Post article reveals heightened tensions with Iran

The espionage games going on in Azerbaijan and Iran are likely to be a result of the on-going assassination of Iranian nuclear scientists.  The article confirms that security elevations were clearly warranted following the botched bombing attempt of Saudi officials at a Washington D.C. area restaurant.  Additionally, increased mobilization of troops at U.S. Army bases also points to increased security concerns.  The mobility of large platoons can be an indicator of the world-wide security awareness from non-public information.

Sunday, as I sat on the outside patio of Sequoia's in Georgetown (btw phenomenal brunch), helicopter runs occurred approximately every 5-10 minutes during the holiday weekend.  Helicopters can be used to carry surveillance and detection equipment.

It should be glaringly obvious that Iran will have nuclear capabilities in the near future (if not already), altering the balance of power in the Middle East.  The acknowledgement is likely to come 6-12 months after the fact.  The ability of N. Korea to maintain complete control over society is exacerbated by their errant threats. The threat of nuclear action allows dictators to appear more competent, manipulative and erratic to gain as much attention as possible.  US policy in the Middle East should not change, although the behind the scenes operations might be altered to compensate for an additional country with nuclear capabilities.  Pakistan and N. Korea already have the a-bomb, while Iran only adds to the list of potential catastrophes.

If Iran and N. Korea continue to believe the a-bomb with stifle modernization, they are badly misinformed. Evolution is inevitable-- Parliamentary and Republic systems allow a country to manage the technological changes in an orderly way, and maintain control of society. Repressed societal change breeds resentment and militancy, often manifested through violence and increasingly desperate actions. After all, desperate times call for desperate measures.

1  See Warrick's article, "U.S. officials among the targets of Iran-linked assassination plot" at <http://www.washingtonpost.com/world/national-security/us-officials-among-the-targets-of-iran-linked-assassination-plots/2012/05/27/gJQAHlAOvU_story.html>.

Campaign dollars swirl around Virginia polls

I just did a telephone survey for Target Consulting Group paid for by the Republican party. I typically lean 55-45 to republicans. For this election cycle, I am quite turned off by the evangelical base, racist policies towards immigrants and the 'loser mentality.'  Although, I do think Romney would be a decent president. However, I just so happen to like Obama better, and the fact that he still coaches his own daughter's basketball team.

Republicans have done a very good job at alienating educated middle class voters such as myself.  For example, as a resident living in Northern Virginia, the presence of immigrants contributes to the overall health of the economy.  First off, they are consumers, soaking up excess housing supply and buying consumer goods (necessities actually, which is a different definition than most people have).  Secondly, the contribution to the labor market is a boom in the form of competition.  Not only do they have an incredible work ethic, they work for a fair price and promote honest competition. If anything, the workers I hire, I often worry that I am not paying them enough money for the job! Finally, they exemplify the spirit of America better than most Americans I know.  Moreover, they are risk takers and entrepreneurs similar to the founding fathers of the country, ultimately seeking peace of mind and a better opportunity for their families. 

Overall, immigration is a boom to local markets. It is no coincidence that the economic and population growth is correlated with a greater presence of minorities. The 'loser mentality' often leads to Republicans leaning too far right to persuade donations from the evangelical base, the same way (I resented) Democrats did during the Bush years.  It will become increasingly difficult to win national elections by alienating a significant portion of the population in women, minorities and educated voters.  Best of luck, biatches.

Downturn in Market sets up QE3

A significant downturn  in global economies will inevitably lead to a coordinated quantitative easing.  The Fed is likely to lead the efforts, followed by China and Europe. Europe may want to consider the fact that it is better monetary policy to purchase assets directly, rather than using banks to take the risk to do it. One bank may fail, but a failed government will always be bought.

Let us not forget the ECB last raised interest rates in July 2011. Bond markets eventually hold governments accountable, as seen in Greece and Italy.  The distressed Eurozone needs a flush of liquidity. The scale of liquidity needed in regional Euro economies, may be too much for Merkel's conservatives to stomach.  The effect of a Greece exit, will lead to a stronger Euro and significantly lower valued Athens pound, rather than ounce or gram. The German effect will stifle manufactured goods, making them prohibitively expensive on world markets.  All this, unless the Euro finds a way to muddle though, which they have become remarkably adept. The guaranteed backing of government debt in the form of direct asset purchases will go a long way to creating a more cohesive monetary union, if they are unable to develop regional fiscal relationships.

To keep the currency peg honest, China must match the US for every theoretical dollar of stimulus. The lower interest rates for banks is likely to feed continued stimulation of the housing bubble that has occurred based on the demand of one billion residents, inching towards more economic and individual freedom from repression.  The impact may also spillover into the search for energy assets, including higher oil prices. I am surprised the flush of liquidity has not already taken effect in energy markets, less the bounce back was more closely tied to direct government expenditures than we think.  At what point does global demand for assets exceed supply?  Last time I checked, there were only 7.011 billion people in the world.   

Dimon's loss highlights risk in proprietary trading activities

JPMorgan's $2billion dollar trading loss, although small in relative terms, highlights potential risk from commercial bank trading activities.  In this instance, the scale is only marginal. However, the fact the loss was isolated, and occurred in otherwise choppy market, with interest rates near lows, makes the potential scale for widespread losses more apparent. Take for example, if the loss was not isolated, and the market had been on a persistent upswing, as experienced in 2007.  In these extraordinary cases, the losses can become exponentially higher, given the leverage in the system.  Capital controls are vital to ensuring a healthy economy and minimizing the risk in the event of widespread panic of liquidity runs. The magnitude loss factor holds an additional constant factor, indicated by the speed in which investors move money from 'the good' institutions from 'the opaque' institutions, in the presence of asymmetric information. An example is moving money electronically from an institution, such as Wachovia, during the crisis, and moving to a credit union. The interconnected electronic accounts have a diverse impact on the banks underlying ability to manage capital, because in fact those assets could disappear over night from massive liquidity runs on assets.

The asymmetric information between commercial banks and regulatory agencies leans itself to a policy of isolating the assets and capital of investment banks from the parent company. Although, the capital markets division at JPM may not be able to take the loss without the assets of the parent company to back it. Trading divisions at major financial institutions play an important role in technological innovation, however, their ability to  cause massive panic was only recently seen in the funneling of securities throughout the world via US mortgage assets.  Moreover, as soon as a new innovation becomes widespread, leading to a economic cycle peak, the speed at which investors will be able to move money becomes an important factor in their ability to manage asset-capital ratios.  The scale in this one event was small, but the potential impact is exponentially large in the presence of a pro-longed economic cycle coupled with asymmetric information and massive runs on liquidity.

For JMU Grads in 2012:
http://jmusportsblog.com/?p=3900

National Security Archives: Iran Contra
http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB365/index.htm

Obama Solidifies New Market with Gay-Rights

Obama's support for gay-rights issues was a strategic announcement, used to court highly educated, suburban, middle-class voters.  His progressive stance as the first African-American President makes the political cost lower, increasing his potential return on investment.  This cost can be calculated in dollars as a +/- when looking at his share among voters in the outer suburbs such as Prince William County, VA, Loudon County, VA, Henrico County, VA, and Chesterfield County VA. These areas are historically conservative, but collectively voted for Obama in 2008.  The outcome may hinge on the domestic and European economy. It should be noted, Virginia's pro-business environment is fueled by the Federal spending in Northern Virginia.