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Java Jag is written by a New York City Executive who has been reading newspapers since he was 12 and has been paying keen attention to the economic world since then. He is a contrarian and has done quite nicely in his investments for some 30 years, thank you very much. Currently holds UUP bought... More
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World Wide Java Jag
  • Boxer Rebellion Round Two
     A parable: It was a difficult, confusing time in the empire. Once the greatest nation on earth, a technology leader, the world’s largest economy with high standards of living and a robust culture, it led the way in its region and looked down on those less developed, i.e., the whole world. Once, all the countries that came into contact with it treated it with deference and respect.

    But, in these new hard times, endless corruption, unsustainable payments to the elite and political intrigue weakened the central government. Internal divisions of religion and class so weakened the ruling class that they could not defend against foreign influence and, ultimately, occupation.

    Foreign corporations encroached on the empire and forced cheaply made industrial goods upon the people, destroying centuries of native industries. Textiles and manufactured products brought from abroad weakened the currency and increased the debt. Taxes were raised to finance the government’s obligations.  Hardship and hunger increased. There was little or nothing the nation had to offer foreigners, so trade imbalances ballooned. The government did not have a solution and became increasingly helpless and desperate.  Their backs were against the wall.

    Does this sound like the United States of America in 2010? Another correct answer would be China in 1900, the year of the Boxer Rebellion.

    China fell hard. The late 19th century found China on its knees. Technology savvy European powers were able to break through China’s physical and cultural walls, forcing China into a half century of humiliation and self-destruction. The West stopped at nothing. They pushed opium on the empire, creating a market of misery out of millions of addicts. They forced Christianity upon the ancient believers in Confucius and Lao-Tzu’s Taoism, disrupting religious beliefs that existed for two thousand years. They granted trading rights to themselves, marginalizing or eliminating the sovereignty of regional Chinese governments and emasculating the central one. Chinese currency had no convertibility, so the only form of payment acceptable to westerners was gold or silver. America, for its part, wanted an “open door” trade policy to break the European stranglehold on imports.

    What happened next is illustrative and what today’s currency-and-trade oppressive Chinese leadership must fear. For they know full well their own history.

    The self-described “fists of righteous harmony” (termed “Boxers” by westerners) aimed to redress the humiliation felt by the Chinese. Arising in the north of Shandong Province, this shadowy organization was infused with a mythical martial arts spirit and a Jihad type belief in their own immortality --the importance of the Muslim Chinese in the Boxer rebellion has been largely ignored. The desperate and ineffectual Empress Tzu Hsi, last of the Ch’ing dynasty, was unsure how to control the Boxers, who wanted to “destroy the foreigner.”  The situation quickly got out of hand.

    The “righteous fists” had their own agenda.  They demanded nothing short of a nationalistic cleansing and a restoration of China’s greatness and sovereignty. The opium traders, the low cost manufactured goods, and the Christian missionaries all had to go immediately and by force.

    The fists swept the countryside, killing, burning and destroying any and all signs of western influence. They slaughtered missionary families and burnt their churches. They set fire to the foreign legations that existed in the main cities. As Charlton Heston fans may remember, this all culminated in 1900 with the surviving foreigners holed up in Peking for fifty-five days, until an arriving Western multi-national army rescued them.

    Why would the Chinese fear this movement happening in America?  Because the shoe is on the other foot.  Having destroyed our manufacturing industry, the Chinese continue to force the opium of low priced goods on us. Now, as then, trans-national companies put their interests before their country’s interests and dictate trading terms. Profits are all. U.S. steelworkers and Senator Schumer, in the role of Boxer General Dong Fuxiang, seeing their country bleeding, have risen to the occasion, and are on the offensive.

    Even the parallel of the Chinese being forced to raise internal taxes to make up for the revenue that poured into the hands of Liverpool manufacturing millionaires, resonates today when we look at our states and cities and their fiscal crises.

    The Chinese know what a popular rebellion looks like. Boxer was one. Tiananmen another. Premiere Wen Jiabao knows what domestic unrest and civil instability can bring. He has been pleading and threatening not to import it to China. Better in Michigan.

    When the Chinese, who monitor everyone’s media very carefully, see that the movement to free ourselves from their tyrannous mercantile yoke is serious, look for window-dressing concessions like allowing them to build factories and invest here. It will happen.  They are not stupid and that 2.4 trillion dollar pile of reserves has to go somewhere. When they see that politicians --currently there are some thirty nine house and senate races using China’s unfair trade as a theme -- get elected, they will get very nervous.

    The Boxer Rebellion ultimately failed and Western powers doubled their imposition of misery on the Chinese. They forced them to further weaken the government’s authority and to pay crippling reparations. Eventually this led to Mao and the Draconian rule of the Communists. Let’s hope America will have a more successful rebellion and redress the oppressive trade policies of the Chinese in a more enlightened and effective manner.


    Disclosure: No Positions
    Tags: China
    Oct 19 10:28 AM | Link | Comment!
  • Letter from Lloyd
    We at Java Jag were unsure about what to write this week, but providence stepped in and we received, from a source labeled “spam” a pdf on the letter below. It appears to have been sent by Lloyd C. Blankfein, CEO of Goldman Sachs to the governor of New Jersey. Since the legitimacy of the Constantine Donation and the Zimmerman telegram are still in doubt centuries and decades later, we’re not going to dwell on its authenticity. You be the judge.

    Governor Chris Christie
    P.O. Box 001
    Trenton, NY 08625

    Dear Governor:

    I send you belated congratulations on your recent election. Our past CEO and Chairman here at Goldman Sachs, Jon Corzine clearly did not do the job his constituents had hoped for, but I am optimistic you can stand up to those difficult and entrenched teachers, policemen and firefighters better than he did. The sense of entitlement and privilege these civil servants and unionists possess knows no bounds. I speak for everyone here at Goldman Sachs when I say leverage, risky finances and fantasy accounting are no way to run a state.

    Anyway, the real purpose of this communication is to alert you to an opportunity that would be a major cash infusion and economic shot in the arm for New Jersey. Our distressed real estate/vulture fund desk came across a defaulted property in Atlantic City -- the 2000 room Revel Hotel/Casino -- a project that has been abandoned by our competitor Morgan Stanley. They have written off and walked away from nearly a billion dollar investment that still requires another billion and a half to complete.

    As you may be aware, there have been some new developments here at GS. Some of our proprietary, structured synthetic credit derivative and swap products have unfortunately come under regulatory, political, and media fire. As I sought to build a stronger and more diverse Goldman, we ventured into areas further afield than our traditional investment and underwriting franchises. This may have confused some of the public and their political representatives. The charges against us simply boil down to: We are “taking bets” rather than making investments.

    Frankly, I agree with those characterizations. Modern finance is very complex and we must be able to offer our clients, while simultaneously availing ourselves of, all avenues for profit from movement in any direction of a market. Short, long, red, black, aces high, covered calls, naked shorts, synthetic CDO’s…craps! What’s the difference? Why do you think they say ‘roll the dice’ when clients are contemplating one of our opaque investments?

    Our executive council, board and I are meeting with our legal representatives to map out a response to the SEC charges. Of course, our PR department is working overtime to spin this favorably. However, and I tell you this is the strictest of confidence, one of the real opportunities we see is to admit to a lot of the charges and capitalize on them even more. The shareholder, who in 2007 protested that she thought, “UBS was a bank and not a ‘casino,’” was unaware of how prescient her remark was.

    Which brings me to my letter to you. We are thinking of opening and operating a casino where market/options/credit bets could be made with liquidity and transparency. All parties and counterparties on each side of a trade would be able see the odds from the floor on a giant digital board…just like sports betting in Vegas. Who better to fix the odds and know the spreads than Goldman! In a sense we have been the ‘house’ of the financial world for a long time.

    Rather than having a sales desk staffed with employees possessing strange names calling and emailing all over the world to sell this toxic stuff, we would open all the bets to the public and everyone could take the positions they felt comfortable with. You can see how this would eliminate all the charges of ‘stacked deck’ and ‘insider self-dealing’ we are now faced with.

    I am sure you will agree this is very exciting. There are even some here who want to follow the Steve Winn model and simply call the casino “Lloyd’s” Others envision large gold (get it) GS letters atop the building.

    We would love to have your support in this endeavor. Your backing would mean a lot to us as we try to buy the Revel for pennies on a dollar. We have formed a shell corporation to make the approach, so, if you hear about Abracadabra Corp bidding on the property, it could well be us.

    Lastly, I am taking the liberty of asking our sovereign and muni-bond underwriting departments to contact you. I may remind you they helped Greece in the past with their debt/accounting. They have advised me that there are numerous ways we could get government tax advantages and/or credit backstopping for this project. We believe this plan will help revitalize Atlantic City by creating a lot of jobs. Isn’t that what Wall Street is about after all?

    Hoping to hear you reaction soonest,

    Disclosure: No Position
    Apr 26 5:36 PM | Link | Comment!
  • Helter Hutaree

    “Helter Skelter.  Helter Skelter.  Helter Skelter… she’s coming down fast.”

    Those lyrics, along with the rest of the Beatle’s song was interpreted by Charlie Manson and his L.A based group ‘The Family’ to be a “message.”  The message, as Manson decoded it, was that a race war was coming to America and with it the apocalypse.  His plan to participate in the cataclysm was to record his own music, then kill random people. He went on to kill the Tate/LoBiancos. Infused by the Zeitgeist of the time; pot, acid, and sex, all Manson needed was the Beatles stoner/psychedelic Double “White Album” to put him and his ‘Family’ over the top.


    That was then: today we have Rupert Murdock, Roger Ailes, Glen Beck, and Sara Palin. They too have a message, one that frankly doesn’t need a lot of decoding. It goes like this: Obama and the Democrats are illegitimate, the President is illegitimate by birth, the administration wants to change the Constitution and bring on socialism and European style government. They want federally funded abortion in the health care bill. They want “death panels”. They want to take away all of your rights including those to have assault weapons.


    The other day I was listening to a radio program called Focus on the Family. They flat-out encouraged their listeners to foment “civil disobedience” over the health care bill. One listener thought the radio host was calling for an armed response.  The broadcaster responded, “You got that right.”


    Conservatives and Right-wing Republicans had no trouble believing that the heavy metal bands Slayer, Metallica and Ozzy Osborne were sending out despairing messages that called for (or encouraged) teen suicides. Lawsuits against the bands were supported by parent groups who saw a direct link between the music and teen suicides.


    It seems to us that this same sort of linkage applies to the paranoid hysteria of Fox News as it relates to the Hutaree militia. At the close of a Glenn Beck show I watched, he implored his viewers to “remain peaceful.” What does that mean? It says to me that he knows that his diatribes inflames and provokes many people, and that he has real power over them. The clear implication to me was that one day he just might tell them to get those guns off their racks and use them. We should all watch for that day: besides, it’s good for ratings. 


    Andrew Stack crashed his small Cessna into an IRS office in Texas. He too had absorbed enough of the Fox News boogiemen: the auto industry, the medical system, big insurers, and the IRS. Nowhere have I read about his media habits. Nonetheless, it would not surprise me in the least if he were a heavy “user” of Fox News. The round the clock histrionic, rhythmic drumbeat repeating the refrain of how the “lifeblood of liberty” is being drained away cannot be soothing for the unstable.


    The plan of the Michigan Hutarees was almost exactly the same as the Manson Family’s plan: start a civil war. The “Colonial Christian Republic” Hutaree’s, as their uniforms stated, planned to ambush a law enforcement officer - to “pop him”- according to an FBI informant.  Then at the officer’s funeral, they planned to kill several more policemen, thus starting a nation-wide conflagration. There were nine members of the Hutarees, a group just a little larger than Charlie’s “Family.”


    The other messages pouring out of the paranoid right go back to a time pre-dating the Beatles: specifically to the Book of Revelations in the Bible. This topic is hot. The gloomy end of the world including a fantasia of beasts, War, the Anti-Christ, hell-fire and brimstone presage the “Final Days” so vividly described in Revelations is being marketed to the masses by Big Business Christianity. The “End of The World” industry has made good use of publishing, radio and cable television to market their message; it is clear that Doomsday sells. The Hutaree’s incorporated this message in their doctrine. Their website told of “resisting” the Anti-Christ that was in our midst.


    This doctrine of “resistance” that Java Jag has written about so much as it relates to Hamas and Hezbollah has a mirror image in the American right’s Fox News Universe. Much about this has been reported especially by Thomas Frank the author of the “Tilting Yard” column in Wall Street Journal about the sense of victimization that is claimed by the conservative and right wing movements. Conservatives are suffering at the hands of liberals. They are always under attack. This political line of being besieged spews forth from Fox News personalities like an open sewer. Watching the crew at Fox, you would think they were pioneers in covered wagons, and the Democrats and the government were the circling Indians. Just watch Glen Beck, Hannity or Bill O’Reilly. Victims all.


    Victims merely strike back when they just “resist” in their minds – rather than being aggressive or war-like. Resistance is a cover for action you are afraid to initiate but feel justified in mounting a defense against. It is an insidious form of cowardice used by the Huratees and Hamas alike.


    Why would an establishment figure like Rupert Murdoch or his company Newscorp create such a destabilizing message? Why would he want to recast himself as Julius Streicher, publisher of the Nazi era hate tabloid Der Sturmer? What possible benefit could accrue to either Murdoch or Newscorp if American law enforcement has to spend valuable time and money to tamp down a new wave of homegrown terrorists? What benefit does Newscorp accrue if Glenn Beck believers start blowing up federal buildings and murdering government officials?


    It is possible that the Hutaree’s may be the first of many blowbacks. The history of the vicious paranoid apocalyptic right wing often mirrors that of one of their iconic figures: Joe McCarthy: a rocketing assent followed by an ignoble flameout. The ever increasing and strident rantings by the Fox crowd and others are more and more foaming at the mouth than news or information. The ever-widening conspiracy theorist’s sucks in more and more members of establishment. The illogic of the rants become more transparent, the destabilizing effects on the Republic more clear. There is a thin line between entertainment and incitement and it would be wise for the corporate world of Newscorp to pay attention to that fact.

    Disclosure: no disclosures
    Apr 07 3:32 PM | Link | Comment!
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