Pro Commerce

Jack Schafer, hero

An example of a standard debate, which I have experienced many times, is in today's Slate.

Jack Schafer takes on a story, more than a year old, from the New York Times, which wildly inflated data on sex slaves and made it into a national crisis.

I find, in this story, the same traditional issues that keep popping up: prudery, NYTimes bias and incompetence and the general inability of Americans to cope with statistical data.

The two worst cases of this statistically-blind-prudery occurred in the early 1980s when the major news outlets announced an epidemic of child kidnappings at a level in excess of 125,000 annually for the U.S.  Only a German writer raised any question about the data.  He found that actual stranger abductions of children, a federal case, never exceeded 130 per year.

Similarly, the press found wanton satanic sexual abuse of children in day care centers across the country.  Cases were reported to be in the tens of thousands annually.  More than 200 trials occurred in which more than 200 innocent people were given extensive prison sentences.  Not a single case of satanic sexual abuse of a child was ever found based on legally reliable evidence.

Women only train cars

Tokyo
In an earlier blog comment entry  an article on the pink cars on intercity private rail lines is mentioned; these cars are for women-only during morning commute hours. The question has come up whether the demand for these pink rail cars is driven by a groping problem. 

First, one needs to think about being groped, since it doesn't happen on a crowded Bart train after a baseball game. Reason: an American woman would make a ruckus and the groper might not survive. 

Second, think about travelers.  Women travelers complain bitterly about being groped in Italy, Turkey and Spain.  Local women don't complain.  It appears local women know how to handle the issue and foreigners are targets because they don't and because locals don't protect travelers.

Third, I have traveled in Japan for 33 years with dozens of women (Japanese and Korean included) gone tens of thousands of miles in crowded trains and no one has ever been groped.  My partner tells me that her Japanese women friends have never mentioned the problem, and the Japanese women I know either dismiss groping as not a problem or one too trivial to talk about. So why the pink commute train cars?

The answer would require a new sociological instrument called the Gender-Cluster Index.  Level 1 would be a society where men and women appear in mixed clusters publicly, most of the time.  Level 5 would be a society where men and women almost never appear in mixed clusters together in public.

Level 1 would be (for most age groups) Americans and Dutch.  Level 5 would be most Arab, North Indian and West African societies.  My local neighborhood in San Francisco, the Castro district, is also a Level 5... mostly groups of men.

What would surprise most readers of this blog is that Japan would be a Level 3 or 4 society on this gender-cluster index.  Japanese men and Japanese women do mix at college age, but rarely before or after that.

That is the main reason there are pink cars on commute trains. Japanese women prefer to be in the company of women.

E-trading

I had a client earlier this year who wanted me to investigate a prospectus that was circulating for an electronic exchange of hedge fund instruments.  The prospectus was well written and the backers had the obligatory Harvard MBA credentials and jobs in the securities and commodities markets. Why shouldn't we all be able to run our own hedge funds?  NASDAQ is an electronic exchange where we can run our own stock portfolios.

It took a few minutes to think about the reason why such an idea would or wouldn't work and two phone calls to friends who are hedge fund managers. 

There is no successful electronic exchange for bonds.  That is the clue.  You can look at the market for bonds on computer, but you can't buy and sell them automatically. The reason is that there are not enough identical bonds trading to make an automatic market.  The way bonds work corporate or government bond are issued  at multiple times of the year, with many different call dates or maturity dates and with a variety of interest rates.  The consequence is that each single bond (with a few exceptions) has a very small market at any one moment. Stocks are issued all at one time, so there is usually a big bunch of the same stock on the market at any one time.

I inherited a portfolio when I became a corporate treasurer.  I  looked at the contents which include some 1953-54 Golden Gate Bridge bonds maturing in 1993, 2003 and later with coupons of 2.35%, 3.11% etc.  I immediately sought to dispose of them, assuming I could get a better return in equities.  It took a month to find buyers for the whole lot and the lot had to be sold as a unit. That is a realistic picture of the bond market.  Whether the GG bond lot was bought by a market maker or a final buyer, I don't know.

Bonds are traded by market makers who buy whatever is offered on the market and hold those bonds until they sell. If the market were an automatic e-trading system, you would put in your bonds to sell at a price fixed by you or offered at the last traded price and wait for someone to buy it.  It could take seconds, minutes, hours or you could be watching your bond sit on the market for a week.

My client's prospectus dealt with hedge fund instruments, proposed for an electronic exchange.  A hedge fund is made up of many investments designed to have little or no risk, which allows the investor to borrow on the hedge and get greater leverage.  For example: I buy SBC stock for $25 and buy a put and call for six months to make sure I can sell it for $26 if the price goes down or cover a short for $24 if the market goes up.  I am assured of a $1 gain, whatever the market does, less the costs of buying the puts, shorts, calls, borrowing interest and trading the stock.   For this certain deal, I borrow 80% of the funds.  I do this by putting the whole package in a contract and selling it to a bank or investment banker. The original hedge can be anything -- stock, bond, a bet on interest markets (called a LIBOR), or a bet on currencies. The point is to take out the risk, borrow on the hedge and sell the resulting package. Or buy the package if someone else created it.

That is precisely the kind of instrument for which a market is difficult to make and an electronic exchange is impossible.  Each instrument, usually created by an investment banker (Morgan Stanley, for example) is one of a kind or a few dozen of a kind.  It would be many times harder to make an electronic exchange for hedge fund instruments than for bonds. 

Don't invest in an electronic exchange business for anything unless the market for each item traded  is large or the seller and buyer are happy to wait days or weeks for each transaction (think eBay).

 

Sharia finance

Sharia forbids earning or paying interest on loans.  So Sharia finance is about the ways to get around this prohibition. Sharia finance also concerns prohibitions on using money to finance the pork or alcohol industries.

The first is not a problem for dividend or capital gains earnings because they clearly involve risk which is a requirement of Sharia investments. The problem arises with home mortgages and savings accounts.

Home mortgages are handled by having a Sharia bank buy the relevant house and then sell it back, on a monthly payment schedule, to the mortgagee plus a rental fee on the use of the house. The net result is identical to a mortgage loan.

A savings account in a Sharia bank is one where the deposited money is invested in only Sharia investments. The returns are dividends and capital gains which are put in a fund that pays out the regular market savings account interest rate. Again, this is  not really very different than a standard bank savings account except for the way the funds are invested (definitely not as secure as a bank savings account and certainly not insured by any government.)

All other Sharia finance is based on equity funds that exclude interest bearing instruments, like bonds, and avoid stocks in inappropriate (pork and alcohol) corporations. (Think socially responsible funds with an Islamic agenda.)

The multiple tools of hedge funds... options, puts, calls and arbitrage contracts are nearly all well suited to Sharia finance (excluding bets on interest rate markets such as Libors.)

The Sharia prohibition on interest was appropriate at the time of Mohammed, as Christianity took the same position. (Jews in both Moslem and Christian societies were relegated to banking.)We now see interest as a rental on money composed of a mix of risk, market pricing (national price index) and the supply of funds.

Old issue

I would love to make an important contribution to the current debate of ideology versus anti-ideology. Unfortunately, I can only make a minimal contribution.

The issue comes up while continuing to read Ron Chernow's book Alexander Hamilton.

I get furious at Jefferson and Madison and want to picket the Jefferson memorial.  Jefferson supported the French Revolution even after Robespierre was using the guillotine daily on the very same great people who had served in and supported the American Revolution. Just like the Lefties who supported the USSR long after Stalin's horrific purges and the Gulag were exposed.

So I asked myself, "If the arguments were the same in 1790 and 1990, where did the core division come from?"

I believe the answer is Plato versus Aristotle. That is the original core division that is at the root of our current debate and the root of the debate when the U.S. was founded.  When I read Plato and Aristotle at the University of Chicago, half a century ago, I was immediately an Aristotelian.

As I now view the debate in the world, Plato was the ideologist and Aristotle the anti-ideologist.

It seems implausible that such a mighty and extraordinary subject (ideology vs anti-ideology) that has wrought havoc in all our lives and generated bitter turmoil for many centuries should be attached to such an ancient intellectual divide.  But it is plausible, and I am personally stunned to recognize it.

The element that has changed the dialog and created human havoc is that Plato did not deal with commerce.    The great sorrow of the past two centuries and the sorrow in the modern dialog-dichotomy is that the ideologists are anti-commerce.  The Platonist/ideologists think that commerce is a moral force and should support their morals. 

My contribution to modern thought is that commerce is not moral.  The recognition of the non-morality of commerce is vital to human understanding.  (Think about why Hitler, Stalin, Pol Pot and Mao murdered so many people -- the people who were the wheels and cogs of commerce.)

I have time on this vacation to re-read Aristotle and I will.

Simple living in Tokyo

Tokyo
I am a devoted simple liver so I am delighted to find fellow members of my global community.

Chicka plays a miniature guitar (easy to carry around the world) and plays in front of my favorite local coffee shop.

Chika is a confirmed and official simple liver.  He lives in a tent in nearby Yoyogi Park (photo on left); the tent is near a public bathroom. Chika has an apartment to receive mail and store miscellaneous items.  He pays $278 a month rent. Chika earns an occasional $1,000 as an actor.  He is 41 years old and single, travels the world.  Chika says he only has a passport and a Citibank ATM card. ( I hope Chuck Prince, CEO Citigroup, learned from his mentor Sandy Weill, who created the first global bank, that we all need a global bank.)

Chika uses the same nearby public bath that I use(lower right.)  It is post-war with the standard murals and no fancy gimmicks.

We discussed simple living and wondered why so few people grasp the reality that life is more fun if you have fewer possessions and less responsibility. We also mutually acknowledged that proselytizing for simple living is a bad idea.  You either get it deep in your heart or you don't.

Chika plays upbeat  popular songs, many love songs and talks about the “heart” of living.

Radiation update

Tokyo
I sit here listening to comforting clicks of my radiation meter.  Comforting because they are so few and far between. The same as last Sunday, 11 clicks in 60 seconds.

Movies fail with ideas

I have to thank Scott for his comments in a blog below.  Scott points out that documentary movies fail as a political media. 

Ideas do best in written form where the mind can examine, mull and analyze.  Movies are storyline based and can make ridiculous and irrelevant connections that have no intelligent meaning.

I feel that is true for most entertainment vehicles. I know that popular songs never reflect the history or the ideas of the era they inhabit and the same is true for the visual arts.  The exception is government art, like Hitler's or Stalin's.

More open calories

If my readers were not shocked enough to read that I commend Subway for its global open calorie commitment, you will be more shocked to find I just ate lunch at Denny's in Harajuku and they have the same practice, all items in the menu include the calorie count, at least here in this restaurant.

Denny's is a sit down restaurant with an extensive menu, nearly all Japanese items.  The wonder of this is that I get the calorie count on a number of Japanese dishes I regularly eat.  Sadly, I discovered that one of my favorites, Tonkatsu (tempura pork cutlet) has more calories than my body burns in 40 hours.

Denny's has great food here... absolutely fresh, local, high quality vegetables. They couldn't have survived otherwise.  The restaurant was full this Sunday afternoon at 3 pm. 

In the U.S. all Denny's food is extracted from one plastic sausage machine, including lettuce.

 

Open calories

I have long been an advocate of open books, letting everyone know the intimate details of your financial statement in order to build trust, esprit, support and community.

Now I have to advocate for Open Calories.  One restaurant is a member of the Open Calorie Community in good standing ... Subway Sandwiches.  Every menu and every wall list has on public display the calories of the items, including the calories of the variety of available dressings. 

The greatest benefit for me, as a traveler, is that I can easily control my caloric intake by going to Subway.  Otherwise I have to guess, and in the world of calories an objective guess is hard to come by. (“That bowl of chili is 400 Kcal... no, its 500 Kcal.”)

Subway is a fascinating business.  One-hundred percent franchise, with the franchise owned by a small privately held company (Doctors Associates Inc.).

How does the anti-globalization clan deal with this global entity, nearly 24,000 outlets worldwide, bigger than McDonald's in the U.S.... each owned by a small proprietor?

Person-hood

I have been told several times to see the movie The Corporation.  I haven't and I don't plan to, based on the description of the movie from people who have seen it and the ideological background of the film makers.

The two comments that always go along with the movie recommendation are that corporations should be deprived of their person-hood rights and that we would be better off without global corporations.

A corporation does not have the rights of a person.  In the Bill of Rights, which applies to individual citizens, the corporation does not have the rights in Article 2 or Article 5. Important rights: a corporation is not a person.  A corporation can't do many things individuals can do such as get a driver's license, get a passport, be a citizen, vote or raise children.

The countries without the presence of global corporations are: North Korea, Cuba, Mali, Chad, Sudan, Yemen, Ethiopia, Turkmenistan and  El Salvador.  All lefties should feel free to move to these countries to celebrate the wisdom of their ideas about global corporations. 

We should also note that Cuba has an excellent educational system, several universities and a good health care system.  What they lack is virtually everything else including edible food, the right and ability to leave the country and even one good shopping mall.

Felt influence

What we know and what we don't know about Mark Felt's role in American history.

• We know that the United States went more than twenty-five years after 1975, politically immobilized by its loss of lives in Vietnam because North Vietnam succeeded in capturing and defeating South Vietnam after a peace treaty was signed. Lives lost; war lost.

• We know that Kissinger and Nixon had signed a successful peace treaty in 1973 with North Vietnam after North Vietnam was severely defeated in the Tet Offensive. South Vietnam forces were well trained and ready to defend themselves under treaty agreements.

• We know that South Vietnam would have successfully fended-off North Vietnamin late 1974 if South Vietnam had had the money and military supplies promised by the United States.

• We know that at the end of 1974 South Vietnam was deprived of funds and military support necessary for its survival, because President Nixon had been forced to resign in August of 1974. Newly installed President Ford did not have the power to influence Congress and support the South Vietnamese

What we don't know is the importance of the role of Mark Felt in bringing down President Nixon.

Felt had three historically unique attributes. First, he was the direct successor of J. Edgar Hoover, the founder and dangerous tyrant who ran the FBI as his personal fiefdom.  Felt used his top position in the FBI, and the powers assembled by Hoover, to destroy President Nixon by secrecy and subterfuge. Second, Felt had unique skills in espionage, learned as head of the FBI counter-intelligence desk, which he used to keep his use of power a secret. Third, Felt had a long history in Washington politics, tutored by Hoover, a master of deceit. Felt leaked his material slowly so that no counter attack and no defense by Nixon was possible.

How the sum total of these unique attributes combined to influence history will take a long time to sort out.  My personal guess is that Mark Felt killed more people (Iranian revolution, Yugoslavia, Lebanon etc. ) and did more damage to the lives of other people (returned Vietnam Vets and their families) than any other American since the Rosenbergs (Soviet nuclear spies).

Schadenfreude

Of course I am delighted at the misery of those people who want the EU to succeed as a political entity. The EU's political representatives opposed the Israeli defense wall because the EU represents widespread European anti-Semitism.  How else to explain the EU silence about the defensive wall that the occupying U.S. Army has build around the Green Zone, the defensive wall that India is building in Kashmir and the defensive wall the Thais are building to protect against Southern Moslems.   (Note that all these walls are protection against Moslems.) 

It is greater satisfaction to me that the founders of modern democracy, the Dutch, voted against the EU. The immediate beneficiaries are the vintners in Champagne.  Their bubbly wine is being lavishly enjoyed in Washington D.C., London, Tel Aviv and Jerusalem.

The Euro is now in trouble.  The previous failure of France and Germany to keep their deficits within Euro constraints, for three years, was acceptable when the EU train seemed to be moving forward.  Now the train may be moving backwards and the failure of Euro constraints looks more serious.  Europe is on a downward Lefty spiral of unsupportable welfare states with voters demanding more welfare.

The logical pan-European structure for the future would be made up of the commercially successful peoples: Britain, Scotland, Holland, Denmark, Sweden, Finland, The Czech Republic and Hungary.

Third world development (part 3)

Part 1 and 2)
The two lessons I learned in Third World development are: that no change is going to occur unless it appeals to existing indigenous people and avoids any form of government.

That leaves only the trade markets as a source of voluntary change. Few things are as beautiful or exciting as an open market in a tribal area. Trade goods move around the world oblivious to government so change must be tied to trade goods.

Trade goods have two serious flaws: they often deteriorate invisibly and cheat the final buyer (think of a ball point pen that is dried-up beyond the first .25 inches); they are dependent on other trade goods for power or repair (think tape players and batteries.)

We will not get change in the Third World from structural adjustments or government aid or loans.  All we will get is more anger and hatred for our crude disruption of ancient societies. Change in Third World areas needs to come from research and development into low cost trade goods that meet these two criteria.

Examples of trade goods that are needed are: ball point pens that change color when they dry up and no longer work; drugs that change color when their potency declines or when temperature damages them; adding machines that are solar powered and don't require paper tape; and improved batteries that can be locally recharged chemically.

I want to create a global organization to achieve these goals.  Are you ready to sign up?