Ruminations, June 7, 2009

Black swans follow the money
In his 2007 book, The Black Swan, Nassim Nicholas Taleb uses the term “black swan” as a metaphor for an unpredicted and uncontrolled extreme event.

Borrowing Taleb’s metaphor, Universa Investments LP created Black Swan Protection Protocol Inflation Fund because they are predicting an extreme event. The Black Swan Fund buys put and call options in about 20 products based upon the premise that the United States is headed for a possible extreme inflationary cycle: hyperinflation.

We often hear people stating that the United States’ fiscal policies are on a disastrous course and we wonder if those statements are merely theorists expounding or politicians ranting. However, when a $6 billion investment firm opens a fund to protect clients from the aforementioned disastrous course, you’ve got to start paying attention.

As Deep Throat told Woodward and Bernstein, “Follow the money.”

The more things change …
In the old Soviet Union, official newspapers would often make outlandish claims of Soviet inventions and of bizarre interpretations of history. The rest of the world would just smile and shake their heads.

Things are different now, right?

Maybe not. Russian President Dmitry Medvedev has formed a committee to rectify alleged distortions of history about Russia. According to Colonel Sergey Kovalov, who writes on the official website of Russian Defense Ministry, Poland started World War II. Had Poland agreed to Nazi demands and ceded Danzig to Germany and allowed the Nazis to build an autobahn and railroad through Poland, the war would have been avoided, he says. Of course, Russia did collaborate with the Nazis in an attack Poland in 1939 but that was justified, says Kovalov, by Poland’s intransigence.

What’s next? Well, maybe Russia will claim to have invented the Internet.

“I don’t want to run General Motors”
President Obama last week told us “what I have no interest in doing, is running GM.” Maybe he thinks that he has no interest in running GM but it doesn’t look that way from here.

Detroit Mayor Dave Bing had heard that GM was seriously considering moving its corporate headquarters out of Detroit to Warren, Michigan. This would have been bad news for Detroit. So, according to Bing, he and his cohorts made a few calls to the White House and last Sunday were assured by President Obama that GM was staying put in Detroit.

In its slimming down mode, GM has announced the closing of several facilities – one, a parts distribution center employing 66 union members, sits in the home district of U.S. Representative Barney Frank (D, MA). The closing of small facilities would seem to be in the purview of GM’s middle management but, evidently, not in this case. Frank told the GM CEO Fritz Henderson that the closure of the Massachusetts facility was not in GM’s best interest and, what do you know, Henderson agreed.

In an effort to save money, both GM and Chrysler plan to close several hundred dealerships. Normally this is a business decision that would have no national implications. However, these are not normal times and the CEOs of both organizations had to appear before Congress to justify a business decision to hundreds of politicians who have, with few exceptions, never had to make a business decision.

The President may think that he doesn’t want to run GM or Chrysler but Washington’s performance would tend to indicate otherwise.

Know your audience
In preparing an address, the first thing President Obama (or any president, for that matter) must do is to know his audience and attempt to bond with them. Each phrase and word choice of the address must be nuanced and carefully vetted for that effect.

But when you’re the President of the United States and speaking in Cairo, not only are you speaking to the Muslim world, you are speaking to Europe, Asia, Israel and America. Can a president speak in this environment and deliver a message that pleases everyone? Hardly.

So how was Obama’s speech in Cairo? From a Muslim perspective, it was pretty good (for the full text of the speech, go here: www.whitehouse.gov/the_press_office/Remarks-by-the-President-at-Cairo-University-6-04-09/). Some critics of the speech say that he was looking for applause lines and that is why he omitted confrontational lines in his address. That’s true to a certain extent; in order to win over his audience, he tried to establish a bond with them by emphasizing more positives than negatives and then framed many of his remarks with references to the Koran.

Once Obama established that bond (with a minimum amount of sucking up), he could address some of the tough current issues such as Afghanistan, Iraq, Palestine/Israel, nuclear weapons, women’s rights and democracy.

He could then say with impunity that the details surrounding our pursuit of al Qaida in Afghanistan are “facts” not “opinions” – a fairly strong statement, considering his environment.

In the case of Iraq, he noted the strong differences of opinion and, although calling it “a war of choice,” he added, “The Iraqi people are ultimately better off without the tyranny of Saddam Hussein.” Could he have made a stronger case for the Iraq invasion (assuming he supported it)? Not to that audience.

He went on to say that, “The first issue that we have to confront is violent extremism in all of its forms.” Some of his critics have asked why he didn’t use the word “terrorist” or “terrorism.” The absence of the word was a judicious choice; using the word “terrorist” and the like, implies, in common usage, the phrase “Muslim terrorist” — and that would be an implied negative with that audience. By contrast, the phrase “minority extremist” implies a small fringe group and the audience could, therefore, more easily side with the U.S. position.

His critics also have said that by balancing Palestinian actions with Israeli actions, he implied a moral equivalency. Not per se. Obama provided two points-of-view. From these points-of-view, if one were of a mind to, one could draw moral equivalencies. I think Obama left that conclusion to the audience because there were, no doubt, some who believe the Palestinians have an overwhelming case; when these people are reduced to moral equivalence, that’s progress.

We can as Americans who were not the target audience, find things with which to disagree (for example, the timeline to withdraw all troops from Iraq by 2012 and the closing of “the prison at Guantanamo Bay … by early next year.”) But even in these disagreements, the rhetoric maybe more audience-nuanced than will be the reality; he has left himself some wiggle room in that a new agreement with the Iraqi government may be negotiated for troop withdrawal and closing the “prison” at Guantanamo doesn’t necessarily close down the facility.

From an American’s point of view, it was not as good as a state of the union address. From an American’s point of view, it was an inadequate presentation of the United States vis-à-vis the Muslim world. But from a Muslim’s point of view, it was pretty good. In fact, near the end of the speech, an audience member shouted, “Barack Obama, we love you!” Americans don’t get that kind of sentiment in Cairo very often.

Robert J. Kulak

West Hartford, Connecticut