Power And Dollar

AIG The Sacrifice: The Reflection Of America’s Political Risk


I agree quite a few points of this article in regard to the AIG episode.


Of course, nothing is perfect.  I would change a word here:

It will certainly make Mr. Obama’s task much more difficult when he tries to sell the public [my version would be:  investors] on his administration’s ability to manage the rest of the bailout, and when he tries to sell private firms on the public-private partnership that will be needed to make the recovery work.”


Obama will have more difficulty to convince investors his future plans work (already stated in the article).  Also, Obama will have more difficulty to get troubled entities to take the bailout.  Look at AIG.  This bailout actually bites! 


AIG was politically insensitive.  This story alone will make firms in the future to invest more to mitigate political risk or at least reputation risk (branding), which is not a good news.  


In addition, a good portion of the reason for these companies to require a bailout is that their valuation (capitalization) fluctuated so greatly they were literally worthless.  So, some companies may realize taking themselves off the exchange is not a bad idea, at least they can insulate themselves from the volatility.  Is that what we want: fewer choices for mutual fund managers and pension fund managers?  If they have fewer options and social security is running out, then what are to do?


Fewer choices on the exchange also means quicker wealth concentration.  Gini coefficient will spike up very quickly.  Is that what Obama wants?


March 20, 2009 Posted by | activism, advocacy, america politics, banking, business, Current Affairs, Current Events, 美國, Democrats, economics, legislation, mccain, obama, opinion, politics, Regulation, Republican, US politics, wordpress-political-blogs | Leave a comment

Bradley Effect Or McCain Effect?

Is Bradley Effect still there?  How can we find out?  If we check the last polls before the election, Obama was having double digit leads.  However, his popular vote is 53% against 47%, 6% lead. 


Here is a list of polls I gathered:


Polling Company Start Date  End Date     Obama    McCain        Total           Diff
Reuters/Zogby 1-Nov 3-Nov 54 43 97 11
Gallup National Polls 31-Oct 2-Nov 55 44 99 11
Fox News National Polls 1-Nov 2-Nov 50 43 93 7
CNN National Polls 30-Oct 1-Nov 53 46 99 7
Ipsos National Polls 1-Nov 1-Nov 50 42 92 8
ABC News National Polls 30-Oct 30-Oct 54 41 95 13
CBS News National Polls 30-Oct 30-Oct 54 41 95 13
Average 52.86 42.86 96 10


CNN previously quoted polling experts  that the Bradley Effect is worth about 6%.  


Average of these last minute poll is about 10%.  The actual margin is now 6%.  Is the Bradley Effect 4%?


Bradley Effect is a voter claims to support an African American candidate and then votes differently.  Did voters really change their minds this way?


The average of the polls for Obama is 53%.  He gets 53% (52.86%).  For this, the voters are consistent.  However, the interesting part is this: the margin shrunk.  What happened?  All the “Other” category voters’ changed their minds.  The Undecided voted for McCain.  The Greens and Libertarians voted for McCain.  So, instead of claiming for Obama and voting against Obama, they claimed something else and voted for the strongest candidate against Obama.  


McCain gets 43% in the polls (average is the same as median and mode).  However, the popular vote is 47%.  So, if you are not an African America candidate and running against an African American candidate, you can count on getting extra votes on the election day, 4% of popular vote.  

In the case of McCain, it is for every 100 votes committed to a pollster, he gets 9 extra votes.  


For an African American candidate, he has to live by “You get what you see”.  He probably cannot expect a measurable vote coming out from the Undecided category in the last days.  This would be consistent with Obama’s strong push in the last few days of the campaign.  


Can we now replace the Bradley Effect with this statement now: “if you are running against an African American candidate and you are not an African America candidate, you can count on getting extra votes coming from other third party candidates or previously uncommitted voters on the election day”. 


If we can get more empirical results, then it is obvious that Democrats will have even more incentives to suffocate other third parties in the future.  This is not about Nader anymore. 


Instead of Bradley Effect, are we now moving into the era of McCain Effectt. 

November 6, 2008 Posted by | Current Events, 美國, Democrats, election, Election 2008, Electioneering, mccain, obama, politics, Republican, wordpress-political-blogs | Leave a comment

What Makes President Obama Not A Sure Thing

Are these undecided voters the key to this election?

As of today (2008.11.03), Obama has 228 electoral votes where the state has >10% polling margin and 50 electoral votes where the state has >5% polling margin.  The difference less than 5% (either way) is 128 electoral votes.

Given the Bradley Effect, and the potential of undecided voters going for McCain, Obama may still get defeated.  What are in play for this result?

1) Bradley Effect – voters misinform pollsters

2) Undecided voters for McCain – not willing to misinform, nor to be McCain voter out right

3) Polling methodology – too many people are not using land lines – greater and greater difficulty in forming a good sample to represent the population

4) First time voters – first time voters have lower voting participation rates; less responsive to GOTV.  Given the huge ratio of first time voters this year, this factor is more important than before;

5) Voting machine – no more funny ballots.  And are the votes auditable?

6) Voter suppression – prevent voters who fit your opponent’s voter profile to vote.  Depriving sufficient resources or space to a few specific precinct or county maybe good enough, especially when coordinated with GOTV at other places.

7) Voting irregularities – fraudulent voter registrations, fraudulent voters.  This list is not short.

These are all technical, minute issues.  However, there are quite a few of factors for anyone to play with now, right?  Any one of these can deliver us a dramatic event (or even traumatic) fit for Hollywood. 

Typically, only the last 2 factors are in play.  This time, we got seven factors!! Five of them have never been seen before.  Too many unknowns.  And there is no time to have an academic debate to discover the truth.  So, there can only be offense for Obama since no number is completely good this time around.

November 3, 2008 Posted by | Current Events, 美國, Democrats, election, Election 2008, Electioneering, mccain, obama, politics, Republican, wordpress-political-blogs | 2 Comments

Obama, 1 Up Over Karl Rove

Voting lines are long.problems/index.html.  Not much news about voter intimidation.  But then this is early voting, not the big day.  Is America ready for the big news that is only 11 days away?  Some people are preparing for the transitions to the next administration.  Some people are already sensing potential presidential candidates for 2012: Hilary Clinton sensed the potential desire of Bloomberg for 2012.


Bloomberg got his way to run for the third term of NYC mayor.  Less than two weeks ago, Clinton said Bloomberg’s third term is “disturbing.  Really, it would not have been disturbing if Clinton won the Democrat primary.  It is disturbing because give the kind of difficulties the future administration will face, the next President may end up being a one term president.  For that reason, Bloomberg’s presidential big would be a problem for her.  


Given the turn out in the early voting, Democrats already see some success in their new and healthier operating model.  Expanding the base is ideal.  When it goes to the final stage, the operation is about turn out.  Candidates locked up their supporters.  How can they actually get them to the voting precinct? 


Obama is experimenting something new: get them early and get them young.  Voting is a habitual product, just like so many other products, such as carbonated drinks or auto insurance.  We already saw how Obama got the young voters.  We are now seeing how to get them early (early to the poll).  


This is labor intensive.  Given the labor cost in America is so high, this is an expensive operation.  Expensive enough that Republicans never resorted to it before.  Now, Obama does not only have a good certainty what votes they reached even though the ballots are not counted, but also what votes McCain got.  Obama got a piece of insurance on these votes.  These votes are of course the solid supporters.  He can now have more flexibility to do his offense to McCain.


This is the kind of operation that shows to aspiring candidates that non profit groups are important.  Or more to the point, candidates and non profit groups need each other.  This kind of operation is labor intensive only people who got a commitment to a cause would be able to help.  




Will he shift even more to the center?  Will he attack McCain more aggressively?  Or will he simply swamp him hardly in the battleground states, especially the ones that do not allow early voting?

October 24, 2008 Posted by | Current Events, Democrats, election, Election 2008, Electioneering, mccain, obama, Palin, politics, Republican, wordpress-political-blogs | Leave a comment

Powell, What Makes A Good Endorsement?

An endorsement is similar to an advertisement.  The endorser would want to make a difference.  What is the difference to an election? Win or lose.  You can win by 1 vote (W) or by a landside.  They all give you the presidency.  An endorsement that takes a black horse to the main field is a good endorsement.  An endorsement that pushes the last block of voters to tip the scale is a good endorsement.  Anything after it is tipped over is an accessory.  Measuring the impact of an endorsement is to measure the size of votes it affects.  For that reason, you and I probably can save the time, in terms of endorsements.  


Analysts give their opinions about what Powell’s endorsement means.  An endorsement can mean a lot of things.  “What is the meaning” is a fun question to ask by media.  It is an interesting content.  It is not an important question to ask.  The good question to ask is: is this endorsement consequential?  is this endorsement relevant?


Is Powell’s endorsement a good endorsement?  Did Powell push Obama to the main field to compete against Hilary Clinton?  Oprah did that.  If the race is already tipped over, then this endorsement is an accessory.  Therefore, the impact of Powell’s endorsement is very questionable.  Powell may end up merely making a public statement about his differences with Republicans rather than making an impact to the race, or grabbing a 3 second media attention for no self gratification (I do not believe Powell has that self gratification need), or showing his political misjudgement or miscalculation (not knowing that the race may already be over).  Powell’s endorsement may end up being no more powerful than John Edwards (Edwards endorsed after it was crystal clear that Hilary Clinton was going to lose).


Powell may not have had polling results to inform him the value (votes) of his endorsement.  Therefore, he is unable to draw a dividend out of this endorsement effectively.  


The only thing that can make such an endorsement into an incentive is to secure a political appointment in the back room.  However, Powell does not need that, even if Powell were to cleanse his past actions.  


Is Powell making this endorsement to reach a resolution for himself before the world (repentance is between Powell and God.  No one else can have that privilege to know)?  What is to gain by exposing Powell’s own differences with Republicans?  

October 20, 2008 Posted by | Barack Obama, Current Events, 美國, Democrats, election, Election 2008, Electioneering, John McCain, mccain, obama, Palin, politics, Republican, Sarah Palin, wordpress-political-blogs | 2 Comments

Market Concurs Pollsters

It is now less than 3 weeks to the voting day.  Electoral vote spread is 128 (Obama vs McCain : 286 vs 158).  Even if McCain takes the rest of the toss up states, he is still 34 votes behind (94 toss up).  Short of Osama (not a typo) surprises, opposition dramatic tricks and voting irregularities, Obama’s path is fairly clear.  In fact, Obama has to tell his supporters not to be “cocky.  


Obama’s searches at google are already double of McCain’s.  Of course the news volumes of the two are about the same.  People are already expecting the result. 


The market seems to suggest the same.  Yesterday was the final debate.  Today would be a check to see if the market likes what the pollsters are saying.  Pollsters are saying Obama won.  Market finally went up for a bit.    


The next check is November 5’s market closing.  What industries go up on that day?  What industry do down on that day?  These would directly reflect the market sentiments regarding the new administration’s policies.  


However, given the state the economy is in, everything should go up, not only because of Obama, but some sense of certainty.  


A lot of commentators gave out long to do lists for the next administration.  This is only an example.  However, I have not seen one mentioned about America’s future creditors.  What future creditors, you ask.  Well, someone has to finance the $700B.  Half of the US bonds are bought by foreigners.  China takes 10%.  Gulf states take another 8, 9%.  With the saving rate close to 0% in America, these foreigner lenders will work like credit card companies.  How much flexibility will the next administration have? 

October 16, 2008 Posted by | Barack Obama, Current Events, Democrats, election, Election 2008, Electioneering, John McCain, market, mccain, obama, politics, Republican, wordpress-political-blogs | Leave a comment

Financial Crisis Now Carries A Political Premium

The financial crisis in America has over rode the presidential election to carry the most political risk in the global economy.  While the American presidential election is a cyclical event and its political risks are more within control than many other political events, such as change of leadership in China.  However, the risks associated to the financial crisis have not only spoiled into arena of political risk, but its impact is immeasurable yet.  This is because its impact is now beyond the financial impact.  


The first impact is the presidential election.  This financial crisis is now driving the voter emotion, which is of course in favor of Obama.  The scarcity of information coming out from the candidates implies the candidates are literally clueless – They do not even attempt to own the issue.  This scarcity of information by itself carries a risk premium to any organization that has a budget to be executed in, revenue or input driven from America.  


The second impact is American financial industry is now so dependent on the government that its operational independence is questionable.  How far are they from being a “for profit organization”?  Why would a company’s compensation be political for it not because its owner is now a government?  AIG is the perfect example.  How much time will it take for these organizations to get political appointments?  These are unlikely events within a foreseeable future.  However, they are at least academic questions at the table rather than unimaginable.


The third impact takes even a longer horizon.  Who is financing the bailout?  Do you think this $700B is coming out from cash?  This money is financed.  Who is lending the money?  Japan, China, Taiwan, Middle East oil producing countries are all big lenders to America.  All exporting countries will take a beating, however not because of their control weaknesses in their financial industry but because the demand in America is weakened.  A smaller pie in America will make the rest of world economy larger in proportion to the States.  Countries like China have a big domestic economy that can sustain a good hit.  Bush asked “Is UN relevant?”  A post 2008 financial crisis world may start to wonder “Is US relevant?”  How much influence from America will be reduced not only by the reduction in moral authority of Bush Administration but also by the scale of US economy in relation to the rest of the world.


A corollary of this impact is the influence of global institutions.  A lot of the existing global institutions are founded on the premise of asserting American influence.  A good example is G7.  Who were the G7 countries?  The non communist Security Council holders of WW2 and the losers of WW2 plus the most American loyal country Canada.  This set was to assure that the strongest industrialized nations can be voted to affirm America’s wishes.  World Bank continues to take the most money from the States, not that no other country is willing to offer more.  And money drives the votes in World Bank.  Head of UNICEF is appointed by America to an American citizen because of budget contribution.  All these institutions will see an erosion of America influence.  



October 10, 2008 Posted by | banking, Barack Obama, Current Events, Democrats, economics, election, Election 2008, John McCain, politics, Republican, wordpress-political-blogs | 1 Comment

What Is The Price Per Vote To Pass The Bailout Bill?

CNN says more banks are likely to fall.  It seems like that 700B will get plenty of asset to buy.  Now, how much did the additional votes cost to get the bill?


Taxpayers For Common Sense compiles a list of 15 pet projects within the bailout bill ().  It would be difficult to determine which provision actually got tucked into the bill to exchange for votes.  However, we can see where the most direct beneficiary of the provisions and see the incentives of the votes, especially the switch votes.  


Of the 15 listed there, 10 of them are costed out.  They total price tag is $26,396 M.  

There were 60 switch votes: 58 No-to-Yes, 1 Abstain-to-Yes, 1 No-to-Yes.


If you cross out the direct beneficiary of the provisions listed in the website and plus 2 guesses I have for the research provision (301) and racetrack provision (317), then you get the table below:

















201 Sales Tax Deduction









































This is a total of $26.4B for 30 votes (some of these votes above are the same votes).  This is a total of $890M/vote.  These 30 votes cover 51% of all swtiched votes.


The famous archery provision is provision 503.  That provision, jointly with 211, gave the bailout bill 1 vote.  Together, those 2 provisions cost $12M.  The interesting thing is that the House Representative who district covers the biggest beneficiary company Rose City Archery, which is located Mytle Point of Oregon, voted against the bill twice.  The original House sponsor is actually Representative Kind from WI (Yes twice).  By far, the most cost effective provision is 602 (Transfer to abandoned mine reclamation fund).  $9M for 7 votes, $1.3M per vote. 


The most expensive provision is 301, $19B.  I only identified TX, IL, WA.  However, I am sure there are more states which would be benefited because of it.  This one so far got 9 votes (and very likely more). 


The most cost ineffective is 601, $3.3B for 1 vote.  It benefits OR and ID.  However, ID completely voted against the bill.  I guess they did not exactly want the money. 

October 7, 2008 Posted by | activism, advocacy, Current Events, Democrats, economics, election, Election 2008, John McCain, mccain, obama, Palin, politics, Regulation, Republican, wordpress-political-blogs | 1 Comment

Who Won? The Republicans Who Changed Their Votes!

A 3 page rescue package became 400 page rescue package.  A lot of improvement?  A lot of pork barrel?  Are the lobbyists now worth the money of the clients?  Who Changed the vote?  Who did not?  Anyway, the bill passed!


There is 1 vacancy in the House.


There are 46 House seats who had a margin of <10% in 2006.  Of the ones who had a margin of greater than 10%, I would consider them as safe seats.  There was 1 abstain in the first vote who had a safe seat. 


The Representatives who are in close contests have no little choice.  They have to respond to their constituents’ pressure of the day. 


If you think the Republicans were dissatisfied about spending money to bailout, you may expect them to continue to vote no.  Or even some of them would change from YES to NO.  Well, this is not quite the case.  They are the ones who really changed their vote this time.




The Republicans held the biggest swing block.  Either voters’ sentiment alone was unable to swing these safely seated Republicans to change their vote or these Representatives were actually following their constituents’ pressure to vote NO.  So, the only way to get them change was to buy them over.  Thus, the new spendings.  Since House majority belong to the Democrats, less incentives were provided to the Democrat Noers. 


The biggest losers are the Democrats who were on safe seats and voted YES initially.  They had nothing to gain whatsoever. 


The biggest winners of the second vote are these NtoYer Republicans.  They are the ones who made the difference, either by the new spending or they suddenly “realized” the importance of the bailout.  Ideology is great, as long as you are ready, able and willing to compromise your ideology!


October 3, 2008 Posted by | activism, advocacy, banking, Barack Obama, Current Events, Democrats, economics, election, John McCain, opinion, politics, Republican, wordpress-political-blogs | Leave a comment

Bailing Out Van Gogh Traders?

The senate has passed Bailout bill, an important bill by itself and even more so during an election season.  Simultaneously, Americans are debating about the next President as well as the centennial financial crisis.  The debate will continue: about what sweeteners ought to be in and what to be tossed out (mainly the idea of buying toxic assets from the banks), even after this implementation.  However, this bailout probably provides an excellent stage for a third debate: what is fair market value?


Part of this mess has something to do with the accounting rule about the value of an asset.  Currently, the valuation of an asset goes by the rule of “mark-to-market”.  Politicians (French Sarkozy for now) is ready to bend the “mark to market” rule .  However, plenty of accountants can explain to you why “mark to market” is important.  


No one can argue against accountant accounting, although plenty of people can win arguments against lawyers about laws.  Accountants will tell you that it is about liquidity in the market, it is about protecting shareholders, etc.  Ask yourself this: can you put all your money into a box that you may not be able to open and retrieve your money?  Accountants are saying you should put the money into something you can always retrieve.  Mark to market makes the box transparent to you.  Even though you are not retrieving the money at this moment, you can still see what you got in the box.  Liquidity gives you transparency.  However, you still have to sell the asset in order to see the value.  With mark to market, you can see the money, based on the current market conditions.  


It comes back to the market design.  Financial institutions put the money in market(s) where the products are thinly traded (not much liquidity).  Thus, if everything is mark to market during the good times, everyone and everything is fine since every asset value is growing.  However, once it falls, liquidity vanishes quickly.  Who is ideal to take the role of market design? Regulating bodies.  Regulating body does not have to be the government.  American Bar Association is a self regulating body.  Accountants used to be a self regulating body.  However, in centennial financial crisis, there was no regulating body for these asset backed commercial papers.  



Let me give an example of a market that has a similar liquidity as the situation we are in: fine arts.  


When the economy is in boom, paintings (or whatever else Sotheby auctions) sell well, both in quantity and in price.  However, once the economy goes down, both quantity and price go down.  When quantity goes down, there is no market and thus no market value for anything you hold.  


In a sense, all these financial institutions were trying to make money out of trading Van Gogh.  That makes this bail out like a Van Gogh traders bail out.

October 2, 2008 Posted by | Barack Obama, Current Events, Democrats, economics, election, Election 2008, John McCain, mccain, obama, politics, Regulation, Republican, wordpress-political-blogs | Leave a comment