Patriotism in the time of the swine flu

A funny thing happened to me on the way to work today, as I was waiting for the light to change a 10 year old street kid walked up to my car and offered me a flag and a surgical mask. Unfortunately I wasn't carrying a camera and couldn't record that image for posterity. Nevertheless on this 14th of August as I drove to work I thought of what it means to be an Indian.

Being Indian means learning to accept disparity. Disparity in wealth, education and opportunity. The car I drove would have fed a hundred of those street kids for a year and yet I don't feel the least bit guilty in driving an expensive German car on these potholed Indian streets.

By the grace of god my children can go to decent schools and enjoy a lifestyle free of wants - that street kid on the other hand is busy figuring out how to hustle his next meal, school and classes are way beyond his field of vision. Like most people in my demographic I just shrug and accept this as an accident of fate. This belief in the karmic cycle and the pithy explanation that life's hardships are a by-product of destiny is what makes me an Indian.

While the current pandemic is global and India isn't alone in its spread - I do remember in 1994 we had the dubious honour of being the epicentre of the first plague outbreak since the Middle Ages! And yet communal hygiene is hardly a priority, most of India's Tier II and some Tier I cities still suffer from open drains and insect infested stagnant water. We Indians take pride in the cleanliness of our homes but do not hesitate to litter the open space just beyond our doors!

Perhaps this rant is coloured by the temporary darkness in my mood - inspite of these warts in my country and the deficiencies in the psyche of my countrymen, India is where my heart is and this is where I live. I am an Indian not out of an accident of birth, but because I choose to be.

Its difficult to rationally explain why I love my country but maybe I'm like the wife who forgives the straying husband, not because she feels compelled to stay in the marriage, but because she knows he is a better man.

There goes my life

All he could think about was I'm too young for this.
Got my whole life ahead.
Hell I'm just a kid myself.
How'm I gonna raise one.

Six years ago when my son was born, I remember being consumed by fear. As I looked at his tiny fingers, tiny feet and perfect little body, I could feel my gut tightening .. Good God am I responsible for this human being? A year ago when my daughter was born I could feel the sweat on my brow, the palpitation.... well you get the picture.

But after a while the fear recedes, we are after all programmed to be parents, to nurture our future generation and that basic instinct kicks in after a while. That fear that I first felt has been replaced by a sense of responsibility. This sense of responsibility manifests itself in surprising ways.

To begin with I've found myself being a lot more ethical in my behavior. In any professional (and personal) context if I'm faced with an ethically gray decision - my litmus test has been "would my children be proud of me if I took this course of action?". Becoming a father has made me a more equitable boss, and a more honest businessman.

Its natural to want the best for my children and for my family, but being a father has also led me to want the best for the world that my children would live in. I find myself to be more socially aware and conscious of the kind of life that we lead and its consequences to the world at large. In many ways I'm worried about my legacy.. As my children start to develop their own opinions and express their curiosity, I find myself wanting to shape their character and their knowledge. I want to share with them what I've learnt and what I've experienced, perhaps this too is part of my desire to leave behind a legacy.

I've been a father of one for six years and of two for one in this time I know I've changed and as my children grow up, I too will grow, not just as a father but as a person as well. The burden of being a father? No its just the burden of my life.

There goes my life.
There goes my future, my everything.
Might as well kiss it all good-bye.
There goes my life.......

A couple years of up all night and a few thousand diapers later.
That mistake he thought he made covers up the refrigerator.
Oh yeah..........he loves that little girl.

Momma's waiting to tuck her in,
As she fumbles up those stairs.
She smiles back at him dragging that teddy bear.
Sleep tight, blue eyes and bouncin' curls.

He smiles.....
There goes my life.
There goes my future, my everything.
I love you, daddy good-night.
There goes my life.

Pappu can't dance

My parents called me "Pappu" when I was young. Ever since I attained adulthood I've made sure no-one else calls me by that name anymore. Unfortunately nicknames - like old lovers - have a tendency to catch up, when you least expect them to.

Over the last couple of months - I've been press-ganged to a Latin American Dance class on alternate days. Its an hour long class and most students pick up enough dance steps to be confident in a couple of weeks. I however am unlike most students...

I have been told that my steps remind people of Sunny Deol. I took that as a compliment until a quick look at the mirror disabused me of that notion. My rendition of a "Quick-Quick-Slow" Salsa Step most resembled the Nazi Goose Step. Alas I have been afflicted with two-left feet syndrome coupled with congential tone-deafness.

This Pappu really can't dance.

Things that make you go ..hmmm

Exhibit 1:

On Friday the 13th of March 2009, the Chinese Premier Wen Jibao said:

"President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures. We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried."

Exhibit 2:

On Sunday the 15th of March 2009, the Chairman of the US Federal Reserve's Board of Governor's Ben Bernanke  does the first national interview a Federal Reserve chairman has ever done in 96 years. He says everything is fine and we’ll be back to business as usual by the end of the year. 

Exhibit 3:

On Wednesday the 18th of March 2009, the US Federal Reserve announces the nuclear option that the Fed will now directly buy the long end of the US Treasury Market. The funds to make these purchases are through an accounting entry a.k.a from "thin air" and other such uncharitable locations.

This announcement causes the 3rd biggest one-day cecline on the US dollar

This of course slices through some key technical levels - including a rising trend-line from December 2008 and the 50 day MA.

It does seem obvious that the US Fed is attempting to replace China as the world's buyer of US Treasuries, which is having the effect of ditching the US $.

(Graphs and Table from Bespoke)

"...profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal.."

The Messiah a.k.a Barrack H. Obama had this to say at a press conference in the Oval Office yesterday

"What you're now seeing is ... profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it,"

Here are some other quotes from politicos in the years past:

September 1929
"There is no cause to worry. The high tide of prosperity will continue." -- Andrew W. Mellon, Secretary of the Treasury.

December 5, 1929
"The Government's business is in sound condition." -- Andrew W. Mellon, Secretary of the Treasury

January 13, 1930
"Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today."

January 21, 1930
"Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington.

May 1, 1930
"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover

June 29, 1930
"The worst is over without a doubt." - James J. Davis, Secretary of Labor.

September 12, 1930
"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor.

June 9, 1931
"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

The Great Depression v1.0 of course did not end until the outbreak of the second world war. In the 10 years between 1929 and 1939 the political types came out with similar utterances every 3-6 months. It seems the Great Depression Mark II is following the same script.

Anybody who bases an investment or trading decision on the assurances of a politician deserves to have his capital taken away from him.

Gold – the perfect anchor in stormy markets

This is an article that I wrote as a sample for content management company.

“May you live in interesting times” – it certainly seems as if we have all fallen victim to this ancient Chinese curse. We are living at a time that our children will consider to be an important inflexion point in man's economic and financial history. On the one hand there is the massive deleveraging and destruction of credit that is causing deflation and on the other hand there are the stimulus packages and liquidity infusions being passed by the world’s governments and central banks that point to future inflation.

While deflation has the upper hand the only safe asset is cash, but if inflation were to rear its ugly head once again, cash will be the single worst asset to invest in. Inflation would lead to an increase in price levels and hence a loss of purchasing power. To protect wealth one should hold assets that can preserve or store value in the face of a general rise in prices: Real Estate, commodities such as Metals, Coal, Crude Oil and Precious Metals are excellent choices in this scenario.

However deflation would remove the shield that these assets provide. Faced with the “ice” of present deflation and the “fire” of future inflation many investors have been reaching for Gold as an anchor in these stormy times.

Gold has certain characteristics that make it special and different from everything else. All the Gold ever mined in human history, approximately 1,50,000 – 1,60,000 tons is still with us. The supply of Gold is very stable and is around 2% of the total Gold. It takes around 9-10 years for a new Gold mine to come online and then a further 5-7 years for production to hit the market. Thus from exploration to sale Gold from new mines takes about 14-17 years by which time existing Gold mines are in decline. Thus this supply is not very likely to change over time. In fact in recorded human history there has been only one time in which the supply of Gold has increased dramatically, that's when Spain took the Gold of the Incas and Aztecs in the 1600s and flooded Europe with it. Thus if Gold were to be used as money it would be relatively free from increases in supply.

Gold has very little industrial use – other than investment its major use is in jewellery. Gold is almost indestructible and when held as coins or “biscuits” is relatively portable. Gold Markets are very deep and very liquid in fact in Foreign Exchange markets Gold trades like any other currency.

But most importantly when owned without any leverage and in metal form, Gold has no counter-party risk. Like all tangible assets – Gold is no one’s liability and hence when used as a store of wealth is not held hostage to someone’s ability to repay.

Because of these reasons – every prudent investor should own physical Gold as an insurance against unpredictable and “interesting” times.

An American Decline - not a foregone conclusion

It has been my belief, reinforced by the global financial crisis, that the American Century is about to end and the decline of the American Empire about to begin. I have believed that America finds itself where Great Britain was at the end of WWII. Tired and exhausted after fighting multiple wars, its economy ravaged (by war for the British and by a debt fuelled consumption binge in the case of the Americans), its leadership new and untested and a deep malaise affecting all segments of society and popular culture - Pax Americana will end in the same manner that Pax Brittanica did.

I found this article on the Asia Times today:
http://www.atimes.com/atimes/Global_Economy/KB18Dj05.html

The author provides a contrary viewpoint, to paraphrase Mark Twain the rumors of the demise of America have been greatly exaggerated. The article's central premise is that the stable tax revenues that accrue from the world's greatest democracy buttress the US' natural position as an investment safe-haven, this provides a natural source of demand for the US$ and sovereign debt. This demand makes the greenback the world's reserve currency and is the fount of American power.

He argues that other economies such as Germany and Japan have demographic issues that will lead to a decline over time, and China on the other hand is a high risk proposition that may provide higher returns but at the cost of higher volatility - hardly the description of a safe-haven investment.

I don't disagree with his conclusions, but the central premise that American tax revenues are stable, is suspicious in my humble opinion. With a declining economy, falling asset prices, growing unemployment and rising societal acrimony I do not see how tax revenues can remain stable. In fact if you were to pursue the CBO's budgetary projections at: http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf you would see that they agree to a decline in tax revenues in 2009 and then an increase from 2010 onwards. I would wager that the coming global depression will push the rise in tax revenues out for a decade (at least).

With falling tax revenues and hence lower debt service capacity, I do not see how sovereign debt buyers will continue to believe in the credit capability of the US Treasury. Abraham Lincoln once said - You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time. And when you cannot fool the bond market into buying more treasuries - its game over!