keynes noted that “liquidity” in the sense that traders could hop in and out of investments like fleas on a dog, was antithetical to the notion of true investment. He noted and lamented how the “musical chairs”, and “Old Maid” mind set among traders lead to foolish behavior. Foolishness, and stupidity are hard to wring out of any market unless and until the foolish and the stupid get burned.
    FM note: This is an important point, never so vital as today. The reference is to one of Keynes most famous observations, from “The General Theory of Employment, Interest and Money” — Chapter 12, The State of Long-Term Expectation. Excerpt:

    This battle of wits to anticipate the basis of conventional valuation a few months hence, rather than the prospective yield of an investment over a long term of years, does not even require gulls amongst the public to feed the maws of the professional; it can be played by professionals amongst themselves. Nor is it necessary that anyone should keep his simple faith in the conventional basis of valuation having any genuine long-term validity. For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs—a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops. These games can be played with zest and enjoyment, though all the players know that it is the Old Maid which is circulating, or that when the music stops some of the players will find themselves unseated.

    Or, to change the metaphor slightly, professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.

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