Thank You, Mr Grasso

Dick Grasso has just resigned as President and Chairman of the Board at The Exchange, aka New York Stock Exchange. He was shown the door because his board had compensated his superior stewardship with cash awards. Option awards were unavaliable given the corporate structure at NYSE. Had he been awarded an annual salary of single digit millions and options as is common in corporate America this tempest would not have materialized... just the same soup, different day. But in the brave new world of stock awards and cash his remunerative success, ~ 150 millions after forgiving another ~50 millions, Mr Grasso is a grasping ghoul fouling The Exchange and corporate culture.

Appointed President and COO in 1988 under Bill Donaldson the current head of the SEC , he was named to the Chairmanship in 1996 upon Donaldson's departure. For 7 years it was his show. And what a show it was. Bull and bear markets of monumental scale, rapid technological change and the concomitant competitive threats, major scandals involving member firms as well as floor members, the exposure of corruption at the highest levels of American corporate culture, and war. Had the NYSE made missteps at any one of these junctures the financial costs alone to the institution would have been measured in orders of magnitude to Mr Grasso's compensation. Can it be reasonably asserted that the institution was uninjured, unscratched through just dumb luck? His stewardship not only saved centimillions in potential fines to the institution he saved the day time and again and as a result there is still an NYSE.

Could this sad outcome be laid at the feet of the same board that granted the compensation? Could they fear the former Chairman, Grasso's old boss who now heads the SEC? Do they cringe in the face of a guy they paid ten cents on the dollar to when compared to Mr Grasso's paycheck?

Forget Mr Donaldson. Grasso's the guy who knows where all the bodies are buried and Elliot Spitzer is on the prowl.

28 Pages of National Security:

Princess Haifa, wife of the Prince Bandar, Saudi Ambassador to Washington for two decades, donates $130,000 to some woman named Ibrahim who she's never met who's married to some guy named Basnan who it turns out is a Saudi double agent. Omar al Bayoumi, a Saudi official of the Saudi Civil Aviation Authority and Basnan's bud, befriends two evildoers, Almidhar and Alhamzi, gets them an apartment next to his and fronts them a couple month's rent with money sent by the Princess to Basnan's wife. It's worth noting that the Saudi double, Basnan, neglects to tell his FBI handlers any of this. Almidhar and Alhamzi land AA 77 on the Pentagon. Basnan meets with Saudi Interior Minister Prince Nayef in Houston in April 2002 while Crown Prince Abdullah is eating barbecue down at Crawford Texas with President Bush. While all this is old news it was awhile before anybody in the media reminded us that Princess Haifa was bankrolling al-Bayoumi and Basnan. The Weekly Standard was first but it took a few days. So this is the likely contents of the 28 page redaction by the Bush administration of the Congressional Report on 9/11. Reason given: National Security. Most everyone has decided that all this reflects negatively on Bush and the accomodation with the House of Saud and Reagan/Bush in 1982 which passed for energy policy that he inherited. He's just covering his backside, yadayadayada.

Wrong.

The revelations stricken from the Conressional Report on 9/11 are truly embarassing to all concerned. To paraphrase a colleague: They know we know, we know they know we know.... So why the concern? Fact is there's a civil war underway in Saudi Arabia that is being fought between essentially centrist Crown Prince Abdullah and fundamentalists under Interior Minister Prince Nayef. Prince Abdullah doesn't need the heat of the stricken revelations just at the moment he attempts to turn the Interior Misisters flank. Our President is inclined to support Prince Abdullah but would be unable to do so just in case the intelligence connection between the Saudi Interior Ministry and AA Flight 77 became undeniable.

Were the putch underway sub rosa in Saudi Arabia to break out into the open, financial markets here and abroad could roil sufficiently to snuff the nascent recovery underway globally.

Think Iran, 1979.

Child Soldiers: Central to the following argument is the following equation: A 12 year old Liberian is more mature than an 18 year old American. In terms of self sufficiency, political sophistication, and emotional maturity the child soldiers of the third world are less children than adults. The 18 year olds volunteering for our armed services are more children than adults. If child soldiers are a bad idea let's clean our own house first. Our troops could easily comprise adults in middle age with no loss in effectiveness and with concrete advantages to the armed services and our nation. I refuse to submit my children to the fray until I'm dead and gone in the service of my nation and freedom. A test of the merits of armed conflict should include the willingness of those who support that conflict to risk their personal safety in its prosecution. After the 50 somethings then sacrifice the 40 somethings and so on down. Let elders lead by example. And let children work to prevent armed conflict and the loss of their parents assisted by adults who know the difference between imperial adventure and just war.

Donald Regan is dead. In his eighties, this former Chairman of Merrill Lynch and Ronald Reagan's Treasury Secretary and Chief of Staff, lost none of the clarity of thought he demonstrated as he and his president moved decisively to reduce federal income taxes from nosebleed levels ( top rate > 70% ). In a bald act of copyright infringement I retransmit here Mr Regan's editorial published in the WSJ after his passing. May he find peace.

A Reaganomic 'GPS'

By DONALD T. REGAN

The recent debate over President Bush's tax proposal had so many echoes of the Reagan era that I could almost recite the parts of the various players from memory. Amid all the clamor, few have stepped back -- as President Reagan did in 1981 -- and asked three basic questions: Where are we, where do we need to go, and how are we going to get there? Unfortunately, we have no GPS that could pinpoint where we are and how to navigate from here to there.

The 1981 tax debate occurred when the economy had serious ills. It was entangled in a strange phenomenon known as stagflation -- a combination of slow growth and inflation that could not be accounted for by the dominant Keynesian economic theory of the time. Keynesian economists believed that slow growth -- or no growth -- was the cure for inflation, but somehow both were happening at the same time. Tax cuts, it was feared, would only create more deficits, stimulate more inflation and raise interest rates -- already in the high teens -- further into the stratosphere.

Ronald Reagan, however, was not troubled by this state of affairs. To answer the question of where we were, he recognized that growth was held back by high tax rates and excessive regulation. As for where we needed to go, his answer was that the first priority was economic growth; other problems would take care of themselves as long as the Federal Reserve maintained a steady and moderate rate of monetary expansion. And his policy for how we were going to get there was breathtakingly simple -- the government was going to get off the back of the American people by taxing and regulating less.

The opponents of Mr. Reagan's program were saying many of the same things they said in response to the Bush tax cut proposal: We can't cut taxes, it will increase inflation and raise interest rates; deficits are already too high; tax cuts will only deprive the government of the revenues it requires to meet the many needs of the American people.

Thanks to President Reagan, we know a lot more today, although it seems that many in Congress didn't get the memo. We know that tax cuts spur economic growth by improving incentives to work and invest and by making more money available for new ventures and small business, where the real job growth occurs in our economy. There are many examples of this in recent history, from the Kennedy tax cuts of 1962, through the Reagan cuts of 1981 and 1986. We also know that deficits do not cause inflation or cause interest rates to rise. Although the deficits during the Reagan period were higher (as a percentage of gross domestic product) than the deficits projected today, interest rates declined after the Reagan tax plan was adopted.

As I interpret Mr. Bush's tax program, I think I see that he has tried to answer the same three questions that President Reagan always kept in mind -- even though the economic problems he faces are different. We are not in a period of inflation. Quite the opposite; inflation and interest rates are at historic lows. We are, however, in the midst of a slow economic recovery, in which jobs are not coming back as quickly as we might have hoped. In fact, the whole economy is changing right before our eyes, and will continue to change. Unskilled or semiskilled jobs are going overseas, and jobs involving knowledge and skill -- technology, specialized services, finance, health care, energy, entertainment and communications -- are the growth areas here at home.

The Bush tax program is ideally suited to address this new economy. Whereas Mr. Reagan saw generalized economic growth as essential, the Bush plan has both a stimulative component to start the engine and a long-term component to advance the process of moving our economy into the new areas of future growth. That's what the dividend tax cut and the cut in the capital gains rate are all about. As companies increasingly pay out dividends, and pay less of a penalty for making profits, investors will have funds to invest in new ventures. Our economy, already the most dynamic in the world, will continue to change and grow in response to the growing skills of the American people, particularly in the service sector.

President Bush should also aim to extend his tax-relief vision beyond financial transactions such as dividends and capital gains. In a knowledge economy, education and learning are real factors of production. Americans who add to their knowledge and skills are, then, adding to the stock of the nation's productive assets. The president's next tax bill should recognize this with tax credits for individuals that match the investment tax credits that have been available to business. That's a program that assesses where we are, where we need to go, and how we are going to get there.

Mullah Ashcroft testified before the Senate Judiciary Committee yesterday. No doubt fresh from a prayer meeting in his office at Justice, the Mullah stated that: "No major terror attack has occurred on American soil since September 11th." While outlining the specific accomplishments in the fight against the evildoers he pointed to the following: "Over 1,000 new and redirected FBI agents dedicated to counter-terrorism and counter-intelligence; 250 new Assistant U.S. Attorneys; and 32 new Joint Terrorism Task Forces".

These guys are good, but do they have email yet?

Few remember the nuclear physicist, Lee Wen Ho, Ph.D. who was taken down by the FBI as a spy for the PRC while at Los Alamos. Lee really did download files onto his notebook and take them home to work on (former CIA head Woolsey kept classified files on his home computer after leaving government service; not a problem). After nine months in solitary confinement (with the light on) FBI dropped 58 of 59 felony counts, Lee copped to one felony and was released for time served. The Mullah wouldn't comment on the investigation and prosecution of Lee since "There are lots of times, especially in international intelligence security matters, when we don't release things because it's not in the national interest to do so,".

No fooling. If folks understood just how lame the security services are as a group there would be so much fear and loathing and gnashing of teeth that national security would indeed be at risk.

Don't be late for prayers.

Iraq conquered. Administration hawks push regime change in Iran and support direct military action there just in case the nuclear program at Natanz is not decomissioned. The force of this logic is staggering. Since Saudi Arabia rulers began their putsch six months ago of the most militant mullahs, just under 2000 of the 80,000 religious leaders have been fired. Officially they've been sent for "reeducation". This is the opening salvo in an as yet undeclared civil war in the kingdom. And should any in the ruling faction favor accommodation with the mullahs, the bellicose approach to Iran by the coalition will so inflame the militant mullahs that there will be no accommodation possible in Saudi Arabia. The more beligerent the coalition towards Iran the more impetus for an otherwise divided and/or uncommitted Saudi ruling class to exterminate militant Islam in their own backyard. It's a survival thing. Priceless.

The Treasury Department (news - web sites) had warned it needed the extension by next week "to preserve the confidence in the U.S. government and to prevent uncertainty that would adversely affect our economic recovery." The current $6.4 trillion limit was breached earlier this year, and Treasury paid its bills by shifting money from government retirement and other funds, maneuvers it said it could not make again. Ken Lay call your office

May 12, Bad Hair Day for House of Saud:

Zealot bombers killed 30+ souls at 3 kaffir housing compounds in Riyadh. The good news is that apparently more Saudi shadid died than American kaffirs. Will the princes send 25k to the families of the shadid as they do to the martyrs' families in Palestine? Nah. It's tough to make the case that the martyrs weren't fighting Zionist crusaders, so expect the checques to go out from the disloyal opposition.

So now it gets interesting...until recently according to the princes there weren't any militant zealots in the Kingdom. Only rival alcohol traders. Then all of a sudden, a week before the simulcast bombings there's a published alert to the populace by the police for 19 zealots which was immediately countered by fatwas from 3 mullahs opposing the princes that said explicitly that these 19 were to be sheltered. Expect the 19 to find lots of support on the ground. This all is an unpardonable affront to the princes.

Good. Now they'll have to take out the backers of the shadid. The dudes who should know better but are obsessed by the lure of real virgins left behind by the martyrs. These folks lurk in the security services, business elites, and radical mosques. The outcome of the pogrom to ensue is far from knowable. But count on it, lots of bad guys on both sides will be dead soon.

It's a perpetual motion machine now.

This calls for a drink.

Saddam Hussein's future is not bright. Assuming he's still with us he's now as dangerous as a wounded bear. All those microbes encased in tupperware avaliable for the asking to worthy holy warriors. And with this act come to peace with his maker and rival Sallauddin. Atone for a secular life and become an arab saint while offing the enemy by the tens of millions. A cancer on humanity, unleashing his malignancies in a cascade of violent insanity. That Iraq may soon become another proving ground for assymetry like Chechnya appears to be the least of our worries. What about the stuff that was in the mobile lab the coalition found recently? Whither to?

Makes you wonder.

Facetime is Out; The Web is the Cure:

Since September 11, 2001 it has been said again and again that things are different. After SARS things get different by an order of magnitude. It's one thing to fear some pencil-necked extremeist with a bulge at the torso, it's another to fear anybody reaching for a handkerchief. By extension, the fear of the space occupied by the handkerchief weilding assassin may just make retail bricks and mortar edifices untenable. Similarly an upgrade to 1st class on an airplane seems like a lateral move. How about an upgrade to my own bottle of oxygen for the duration of the flight?

Prominent stocks and indices in this country have risen above and held at levels above flattening 200 day moving averages for long enough to question the persistence of the bear trend of the past three years. Yes things are different. The obvious financial victims of SARS (air travel, lodging, leisure travel) were already zeroed out in terms of their impact on the indices by The War on Terror. But what wasn't obvious is that if we hope to avoid the raging contagion, we're a whole lot more likely to become users and customers of all things Internet. Suddenly, getting groceries anonymously online sounds sensible. And so does a whole range of web-based goods and services. While it is a stretch to posit the cure for tech wreck it is becoming clear that many firms are about to enjoy increased demand for their cyber products and services.

When the going gets different, the different turn pro.

I Think I'm Turning Japanese; I Really Think So:

Used to be Europe/Great Britain was the leading indicator of securities trends here in the USofA. No longer. Asia now leads the curve in investment trends and the time lag appears to be around a decade. 1990 began with the Nikkei 225 Index at its zenith ~39,000. Think bubble. Think of Japan unable to get out of its own way for 13+ years. http://www.nipponstock.com/visitor/apps/html/indexe.html Sky-high taxes, corporate malfeasance, structural rigidity, low liquidity and the associated high gearing ratios, regulatory/political collusion, and the absence of political will to restructure. Long bonds at unthinkable yields combined with a volatile and ultimately declining currency. Insurance companies insolvent due to negative portfolio returns. Sound familiar? It gets better.

Let's call this background for securities price discovery in Japan. Everyone in the bull camp for US securities now hangs their hat on one time tested guage. The Three Year Rule. American stocks never go down more than three years running. We endured three years eating grass and dirt and now for the bulls there surely is an up year in the cards for 2003.

Back to Japan. Nikkei didn't make it in year four but year five was a marginal improvenent. Five years before a plus tick! The bad news: Year ten was a pretty decent one in percentage terms though it essentially went nowhere. Dear Reader, Nikkei is still building a base thirteen years on and it is at twenty year lows! So much for retained earnings and free cash flow.

Market participants are getting scarcer but those who will admit to being stock or index traders here speak of failed rallies and breaks. Trying times for sure. But just the beginning, if Japan is any indication. From 1992 to 2000 Nikkei traded in a range between 15,000 and 21,000. Which indicates that the Nikkei was able to mount 30% rallies and 25% breaks but money was steadily flowing out and making serious yen was unthinkable.

And then it tanked. At ~8,000 it's on the low side of one half of the 9 year congestion area.

In the US we mark time to a Japanese Karaoke tune. Bonds go higher, but slowly, and the currency punishes all investors inexorably.

There is a way out. One that the Japanese lacked the will to implement.

Money goes where it's well treated. Can anyone doubt this? Raise interest rates and slash taxes. Reward investment thereby. As capital flows in, in anticipation of its pampering, an optimism will accompany it that negates the ennui of the last thirteen years in Japan and adds the marginal investment yen which in turn fuels additional optimistic flows. Here in these United States were we to slash tax burdens and raise interest rates capital inflows could cure Japanese Disease in its acute stage before it becomes a chronic affliction.

The Japanese Disease is not without an antidote.

From today's WSJ: Syria, meanwhile -- which has been accused by the U.S. of experimenting with chemical weapons and charged by Israel with hiding Iraqi chemical or biological weapons -- said it would propose to the U.N. that the Middle East be declared a zone free of weapons of mass destruction. The move was pointedly aimed at Israel, which is widely believed to have nuclear weapons.

I think this is worth a letter of support for this initiative. Send a letter to your representatives in support of disarming both Israel and Iran. Then it's off to Pakistan, N Korea, and India.

Imagine Whirrled Peas.

History Repeats: Eason Jordan's Op-Ed piece from April 11 ( http://www.nytimes.com/2003/04/11/opinion/11JORD.html?ex=1050638400&en=ea21e8c88feae21c&ei=5062&partner=GOOGLE ) reminds me of Stalin's relationship with the press. Reporters found it convenient to report on the idea of collectivisation and omitted the realities on the ground. Missing the destruction of millions of civilians. Once again the organs of media are full of beans. What's different this time is that they report on their own news. Jordan gets a news coup. I beg to differ: This guy should be on his way to jail, soon. Good riddance. Not reporting real news in order to attain exclusive American network access for one's news network could play out in multiple motifs. Let's to the President's Press Conference. You toe the party line in there or they don't take your questions. Maybe networks shade truth domestically on a similar scale. Will we ever know unless they confess?


Don't hold your breath.

US State Department As Full of Beans As Ever: Today Undersecretary of State, James Bolton proved that State has it backwards, again. While kissing rings at the Vatican, he's quoted in today's Washington Post as follows: "We are hopeful that a number of regimes will draw the appropriate lesson from Iraq that the pursuit of weapons of mass destruction is not in their national interest".

One of the reasons we mugged Iraq is because they have 0 nukes. Pakistan has left India powerless to act precisely because they have the bomb and the missles to deliver them. The bad guys aren't stupid. After all, they're still on top of the heap in their corners of syphilization. Only Uncle Sam can afford to employ people disingenious enough to not understand that Iraq's fall and Pakistan's survival revolve around the ownership of nuclear capabilities. The race is now on in earnest. The lesson of Iraq. Now when your totalitarian neighbor get nukes what is your option? Don't call Bolton.

The mouse roars.

"When the full stories of these two incidents (1993 WTC Center bombing and 1995 Oklahoma City bombing) are finally told, those who permitted the investigations to stop short will owe big explanations to these two brave women (Middle East expert Laurie Mylroie and journalist Jayna Davis). And the nation will owe them a debt of gratitude."

- Former CIA Director James Woolsey, "The Iraq Connection" - Wall Street Journal, September 5, 2002

http://www.benadorassociates.com/mylroie.php
http://www.jaynadavis.com

Fundamentalists In Our Midst: It isn't just rioting Hindus at Ayodhya or Muslim zealots in madrassas who have passed on reason for large doses of revealed truth. Between 21 & 27 January, Harris Interactive ( www.harrisinteractive.com ) polled more than 2000 individuals online regarding their religious beliefs. The virgin birth held sway at about 78% regardless of race and ranged from 84% of those with high school or less on down to 60% of post grads. Hell was big in everyone's belief system at 69% of adults. But Democrats were somewhat more forgiving than their Republican counterparts: 63% versus 82%. In all fairness, Republicans believed in Heaven more ( 89% ) than Democrats ( 80% ).

What a rareified response is "Don't know". When it comes to where folks expect to end up after departing this vale of tears, 75% of Christians expect to enter the Divine Kingdom while only 1% figure to rate eternal damnation. Only 12% "Don't know".

Praise the Lord....and pass the ammunition.

Medicare: What I don't know about Medicare doubtless fills hundreds of volumes of rules and regs. I lose 3% of my income to these folks ...no matter the level of income. Why should individuals who engage in risky behavior, healthwise, get these services at the same cost as those folks who don't become unhealthy from avoidable behaviors? No really. Go to an airport and see how pasty folks look. I'm sure you know what I mean. Obiesity, a disease? Smokers? Cardiovascular abuse?

These types are legion in the system. They risk their own health and add enormous burdens to our shared medicare expense. They consume scarce resources through their own behaviors. Let them bear the added cost to healthcare that they represent. Demonstrate the true costs of such behaviors to practitioners of them with a market based approach.

Increase the supply of healthcare and favorably impact its cost as well.

First Policy Statement: Characterizing idealogues and policies as left or right of center obscures perception. A continuum from anarchy to totalitarianism better describes the where of any political actor or action. On the ground there is no distinction between communist and facist. They're both bad for your health. Of course the other end of the continuum sounds attractive but it is practiced in few places. Try the southern Caucasus.

Moderation in all things, including moderation.