Tuesday, March 31, 2009

Troop buildup in Afghanistan is great leverage against Iran

I doubt that anybody is happy with the prospect of the U.S. troop buildup in Afghanistan, but Iran is clearly the "player" with the most to lose from such a prospect, meaning that the buildup gives the U.S. significant leverage that will be very meaningful and helpful in negotiations with Iran.

The buildup is occurring primarily due to political instability in Afghanistan. A side effect of the buildup is that significant U.S. troop presence in the region is a deterrence to Iranian "activity" in the region.

The only way that Iran can "deter" a more aggressive buildup is to work very hard to encourage and assist in stabilizing the region. Specifically, that would mean reducing its support for terrorism in general and reducing its moral support for the Taliban.

So, if Iran wants to keep the size of the U.S. presence in check, Iran will have to work for exactly the political aims that the U.S. is pursuing. Otherwise, the U.S. presence will increase and Iran will be under even greater pressure.

The escalating U.S. presence also distinctly "implies" to Iran that Iran's "pursuit of nuclear ambitions" is not "helpful" if Iran wants the U.S. to have a less significant presence in the region. The U.S. can imply that any reduction in U.S. presence in the region requires Iran to be cooperative with U.S. aims on all fronts.

I have not been a fan of increasing U.S. presence in Afghanistan, but since it will be killing multiple birds with one stone, it does have a beneficial silver lining, and for that reason should be supported, at least for now.

-- Jack Krupansky

Wednesday, March 25, 2009

My question for WhiteHouse.gov: Universal Health Care -- with NO fine print

I just submitted my question to the WhiteHouse.gov online Town Hall:

Why can't we simply say that one of our economic goals is "Universal Health Care -- with NO fine print" -- in those simple, meaningful words -- rather than evasively refer to "reform" and "cost savings" and other confusing nonsense?

I'm waiting for my answer.

-- Jack Krupansky

Sunday, March 22, 2009

I continue to have great confidence in President Obama's economic team

Nothing new here, but I just wanted to reaffirm that I continue to have absolute confidence in President Obama and his economic team, including Tim Geithner and Ben Bernanke, despite all of the gratuitous scorn being heaped upon them. I have absolutely no reservations about any member of the team and their policy decisions to date. They have a big task in front of them and are doing an absolutely amazing job.

What about the big Wall Street bonuses? Yeah, what about them?!?! Talk about a red herring. Yes, the bonuses are absolutely outrageous, but so what?! President Obama and his economic team have plenty of much bigger fish to fry, so please, please, please stop trying to distract them from focusing on the core of the problem. The bonuses are a mere sideshow. Let Congress hold some hearings and then let's move on. If any laws are being broken, then of course the relevant law enforcement authorities will pursue the matter at that level, but the kind of mindless "outrage" being puffed up in the media and by disgruntled Republicans and non-centrist Progressives is a real waste of national energy.

Message to President Obama and his economic team: Back to REAL work.

-- Jack Krupansky

Future of Wall Street and public companies

With so many rules and regulations and with many more coming, one has to wonder about the future of public companies, the stock market, and Wall Street. Besides, with the advent of the Internet and direct access to consumers and businesses and financial institutions, what benefit does Wall Street really provide? I do not have any immediate answers, but this is something to think about.

One possibility is that a much smaller collection of companies will remain public while smaller companies and some larger companies seek shelter in status of non-public ownership or consolidation with other firms.

It is quite possible that Google (GOOG) was the last major tech IPO of our lifetimes, or at least until Wall Street morphs into a far more rational structure.

It would not surprise me if some of the big banks decided to go private, especially with their puny stock prices.

I remain comfortable with my modest stake in Microsoft (MSFT). It is certainly not be as glamorous as it once was, but it is relatively rock solid (despite what Apple fans and the anti-Microsoft crowd will tell you) and one of the very, very few companies with an AAA credit rating. And it pays a nice dividend which appears to be relatively safe and secure. I am not buying any more outright, but I am reinvesting dividends, at least for now.

I am wondering whether Verizon (VZ) might be a good investment, but I have not done any deep research yet. Landlines may be fading, but the phone companies are stealing cable customers as well. I am contemplating Qwest (Q) as well. One big question is what the new broadband infrastructure stimulus spending will mean for these companies.

-- Jack Krupansky

Tuesday, March 10, 2009

Tracking the ongoing media mania over alleged parallels to The Great Depression

I am endeavoring to track the current media mania of attempting to draw parallels between the current economic situation and The Great Depression. I am doing this by using Google News to count the total number of "news" references to the phrase "The Great Depression" in the previous 24 hours.

  • 1/10/2009: 411 hits
  • 1/30/2009: 319 hits
  • 2/6/2009: 308 hits
  • 2/25/2009: 389 hits
  • 3/10/2009: 306 hits

-- Jack Krupansky

Monday, March 09, 2009

My suggestion for the White House economic recovery web site: blog and Twitter

The White House has an "okay" web site for the stimulus package, www.recovery.gov, but it needs a blog and they need to exploit Twitter. I sent them the following suggestion:

The web site needs a blog and Twitter feeds to provide us with more timely information.

See the NY Fed site for Twitter examples:


-- Jack Krupansky

They do have a blog on the main White House web site, so it is not an unnatural request.

Somehow, I find it amusing that the New York Federal Reserve Bank is on Twitter!

In any case, I at least gave them some useful feedback. Have you??

-- Jack Krupansky

My suggestion for the White House economic recovery web site

It is all well and good that the White House has a web site for the stimulus package, www.recovery.gov, but I did not find it immediately helpful in terms of how much money is actually flowing into the U.S. economy. I sent them the following suggestion:

What is missing and really needed is a classic thermometer that shows the amount of stimulus funding that has actually been disbursed or spent by each agency and is actually out there in the economy.

There should be a daily log listing the agency, specific program, and amounts for daily disbursements and expenditures into the economy above the agency/program baseline budget that is directly attributable to the ARRA stimulus spending.


-- Jack Krupansky

It will be interesting to see if they actually can tell when each dollar of ARRA money is disbursed or spent.

In any case, I at least gave them some useful feedback.

-- Jack Krupansky

Is the nation at the brink of a depression?

What a great name for someone alleging that we are on the "brink of a depression": Specter. According to an Associated Press article entitled "Specter says nation on 'brink of a depression'":

The nation is on the "brink of a depression," but there's a "reasonable chance" that the $787 billion economic stimulus package will help ease the situation, Sen. Arlen Specter said Monday.

Specter, R-Pa., said the nation's economic situation is more dire than the public has been told, but did not elaborate.

"Our economic problems are enormously serious - more serious than is publicly disclosed. And I think we're on the brink of a depression," he told reporters at the state Capitol.


"Had there been no stimulus, I think we'd have gone right off the edge," he said. "I think we're pretty close to the edge anyway, to be very brutally blunt about it."

This is the same Arlen Specter who concocted the infamous Single-Bullet Theory of the JFK assassination and here he is concocting a conspiracy theory about the U.S. government allegedly withholding information about the economy. Yeah, right.

In truth, there is no "edge" or single trigger event for a depression. A true depression is a very long, very slow downward slide. Sure, people worry about whether our current slide might have that lasting potential, but there is no evidence of that yet -- even if the dear senator might have fearmongered himself into believing so.

It may not feel like the government actions are having much of an effect, but that is because the Federal Reserve, Treasury, et al are still busy putting all of the elements into place and it will take more than just a few months to see fruit borne of those efforts.

My theory is simply that we need to finish burning off the excess "growth" of the past several years which was fueled by super-cheap credit and exotic financial instruments. That might mean a net hit of 5% to 10% to GDP, employment, income, and spending, but this is not a long-term depressionary process. Sure, such a "structural contraction" is much worse than a garden-variety inventory-based recession, but we already have enough structural supports in place to effectively preclude a true depression.

If we are at a brink, it is a brink of starting to see the positive impact of the stimulus and the Federal Reserve efforts to restart non-bank lending (what was called the "shadow banking system.")

The simple reality is that politicians love to peddle one of two things: sunny-day fantasies or deep, dark gloom. The latter gets a lot of traction these days regardless of what reality might be.

-- Jack Krupansky

Has the economy really fallen off a cliff?

Colorful metaphors are great fun, but never terribly enlightening. Warren Buffet is an endless source of colorful metaphors, the latest of which is his allusion that the U.S. economy has "fallen off a cliff." He uttered this odd characterization in an interview on CNBC [but... but... but... I thought their credibility had "fallen off a cliff" after Jon Stewart's "takendown"!!! Have they rehabilitated themselves already?!?!] that is summarized in a Reuters article by Jonathan Stempel entitled "Buffett says economy fell off cliff, fears inflation."

Now, to be fair, maybe Mr. Buffett considers any recession to be a "cliff." Sure, any contraction of economic activity is not to be desired, but the simple fact is that the "fall" to date of the U.S. economy has been only a "few" percent, which is hardly a cliff.

Now, the stock market can be legitimating characterized as having "fallen off a cliff", but there has been no comparable decline in the overall real economy, whether you look at GDP, employment, income, or spending.

To be clear, yes, the U.S. is experienced a severe "structural contraction", that may leave the U.S. economy 5% to 10% smaller over the next year or two, but that hardly constitutes a "cliff."

A fall from a cliff is not something that you survive. The U.S. economy is surely going to survive.

Mr. Buffett enjoys being colorful, something that CNBC is well-positioned to promote, but not for any socially useful purpose.

-- Jack Krupansky

Wednesday, March 04, 2009

Zombies and nationalization, what's it all about?

With all of the non-stop, mega-volume talk about "zombie banks" and how nationalization of banks is the only way to go, one has to wonder whether President Obama and his team are really as bone-headed stupid as their critics suggest. So, what is really going on?

Put simply, it is all about sour grapes and lobbying.

First, let's acknowledge that there is always more than one way to skin a cat, and that includes dealling with so-called zombie banks. So, maybe critics half a half a point in that their proposals could work. The problem is that these critics refuse to accept what I just said, namely that there are in fact multiple possible paths that lead out of the current financial swamp. Alas, pride, ego, and ideology prevent the critics from admitting any such thing.

Second, the whole concept of a bank being a so-called "zombie" is predicated on all of their "risky" credit assets effectively being worth zero or at least something very far from 100 cents on the dollar. The real problem is that we will not know the true value of many of these assets until the economy is back to normal growth mode. Until then, hard-core freemarketeers will insist that all "risky" assets are effectively worth zero. Their ideology and possibly even personal trading positions prevent them from allowing that a significant fraction of these risky assets will be worth something much closer to 100 cents on the dollar a few years from now. In short, one man's "zombie" is simply another doctor's hospital patient. Never confuse the present with the future. The future has to be worth something to any sane person, but those who drone on and on about zombies can admit no such thing.

Third, many of these critics are probably just shilling for pals who have bearish trading positions that are bets on the decline or failure of the various financial institutions. Even if they do not have a direct position, they may pal around with traders and speculators who do and essentially be their mouthpieces.

And then there is the media. They love a juicy story. Negativity sells. They are out to make money, not enlighten you.

The real bottom line is that many of the critics are much more interested in lobbying for their pet plans than allowing that the administration economic team might succeed.

Treasury and the Federal Reserve may not yet have all of their ducks lined up yet, but they are actually doing an outstanding job and much more likely to succeed than their critics will ever be willing to admit, even after the fact.

Yeah, our major banks sure have made a lot of mistakes over the past five years, but it would be far better to allow the administration economic team to continue their efforts, which includes course adjustements as reality evolves, than to try to bend to every self-serving criticsim and proposition that critics lob at them.

Personally, I do not see any of the big banks as likely to fail or in need of true nationalization. All of them are in fact lending, but not to the excess we saw during the housing boom. I see no merit in referring to them as zombies. Yes, more bailout money will clearly be needed (a trillion, maybe two?), but their trajectory is getting better as each day, week, and month goes by.

The good news is that the evil old Wall Street which was the primary driver of the excesses of recent years is rapidly vanishing.

In short, no sane American need lose even a moment of sleep at night worrying about "zombies" and "nationalization".

-- Jack Krupansky

Tuesday, March 03, 2009

What are we doing in Afghanistan?

I am no fan of New York Times Op-Ed columnist Bob Herbert, but in his column entitled "Wars, Endless Wars" he does raise troubling questions concerning just what exactly the U.S. is doing in Afghanistan. As he puts it:

The U.S. economy is in free fall, the banking system is in a state of complete collapse and Americans all across the country are downsizing their standards of living. The nation as we've known it is fading before our very eyes, but we're still pouring billions of dollars into wars in Afghanistan and Iraq with missions we are still unable to define.

Bob expresses his concerns, but does not really try to dig deeply to identify the root problems other than a sense that there is simply no clear strategy.

Is it really all about Iran, keeping them boxed in and under pressure to abandon their support for terrorism (Hamas and Hezbollah) and their "nuclear ambitions"? Maybe, but not quite since there are also troubles in Pakistan.

Is it really all about religious extremists? If so, major military operations are probably not likely to ever reach a point we could call success.

Is it maybe at heart a war on Islam? Could be, but nobody will admit that in public.

Is it driven by yet another crackpot worldview and policy initiative of the shadowy so-called Pro-Israel Lobby? Once again, it could be, but nobody will admit that in public.

Whatever it is, we do not appear to have a robust exit strategy identified and in place and underway.

Are we fighting "terrorists" or shadows or even illusions? Maybe all three.

-- Jack Krupansky