How Palin Destroyed the Republican Party
This post might be a bit premature as the official tally has yet to come in. Nevertheless, with a strong 10 point lead over McCain in the latest Gallup poll, I think it is pretty safe to say Obama will likely come out on top. If I am wrong, well this post will clearly be irrelevant. Nevertheless, the past 8 years have put the Republican party in a bit of a bind. Since 1980, the Republican Party has been the party of Ronald Reagan. Following the Watergate scandal, Reagan helped re-legitimize the party, by forging an unholy alliance between Middle American and big business. The Wall St. Republicans were willing to concede social issues to Middle Americans, while the Middle Americans were willing to concede economic issues to the Wall St. Republicans. It must be remembered that as recently as 20 years ago, liberal bastions such as Connecticut and New Jersey were voting Republican in national elections. In many ways, George W. Bush was a natural heir to the party's thrown, with a foot in Connecticut big business and a foot in Texas Born-Again Christianity and Conservatism. In effect, Bush's ascension to power within the Republican ranks was the logical conclusion of Reagan's Unholy Alliance. However, as Bush's presidency floundered between unnecessary wars, growing deficits and more recently, the economic crisis, Bush in many ways tore down the legitimacy of Reagan's ideology, the heart and soul of the Republican Party.
As a result, the Republicans currently find themselves at a crossroads. Despite having the presidency and majorities in the House and Senate as recently as 2004, all of the party insiders from that era seem to have the equivalent of political leprosy. The party's views on foreign policy and economics have been discredited and there seems to be no one ready to step into a leadership position. This was most notable during the primary season, given the lack of quality Republican candidates. Mitt Romney was accused of being a Mormon robot and failed to so well in any of the primaries. Rudy Guliani is well, Rudy Guliani, a New York Paleocon, hated by liberals and Middle Americans alike. Ron Paul was probably the most interesting candidate, although slightly insane, he appealed to Wall St., libertarians and for some reason younger Republicans. At the end of the day McCain, a strong contender in 2000, who had since sold his soul to get elected, was chosen. However, aside from Ron Paul, who will probably always be relegated to the roll of something of a circus freak in national politics, the only contender who seems to have a future on the national stage is Mike Huckabee from Arkansas.
Arguably, Huckabee and Palin are going to be left as the two strongest leaders of the Republican party out of this election, however both pose the greatest threat to the integrity of the Republican party. For years, the Republican Party secured victory after victory by getting poor whites to vote against their interests with big business money. However, in the last election cycle there has been a marked change. Obama secured an enormous fund raising advantage, partially through small donors, but largely through big businesses like Goldman Sachs, turning against the Republicans. It has been documented that Wall St. the historic Republican stronghold is likely to vote for Obama 2 to 1 in this election, even with the relative centrist, pro-free market McCain at the helm. Huckabee and Palin represent a sharp departure from this.
Huckabee and Palin are not Republicans in the broader sense. Rather, they are purely Republicans based on social issues, military and Middle-American nationalism. Despite large support amongst individual voters, Huckabee had a miserable time raising money throughout the primaries, as the wealthier faction of the party turned on his more populist economic principles. Palin on the other hand came off as a joke and an offense to the more educated and centrist factions in the party. While both enjoy large support in the conservative, Born-again Christian base, that is not enough to win outside of the Southern and Plains States. In the end, this direction will only serve to alienate more Centrist voters, especially considering the majority of Americans already have an unfavorable opinion of Palin. At the end of the day, the Bush presidency has discredited the central tenants of the Republican party. As a result, the party has been left without any centrist rising stars from this cycle and threatens stear in a more anlienating direction, thus breaking up Reagan's unholy alliance between Wall St. and Middle America.
Tuesday, November 04, 2008
Monday, November 03, 2008
To Have and to Have Not
Anyone who's kept up with me over the past few years might have noticed a pretty marked conservative shift in my thinking over the past few years. While in high school and the early part of college, I definitely was leaning pretty strongly in favor of socialism, recently I've begun gravitating more towards libertarianism or neo-liberalism. In Resurrection, Tolstoy makes the observation that people tend to adapt their moral beliefs to justify their profession. A prostitute, he claims, believes that she is performing a most necessary duty for humanity, as men first and foremost need sexual satisfaction. I can't say I've had too many interactions with prostitutes, so I'll just have to trust Tolstoy on this one.
Since getting out of college, I've decided to embark on a career in finance. I chance job offer in Oklahoma got me started down the path, where I found that it's actually a really interesting subject and I am not all that bad at it, despite very little formal training. As a result, finance has become my most recent obsession, taking the place of Russian literature. Naturally, my views on economic policy have shifted a bit as I've learned a bit about it. Living in the remains of "Socialist Paradise" has also made a strong impression on my world view, as every day, I see the legacy of 70 years of socialist rule. In any case, over the past few months, there has been one question that still gnaws at me, probably one of the central questions in defining a person's political outlook: why are some people rich and some people poor?
Before I embarked on my journey to the heart of the financial beast, I generally attributed social inequality to dumb luck. I have met more than my share of rich idiots, who have landed cushy jobs merely through of family connections and massive inheritances to boot. On the other hand, I've met plenty of smart, ambitious people, who for whatever reason will remain poor for the rest of their lives. Take Verkhny Lomov, the Russian village I visited a few weeks back. If you are born in a village with in the middle of nowhere, with no indoor plumbing, limited educational opportunities, odds are you won't be able to rise out of it, no matter how brilliant you are. Even when you think about it, genetic gifts boil down to little more than pure and simple dumb luck. My tag line from that era was, "What separates me from a poor, crippled, Somali orphan? Luck."
However, on the other end of the spectrum, we have to realize that life just isn't fair. One thing that annoys me about American society, as anyone who reads this blog might pick up on, is the tendency for Americans to complain. I mean, really, life in America is not all that hard. It's designed not to be. In the summer of '07, when I was in California, one person who I talked a great deal to was my brother's bitter, 45-year old, unemployed roommate Joe. Joe grew up around Chicago in a working class family. Dropped out of High School and moved out to California on a whim. I guess he worked a bunch of odd jobs and at some point along the way got a GED, except like every other bitter, stupid liberal, he fancied himself to be much smarter and more educated than he really was. All he ever wanted to do was bitch about how the system was fixed. For the first day or two, it was interesting to have a lively debate. It quickly dawned on me, that he spent his life sitting in front of a computer, reading the latest conspiracy theory blog, churning over the same-old, ridiculous ideas. At the end of the day, Joe is 45, unmarried, unemployed, studying at community college and living off student loans. While unquestionably, there may have been some circumstances in his life that made him less likely to succeed in life, he still could've done much more to improve his lot. Really, is it anyone else's fault that he is bitter and miserable or did he just piss away every opportunity he was given?
Anyone who's kept up with me over the past few years might have noticed a pretty marked conservative shift in my thinking over the past few years. While in high school and the early part of college, I definitely was leaning pretty strongly in favor of socialism, recently I've begun gravitating more towards libertarianism or neo-liberalism. In Resurrection, Tolstoy makes the observation that people tend to adapt their moral beliefs to justify their profession. A prostitute, he claims, believes that she is performing a most necessary duty for humanity, as men first and foremost need sexual satisfaction. I can't say I've had too many interactions with prostitutes, so I'll just have to trust Tolstoy on this one.
Since getting out of college, I've decided to embark on a career in finance. I chance job offer in Oklahoma got me started down the path, where I found that it's actually a really interesting subject and I am not all that bad at it, despite very little formal training. As a result, finance has become my most recent obsession, taking the place of Russian literature. Naturally, my views on economic policy have shifted a bit as I've learned a bit about it. Living in the remains of "Socialist Paradise" has also made a strong impression on my world view, as every day, I see the legacy of 70 years of socialist rule. In any case, over the past few months, there has been one question that still gnaws at me, probably one of the central questions in defining a person's political outlook: why are some people rich and some people poor?
Before I embarked on my journey to the heart of the financial beast, I generally attributed social inequality to dumb luck. I have met more than my share of rich idiots, who have landed cushy jobs merely through of family connections and massive inheritances to boot. On the other hand, I've met plenty of smart, ambitious people, who for whatever reason will remain poor for the rest of their lives. Take Verkhny Lomov, the Russian village I visited a few weeks back. If you are born in a village with in the middle of nowhere, with no indoor plumbing, limited educational opportunities, odds are you won't be able to rise out of it, no matter how brilliant you are. Even when you think about it, genetic gifts boil down to little more than pure and simple dumb luck. My tag line from that era was, "What separates me from a poor, crippled, Somali orphan? Luck."
However, on the other end of the spectrum, we have to realize that life just isn't fair. One thing that annoys me about American society, as anyone who reads this blog might pick up on, is the tendency for Americans to complain. I mean, really, life in America is not all that hard. It's designed not to be. In the summer of '07, when I was in California, one person who I talked a great deal to was my brother's bitter, 45-year old, unemployed roommate Joe. Joe grew up around Chicago in a working class family. Dropped out of High School and moved out to California on a whim. I guess he worked a bunch of odd jobs and at some point along the way got a GED, except like every other bitter, stupid liberal, he fancied himself to be much smarter and more educated than he really was. All he ever wanted to do was bitch about how the system was fixed. For the first day or two, it was interesting to have a lively debate. It quickly dawned on me, that he spent his life sitting in front of a computer, reading the latest conspiracy theory blog, churning over the same-old, ridiculous ideas. At the end of the day, Joe is 45, unmarried, unemployed, studying at community college and living off student loans. While unquestionably, there may have been some circumstances in his life that made him less likely to succeed in life, he still could've done much more to improve his lot. Really, is it anyone else's fault that he is bitter and miserable or did he just piss away every opportunity he was given?
Saturday, November 01, 2008
An Idea that Will Piss Everyone Off, but Just Might Work
As my life has descended into chaos this week, I haven't had much time to update this blog. I hope my dear readers don't mind. I've been meaning to write a big piece in defense of Russia in the financial crisis, but it will probably have to wait til next week. In any case, the markets are up 43% or something this week, so it seems the market has beaten me to the punch.
In any case, the American economy is the really interesting story in the world, right now, of course. As I've been harping upon in a few of my recent posts, the real culprit seems to me to be our current account deficit. We've spent more than we've earned recently. While America is still the world's third largest exporter, behind Germany and China, totaling around $1.15 trillion in 2007, our production is nowhere near enough to make up for our consumption. As I mentioned in a previous piece, the United States' current account deficit stood at $800 billion or 5.8% of GDP over the same period.
The structure of the American economy that has developed over the past few years is largely to blame for our current trade imbalances. In 2007, only 23.2% of the work force was dedicated to agriculture or manufacturing. The remainder was dedicated to management and the service sector, effectively making our consumption more efficient but not helping solve our problems of over-consumption. As I stated in my last piece, unions have been a major part of the problem, as they have driven manufacturing wages up in the country, making production in America uneconomical. Additionally, the United States has undergone a gentrification over the past 40 or so years. Today, many Americans regard blue collar jobs as beneath them and demand extra pay to occupy those positions.
Nevertheless, just south of the border there are hoards of people who are willing to work blue collar jobs for minimal pay, who can't get visas to work in America. If we were to begin employing workers from Latin America under a special visa plan, allowing employers to give them work at below the current minimum wage, we could easily provide a much needed boost to American industry, even providing businesses incentives for moving industries such as textiles and other consumer goods to move back to America. Many will see the plan as inherently racist, but at the end of the day, these people are not American citizens and it is their choice. Besides, race would not be a criteria, merely country of origin and we already employ those restrictions. Ask any Russian how hard it is to get a US visa. Relaxing requirements for these new visas would provide the American economy with much needed, cheap workers in the manufacturing sector, and at the end of the day, it would just legitimize and bring under a legal umbrella a system that already exists.
As my life has descended into chaos this week, I haven't had much time to update this blog. I hope my dear readers don't mind. I've been meaning to write a big piece in defense of Russia in the financial crisis, but it will probably have to wait til next week. In any case, the markets are up 43% or something this week, so it seems the market has beaten me to the punch.
In any case, the American economy is the really interesting story in the world, right now, of course. As I've been harping upon in a few of my recent posts, the real culprit seems to me to be our current account deficit. We've spent more than we've earned recently. While America is still the world's third largest exporter, behind Germany and China, totaling around $1.15 trillion in 2007, our production is nowhere near enough to make up for our consumption. As I mentioned in a previous piece, the United States' current account deficit stood at $800 billion or 5.8% of GDP over the same period.
The structure of the American economy that has developed over the past few years is largely to blame for our current trade imbalances. In 2007, only 23.2% of the work force was dedicated to agriculture or manufacturing. The remainder was dedicated to management and the service sector, effectively making our consumption more efficient but not helping solve our problems of over-consumption. As I stated in my last piece, unions have been a major part of the problem, as they have driven manufacturing wages up in the country, making production in America uneconomical. Additionally, the United States has undergone a gentrification over the past 40 or so years. Today, many Americans regard blue collar jobs as beneath them and demand extra pay to occupy those positions.
Nevertheless, just south of the border there are hoards of people who are willing to work blue collar jobs for minimal pay, who can't get visas to work in America. If we were to begin employing workers from Latin America under a special visa plan, allowing employers to give them work at below the current minimum wage, we could easily provide a much needed boost to American industry, even providing businesses incentives for moving industries such as textiles and other consumer goods to move back to America. Many will see the plan as inherently racist, but at the end of the day, these people are not American citizens and it is their choice. Besides, race would not be a criteria, merely country of origin and we already employ those restrictions. Ask any Russian how hard it is to get a US visa. Relaxing requirements for these new visas would provide the American economy with much needed, cheap workers in the manufacturing sector, and at the end of the day, it would just legitimize and bring under a legal umbrella a system that already exists.
Monday, October 27, 2008
There is Power in a Union
When Billy Bragg wrote those words in 1986, the US and UK were standing at an economic crossroads. For years, unions had been an important economic force in both nations, protecting workers rights. They had been helpful in the creation of the middle class in both countries, however in the 1980s their power began to wane. Many blamed the conservative Reagan and Thatcher for their administrations, rather than accepting the economic reality. While in the past unions have been an extremely useful defender of their workers, right now they are part of the problem, not part of the solution.
The US manufacturing sector has been an unquestionable loser of globalization. In 1964, manufacturing accounted for 27% of GNP and 24% of the workforce, while in 2004, it accounted for 13.8% and 10.5% respectively. In order to offer competitive prices, many American companies have been forced to shift operations overseas in recent decades. Even though Americans manufacturing sector is the most efficient in the world, it is still unprofitable for most companies to maintain operations in America as a result of high labor costs.
Union factory workers in America are often paid far more than the average American. In 2007, unskilled United Auto Worker members for instance are paid an average hourly wage $27.81 an hour or about $58,000 a year, compared to a per capita income of $46,000. While factory workers in America were once making slave wages, the union members of today are doing OK, however their firms are not. The Big 3 automakers, Ford, General Motors and Chrysler are on the knees right now, posting record losses and holding enormous pension-related liabilities, partially as a result of mismanagement, but also a result of their employment costs. Yet, their unions are unwilling to renegotiate their pension liabilities. As a result an everyone loses situation is developing. The Big 3 will likely be forced into bankruptcy, closing plants, laying off workers and eliminating workers' pensions.
When I was working in Oklahoma, my work involved a project with a tire plant that was closing its doors. The company tried to renegotiate with the union, offering to keep the plant open if they could cut salaries by 30%, however union officials refused out of fear of setting a bad precedent.
Many in the media have been critical of Wall St. banks for sacrificing the greater good in the search of short term profit. I fail to see how the unions are any different. While the unions at one point served a great purpose, they need to accept the fact that their members are now firmly in the middle class, and their stuborness will only cause more manufacturing jobs to leave the country.
When Billy Bragg wrote those words in 1986, the US and UK were standing at an economic crossroads. For years, unions had been an important economic force in both nations, protecting workers rights. They had been helpful in the creation of the middle class in both countries, however in the 1980s their power began to wane. Many blamed the conservative Reagan and Thatcher for their administrations, rather than accepting the economic reality. While in the past unions have been an extremely useful defender of their workers, right now they are part of the problem, not part of the solution.
The US manufacturing sector has been an unquestionable loser of globalization. In 1964, manufacturing accounted for 27% of GNP and 24% of the workforce, while in 2004, it accounted for 13.8% and 10.5% respectively. In order to offer competitive prices, many American companies have been forced to shift operations overseas in recent decades. Even though Americans manufacturing sector is the most efficient in the world, it is still unprofitable for most companies to maintain operations in America as a result of high labor costs.
Union factory workers in America are often paid far more than the average American. In 2007, unskilled United Auto Worker members for instance are paid an average hourly wage $27.81 an hour or about $58,000 a year, compared to a per capita income of $46,000. While factory workers in America were once making slave wages, the union members of today are doing OK, however their firms are not. The Big 3 automakers, Ford, General Motors and Chrysler are on the knees right now, posting record losses and holding enormous pension-related liabilities, partially as a result of mismanagement, but also a result of their employment costs. Yet, their unions are unwilling to renegotiate their pension liabilities. As a result an everyone loses situation is developing. The Big 3 will likely be forced into bankruptcy, closing plants, laying off workers and eliminating workers' pensions.
When I was working in Oklahoma, my work involved a project with a tire plant that was closing its doors. The company tried to renegotiate with the union, offering to keep the plant open if they could cut salaries by 30%, however union officials refused out of fear of setting a bad precedent.
Many in the media have been critical of Wall St. banks for sacrificing the greater good in the search of short term profit. I fail to see how the unions are any different. While the unions at one point served a great purpose, they need to accept the fact that their members are now firmly in the middle class, and their stuborness will only cause more manufacturing jobs to leave the country.
Sunday, October 26, 2008
Evraz: Short-Term Pain, Long-Term Gain
The collapse of the Russian stock market has been one of the more surprising events of the past year. Russia is probably in one of the strongest positions in the world to withstand the crisis, given it's large current account surplus, relatively low leverage levels across the private sector and continued strong economic growth. While Western nations are currently panicking over the prospect of a recession, Russia is likely to produce just shy of 8% economic growth this year, and economists are predicting 5% economic growth next year. Yet despite all this, the RTS index is down around 80% from it's May highs, currently trading with a PE of about 3.
There have been a number of reason's for RTS's precipitous decline. To put it mildly, Putin hasn't exactly done a great job on the PR front this year. While the war with Georgia is debatable, his comments and actions regarding Mechel were just plain stupid. Nevertheless, the reaction by Western investors was also overstated. While fears of repeat of Yukos are understandable, it is an extremely unlikely scenario for a number of reasons that I won't get into here, for the sake of brevity. Still, Putin's comments merely served to increase investors' perceptions of Russia as a risky nation, right at a time when investors were shunning risk. Additionally, outside of the country's oligarchs, Russia has few long-term, value investors. Western hedge funds, investment banks and investment managers account for the majority of the volume on Russia's stock exchanges, resulting in a lack of long-term investors, who would be willing to put in a floor. Consequently, many foreign investors have simply pulled their money out of fear that other western investors would pull their money, resulting in margin calls and more selling. Finally, falling commodity prices have also put significant downward pressure on the markets.
Still, the RTS is trading at such a discount right now, it seems as if some investors are pricing in the Apocalypse. While losses on the RTS will likely continue over the next month as hedge funds continue to sell off assets to meet investor redemptions, Russian stocks are a screaming buy right now. First echelon companies with strong financials like Gazprom and Lukoil are trading with PEs as low as 2.5 and 1.6, respectively. Another interesting name trading with a PE of 2 is Evraz. The company is in an extremely strong financial position, posting a 50% ROE for the year ending June 30. While steel prices are likely to decline and margins are likely to tighten for steel companies around the world in the coming year, Evraz is largely insulated from any moves in iron ore and coal, as the company is vertically integrated, being it able to meet 93% of its iron ore and 100% of its coal requirements. Although the company is relatively leveraged, with a 56% debt-to-equity ratio, many of these issues are coming to maturity in the distant future. Next March, Evraz will have $300 million in eurobonds maturing, but with a debt/EBITDA of 1.57, it should have no trouble meeting its obligations.
While Evraz got into trouble with the government this summer over selling coal on the international market for less than it did on the domestic market, Evraz's international sales only account for 1% of total coal production. Additionally, given Abramovich's close relationship with Putin, it is unlikely that Putin would take significant action.
While there may still be some pain ahead for Evraz shareholders in the coming weeks, in the long term, this company is ready to come screaming back in the next two years.
The collapse of the Russian stock market has been one of the more surprising events of the past year. Russia is probably in one of the strongest positions in the world to withstand the crisis, given it's large current account surplus, relatively low leverage levels across the private sector and continued strong economic growth. While Western nations are currently panicking over the prospect of a recession, Russia is likely to produce just shy of 8% economic growth this year, and economists are predicting 5% economic growth next year. Yet despite all this, the RTS index is down around 80% from it's May highs, currently trading with a PE of about 3.
There have been a number of reason's for RTS's precipitous decline. To put it mildly, Putin hasn't exactly done a great job on the PR front this year. While the war with Georgia is debatable, his comments and actions regarding Mechel were just plain stupid. Nevertheless, the reaction by Western investors was also overstated. While fears of repeat of Yukos are understandable, it is an extremely unlikely scenario for a number of reasons that I won't get into here, for the sake of brevity. Still, Putin's comments merely served to increase investors' perceptions of Russia as a risky nation, right at a time when investors were shunning risk. Additionally, outside of the country's oligarchs, Russia has few long-term, value investors. Western hedge funds, investment banks and investment managers account for the majority of the volume on Russia's stock exchanges, resulting in a lack of long-term investors, who would be willing to put in a floor. Consequently, many foreign investors have simply pulled their money out of fear that other western investors would pull their money, resulting in margin calls and more selling. Finally, falling commodity prices have also put significant downward pressure on the markets.
Still, the RTS is trading at such a discount right now, it seems as if some investors are pricing in the Apocalypse. While losses on the RTS will likely continue over the next month as hedge funds continue to sell off assets to meet investor redemptions, Russian stocks are a screaming buy right now. First echelon companies with strong financials like Gazprom and Lukoil are trading with PEs as low as 2.5 and 1.6, respectively. Another interesting name trading with a PE of 2 is Evraz. The company is in an extremely strong financial position, posting a 50% ROE for the year ending June 30. While steel prices are likely to decline and margins are likely to tighten for steel companies around the world in the coming year, Evraz is largely insulated from any moves in iron ore and coal, as the company is vertically integrated, being it able to meet 93% of its iron ore and 100% of its coal requirements. Although the company is relatively leveraged, with a 56% debt-to-equity ratio, many of these issues are coming to maturity in the distant future. Next March, Evraz will have $300 million in eurobonds maturing, but with a debt/EBITDA of 1.57, it should have no trouble meeting its obligations.
While Evraz got into trouble with the government this summer over selling coal on the international market for less than it did on the domestic market, Evraz's international sales only account for 1% of total coal production. Additionally, given Abramovich's close relationship with Putin, it is unlikely that Putin would take significant action.
While there may still be some pain ahead for Evraz shareholders in the coming weeks, in the long term, this company is ready to come screaming back in the next two years.
Thursday, October 23, 2008
It's Time to Get Responsible
I've decided to get a little ambitious with this one. As anyone, if there is anyone, who reads this blog may note, I have been very critical of the way the media has been portraying the current crisis. To be redundant, to say this is a subprime crisis misses the point. This is a debt crisis caused by an unsustainable amount of debt in the economy. Underlying this problem, however, is a massive $800 billion annual current account deficit. That means that every year, the US consumes $800 billion more dollars than it produces. To fund this the US relies on artificially low taxes, essentially a government subsidy, paid for with government debt, and private debt from banks and financial intermediaries. In the course of the past year, this debt load became unsustainable, resulting in the current crisis. However, attacking Wall St., derivatives, the mortgage brokers, etc. completely is purely an act of scapegoating and does not address the real culprits or causes. Collectively as a society Americans are to blame for being irresponsible and buying what they can't pay for.
Over the past two decades, since the end of the Cold War, the US has been guilty of nothing short of hubris. Americans hold the belief that their nation is an indestructible fortress and it should be. And while America is undoubtedly an unparalleled military power in the world, she is currently facing an enormous and silent threat to our way of life, an economic one. If left unchecked the nation's habits will result in a massive decline in world standing and way of life, leaving America a shell of its former self.
As I outlined in a previous post, in the past how in the past 20 years a culture of entitlement has developed in America. Defining the laws of economics and nature, Americans have come to believe that the should never die, suffer or be denied. The United States' GDP stood somewhere around $13.8 trillion in 2007, while our current account deficit was $800 billion. This means that we took out debt to finance roughly 5.8% of all our purchases. That year, the US national deficit ran at $162 Billion, meaning the US government took out that much debt to subsidize taxpayers in 2007. However, the deficit grew by about $500 billion due to interest payments. The remainder of the deficit was financed through the private sector. Quite naturally, a nation cannot just take out debt to the tune of 5.8% of GDP ad infinitum and not expect a crash to occur.
America has had a mixed relationship with globalization. On the one hand, the US citizens have been able to buy foreign-produced goods at far cheaper prices than had they been produced domestically. This increase in trade has in turn created many direct and indirect jobs. As Americans have spent more money on clothing, electronics and other consumer discretionary items produced overseas, jobs have been created in the service sector. On the other hand, as companies try to cut costs and remain competitive, many have been forced to shift production overseas. As a result, the American manufacturing sector has been decimated, leading to our massive current account deficit. Over the past few decades in America there has been a gradual shift away from the manufacturing sector into the services sector, which does not produce any exportable goods. At the same time, if the US were simply to decrease imports, many of these jobs in ther service sector would simply be lost, resulting in decreased GDP and in turn consumption of domestic goods. Ultimately, there are no easy solutions to this problem, as Americans in the manufacturing sector would have to take a signficant pay cut to once again make the sector competitive, and any decrease in domestic trade, even of imported goods, would likewise have a negative effect on the economy. Ultimately, a severe recession seems to be the only way for the US to correct its trade imbalance.
There has been much talk in the media of late about energy independence in the United States. Given that the US imports approximately 5 billion barrels of oil per year, and with oil averaging around $65 a barrel in 2007, this resulted in a about $320 billion contribution to our trade imbalance. Yet over the same period, the US imported approximately $2 trillion in good over the same period, and the US consumed $14.3 trillion over the course of the year. Even if the US had been independent from foreign oil in 2007, the nation would've still consumed about $140 billion more than it produced or about 3.5% of GDP, and would have still imported $480 billion more than it exported. While America's dependency on foreign energy is a problem, and will become a growing problem as energy becomes scarcer and scarcer in the coming century, the United State's dependence on foreign oil alone is not the problem. Foreign oil accounted only for 2.2% of total consumption in the US. Over the past few decades Americans have simply spent too much on cars, houses, televisions, etc. and saved too little.
In particular, the United States has spent too much on defense over the past two decades. In 2007, defense spending totalled $700 billion or 5% of total GDP, not including the war in Iraq, which has cost an estimated $800 billion since it began. Americans are in love with their military and hold it as a great source of pride. However, at the end of the day, much of the nation's military spending is purely useless. Even though the Cold War is over, America continues to purchase defense systems designed to fight a war against a major foe with a strong Air Force. As is, no nation in the world would be able to stand up to America's defense systems from 20 years ago, so why continue to invest in weaponry that will never be needed to fire a shot in anger? For instance, congress has allocated $62 billion for the F-22 fighter program. Even though there is no air force in the world that can stand up to the USAF's aging and "outdated" fleet of F-15s. Additionally, the F-22 would only be useful in a war against a major power like Russia, which would go nuclear in about 30 minutes, or China, which would turn into a very long, protracted and bloody struggle. However, these wars are not likely to come about, as they would certainly be a disaster for every country involved and the world at large. Since the end of the Cold War, the US has found itself in low-intensity conflicts against insurgencies, like the ones in Iraq and Afghanistan, fought primarily by infantry on the ground. There is no need to continue acquiring high tech fighter planes that can shoot anything out of the sky, nuclear submarines, stealth bombers and the latest guided missle cruisers for use against these opponents. While Americans may be proud of the fact that we can strike any country on the face of the earth on their home turf with little impunity, this pride is ultimately hurting America. Every year, the US invests hundreds of billions of dollars in defense systems that offer no long term return at a time, when the government needs to be thinking about fiscal responsibility and growth. Being the world's police man and pursuing interventionist policies has provided no economic benefit for America over the past two decades and never will, especially when considering the $800 billion the US has already shelled out for Iraq. These funds would be better off being directed towards projects that have economic benefit. Ultimately, the US military is there to protect the nation, but right now it is making the country less secure, not more.
While the bubble of private debt is currently bursting in America, resulting in a massive recession, there is still a far more scarier bubble growing right now, partially to help salvage the nation's banking system. In 2008, America's sovereign debt currently stands at around $10 trillion or 70% of GDP, and it continues to grow at an astounding pace. The last time the national debt reached this level was in the aftermath of World War II and the Great Depression, yet we are just coming out of a period of unparralleld prosperity. If left unchecked, it is only a matter of time before investors begin to turn away from the US and the dollar experiences a steep devaluation, creating a crisis of unimaginable proportions. Although it may be painful and politically unpopular, it's time the government stopped subsidizing taxpayers excessive spending habits and began addressing it's own wasteful and inefficient use of funds.
As Americans wake up to the fact that they are not as indestructible as they once thought, some serious questions need to be asked. Rather than pointing fingers and blaming everyone but themselves, it's time Americans took a look in the mirror. America has been living beyond its means for some time and now it's paying the price. However, more than anything else, it's time Americans got responsible.
I've decided to get a little ambitious with this one. As anyone, if there is anyone, who reads this blog may note, I have been very critical of the way the media has been portraying the current crisis. To be redundant, to say this is a subprime crisis misses the point. This is a debt crisis caused by an unsustainable amount of debt in the economy. Underlying this problem, however, is a massive $800 billion annual current account deficit. That means that every year, the US consumes $800 billion more dollars than it produces. To fund this the US relies on artificially low taxes, essentially a government subsidy, paid for with government debt, and private debt from banks and financial intermediaries. In the course of the past year, this debt load became unsustainable, resulting in the current crisis. However, attacking Wall St., derivatives, the mortgage brokers, etc. completely is purely an act of scapegoating and does not address the real culprits or causes. Collectively as a society Americans are to blame for being irresponsible and buying what they can't pay for.
Over the past two decades, since the end of the Cold War, the US has been guilty of nothing short of hubris. Americans hold the belief that their nation is an indestructible fortress and it should be. And while America is undoubtedly an unparalleled military power in the world, she is currently facing an enormous and silent threat to our way of life, an economic one. If left unchecked the nation's habits will result in a massive decline in world standing and way of life, leaving America a shell of its former self.
As I outlined in a previous post, in the past how in the past 20 years a culture of entitlement has developed in America. Defining the laws of economics and nature, Americans have come to believe that the should never die, suffer or be denied. The United States' GDP stood somewhere around $13.8 trillion in 2007, while our current account deficit was $800 billion. This means that we took out debt to finance roughly 5.8% of all our purchases. That year, the US national deficit ran at $162 Billion, meaning the US government took out that much debt to subsidize taxpayers in 2007. However, the deficit grew by about $500 billion due to interest payments. The remainder of the deficit was financed through the private sector. Quite naturally, a nation cannot just take out debt to the tune of 5.8% of GDP ad infinitum and not expect a crash to occur.
America has had a mixed relationship with globalization. On the one hand, the US citizens have been able to buy foreign-produced goods at far cheaper prices than had they been produced domestically. This increase in trade has in turn created many direct and indirect jobs. As Americans have spent more money on clothing, electronics and other consumer discretionary items produced overseas, jobs have been created in the service sector. On the other hand, as companies try to cut costs and remain competitive, many have been forced to shift production overseas. As a result, the American manufacturing sector has been decimated, leading to our massive current account deficit. Over the past few decades in America there has been a gradual shift away from the manufacturing sector into the services sector, which does not produce any exportable goods. At the same time, if the US were simply to decrease imports, many of these jobs in ther service sector would simply be lost, resulting in decreased GDP and in turn consumption of domestic goods. Ultimately, there are no easy solutions to this problem, as Americans in the manufacturing sector would have to take a signficant pay cut to once again make the sector competitive, and any decrease in domestic trade, even of imported goods, would likewise have a negative effect on the economy. Ultimately, a severe recession seems to be the only way for the US to correct its trade imbalance.
There has been much talk in the media of late about energy independence in the United States. Given that the US imports approximately 5 billion barrels of oil per year, and with oil averaging around $65 a barrel in 2007, this resulted in a about $320 billion contribution to our trade imbalance. Yet over the same period, the US imported approximately $2 trillion in good over the same period, and the US consumed $14.3 trillion over the course of the year. Even if the US had been independent from foreign oil in 2007, the nation would've still consumed about $140 billion more than it produced or about 3.5% of GDP, and would have still imported $480 billion more than it exported. While America's dependency on foreign energy is a problem, and will become a growing problem as energy becomes scarcer and scarcer in the coming century, the United State's dependence on foreign oil alone is not the problem. Foreign oil accounted only for 2.2% of total consumption in the US. Over the past few decades Americans have simply spent too much on cars, houses, televisions, etc. and saved too little.
In particular, the United States has spent too much on defense over the past two decades. In 2007, defense spending totalled $700 billion or 5% of total GDP, not including the war in Iraq, which has cost an estimated $800 billion since it began. Americans are in love with their military and hold it as a great source of pride. However, at the end of the day, much of the nation's military spending is purely useless. Even though the Cold War is over, America continues to purchase defense systems designed to fight a war against a major foe with a strong Air Force. As is, no nation in the world would be able to stand up to America's defense systems from 20 years ago, so why continue to invest in weaponry that will never be needed to fire a shot in anger? For instance, congress has allocated $62 billion for the F-22 fighter program. Even though there is no air force in the world that can stand up to the USAF's aging and "outdated" fleet of F-15s. Additionally, the F-22 would only be useful in a war against a major power like Russia, which would go nuclear in about 30 minutes, or China, which would turn into a very long, protracted and bloody struggle. However, these wars are not likely to come about, as they would certainly be a disaster for every country involved and the world at large. Since the end of the Cold War, the US has found itself in low-intensity conflicts against insurgencies, like the ones in Iraq and Afghanistan, fought primarily by infantry on the ground. There is no need to continue acquiring high tech fighter planes that can shoot anything out of the sky, nuclear submarines, stealth bombers and the latest guided missle cruisers for use against these opponents. While Americans may be proud of the fact that we can strike any country on the face of the earth on their home turf with little impunity, this pride is ultimately hurting America. Every year, the US invests hundreds of billions of dollars in defense systems that offer no long term return at a time, when the government needs to be thinking about fiscal responsibility and growth. Being the world's police man and pursuing interventionist policies has provided no economic benefit for America over the past two decades and never will, especially when considering the $800 billion the US has already shelled out for Iraq. These funds would be better off being directed towards projects that have economic benefit. Ultimately, the US military is there to protect the nation, but right now it is making the country less secure, not more.
While the bubble of private debt is currently bursting in America, resulting in a massive recession, there is still a far more scarier bubble growing right now, partially to help salvage the nation's banking system. In 2008, America's sovereign debt currently stands at around $10 trillion or 70% of GDP, and it continues to grow at an astounding pace. The last time the national debt reached this level was in the aftermath of World War II and the Great Depression, yet we are just coming out of a period of unparralleld prosperity. If left unchecked, it is only a matter of time before investors begin to turn away from the US and the dollar experiences a steep devaluation, creating a crisis of unimaginable proportions. Although it may be painful and politically unpopular, it's time the government stopped subsidizing taxpayers excessive spending habits and began addressing it's own wasteful and inefficient use of funds.
As Americans wake up to the fact that they are not as indestructible as they once thought, some serious questions need to be asked. Rather than pointing fingers and blaming everyone but themselves, it's time Americans took a look in the mirror. America has been living beyond its means for some time and now it's paying the price. However, more than anything else, it's time Americans got responsible.
What the Hell Happened to Oil?
I usually try to stay away from commodities, because it is not exactly my forte. I've never studied the complex economics and statistics required to properly estimate how a shift in supply or demand, one way or another will lead to a specific change in price. When I was working in Oklahoma, predicting grain and energy prices was part of my job, and while my predictions for ethanol have more or less come true, I didn't expect grain prices to jump so much. Then again, neither did the department of agriculture. In short, I know my limits, but against the backdrop of what's going on in the broader market, something looks really fishy about the oil market right now.
Today, oil is trading around $68 a barrel, and it was trading around $66 yesterday. Yet, on Sept. 30, it was trading around $100 a barrel. While this summer's run up in oil prices into the $140s was certainly a bit bubbly, oil's recent crash also seems to be driven by something beyond fundamentals. Oil rose sharply in the first half of this year, primarily on the back of a weak dollar. As the dollar declined, investors dove into commodities in search of a hedge. However, as the dollar began to strengthen this summer, oil dropped precipitously. Additionally, there were concerns that the oncoming recession would result in demand destruction for energy. Of course, supply and demand in the oil markets are pretty tight, resulting in a lot of volatility. Any demand destruction will have a huge negative effect on the price of black gold. Nevertheless, something about all this doesn't sit right with me. Oil seemed to be bottoming somewhere around $100 a barrel, in September of this year, a figure, from what I understand that many economists see as the commodity's intrinsic value. If you look at the first graph, you will notice it had a healthy bounce around $90 around that time, indicating a support level. There seems to be something afoot here aside from fear.
If you look at the three month chart of the Dow Jones (the second one), you will note that recent carnage on the equity markets began around October 1. This is important, because at the end of September, hedge funds were hit with redemption requests and were forced to unload a ton of securities to meet those requests, thus driving down the markets. As a result, a non-secular wave of selling oil has begun in the market as hedge funds were and still are pressured to sell off assets. Like with just about every other securities market in the world, oil has disconnected from the fundamentals and probably will be for at least another month or two. Nevertheless, once some of the fear leaves the market place and investors start feeling somewhat comfortable with the situation, there should be a sharp turn around. Although the contracts for delivery in the coming months will not likely experience much of a rebound, due to the general negative sentiment and fear, contracts maturing later in 2009, in May for instance, will likely end up in the long term once this wave of selling is over. The chinese are still buying cars and America is still amazingly dependent on the stuff.
If you look at the three month chart of the Dow Jones (the second one), you will note that recent carnage on the equity markets began around October 1. This is important, because at the end of September, hedge funds were hit with redemption requests and were forced to unload a ton of securities to meet those requests, thus driving down the markets. As a result, a non-secular wave of selling oil has begun in the market as hedge funds were and still are pressured to sell off assets. Like with just about every other securities market in the world, oil has disconnected from the fundamentals and probably will be for at least another month or two. Nevertheless, once some of the fear leaves the market place and investors start feeling somewhat comfortable with the situation, there should be a sharp turn around. Although the contracts for delivery in the coming months will not likely experience much of a rebound, due to the general negative sentiment and fear, contracts maturing later in 2009, in May for instance, will likely end up in the long term once this wave of selling is over. The chinese are still buying cars and America is still amazingly dependent on the stuff.
Wednesday, October 22, 2008
Moscow's Impending Real Estate Crash
It's been a while since I've written here. I hope my devoted readership doesn't mind all that much. I've gotten side tracked by a few things, like trips to the provinces and a weird and interesting encounter last night that may prove pretty promising, but more about that later. I hope my devoted readership doesn't mind. So since I live in Russia, you would think I would focus more on the motherland, but with the crisis in America and everything, which is just so much more interesting, I mean a once in a century event, my attention has been elsewhere.
In any case, as anyone living in Moscow may know, over the past few years, real estate prices have gotten to ridiculous levels, especially given the average income in the city and the quality of living space. For instance, I live in a pretty crappy 3 room apartment, far from the center and in a not particularly posh region to say the least. Apparently, this apartment would now fetch about $300,000. Doing a quick, back of the envelope calculation, that would mean that a mortgage this apartment would cost $42,000 a year, assuming a 17% interest rate (not too ridiculous in Russia), a 5 year term (again, pretty standard) and 52% down (a whopping $156,000, but once again standard in Russia). The first question I have to ask is how many Muscovites can afford $156,000 up front, especially when you consider that the median income is somewhere around $1200 a month. Secondly, we pay out 33,000 roubles a month, which translates into about $15,000 a year, roughly what the average Muscovite makes. Therefore in Moscow, annual mortgage payments cost roughly 3 times as much to buy as it does to rent, even with 52% down! By comparison in the US monthly mortgage payments generally cost about 1.4 times rent, and it's pretty easy to pay only 30% down for a prime mortgage, as opposed to the 52% required by Russian banks. I am not going to go into subprime here. In any case, Moscow is clearly ripe for a fall.
There have been a number of factors driving up Moscow real estate prices over the past few years. First and foremost, many wealthy Russians, who don't know how to or are just not comfortable investing in stocks, bonds, mutual funds, etc. chose to invest in real estate, because it is a more tangible asset. Nevertheless, this has naturally resorted in quite a bubbly market. Additionally, for anyone, who hasn't been to Moscow, for Russians and the former Soviet Union, more generally, Moscow is something like New York, DC and Los Angeles all combined into one, granted with some of the high culture aspects stripped out and left in Petersburg. As a result, anyone stuck in a village with no work, nothing to do and aspirations to something greater comes to Moscow, driving up the price of real estate. For instance, this weekend, I was out in a small village in the countryside 525 KM from Moscow, where there is absolutely no work and nothing to do. When I asked how people make a living, my friend Dima told me half of his classmates from school had come to Moscow to work construction and make a living.
Although many in Russia initially believed it would be immune to the current crisis in the West when it first appeared last fall, a year later, the RTS index is down about 70% and the country completely cut off from the world debt markets, it's clear that it has certainly taken its tole. Despite the fact that the Russian economy is not anywhere near as leveraged as the American economy, loose banking standards are certainly affecting the banking system here. Additionally, Russian banks are having trouble raising money abroad, resulting in a complete clamp down on long-term lending such as mortgages and commercial loans, as in the West. The first victims of the crisis after the banks will likely be the Moscow real estate developers, reliant on this funding, who have already halted a number of projects. This means that the provincial, Caucasian and Central Asian gasterbeiters (construction workers) will likely soon find themselves out of work and forced to search elsewhere. Typically, these gasterbeiters rent out small, run down apartments in the more run-down sections of town. However, when they are gone, demand will decrease and these apartments will become vacant. Many young residents of Moscow, like yours truly, may opt to sacrifice living standards for a cheaper rent, thus pushing down prices throughout the city.
Despite these headwinds, my friend Andrey assures me that he doesn't think a market crash is imminent, due to a lack of transparency in the Moscow real estate market and the relative unpopularity of mortgages in the country. While the Moscow real estate market lack of transparency in the real estate markets may retard the decline of prices, it will still eventually happen. Also, real estate is not a liquid investment. Even in America, where housing prices peaked over two years ago, they are still declining and showing no sign of stopping. By contrast, the Dow Jones has shed about 20% in this October alone. A drop in Moscow real estate prices won't happen over night, but the bubble still has to burst eventually. Secondly, although mortgages are only a recent invention in Russia, they still were still taken out for a lot of real estate purchases in Moscow over the past few years. The lack of availability of mortgages will certainly put another dent in demand for Moscow real estate.
Finally, Andrey maintains that not all regions are likely to be affected equally. While the regions on the outskirts of the city, home to migrant workers will likely see a drop in prices as a result of their departure, the Center might not. However, the center is generally home to Moscow's wealthier business class, the Muscovites most likely to be licking their wounds from this year's crash. Victims of Russia's stock market crash are far less likely to be making any kind of investments in the coming year as their capital base is depleted and worries about the crisis are in the front of their mind.
Before the financial crisis truly hit Russia, demand for apartments in Moscow had already reached an unsustainable level, given the massive discrepancy between earnings and the price of real estate. The price effectively left Moscow apartments off limits to everyone except for Moscow's rich, who while plentiful still have the majority of their assets tied up in real estate already. The crisis will merely serve as the catalyst for the bursting of the bubble. My main question now is how this is going to affect the Russian economy as a whole. Real estate and construction are huge parts of the Moscow economy. Additionally, wages earned at Moscow construction sites provide a living for many in the impoverished provinces. My only hope is that when the bubble bursts, some wealthy Russians will shift some of their assets into other classes. Russian stocks are an amazing buying opportunity right now. Maybe if there had been some more local money in the stock market, the fall wouldn't have been as severe when the fly-by-night, Western, hedge fund managers pulled their money.
It's been a while since I've written here. I hope my devoted readership doesn't mind all that much. I've gotten side tracked by a few things, like trips to the provinces and a weird and interesting encounter last night that may prove pretty promising, but more about that later. I hope my devoted readership doesn't mind. So since I live in Russia, you would think I would focus more on the motherland, but with the crisis in America and everything, which is just so much more interesting, I mean a once in a century event, my attention has been elsewhere.
In any case, as anyone living in Moscow may know, over the past few years, real estate prices have gotten to ridiculous levels, especially given the average income in the city and the quality of living space. For instance, I live in a pretty crappy 3 room apartment, far from the center and in a not particularly posh region to say the least. Apparently, this apartment would now fetch about $300,000. Doing a quick, back of the envelope calculation, that would mean that a mortgage this apartment would cost $42,000 a year, assuming a 17% interest rate (not too ridiculous in Russia), a 5 year term (again, pretty standard) and 52% down (a whopping $156,000, but once again standard in Russia). The first question I have to ask is how many Muscovites can afford $156,000 up front, especially when you consider that the median income is somewhere around $1200 a month. Secondly, we pay out 33,000 roubles a month, which translates into about $15,000 a year, roughly what the average Muscovite makes. Therefore in Moscow, annual mortgage payments cost roughly 3 times as much to buy as it does to rent, even with 52% down! By comparison in the US monthly mortgage payments generally cost about 1.4 times rent, and it's pretty easy to pay only 30% down for a prime mortgage, as opposed to the 52% required by Russian banks. I am not going to go into subprime here. In any case, Moscow is clearly ripe for a fall.
There have been a number of factors driving up Moscow real estate prices over the past few years. First and foremost, many wealthy Russians, who don't know how to or are just not comfortable investing in stocks, bonds, mutual funds, etc. chose to invest in real estate, because it is a more tangible asset. Nevertheless, this has naturally resorted in quite a bubbly market. Additionally, for anyone, who hasn't been to Moscow, for Russians and the former Soviet Union, more generally, Moscow is something like New York, DC and Los Angeles all combined into one, granted with some of the high culture aspects stripped out and left in Petersburg. As a result, anyone stuck in a village with no work, nothing to do and aspirations to something greater comes to Moscow, driving up the price of real estate. For instance, this weekend, I was out in a small village in the countryside 525 KM from Moscow, where there is absolutely no work and nothing to do. When I asked how people make a living, my friend Dima told me half of his classmates from school had come to Moscow to work construction and make a living.
Although many in Russia initially believed it would be immune to the current crisis in the West when it first appeared last fall, a year later, the RTS index is down about 70% and the country completely cut off from the world debt markets, it's clear that it has certainly taken its tole. Despite the fact that the Russian economy is not anywhere near as leveraged as the American economy, loose banking standards are certainly affecting the banking system here. Additionally, Russian banks are having trouble raising money abroad, resulting in a complete clamp down on long-term lending such as mortgages and commercial loans, as in the West. The first victims of the crisis after the banks will likely be the Moscow real estate developers, reliant on this funding, who have already halted a number of projects. This means that the provincial, Caucasian and Central Asian gasterbeiters (construction workers) will likely soon find themselves out of work and forced to search elsewhere. Typically, these gasterbeiters rent out small, run down apartments in the more run-down sections of town. However, when they are gone, demand will decrease and these apartments will become vacant. Many young residents of Moscow, like yours truly, may opt to sacrifice living standards for a cheaper rent, thus pushing down prices throughout the city.
Despite these headwinds, my friend Andrey assures me that he doesn't think a market crash is imminent, due to a lack of transparency in the Moscow real estate market and the relative unpopularity of mortgages in the country. While the Moscow real estate market lack of transparency in the real estate markets may retard the decline of prices, it will still eventually happen. Also, real estate is not a liquid investment. Even in America, where housing prices peaked over two years ago, they are still declining and showing no sign of stopping. By contrast, the Dow Jones has shed about 20% in this October alone. A drop in Moscow real estate prices won't happen over night, but the bubble still has to burst eventually. Secondly, although mortgages are only a recent invention in Russia, they still were still taken out for a lot of real estate purchases in Moscow over the past few years. The lack of availability of mortgages will certainly put another dent in demand for Moscow real estate.
Finally, Andrey maintains that not all regions are likely to be affected equally. While the regions on the outskirts of the city, home to migrant workers will likely see a drop in prices as a result of their departure, the Center might not. However, the center is generally home to Moscow's wealthier business class, the Muscovites most likely to be licking their wounds from this year's crash. Victims of Russia's stock market crash are far less likely to be making any kind of investments in the coming year as their capital base is depleted and worries about the crisis are in the front of their mind.
Before the financial crisis truly hit Russia, demand for apartments in Moscow had already reached an unsustainable level, given the massive discrepancy between earnings and the price of real estate. The price effectively left Moscow apartments off limits to everyone except for Moscow's rich, who while plentiful still have the majority of their assets tied up in real estate already. The crisis will merely serve as the catalyst for the bursting of the bubble. My main question now is how this is going to affect the Russian economy as a whole. Real estate and construction are huge parts of the Moscow economy. Additionally, wages earned at Moscow construction sites provide a living for many in the impoverished provinces. My only hope is that when the bubble bursts, some wealthy Russians will shift some of their assets into other classes. Russian stocks are an amazing buying opportunity right now. Maybe if there had been some more local money in the stock market, the fall wouldn't have been as severe when the fly-by-night, Western, hedge fund managers pulled their money.
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