The coming days
The week ahead
More economic fears, the last week of campaigning in America, and other news
• BARACK OBAMA and John McCain embark on a whirlwind of political rallies in the last full week before America's presidential election. Mr Obama, who holds a steady lead over Mr McCain in the opinion polls, is also due to appear in a half-hour campaign “infomercial” on primetime television on Wednesday October 29th, the anniversary of the 1929 Wall Street crash. His TV slot will delay the start of a World Series baseball game by 15 minutes.
For background, see article
• AN EMERGENCY summit to revive Zimbabwe’s faltering power-sharing deal should be held on Monday October 27th. The deal is deadlocked over the allocation of cabinet seats between Robert Mugabe’s Zanu-PF party and the Movement for Democratic Change led by Morgan Tsvangirai. Mr Tsvangirai, who is supposed to become prime minister under the terms of the deal, accuses Mr Mugabe of trying to install his followers in important cabinet seats. The chances of other African leaders loosening Mr Mugabe’s limpet-like grip on power look slim.
For background, see article
• THE ill-effects on the real economy caused by the financial crisis are likely to become more apparent. The Federal Reserve may decide to lower interest rates again. Then on Thursday October 30th preliminary estimates for America's third quarter GDP will be released. These are expected to show that the economy has contracted by half a percentage point at an annual rate. This will provide the first official indication that America is sliding into a recession that many pundits believe could be long and painful.
For background, see article
• FOLLOWING the untimely death of President Levy Mwanawasa in August, Zambians must vote for a new leader on Thursday October 30th, just two years after their previous presidential election. Four candidates are in the running. But the real contest is between Rupiah Banda, the vice-president who has acted as caretaker since Mr Mwanawasa’s death, and Michael Sata, a fiery populist who was defeated in 2006.
Commentary by Amity Shlaes
-- Obama, OK. Obama-Pelosi-Reid? A nightmare for markets. McCain-Pelosi-Reid? OK. McCain and Republican majorities in both House and Senate? Another nightmare.
That at least is the analysis of Eric Singer of Congressional Effect Fund, a new mutual fund. As noted in an earlier column, Singer got into the index business after he found that the Standard & Poor's 500 Index performs two or three times better when Congress is out of session than when at least one of the two chambers is at work.
That difference, Singer discovered, wasn't because of political party -- a laboring Republican Congress was also problematic. The poor performance, rather, reflects market anxiety that the House and Senate generate when they pass a new regulation or revise laws already on the books. Simple congressional workday chatter about possible changes is also negative, according to the Singer data.
``Even talk is not cheap,'' he says.
This past August, with Congress safely on holiday, markets were still weird. That set Singer to wondering anew.
He noted that there were years, such as 1998, in the middle of Congress's Republican reassertion, when markets did great even when lawmakers were at their posts.
Combing his data back to 1965, Singer found a second trend. A split Washington, in which at least one of the two chambers is led by a party other than the president's, points to a better total return for the S&P 500 than a unified Washington in which the presidency, House and Senate are controlled by one party.
Clinton Constrained
Having Democrat Bill Clinton in the White House in 1998 constrained congressional Republicans, or the other way around.
Singer found that the average annual total return for the S&P 500 when Washington is a one-party town is 9.4 percent. The average performance for the index when Washington is split is 10.6 percent.
The distinction becomes clearer when you adjust for inflation. Singer used the annual average of the daily gold price as a deflator rather than a year-over-year number because he wanted to screen for the volatility of commodities. Singer found that in periods of a unified Washington, the S&P 500 averages real losses of 7.8 percent. A split Washington, by contrast, racks up a real gain averaging 8.7 percent. That 16- plus point spread is the quantification of the peril of a powerful Washington.
These numbers also suggest that inflation tends to be worse in unified years. This makes sense -- when Washington is mightier, one fashion in which it uses its power is minting money, consequences be damned. A Federal Reserve chairman who must report to only one party, instead of two, has fewer rounds to make when he seeks support for the Fed's actions.
Drama Days
The Singer method also captures the drama of 1980. Washington was all Democratic, though it was clear even in the spring that Ronald Reagan might win the presidency.
The market reacted by rising in anticipation of a change. The price of gold reacted by falling late in the year. One might argue that this reflected the market's faith that Reagan would spend less than President Jimmy Carter. But the change in gold prices may also have been the result of political division within the Democratic Party.
The new Fed chairman, Paul Volcker -- a Democrat who today is advising Senator Barack Obama in the race for president against John McCain -- started applying the brakes at the Fed. By exercising monetary restraint, a trait identified at the time with the Republican Party, Volcker -- with backing from Carter - - provided a counterweight to free spenders of either party.
Hurting Returns
An all-Republican Washington can hurt real total returns, too. In 2005, the S&P gain of 4.9 percent was more than erased by the 8.5 percent increase in the price of gold. In 2006, gold was up about 36 percent but the S&P climbed only 16 percent, a net 20 percent loss.
The scholars who look at this sort of thing all have slightly different takes on it. Some quibble, for example, with Singer's choice of gold as a measure of inflation. But recent events confirm the validity of the gold meter. The consumer price index shows an increase of only 2.5 percent between December 2005 and December 2006 -- quite a contrast with that 36 percent increase in gold for the year. Today's markets suggest that gold did a better job than the CPI of predicting bubbles.
In Singer's data we see early discounting for this year's stock price collapse.
It's been said of numbers that if you torture them enough they will admit to anything. This year Congress and the White House were held by different parties, and we still managed to have our historic crash.
Getting Ready
Markets, which don't care whose campaign they ruin, may also be bracing for an all-Democratic Washington. Consumers may also be spending less not only because of the market turmoil but also because they believe a government dominated by Democrats may, in the future, allow them to keep less of their earnings.
This would fit in with the late Milton Friedman's permanent-income hypothesis. Singer is now studying market performance when a single party holds not only the White House and Congress, but also a filibuster-proof majority in the Senate. With each passing day that, too, looks like a number worth crunching.
Oct. 27 (Bloomberg) -- The Bank of Korea slashed interest rates by a record at an emergency meeting in an attempt to restore confidence after stocks lost a fifth of their value and the won fell to a decade low last week.
Governor Lee Seong Tae lowered the seven-day repurchase rate by 75 basis points to 4.25 percent and cut rates on special loans for small and medium-sized companies to 2.5 percent from 3.25 percent, the central bank said in a statement in Seoul today. It will also accept bonds issued by commercial banks as collateral in its money-market operations, giving them access to more funds.
President Lee Myung Bak, who met Finance Minister Kang Man Soo and central bank Governor Lee yesterday, said today the country is far from experiencing a repeat of the 1997 financial crisis when it needed a $57 billion loan from the International Monetary Fund.
``The Korean authorities felt compelled to take dramatic action in the face of global turmoil,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. ``The rate cut might provide a brief boost to the financial market but the general panic environment prevails.''
South Korea's Kospi stock index fell 0.8 percent at 10:55 a.m. in Seoul after earlier rising as much as 3 percent. The index plummeted 20 percent last week. The won sank to 1,441.60 against the dollar from 1,424, extending this year's drop to 35 percent.
Japan's Measures
Japan's government will compile a package of measures after stocks slumped last week, Finance Minister Shoichi Nakagawa said last night. The Nikkei 225 Stock Average fell today to the lowest since 1982 before rebounding.
``Emergency meetings by policy makers around the world reflect their fear and the severity of the financial turmoil,'' said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. ``They are on the right track and this excessive volatility in markets should calm soon.''
``A large cut in the base rate is called for in order to guard securely against the possibility of a sharp contraction of real economic activity,'' the bank said in a statement, adding it would attempt to ward off a slowdown in economic growth and keeping a watch on inflation.
Currency Rules
The bank said today it would also ease rules to make it easier for exporters to borrow dollars. Also, small businesses that borrowed mostly in Japanese yen can extend their foreign- currency loans for another year, it said. The won has fallen 45 percent against the yen this year.
``The Bank of Korea will likely cut rates again at their monthly rate-setting meeting next week,'' Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul. ``The Bank of Korea seems determined to stop the market panic from the U.S. financial crisis spreading.''
The Bank of Korea last week raised the limit on so-called total loans to 9 trillion won ($6.2 billion) from 6.5 trillion won. Total loans are offered to commercial banks at a special interest rate -- lower than the nation's benchmark rate of 4.25 percent -- with the funds earmarked for small and medium-sized businesses.
Federal Reserve policy makers, meeting this week, are forecast to lower interest rates for a second time this month to try to thaw frozen credit markets and prevent a deepening recession.
President Lee held the emergency meeting on returning from a Beijing gathering of Asian and European leaders at which they called for an overhaul of World War II-era banking rules. It was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted amid bank failures and plunging stock prices that began in September.
South Korea last week pledged $130 billion to support lenders struggling to obtain foreign funds and said it will spend as much as 8 trillion won to rescue builders struggling with unsold homes. The central bank said Oct. 24 it will inject 2 trillion won into the financial system through repurchase- agreement operations.
Oct. 27 (Bloomberg) -- Asian stocks fell for a fourth day in volatile trade, led by banks and technology shares, as concern that a global economic slowdown is deepening outweighed government measures to stimulate growth.
Mitsubishi UFJ Financial Group Inc. slumped 11 percent after the Nikkei newspaper said the bank will have to raise funds to bolster capital. Their declines helped the Nikkei 225 Stock Average touch a 26-year low. Hyundai Department Store Co. plunged 15 percent in Seoul even after the Bank of Korea cut interest rates by an unprecedented 75 basis points. Elpida Memory Inc. tumbled 16 percent after Deutsche Bank AG advised investors to sell the stock.
``In this kind of market that's moving without sensible reasons, only God knows what's going to happen tomorrow,'' said Yoshinori Nagano, a Tokyo-based senior strategist at Daiwa Asset Management Co., which manages the equivalent of $96 billion. ``That's why people are so scared of what's ahead of them and sell whatever they have to avoid losses.''
The MSCI Asia Pacific Index declined 1.7 percent to 79.03 as of 11:10 a.m. in Tokyo, extending a three-day, 13 percent retreat. The Nikkei gained 0.6 percent to 7,691.30, after earlier falling to its lowest level since November 1982 and climbing as much as 3 percent. The measure
South Korea's Kospi Index dropped 0.6 percent, after jumping as much as 3 percent following the rate cut. Taiwan's Taiex Index tumbled 5.5 percent, led by Hon Hai Precision Industry Co. after regulators widened daily limits for stock declines.
New Zealand, Singapore and Malaysian markets are closed for holidays. Standard & Poor's 500 Index futures rose 0.9 percent.
Government Measures
Japan's government will compile a package of measures to support the country's stock market, Finance Minister Shoichi Nakagawa said yesterday without being specific. Traders also increased bets that U.S. Federal Reserve policy makers, meeting this week, will cut its target for overnight loans between banks in half to 0.75 percent this week.
``Emergency meetings by policy makers around the world reflect their fear and the severity of financial turmoil,'' said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. ``They are on the right track and this excessive volatility in markets should calm soon.''
More than $11 trillion has been erased from the market value of equities so far this month, accounting for almost one-third of the total value wiped off stocks this year. MSCI's index of developed and emerging stock markets plunged 47 percent in 2008, headed for its worst year on record, as credit-related losses topped $660 billion.
Mitsubishi UFJ fell 11 percent to 607 yen. Mizuho Financial Group Inc. declined 13 percent to 233,900 yen, the lowest since November 2003. Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank, slid 11 percent to 385,000 yen.
Fundraising Reports
Mitsubishi UFJ may raise as much as 1 trillion yen ($10.6 billion) by selling new shares to improve its finances, the Nikkei newspaper said yesterday. Mizuho Financial and Sumitomo Mitsui may also raise capital, broadcaster NHK reported. The three banks said in separate statements today that nothing has been decided.
Hyundai Department tumbled 15 percent to 46,300 won, extending a 15 percent decline on Oct. 24. KT&G Corp., South Korea's biggest tobacco company, lost 6.6 percent to 72,200 won.
The Bank of Korea cut its seven-day repurchase rate by 75 basis points to 4.25 percent today at an emergency meeting of policy makers. The central bank also eased its rules on foreign- currency lending to allow exporters to borrow dollars to pay for their currency-related losses.
Hon Hai
Taiwan stocks fell after the island restored its daily stock trading limit to 7 percent starting today. The financial regulator halved the range to 3.5 percent from Oct. 13 to Oct. 24 to help stem a plunge in the stock market.
Hon Hai, the world's largest contract electronics manufacturer, sank 6.9 percent to NT$70.4. Quanta Computer Inc., the world's biggest notebook-computer maker, tumbled 7 percent to NT$29.35 in Taipei. Cathay Financial Holding Co., Taiwan's largest financial-services company, dropped 6.9 percent to NT$30.20.
Obama's Plan for a Second-Class Economy
What's so great about another depression?
HOLMAN W. JENKINS JR.
People always underestimate how bad things can get. So advised a guy who made millions as a short seller in the 1980s. His insight certainly is borne out in the continuing market selloff -- and one reason is the incentive for political actions that actually make things worse.
![[Barack Obama]](http://s.wsj.net/public/resources/images/HC-GL956_Obama_BV_20080918113637.gif)
Barack Obama
Raymond Moley, a New Dealer who ended up dissenting from the Roosevelt administration, voiced a well-founded fear that FDR and his brain trust were more interested in exploiting the crisis to expand their political majorities and centralize power than in getting the economy growing again. David Kennedy, the Yale historian, forthrightly addressed these considerations in his book "Freedom from Fear." Amity Shlaes, in her recent "The Forgotten Man," pushed the analysis further. Sadly, these are brave exceptions, because arguing about the FDR legacy is tantamount to taking sides in current political contests. Ben Bernanke has learned the monetary lessons of the Great Depression, but the political class is largely ignorant of how the disaster was prolonged by tax and regulatory policy out of Washington.
Our next president is likely to be a guy with some book learning and all the life lessons you can gain from three terms in the Illinois state senate. He's already besieged by excited advocates of a "New" New Deal, a vast expansion of federal responsibility to assuage the supposed insecurity of the Middle Class. Except there's a problem: Washington over the past 70 years has not surrendered the Middle Class to the law of the jungle but already made it dependent on government for retirement income and health care for fully a quarter of the average person's adult life. Without any change in policy or bold new initiatives, we will soon have European-like levels of taxes and government spending to meet these commitments. We don't have a crisis of insufficient government as (arguably) we did in the 1930s. We have a crisis of too much government -- an insight likely to be lost on anyone afflicted with indiscriminate FDR idolatry. Forced selling by hedge funds undoubtedly plays a role, but the market cannot but be discounting the likely outcome of the presidential election: An Obama landslide that would sweep from the table any nonstale vision of a path to the future based on privatization, personal savings and curing the third-party-payer illness of our health care system.
Washington Is the Problem
FedEx's CEO on McCain, free trade and the tax bias against capital-intensive industries.
STEPHEN MOORE
Memphis, Tenn.
Fred Smith is in an agitated state. He's just returned from a Washington Redskins game -- played in FedEx field in Washington -- and the team has been upset by the St. Louis Rams. "It was just awful," he grouses. "My son's one of the coaches, and he was ready to jump off the ledge of the stadium."
There are few better people to ask about our current economic precipice than Mr. Smith -- or, as some people call him, "Fred Ex." His company has $38 billion in sales, employs four football stadiums full of workers, owns 300 jet airplanes, and tens of thousands of trucks and vehicles. FedEx moves an incomprehensible seven million packages each day to every corner of the globe. And the good news is that Fred is optimistic -- sort of.
![[The Weekend Interview]](http://s.wsj.net/public/resources/images/ED-AI426_winter_DV_20081022184329.jpg)
Ismael Roldan"Oh, the country is going to get through this and the financial markets will stabilize," he assures me, but only after we go through a period of "trauma and readjustment."
I ask him just what he means by "trauma." He attributes the financial crisis to "the intersection of four long-term developments." Reckless mortgage lending policies; high energy prices; mark-to-market accounting rules; and national policies that favor what he calls "the financial sector over the industrial sector."
"Rather than in our business where you have to have a dollar of equity for, 10 cents or 15 cents of debt," he explains, "it's exactly the opposite in the financial sector where you have one dollar of equity for 10, 25, 50 times risk." "Things became so flipped upside down," he explains, that "the assets at these banks became the liabilities and the liabilities became the assets. These people were making these fantastic returns -- at places like Fannie Mae and Freddie Mac -- but in reality they weren't adding a lot of value. I have said time and again that there is a fundamental tendency in good times in the financial sector to over-leverage. Our national policies actively encouraged all this debt."
How so? "The United States has a completely uncompetitive tax structure in general and it has a particularly onerous tax structure for firms that are asset-intensive. If you run an industrial company like FedEx, which employs 290,000 folks, most of whom are blue-collar people, the way we have to run this business is to equip those workers with billions of dollars of assets that allow them to pick up and deliver millions of things around the world."
His theory is that the tax bias against capital explains why so much top U.S. talent got whisked off to become investment bankers. "Not too many young people coming out of school are studying to be production managers at General Motors." He says that most of FedEx's first line managers come not from the top flight universities, but out of community colleges and the military. "The top talent has wanted to go to Wall Street."
He has come to hold the get-rich-quick Wall Street financiers in more than a little disdain. He views the heroes of the U.S. economy as the companies that actually produce real goods and services. He sees the Wall Street collapse as an inevitable byproduct of investment bankers building multitrillion dollar debt pyramid structures.
So how do we fix this problem and retool our industrial sector in a pro-competitive fashion? "We've got to reduce the taxes on equity. Let companies expense their capital purchases."
He uses an example from FedEx. "Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We'd buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate."
We turn to the election. Mr. Smith is one of the most enthusiastic supporters of John McCain among the Fortune 50 CEOs. When I ask why, he says instantly: "Because I agree with him on trade, taxes, energy and health care."
Next I ask Mr. Smith about the class warfare theme of the political debate. "The politicians deplore the fact that we have a disparity of income," he says, but "the only way to make a blue-collar person earn more is to invest in capital, training and infrastructure. So the more you tax capital, the more you hurt workers." He estimates that about 70% of the return from FedEx capital expenditures is captured by workers in the form of higher wages as their productivity rises.
He sees a big problem in that so few Americans now pay any income tax. "We're now at a point where a very large part of the population pays no federal income tax at all. When you have a majority of the population that realizes that you can transfer money from the productive to themselves, that's one of the great questions for the future of civilization, as far as I'm concerned."
As for CEO pay, Mr. Smith concedes that in some cases corporate management pay scales have gotten far out of line with shareholder interests. But he is quick to add: "I don't think anybody begrudges somebody making a large amount of money as long as it benefits everyone else. The problem is when they make a large amount of money and the shareholders get clobbered." As he sees it, "There's only one solution, and that is for a competent board of directors to oversee managers and give them incentives which are long-term in nature and which are irrevocably tied to the fortunes of the shareholders."
I tour the FedEx command and control center outside the Memphis airport. It's an awesome sight. FedEx operates its own air traffic control system and its own weather monitoring services. It takes over whole airports at night, and it operates its own risk mitigation operation to prepare for every possible contingency. "We have to know instantly how we reroute our planes if that storm in Tulsa turns into a tornado," the operations manager explains. There's a massive screen covering an entire wall that monitors the location and progress of every FedEx plane in the sky.
The computer technicians show me a jaw-dropping display on the computer screen of a fast-motion day of FedEx plane travel. Starting in the wee hours of the morning, the planes descend from all over the country into the Memphis airport. A few hours later, after being loaded with packages, the jets begin their assault on the major cities of the nation and world. They call this the "ant farm," because it resembles armies of ants scurrying to every corner of the globe. This is a company that has staked its entire reputation on getting packages to their appointed destination, "absolutely, positively overnight."
I keep thinking how many tens of billions of dollars Uncle Sam would save if it were one-third this efficient. These are the people that should have been in charge of the rescue operation during Hurricane Katrina. "We got all our people out -- no problem," Mr. Smith tells me.
Considering FedEx's world-wide operations, and its rapid expansion in China, it occurs to me that there is perhaps no other company in the world more dependent on international trade. Sure enough, Fred Smith is a fanatical supporter of free trade. So much so that he says, "I think the best thing the United States could do is to unilaterally disarm. It should open up markets. The agricultural subsidies are terrible. They're just immoral."
On economic grounds, he continues, "I think the history is very clear, that trade is the main reason that the world has enjoyed the prosperity. Look at China. They've drug hundreds of millions of people out of poverty through trade."
Trade aside, no issue is of greater consequence to FedEx than energy policy. FedEx consumes 1.3 billion gallons of jet fuel a year, and is the largest user of energy in the world next to the U.S. military. Mr. Smith sits on the board of the Energy Security Leadership Council, which issued a report a few months ago advocating a huge expansion of domestic energy supply. How do we do this?
"Two things," he insists. "The first is we should maximize oil production in the United States in every respect. Everything, offshore, Alaska, shale, nonconventional, coal to liquid, gas to liquid, and nuclear. Let the market work.
"Second, and this is where I am an apostate on the free market, and also where I disagree in the main with, with Boone Pickens," Mr. Smith adds. "The United States has only one real way to reduce our dependence on foreign petroleum, in terms of reducing demand while we're increasing our domestic supply, and that is to electrify the short haul transportation system, to go to battery powered cars. The technology that brought us laptops and cell phones has reached a point where these lithium ion batteries can now produce cars like the Chevy Volt and the new plug-in Toyota Prius." Many FedEx trucks are already using this technology, though he admits they aren't yet cost efficient but are 42% more fuel efficient.
Mr. Smith ends our interview with a little sermon about what the U.S. must do to retain its global economic superpower status. "Many of our current policies are not conducive to continued economic leadership. We restrict immigration when we have thousands of highly educated people that want to come to the United States, and some of our greatest corporations [are] crying out that we don't have the scientific talent that we need to develop the next generation of innovations and inventions . . .
"That's where all wealth comes from . . . It's not from the government. It's from invention and entrepreneurship and innovation. And our policies promote a legal and regulatory system which impedes our ability to grow entrepreneurship. Lastly, if we want to make [America's workers] wealthier we have to quit demonizing quote, big corporations."
As I walk out the door I ask Mr. Smith if he's communicated these ideas directly to Barack Obama. "I haven't met Barack Obama," he replies. "He's certainly a charismatic fellow and well-spoken. I just disagree with him on trade and taxes and energy and health care."
Mr. Moore is a member of the Journal's editorial board.
Commentary by Michael Lewis
- The first time I sensed the alarming change in my soul was when I caught myself, five minutes after the market open, reaching for a reefer.
Trust me, I didn't amass legacy wealth (underestimated by Forbes magazine in the high eight figures) by smoking weed during trading hours. Exhaling that first hit I thought and might even have moaned aloud: ``Whoa, dude! Why are you even running a hedge fund?'' The markets were collapsing, and so was my passion.
Bloomberg subscribers have come to know me as a seriously successful hedge-fund manager who tries to serve society in more ways than one. Not only have I made as much money as possible, and proven the natural inferiority of the little rich-kid idiots from Harvard and Yale who went to work for Lehman Brothers Holdings Inc. I have also freely shared my thoughts and opinions with you.
As the trading room filled with smoke, and acquired that only sweet smell I know that is not success, I realized it was time for me to share more. To go deeper. I needed to re-examine honestly who I was, and why.
What could possibly have caused me to doubt my own value? I cannot say. But with my lungs stretching to the bursting point I felt a sudden urge to make the argument for shorting myself. I looked for weaknesses. I found three:
Misplaced Trust
1) I trusted America to do the right thing.
My fund may be an offshore entity, but I trade in U.S. markets. When they move from ``God Bless America'' to ``Take Me Out to the Ballgame'' at Yankee Stadium, I keep my hand over my heart. And I trusted my government to preserve one of man's most basic rights: the right to short Morgan Stanley.
Six weeks ago I was right where I wanted to be: short not only Stanley but also Goldman Sachs Group Inc., in real size. Both were going to zero, and I was going to have another Merry Christmas. Then the Goldman alums at Treasury jump in and force the Securities and Exchange Commission to ban short selling.
The short squeeze forces me to buy back everything at prices that would make a Japanese investor blink. How did I feel? Imagine how it would feel to be Michael Jordan in mid-air, three feet above the rim with no one around you, when the ref blows the whistle. Dunking is now illegal, he says. The league fines you for trying to dunk; the media lambastes you for trying to dunk. Barney Frank subpoenas the dunkers.
I'm not saying I'm the Michael Jordan of hedge-fund managers. Others say that. I'm saying that for the first time in his career the Michael Jordan of hedge-fund managers feels like picking up his ball and going home. Which brings me to...
Love What You Do
2) I hate my job.
When people ask me what it's been like making hundreds of millions of dollars for myself I always try to smile as if to say: ``It's no big deal. Some people are just built to win in the financial markets.''
The truth is nothing comes naturally in the financial markets. Winning is so much harder than you know. It comes with this huge opportunity cost: not winning at something else. For example, I think I could be one of the best ever at finding meaning in life. But I have to put that to one side, to help keep markets efficient. Don't get me wrong. I'm not a whiner and I'm not a quitter. I'm not writing a letter to my investors to tell them why I'm too good for their money and my own Blackberry. No, I'm no Andrew Lahde. (Though he has a point about pot.) I'm just underutilized. Which leads me to...
Wrong Man
3) I was rocked to my core that I -- or one of the few people like me -- wasn't put in charge of the bailout.
If you haven't figured it out by now, America has hired the wrong Paulson. There are two of them, Hank and John. Hank turned Goldman Sachs from an investment bank into a busload of tourists going to a casino, with borrowed money.
Goldman might have been the smartest investment bank but you only needed to see Dick Fuld testify before a congressional committee to know how much that means. No pun intended, but Dick didn't know dick.
Astute observers will note that every time they run across a party of midgets, one is tallest, and his name is usually Goldman. Suffice it to say that while Hank's shop was creating subprime mortgage-backed bonds, John's was shorting them. Hank wound up working for the government, John wound up making $3.7 billion. For himself.
Wake up America! The teacher has just asked the class to send one member to the chalk board to figure out a problem. You just reached past the A student in the front row and plucked the guy in the middle who's working hard for a B-minus. And he's confused!
To be honest, I'm not sure what I'm going to do next with my life. But the more I think about it, the weakness I'm feeling isn't mine. It's yours.
Oct. 27 (Bloomberg) -- The yen rose against the dollar and was approaching a 13-year high as the risk of a global recession and an extended slump in the world's stock markets prompted investors to slash carry trades.
The yen also advanced against the Australian and New Zealand dollars, two favorites of so-called carry trades, in which investors fund purchases of higher-yielding assets with Japanese currency. Gains in the yen may be limited after the Reserve Bank of Australia said it bought Australian dollars on Oct. 24 after the currency fell 22 percent this month.
``The yen has further to rise,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``Higher- yielding currencies are falling apart. The global economy is in trouble and the yen looks relatively attractive because Japan isn't as damaged as other countries.''
The yen rose to 93.20 per dollar as of 8:51 a.m. in Tokyo, from 94.32 in New York on Oct. 24, when it surged as much as 7 percent to 90.93, the highest level since August 1995. Japan's currency gained to 117.54 per euro from 118.96 at the end of last week, when it reached 113.81, the strongest level since May 2002. The euro bought $1.2613 from $1.2623. The yen may rise to around 90 per dollar today, Amikura forecast.
Japan's currency has jumped this month by 14 percent against the greenback, 27 percent versus the euro, 46 percent against the Australian dollar and 37 percent versus the New Zealand dollar as traders slashed carry trades.
Japan's benchmark rate of 0.5 percent is the lowest among major economies.
RBA Intervention
Gains in the yen may be limited by speculation Japanese authorities will sell the currency to stem its rapid gains.
The Reserve Bank of Australia bought the Australian dollar on Oct. 24 as it fell to a five-year low of 60.57 U.S. cents, a central bank spokesman said today. The Aussie, as the currency is known, last traded at 6173 U.S. cents from 62.23 U.S. cents.
The RBA was ``providing liquidity into an illiquid market and may intervene again in similar circumstances, said a spokesman who declined to be identified.
``Traders may hesitate to buy the yen from here,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co., Japan's fifth-largest broker by revenue. ``Other central banks were surely aware that the RBA intervened. We can't rule out further intervention to stabilize currencies.''
Central banks intervene in foreign exchange markets when the arrange purchases and sales of currencies.
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