Sunday, May 4, 2008

Weekend Reading

Here is a list of some interesting stories

I am putting the first group together first because they are by my favorite journalist, Fareed Zakaria. He has a new book out called "The Post-American World". I have yet to work through the entire body of the articles as they are immense (20-30 minute reads!) but from what I have read so far he is summarizing in a much more polished manner many of the ideas I have been proposing; ideas I believe an inward looking America is not accepting. I look forward to completing the texts and if you are not reading this gentleman (his homebase is Newsweek but you can sometime catch him on TV - he even makes The Daily Show seem more brilliant), you should.

I have a lot of solutions but most involve the absolute eradication of Washington D.C. :) He offers a few as well, and has a still bright outlook on the future. I think these articles are so important to understand, I'd rather you read them than anything in this blog... this week. (make sure you come back next week) ;)

First of 2 long summaries - The Future of American Power; How America Can Survive the Rise of the Rest
Summary: Despite some eerie parallels between the position of the United States today and that of the British Empire a century ago, there are key differences. Britain's decline was driven by bad economics. The United States, in contrast, has the strength and dynamism to continue shaping the world -- but only if it can overcome its political dysfunction and reorient U.S. policy for a world defined by the rise of other powers.

Newsweek: The Rise of the Rest
It's true China is booming, Russia is growing more assertive, terrorism is a threat. But if America is losing the ability to dictate to this new world, it has not lost the ability to lead. American anxiety springs from something much deeper, a sense that large and disruptive forces are coursing through the world. In almost every industry, in every aspect of life, it feels like the patterns of the past are being scrambled.

Or for a Cliff's Notes - here is a quick audio from NPR

WSJ: Credit Crunch Sends More Consumers to the Sidelines
  • As hundreds of companies reported earnings during the past two weeks, their chief executives had a common refrain: consumers are worried and are cutting back on everything from premium coffee to motorcycles.
  • "We've really seen, in the U.S., a slowdown across all products, all vintages, all geographies," American Express Co. Chief Financial Officer Dan Henry said in his company's earnings call last month.
WSJ: Economic May Face Prolonged Pain, History Suggests
  • The worst of the financial pain may have passed, but the economic pain could be just starting. But history suggests celebration may be premature. It's common in a crisis for markets to hit bottom long before the economy does.
NYTimes: Auction Rate Security Market is Frozen. Investors Trapped. But Wall Street Still Finding a Way to Make Money... off of the Crisis, in fact. (Summary: the individuals in this country are taken for fools; and Wall Street always wins in the end - hence go long Goldman Sachs)
  • It is Day 79 in the hostage crisis otherwise known as the auction-rate securities market. Some $300 billion worth of investors’ funds — advertised as being easy as pie to cash in — are still locked up. And the brokerage firms that got investors into this mess are doing little to help.
  • But investors trapped in these securities are not the only victims of this debacle; taxpayers are, too. That’s because municipal issuers of auction-rate notes — towns, school districts, hospitals, highway authorities and others — are being asked to pay up to redeem and restructure the debt.
  • Even as investors and taxpayers are hurt by this frozen market, Wall Street is making money from it. In fact, the auction-rate securities mess is another illustration of damaging conflicts of interest at the nation’s big brokerage firms.
  • Naturally, investment bankers who agreed to operate these auctions were paid for their services: 0.25 percent of the security’s total issue for each year of its life. Unnaturally, big firms still earn these fees even though 70 percent of the weekly auctions of these securities are failing.
NYTimes: Economist (Democrat) and former VP of Federal Reserve Alan Blinder on the case for a "Newer" Deal
  • PART of the New Deal was a new financial deal. The shameful shenanigans leading up to the 1929 stock market crash and the frightening wave of bank failures during the Depression led directly to the creation of the Securities and Exchange Commission and the Federal Deposit Insurance Corporation.
  • As we emerge from this, the worst financial crisis since the 1930s, a New Financial Deal may follow. If so, what should some of the reforms be? A warning to laissez-faire-minded readers: The following is mostly about the dreaded “R” word — regulation. But I’m afraid that we need more of that, starting in the mortgage market.
NYTimes: Even the Insured Feel the Strain of Health Insurance
  • The economic slowdown has swelled the ranks of people without health insurance. But now it is also threatening millions of people who have insurance but find that the coverage is too limited or that they cannot afford their own share of medical costs.
  • Many of the 158 million people covered by employer health insurance are struggling to meet medical expenses that are much higher than they used to be — often because of some combination of higher premiums, less extensive coverage, and bigger out-of-pocket deductibles and co-payments.

NYTimes: The Rebates Might Not go to the Mall
  • Everyone is counting on these rebates to push up restaurants, retailers, homebuilders - anything and everything discretionary. What's the reality? Well polls are polls so take them at face value but this chart shows, all these hopeful bulls awaiting these rebate checks to save their "early (economic) cycle" stocks might be disappointed. Oh well, that's a worry for another day - now we rally on the hope that none of the below is true (12% spent on discretionary items). has some interesting stories
  1. How the Mortgage Industry Nurtured Deceit - a touching piece on the "liar's loan" or "stated income" loan
  2. How Bad Could it Get? - Will the Recession (what recession, no recession here folks!) be more like 1990-1991, or the Great Depression?
  3. Is India More Equal than the United States - we know income inequality is far less pronounced in "the socialist" Scandinavian countries, but even India has less divergence? Hmm... perhaps we need to rethink how we measure?
  4. John McCain and his Money - What the Candidate's Investing Strategy Says About his Character
NYTimes: Thomas Friedman asks "Who Will Tell the People?" - We are not who we think we are - we are living on borrowed time and borrowed dimes.
  • Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America.
  • We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans.
  • And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore ... have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.”
We continue to live in some of the most amazing times with some of the biggest shifts in history. Until we stop fighting and start acting, much of it is going to simply pass us by. Read Zakaria.

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