Monday, September 29, 2008

I Want My Billy Jeff

The events of the past few months---Hurricane Ike, the worst financial crisis since the Great Depression, the Russian invasion of Georgia---weren’t on our radar screen when the political parties were choosing their Presidential nominees. The Iraq war, which many thought would be the most important issue in the Presidential campaign, has been relegated to the inside pages. Neither Senator Obama nor Senator McCain seem up to handling the challenges of this Black Swan era, when “extreme events do happen and have a big effect” on the course of history.

Ideology is of secondary importance. We need a leader whose knowledge of economics, culture, arts, science, history, international affairs and the exercise of military power is both broad and deep. We need a President who can judge when to move quickly and when to go slow, when to act in concert with others and when to act unilaterally. We need a man or woman of experience as well as intellectual bandwidth. We need someone who can articulate his thinking clearly and bring the people around to his point of view. It’s time to repeal the 22nd Amendment. We need, and I never thought I would ever say this, William Jefferson Clinton. © 2008 Stephen Yuen

Friday Afternoon Blues

The San Francisco Blues festival came to town last weekend. The amplified sound reverberated off the concrete, making it difficult to focus on the financial formulas in a complicated spreadsheet. I took the elevator down to the Plaza and watched gray-haired fifty-somethings exult to the beat. Will boomers ever start acting their age?

I went back to the office and wrapped up a couple of small projects. Glancing out the window improves one's perspective. And the Bay has a calming effect, an attribute not to be taken lightly in these tumultuous times.

Wednesday, September 24, 2008

Panicky Ruminations

One week ago the annual report from one of my money market funds arrived. For the first time in a long time I didn’t send it directly to the recycling pile. I scanned its list of investments. None of the recent companies in the headlines, Bear, Lehman, WaMu, IndyMac, AIG, Merrill, was on the list.

Just as seemingly healthy 40-year-old men have been known to keel over in the office, rock-solid financial names have been collapsing. Could a big bank—despite the ministrations of Doctor Fed—be next? Even if I could pull out of my (uninsured) money market funds, where would I put the money, under the mattress?

I reprised the Y2K conversation with my partner. We wondered whether we should set aside some cash—real folding money—to buy food, gas, and other essentials. Look at how the Hurricane Ike survivors are stuck without power, water, and ATM access.

My panicky ruminations were dispelled for the moment by Friday’s announcement:
The U.S. Treasury Department announced a massive program Friday to shore up the nation's money-market mutual-fund sector, responding to concerns that the global financial crisis is starting to affect those historically safe assets.
[. . .]
Under the Treasury program, the government will insure the holdings of any eligible publicly offered money-market fund. The funds must pay a fee to participate in the program.
To me insuring the safety of money-market funds was the most important of all the stabilizing actions that the government took. The public can handle a declining stock market. When millions of people can’t get at their cash, that’s when widespread panic ensues.

The Federal Reserve and the Treasury Department contained the fire last week. But it's still burning. © 2008 Stephen Yuen

Saturday, September 20, 2008

Choppy Seas

A little over seven years ago we experienced a day that changed everything. Yet some things, thankfully, do not change. On September 11th San Francisco Bay was as cool, breezy and inviting as ever as we locked up the office at noon. We hoofed over to Pier 40 and spent the rest of the day snacking, imbibing, chatting, and simply enjoying the view aboard our hired ferry. We had had a decent year so far, but at least we’re still around, which wasn’t so certain seven years ago.

Little did we suspect that the upcoming week’s events would change everything in the world of global finance. Time to get back to work. Maybe seven years from now we’ll be able to enjoy another boat ride.

Alcatraz: just the place to house toxic financial instruments.

Thursday, September 11, 2008

What They Are Expected to Do

Every Certified Public Accountant wants to have successful clients. Success means that there are usually no problems with the audit---when production, inventory, sales, and customer service systems are smoothly humming, it's a good predictor that accounting, reporting, and internal control systems are also reliable. The client pays your invoices on time, and the employees and managers are not only willing but eager to talk to you about their company.

And yet, although they may like the business and the people, CPA’s can’t get too close. Accountants’ principal duty is to the shareholders, lenders, and anyone else who reads the financial statements. There may come a time when auditors must disclose information that will damage the stock price. They have to make a choice between their client and their responsibility to the public. There is no question what they are expected to do.

Keeping their distance and independence is a must for CPA’s if they are to maintain trust and a reputation for integrity. Some accountants violated that trust during the go-go tech boom and Enron / Worldcom scandals. In order to save the profession, accountants had to reassert the guiding principles of independence and integrity. You don’t see auditors standing up and cheering at shareholders meetings.

In my idealistic youth I thought about a career in journalism. Woodward and Bernstein (of Watergate fame) were my heroes. They pursued a story that brought down an administration. Yet they didn’t make up facts; if information could not be verified, they left it out.

Today the profession of news journalism has lost its way. Opinion has leaked beyond the editorial pages to the rest of the newspaper. “Newsmen” publish unconfirmed rumors that support their stances and ignore inconvenient facts that don’t. Outside the office, they openly display their political preferences; there’s no attempt to maintain even the appearance of objectivity.
Yet when Obama emerged from a curtain on stage, the audience of more than 2,000 [minority journalists] bolted to its feet, cheered and whistled. His remarks drew repeated applause throughout the 30-minute broadcast, which CNN and Time Inc. sponsored.
Reporters, if you want to be an advocate, do both yourself and journalism a favor. Leave. Go to Madison Avenue. The pay’s better.
© 2008 Stephen Yuen

[Update 9/21 - a quiet Sunday morning, then Instalanche! Welcome, everyone.]

Thursday, September 04, 2008

Vegetable Lovers

Down to the last lasagna: Rob, Jim, Kay, and Marge.

When it’s our church’s turn to serve lunch at the community center in Redwood City, I’ve been making salads. No, I’m not a nutrition freak, and yes, many of the people to whom we serve a free hot meal bulk up on the doughnuts and pasta, but as one of our customers said to me, “They [the food charities] always give us the sugar.” There were more vegetable lovers among our clientele than one might suppose. But this is the Bay Area.

Salads are easy to make: I wash and chop a package of romaine and cover the greens with a layer of bright red cherry tomatoes. If I’m not too lazy, I’ll dice an onion and grate some carrots and/or cheese. Three other people brought salads. Once again we ran out of salads first, then the lasagna.

Forty people were waiting by the gate when we opened, and the gentlemen and ladies helped us unload the cars. We were a little shorthanded this Labor Day weekend and were slow in setting up, but no one complained. They knew that we weren’t getting paid—at least monetarily—for our efforts. The count rose to sixty by the time we were done. We ran out of everything except the doughnuts, which we dropped off at the Catholic workers’ house a mile away. A nice quiet Sunday afternoon--it was certainly less eventful than one year ago. © 2008 Stephen Yuen

Monday, September 01, 2008

A Teaching Moment

The Sarah Palin story won’t stop moving. Jeff Goldstein chronicles the crazy narratives that the win-at-any-cost leftists are throwing up on the wall in the hope that one of them will stick to the Alaska governor. The rumor that even most Obama-Biden supporters wouldn’t touch was the one that had Governor Palin covering up an out-of-wedlock birth of a son to her 17-year-old daughter Bristol by claiming Trig as her own.

Today the McCain campaign confirmed that Bristol is pregnant and will marry the father of the child. As one commentator remarked, Astounding!

The good news for Palin supporters is that there’s no question that Trig is Sarah’s child. It’s biologically impossible for Trig to have been born in April to Bristol and for Bristol now to be five months pregnant.

Nevertheless, Bristol’s pregnancy is a troubling distraction at best. It could raise a host of questions and commentary on the Palins’ parenting abilities, Bristol’s decision to have the baby and get married (if abortion is not an option, why not give the baby up for adoption?), what their religious beliefs say about this situation, the wisdom of joining a Presidential campaign when all this is going on in one’s family, etc.

It is also possible, however, to look at the Palin predicament as one of life’s teaching moments, the unforeseen kind that usually arises when one is presumptuous enough to make plans. The Palins are trying to be true to their faith by walking a much more difficult path, in one case carrying a Down’s Syndrome baby to term and in another case not terminating a teenaged pregnancy. The needs of the other--the child--outweigh the needs of the self.

Political opponents may characterize evangelical Christians’ support of the Palin family as hypocritical expediency, much as feminist groups rallied around Bill Clinton despite his serial womanizing. But that characterization would be wrong; it simply shows how far removed from reality is the media stereotype of sincere Christians as burn-em-at-the-stake Cotton Mathers.

Christians, whether liberal or conservative, Protestant or Catholic, rich or poor, know that they have all sinned and yet are forgiven. I have never heard a Christian (whom I personally know, not the ones on TV) pass judgment on the personal failings of others (violent terrorist actions, such as suicide bombing, I have heard condemned, but that is in a different league from what I’m talking about). This condemnatory caricature tars a whole group by the actions and words of a very small minority.

To the extent that they think to pray about these matters, I hope and expect the vast majority of Christians to put politics aside and pray for the health and welfare of Sarah Palin’s family, as they would for Barack Obama’s, Joe Biden’s, and John McCain’s. There are more important things in life than winning an election. © 2008 Stephen Yuen