Saturday, September 30, 2006

Iraq ---What if the U.S. withdraws?

Late last night on HBO I watched a rerun of a Bill Maher show that had first aired three weeks ago. The panel members were: P.J. O'Rourke, the libertarian-conservative wit; an editor at; the leader of Matchbox 20; and of course Maher. The subject of the half hour or so discussion was primarily Iraq and the related issues of the terrorist threat, terrorist torture, Israel and Iran. It was entertaining, if that's appropriate to say. There were definitely different starting points on the issues but all agreed that things are a mess today. But the question "what do we do now" was asked at the end, and on a program where anything can be said using any colorful language or expression, with clearly opinionated folks participating, no one could or would answer the question.

Why? Although not said, my guess is that despite the mess we appear to be in, what happens if we withdraw?

Should I speculate? Sure why not---my opinion totally.

If we withdraw, Iraq would go into a short, perhaps very short, period of reprisal, violence and chaos. We would see videos of American bases being trashed by jubilant crowds, waving flags, and standing atop abandoned U.S. vehicles and buildings. The fact that many of the 70% of eligible Iraqi voters who participated in the national election(far greater of course than participation here in the U.S. where the dangers are somewhat different) might be hiding in their homes in terror would probably not be a key focus of media attention.

But this may be a brief period. Very quickly, through an alliance and aid, Shiite Iran would become a de facto partner with the Shiite majority(60%). Once order was restored, the Sunnis(20%), presumed to be toast, would be powerless but relatively safe as Iran's influence would persuade the Iraqi Shiites that the political benefit of the appearance of unified Muslims required a show of restraint and, at least on the surface, reconciliation. The message would be that it was the U.S. intervention that led to the brother against brother violence and now, please listen all of you Sunni Saudis, peace can prevail.

The Kurds in the north(20%) who have been minding their own business and getting along ok(although not especially prosperously) being out of the epicenter of terrorism and violence, would over time become the new Bosnia, with the Shiite/Sunni Iraqis from the south and the Iranians from the east playing the Serb role and the Kurds getting the Bosnian non-Serb role. Without an American presense, Turkey would contain the western border and, while giving lip service to peace, would likely block supply routes and slow humanitarian aid.

One could say to this scenario "Impossible, the Iraqis and the Iranians fought a WWI type war in the '80's, and the Sunnis humiliated the Shiites for at least 25 years ". But that was all under the secular Sunni Saddam tyranny, and things have changed.

For the U.S. the result of withdrawal would likely have significant global political ramifications, mostly not too good---not much upside in this, at least in the short term. Far worse, however, no one can rule out the possibility that this situation could raise the ante such that it leads to an eventual conflict that would be the equivalent of a World War. Very far-fetched thought I hope, but it did happen twice in the 20th century.

The other unfortunate possibility is that this totally speculative line of thinking, if also in the minds of others, could lead either Israel or the U.S., with the unspoken acquiesense of the Saudi monarchy, to look for or create an opportunity to deal with Iran soon.

Hey, this has been upbeat? What IS the best solution now, given the situation as it is now, looking ahead and not backward, and putting politics aside(how naive am I). It is obviously a difficult question, but using diplomacy on all fronts and scaling back carefully when given opportunities seems to be the middle ground. That's not a satisfying or creative solution and it's sad that there is no quick resolution in sight. But maybe six weeks from now this discussion can begin. At the moment, however, the Bush/Cheney parade is going to save us from the terrorists next door while the Democrats will campaign on multiple opinion fronts, depending on their home constituents' views, to regain some power.

Tuesday, September 26, 2006

From the notebook of...

"I am only one but I am one. I can not do everything but I can do something. What I can do I ought to do, and what I ought to do, by the grace of God I will do." Tom Dooley

Friday, September 22, 2006

From the notebook of...

(the following was clipped into the notebook, and it was written by my Grandmother's older sister in the early 1960's and describes a time around 1895)

Pleasant Memories

The two-story frame house with a picket fence all around it, and with a front upstairs and a back upstairs, was on North Union Street in Concord, North Carolina. That was where Grandma Susan lived and to me, her granddaughter, it was a wonderful place. It held many interesting things, but the most fascinating was a room in the back upstairs with trunks full of dresses, hats, shoes and finery of by-gone days. There was nothing I would rather do on a rainy day than to be told that I could go up in the back upstairs room. I always waited for an invitation to go and was disappointed if I didn't get it.

Then there was the long grass in the front yard we would plait and unplait, naming each plait an imaginary character; the rose garden in the side yard; the wistaria vine across the entire front porch making a lovely sight when in bloom; the grape leaves forming a walk through the vegetable garden; the smoke house with hams, sausage, red pepper, etc. hanging from the rafters; and in winter always a barrel of sauerkraut. We used to run in and lift up the rocks and the top and grab a handful and then scamper out to eat it.

Grandma Susan, as well as I remember, was never without pies. Her specialty was apple and berry pies. I used to watch her make them and there was no doubt about it, she was an expert, never a drop of juice oozing out to mar their beauty. In the summer she would roll the crust on a long table on the back porch and say "I know I have rolled enough pie crust to reach from here to Cuba". She was famous for the "good table she set" and well deserved the honor.

Another pleasant memory was her fruit cake. She could cut it mighty thin, as there were many grandchildren, but every bit was delicious with a flavor all its own. She iced it "to hold the moisture" she would say. She always had some from one Christmas to the other and loved to see people open their eyes wide when she would ask them to have a piece of fruit cake in the middle of the summer.

Grandma was of small stature but with quick movements, having no patience with lazy people. Her leisure moments, however few, were spent sewing and darning, her darning basket always handy.

Thursday, September 21, 2006

From the notebook of...

"How shall I know, unless I go
To Cairo and Cathay,
Whether or not this blessed spot
Is blest in every way

Now it may be , the flower for me
Is this beneath my nose
How can I tell, unless I smell
The Carthaginian rose?"

Edna St.Vincent Millay

Wall St. Journal editorial on immigration

Today the Wall Street Journal editorial page's lead comment was entitled "The Great Wall of America" with the subtitle "House Republicans build a strange public monument". It's a good piece, worth reading, from my point of view and it concludes as follows:

"The only way to reduce the flow of illegal Mexican immigration is to provide a legal, orderly process to match open American jobs with workers who want to fill them. Mr. Bush is for that, and so is the Senate, but House Republicans have concluded that they're better off building fences. When Ronald Reagan spoke of America as being a 'shining city on a hill' , he wasn't thinking of one surrounded by electrified barbed wire fences."

One further excerpt underscores the House Republicans' unhealthy obsession with this proposed 700 mile wall:

"Here's one example of how tough they are. Steve King of Iowa suggested in front of the C-SPAN cameras that at the top of this new fence 'we electrify this wire with the kind of current that would not kill somebody, but it would be a discouragement for them to be fooling around with it'. Then he added: 'We do this with livestock all the time.' There's an inclusive political message for you."

E-mail dialogue with a resident of Thailand

JB -- Eyes Not Sold
TR -- Thailand resident

JB-- "Reports just coming across here(in New York) about the military coup in Bangkok. So far it sounds like no violence, just a done deal. Bars and cabarets still going strong and the military 'apologizes for any inconvenience'...Hope all continues well there."

TR -- "Well, it's 3:40 in the morning here. A call from the states on this just woke me up. So, thought may as well check out the news on TV, see what the fuss is all about. Nope, they have shut down broadcasting, a'la mango republic. Silly me, of course this is the first thing you do when you take over a country with tanks. And no one does this better than the Thais. Decades of practice. It's Coup 101 and here we go again. So let me know what's going on over here when you get a chance. Meantime I'm going back to bed. Tomorrow's just another day in the life of Thailand and the children who run this country. Tee time 9 am."

TR -- "Day two and all's quiet on the Eastern Front. Not a problem, as long as they keep the tanks off the golf course."

JB -- "I'm glad all is well as far as your life goes. I assumed it would be, but it must be a little strange, just as background noise, to know that for the moment you are in a country with no Constitution and presumably no rights of due process. I assume that, de facto, they do exist, but there is no pretense of that being guaranteed. Keep in touch."

TR -- "Due process of law? Constitution? In good ole Siam? Not to be glib but that's what coup d'etats are for over here; to enforce what the system, which does exist on paper, was meant to do, but couldn't. From the courts to the politicians, the police to the civil service employees, all of these institutions are for sale, corrupt to its very core this land is. Thaksin was democratically elected but not without unabashed cold cash in hand "vote buying" in the rural areas where all of his votes came from. Government service jobs are bought and sold at every level with the buyer then requiring "payback" on his investment through bribes, facilitating payments, etc. And on and on the system goes, feeding on itself. An honest person is of no use to anyone within the system. It's a show me the money culture and a military coup becomes the only way to get through it. But it's a coup with the King's blessing and that makes all the difference. Thailand has its methods, albeit more art than science. And it's a lovely country."

JB -- "So can I, without using your name, excerpt our brief back and forth dialogue and turn it into a post on my blog? It would possibly be interesting."

TR -- "Blog away mate. But yes, thanks, no names please. Ten years in a Thai prison would really mess up my single handicap."

From the notebook of...

"Bed before eleven
Nuts before seven"

Dorothy Parker

Excerpts from the last lectures of Carroll Quigley(continued)

"The appearance of stability from 1840 to about 1900 was superficial, temporary and destructive in the long run, because, as I've said, you must have communities, and communities and societies must rest upon cooperation and not on competition. Anyone who says that a society can be run on the basis of everyone trying to maximize his own greed is talking total nonsense. And to teach it in the schools, and to go on television and call it the American way of life still doesn't make it true. Competition and envy cannot become the basis of any society or any community."

Tuesday, September 19, 2006

From the notebook of...

(the following is the opening of a brief presentation that my grandmother made to the local historical society in 1964)

"Greetings for 'our towns' day

Thomas Wolfe said you can't go home again
But then of course he referred to men
For here you are, come what may
To help us celebrate 'our towns' day.
We'll do away with airs and graces
And just enjoy your welcome faces.
I can say without a doubt
You'll always find the latch-string out
So on with the chatter
And on with the fun
A royal greeting
To every one."


"And that's the thing, she concludes. Just because things happen slow doesn't mean you'll be ready for them. If they happened fast, you'd be alert for all kinds of suddenness, aware that speed was trump. "Slow" works on an altogether different principle, on the deceptive impression that there's plenty of time to prepare, which conceals the central fact, that no matter how slow things go, you'll always be slower."

From "Empire Falls" by Richard Russo, Vintage Books, page 441

Monday, September 18, 2006

From the notebook of...

"Visits always give pleasure--if not the arrival, the departure."

What's ahead for the markets?

What's ahead for the securities markets? I don't know.

The consensus wisdom of CNBC and many market commentators is that there are rough times ahead, maybe not this week or next but certainly by 2007. Primary and well known reasons are the growing imbalance in the U.S. residential housing market, higher interest rates, the potential for the inflation rate to increase, and high energy costs. These pressures could lead to a break in the resilience of U.S. consumer spending and impact both U.S. corporate profits and the health of export focused countries that both live off of the U.S. market and fund the U.S. treasury market. This scenario could be right, and if so it would lead to a decline in the U.S. equity and bond markets, and possibly to a recession.

But it seems to be human nature, at least for many media commentators and media focused securities analysts, to always stay on the "safe" side and never risk being the fool who is too optimistic, not a realist but a dreamer. The current general critique of the markets has spawned the cliche of the year often delivered with a serious look, head tilted down, peering over reading glasses and looking straight into the camera that "the consumer has been using his home like a giant ATM and it's running of cash". Even the Swiss based head of the Julius Baer International Equity Fund used almost that exact phrase in an interview in Barrons this week. Market cliches may be correct but they may be too easy.

So what's going right. What markets are solid or improving. First, look at the merger and acquisition climate. It is everything that the U.S. residential housing market is not. Mergers, acquisitions, go privates and IPO's are all on the table. Prices are generally in a zone where deals can get done, meaning the buyers see the opportunity to make a productive investment and the sellers don't see their values in the bargain basement. Longer term interest rates in the bank, bond and swap markets are still historically at reasonable levels if debt is needed, and equity markets can be receptive to paper that makes economic sense. The health of the current M&A market is underscored by the fact that bad IPO's get rejected. A healthy M&A market can lead to companies that are more focused, globally competitive, and profitable. A healthy M&A market generally does not occur in a market about to head off a cliff. (note--this comment will not address some issues of concern in the go private market, maybe at another time)

Second, look at the commercial real estate market. While there have been some rumblings recently about aggressive lending by mid-tier and small banks to middle market commericial real estate, the major market of large commercial real estate appears to be sound. In most markets occupancy levels are reasonable and debt to equity ratios are conservative when compared to the troubled late '80's early 90's. This market attracts both foreign and U.S. capital, and again the rate environment for longer term investments and projects is still attractive. No blow up on the horizon here it seems, and this has been a staple of recessions.

Third, the energy market has some positives. I'm not talking about the price of oil which, while declining at the moment and that's good news, is still at a level that puts pressure on the consumer without a doubt. But natural gas prices have declined significantly and with new supply coming onstream it is unlikely that they are going back up any time soon. 63% of American homes use natural gas for heating and last year the cost of heating those homes rose dramatically. This year it is going back down. In the aggregate, this is a meaningful bit of relief for the consumer.

What's ahead for the markets? I am only certain that the easiest interpretations are often not right, and when they are right the timing may not be near term. Uncertainty, which we surely have, can provide opportunity.

Sunday, September 17, 2006

From the notebook of...

The Hardship of Accounting

Never ask of money spent
Where the spender thinks it went
Nobody was ever meant
To remember or invent
What he did with every cent.

Robert Frost

Saturday, September 16, 2006

Excerpts from the last lectures of Carroll Quigley (continued)

"The last Carolingian was removed in 887 for not fighting the Vikings vigorously enough, and for one hundred years there was no ruler. As a result, the area between the Loire and the Rhine was reduced to a large number of self-sufficient villages, subject to the private power of mounted spearmen, without any state, monarchy, or public authority. This period, and these social conditions, we call a Dark Age. There is nothing wrong with Dark Ages; they are frequently the most productive periods in the history of any civilization. Any of you who have read Lynn White's book on the technological advances of the Dark Ages, such as the plow and harnessing, know that Western Civilization got a great deal from its Dark Age. But, most significantly, out of the Dark Age came the most magnificent thing that we have in our society; the recognition that people can have a society without having a state. In other words, this experience wiped away the assumption that is found throughout Classical Antiquity that the state and the society are identical and therefore you can desire nothing more than to be a citizen."

From the notebook of...

"One must wait until the evening to see how great the day is." Sophocles

Friday, September 15, 2006

The Politics of Fear

It has become obvious in the last few weeks that the Republican campaign strategy for the mid-term elections is based on fear. Bush, Frist, random congressmen, and others this week have uniformly returned over and over in interviews to the immediacy of the Al Qaeda threat. Bush, when asked by a reporter in an interview about torture tactics by the CIA, responded with a question to the reporter--"Do you have a family?"

This is unfortunate, because there are many issues to discuss and, I believe, many Republicans and Democrats who have the capacity to honestly discuss these issues. For the Republicans, however, the White House directs strategy. For the Democrats, as we have seen for the last 6 years, no person or group drives any consensus.

Looking at the extremely important need to guard against terror, but in a way that doesn't suggest that we have to look under our beds each night to check for a hidden cell member, I recommend reading James Fallows article "Declaring Victory" in the September issue of the Atlantic Monthly. Here are few excerpts:

---Al-Qaeda's mistakes, and our successes, have sharply reduced the terrorist network's ability to harm the United States. Its threat now rests less on what it can do itself than on what it can trick, tempt, or goad us into doing.

---Americans still face dangers, as they always have. They have recently lacked leaders to help keep the dangers in perspective.(I should add that now the "leaders" are knowingly abandoning perspective)

---Al-Qaeda can do more harm to the United States than to, say, Italy because the self-damaging potential of an American overreaction is so vast.

---The terrorists keep killing Muslim civilians. That is their Achilles' heel. Every time the bombs go off and kill civilians it works in our(U.S. and allies) favor.

---"The things we have done right have hurt Al-Qaeda. The things they have done wrong(the attacks on mosques and markets) have hurt them worse. There is only one thing keeping them going now. That is our incredible mistakes."

What was refreshing about this article was that it dealt with facts and issues and for the most part was devoid of overt political commentary.

From the notebook of...

" 'The Study of Music' -- Not too important that his talent was meager -- but what did matter was that he was cultivating a taste for one of the basic values of our existence."

Thursday, September 14, 2006

Paulson on track

It's early, but after two months in office new Treasury Secretary Hank Paulson appears to be on track. The New York Times today details his prepartion for a trip to China. Paulson is using "forceful language" in criticizing China's economic policies in advance of the trip. The trip, however, will first take him to the IMF meeting in Singapore where his intent is to lobby for giving China more of a voice in the international agency. He has an approach and a point of view that is clear. in an article today on Paulson quotes an economics professor as saying "Paulson seems to want to come out with coherent policies instead of the cheerleading, traveling salesman approach that Snow was forced to take. Once you venture onto the rubber chicken circuit you lose something." The Bloomberg story also details an August 18 conference call led by Paulson and joined by the Chairman of the Council of Economic Advisers, the Budget Director, and the head of the National Economic Council. To quote the Bloomberg article, "Paulson was the first to speak, telling reporters that one reason Bush was struggling to get credit from the public for economic growth was that 'many Americans aren't feeling the benefit'." Makes sense.

From the notebook of...

"Beware of all occasions requiring new clothes." Thoreau

New feature coming

Beginning soon, Eyes Not Sold will begin a new feature entitled "From the notebook of..." Recently, in closing down my parent's house, I found a notebook/journal written by my Grandmother. There is a tradition of privacy on this side of my family and I will not use her name. What I will say is this. My grandmother was born in 1891 and died in 1983. She lived in North Carolina and spent her adult life in a town of 2000 people where she was, for 52 years, the piano teacher. While she by necessity lived modestly, she was wealthy in spirit, intellect, friends and family. The notebook that I found was kept, somewhat haphazardly, from 1961-1972. It is not large, and is filled with many varying entries: lists of books that she read in a given year; one year's Christmas gift list; another year's Christmas card list; drafts of her speeches to the local historical society; lyrics to various songs that she or her students would play; lists of people that she met and what they did; and lots more. Interspersed among all of this are quotations that she found interesting enough to write in the notebook. These quotes, sayings, brief poems, and brief stories are what "From the notebook of..." will be all about. Quite a few of the quotes and sayings relate to a perspective on getting older, but there's much more than that. If there is a source noted for any quote I will include it. If any explanatory note is needed I will add it in parentheses. Otherwise this will be an unedited regular dose of my Grandmother's notebook quotations.

I must note that this new feature of the revived Eyes Not Sold may seem inconsistent with comments about markets, the economy, politics, and Iraq. It is.

Excerpts from the last lectures of Carroll Quigley

Professor Carroll Quigley, of the history department at Georgetown University's School of Foreign Service, was the best teacher that I ever had, by far. He was brilliant, eccentric, intimidating, and kind. Shortly after his retirement, in October 1976, he gave a series of three lectures called "Public Authority and the State in the Western Tradition: A Thousand Years of Growth, 976-1976". Professor Quigley died unexpectedly, at the age of 76, one month later. What follows are a few brief quotes from those lectures. They don't remotely do justice his thought process or work, but I find them interesting. These lectures to my knowledge have not been published. They were distributed in pamphlet form to his colleagues and former students after his death. Thirty years later, while dated in some respects, perhaps these excerpts have some application today. More will follow in future posts.

--- "The fundamental all-pervasive cause of world instability today is the destruction of communities by the commercialization of all human relationships and the resulting neuroses and psychoses. The technological acceleration of transportation, communication and weapons systems is now creating power areas wider than existing political structures."

--- "Secrecy in government exists for only one reason: to prevent the American people from knowing what's going on. It is nonsense to believe that anything our government does is not known to the Russians at about the moment it happens."

--- "When a society is approaching its end, in the last couple of centuries you have what I call misplacement of satisfactions. You find your satisfactions--your emotional satisfaction, your social satisfaction--not in moment to moment relationships with nature or other people, but with power... You find your emotional satisfaction in making a lot of money, or being elected to the White House, or in proving to the poor, half-naked people of Southeast Asia that you can kill them in large numbers."

--- "Much of the legislation of the last forty years in this country has been aimed at the destruction of families, neighborhoods, ghettos, parishes and any other communities."

---"It became fashionable in Western Civilization, particularly in the last hundred years, to be scornful of religion. But it is a fact that human beings have religious needs. They have a need for a feeling of some certitude in their minds about things they cannot control and do not fully understand, and with humility, they will admit that they do not understand them. When you destroy people's religious expressions, they will establish secularized religions like Marxism."

Tuesday, September 12, 2006

While waiting

Waiting for Eyes Not Sold to resume posting? You could go to and pass some time(or go to and hit throw paper).