Finally! Someone besides myself who sees the threat of these micro-Terrorists as something overplayed in our media. A knuckleheaded, extra Y-chromosome TSA worker (which comprises 93% of their current staffing) cause ten times more trouble than all these sand sheperds combined.
Jumping the Shark
When a once-popular TV show becomes a strained parody of itself, it is said to have "jumped the shark."
The pop culture phrase comes from an episode of Happy Days, in which Arthur "the Fonz" Fonzarelli jumps over a shark while water skiing. (And still wearing his leather jacket, of course.)
After a long and successful run, the Happy Days writers were running out of gas; the show just went downhill from that point. To "jump the shark" thus became shorthand for losing the plot.The phenomenon is not limited to TV shows. Hollywood has practically turned shark jumping into an art form; no movie franchise is immune from bad sequels. For every Karate Kid, it seems, there is a Karate Kid II and Karate Kid III. It happens to industries and companies too. Widely admired growth stocks jump the shark when, for whatever reason, perpetually rosy projections suddenly seem far-fetched. New realizations sink in, the old spell is broken, and the magic multiple fades. DELL and SBUX are recent examples of this.
Shark Jumping Candidate #1: Terrorism.
In an article titled "New Face of Jihad Vows Attacks," the New York Times reports on Fatah al Islam, a Lebanon-based terrorist organization with Al-Qaeda-like aspirations. The article begins:
TRIPOLI, Lebanon -- Deep in a violent and lawless slum just north of this coastal city, 12 men whose faces were shrouded by scarves drilled with Kalashnikovs.
In unison, they lunged in one direction, turned and lunged in another. "Allah-u akbar," the men shouted in praise to God as they fired their machine guns into a wall.
Hmm. Synchronized lunging in one direction and then another? Firing machine guns into a wall? Sounds like a campy rendition of West Side Story gone wrong. In describing Fatah al Islam's youthful recruits, things get worse:
Hussein Hamdan, 19, who keeps a poster of Osama bin Laden in the bedroom he shares with two sisters, is a street tough attuned to religious fundamentalism. He dropped out of school at age 10, spent 18 months in jail on assault charges, and in March - "just to make a statement," he said - took a razor and repeatedly slashed both his forearms. "I want to become a mujahedeen and go to jihad in any country where there are Jews or Americans to fight against them," he said.
To be clear, seething hatred is not funny. But come on now... a bin Laden poster on the bedroom wall? Sharing a bedroom with two sisters? What kind of statement might this "street tough" be making, other than "I am an angry teenage basket case?" This guy doesn't need to go fight infidels. He needs his own room.
US intelligence officials are taking Fatah al Islam seriously, as they should. But one can't help but think the terrorist song and dance is rather stale.
These days, geopolitical concerns are starting to look distinctly "old school" once again. Zealots are taking a back seat to hard-nosed governments. Call it the return of the nation state.
Just consider -- you've got China shooting down satellites, Russia threatening a new arms buildup, Venezuela funding its neighbors, Syria and Iran participating in Middle East strategy talks, Japan pondering re-militarization, Israel pondering preemptive attack, and the US and UK looking to overhaul their existing nuclear capabilities. Add to that mix the geopolitically sensitive nature of central bank cash flows, US dollar reserves, and global trade. Then top it all off with deep-seated energy concerns and a natural resource grab spanning multiple continents.
It's a new age of realpolitik... one in which terrorist organizations are no longer a driving geopolitical force.
Shark Jumping Candidate #2: Wacky Dictators.
For a while there, wackiness was in an uptrend. Mahmoud Ahmadinejad of Iran was making vaguely alarming references to the coming of the Twelfth Imam. Hugo Chavez of Venezuela was telling the US to "go to hell gringos!" and shouting from the rooftops about the Socialist Revolution. Robert Mugabe of Zimbabwe was bulldozing houses in Harare and consolidating his grip on power.
All three men in are still in power now, but cracks in the foundation are beginning to spread.
While Iran grows stronger as a regional force, Mr. Ahmadinejad grows weaker on the home front. Evidence suggests that ordinary Iranians are primarily concerned with their economy and personal well being -- just like Americans. Many resent the wild crusader, and say they would not have voted for Mr. Ahmadinejad had they known things would turn out this way. There are grumblings among the mullahs too. If Iran's latest round of nuclear machinations goes wrong, Ahmadinejad could yet be yanked off the stage.
In Venezuela, Chavez is overstepping his bounds and, in doing so, showing his limitations as a strategist. The Economist reports:
Even many "chavistas'are wary of the ever-greater power wielded by their president. Indefinite re-election is opposed by over 60% of respondents in his poll, according to Mr Schemel. Some of the president's academic sympathisers are expressing alarm. The new party is being set up "without debate, without consultation, and...in arrogant terms," argues Margarita López Maya, a historian. (I'd add here that the rich and well-to-do natives are leaving Venezuela in droves. Nothing weakens an economy like the moneymakers and financial leaders jumping ship.)
In Zimbabwe, Robert Mugabe has all but come unhinged. As the New York Times reports, Mugabe has "barred opponents from leaving the country, ordered his thugs to literally crack the skulls of opposition leaders, accused his own party's youth group of plotting against him, and told Western critics to "go hang.'"
Goofball fanaticism is out. Machiavellian pragmatism is very much in. This is demonstrated by Russia and North Korea's taste for cold hard cash.
North Korea's Kim Jung Il has long played the "crazy card' with surprising skill, using the threat of instability to keep the dollars flowing into his regime. The Dear Leader has realized that the west, and South Korea in particular, will endure an endless stream of tirades and hostility as long as everyone is able to "keep talking." China, too, is desperate to avoid an economic implosion that sends a mass of starving North Korean refugees pouring over its borders. (Actually, I call "bullshit" on this entry in particular. We all know that North Korea is a client state of China's. Il-Jongo doesn't take a crap without Beijing's say so. Their posturing is a test against the West and always will be. China will use N.K. to goad the US into WWIII)
Vladimir Putin plays his cards well too. Though he may look like a brazen thug to the rest of the world, Putin is overwhelmingly popular in Russia, thanks to oil and gas revenues fueling a widespread economic boom.
As Russia's economic expansion heads into its seventh year, Mr. Putin has put a relentless focus on collecting the cash. This has led to the blatant strong-arming of western oil & gas companies, like Shell, and now to an escalated game of hardball with Iran. Russia's sudden sharp turn against Iran on the subject of nuclear enrichment--and its threat to cease delivering fuel for the Bushehr power plant--is no doubt motivated by cash flow concerns.
It's all about the money honey. No wackiness there.
Shark Jumping Candidate #3: the US Dollar.
The US Dollar index is not far from its December 2006 lows as of this writing. Once those lows are broken, one has to go all the way back to 1992--the dollar's lowest point in twenty years or so--to find anything lower.
As the likelihood of a rate hike falls, so do the dollar's prospects. The stock market celebrated the Federal Reserve's softer tone at its latest meeting, ignoring the fact that rates are going on hold because the economy is vulnerable. (Weak homeowners and overstretched consumers are in no position for their debt service costs to go up.)
As it becomes obvious that the Fed's hands are tied, a number of other currencies begin to look more attractive. The krona, the ringgit, the baht, even the rupee... all are holding their own. The Euro and the Australian dollar, buoyed by rising rates, are carving out historic highs.
Nor does it help that the tide of foreign capital making its way into US equities and US treasuries is threatening to slow, or even reverse. Reduced interest in dollar-denominated assets will do the greenback no favors. In sum, the virtuous circle supporting the dollar in recent years could soon turn vicious.
The final problem for the US dollar is, of course, the massive trade deficit. This horse has been beaten thoroughly but is not yet dead; the challenge of rounding up $850 billion per year in financing is not trivial. As Brad Setser of Roubini Global Economics notes,
the US deficit is bigger than China's (not small) surplus, Japan's (not small) surplus and the oil exporters' (not small) surplus. You need to sum up all three big surpluses to come close to meeting the United States need for financing.
Look out below.
Shark Jumping Candidate #4: Private Equity.
Wall Street places a great premium on being taken seriously. There is a carefully crafted image built up around the sanctity of investing, the tradition of wise institutions, the reserved nature of distinguished firms, and so on.
Every once in a while, you get a chain of events that blows back the lid on that whole ethos, revealing the Street for what it is: a greedy circus. Or a mental institution where the inmates run the asylum. Or both.
Such a chain of events has recently culminated with news that the Blackstone Group, the face of private equity, plans to go public.
Folks, if ever a self-parody existed, this is it.
In February, Blackstone put together a whopping mega deal, buying out Sam Zell's Equity Office Properties Trust for $39 billion. The all-powerful head of Blackstone, Stephen Schwarzman, then threw himself a Gatsbyesque birthday party to which all of Wall Street and half of Washington was invited. (All the A-listers anyway.)
Shortly after that Mr. Schwarzman, with an estimated net worth of $10 billion, was featured on the cover of Fortune magazine as "the new king of Wall Street." (Jeff Bezos' man-of-the-year profile in Time comes to mind, not long before dot coms collapsed.)
And now, the new king of Wall Street plans take his firm public.
There is a delicious irony here. In theory, private equity firms make money through their skill at streamlining operations and fixing broken companies. (In reality, they make a much bigger killing through leveraged finance and cash flows bought on the cheap. But that's another discussion.) Firms like Blackstone can supposedly whip a company into shape better than public shareholders can, and prefer to do so without having anyone look over their shoulder.
Mr. Schwarzman has argued countless times for the superiority of the PE model. In seeking to go public now, he makes a blatant mockery of his own views.
Furthermore, there is no compelling reason for Blackstone to tap public equity... except for the lure of huge gobs of cash. The major news outlets--WSJ, NYT, The Economist and so on--are all reasonably skeptical, asking if such a move could be the marker of a top. After all, if the savviest buyers in the world are now selling, why should you and I be buying?
Yet Blackstone forges ahead anyway. And if the offering is successful, other PE titans will follow.
Your editor is reminded of an old NBA story, from the time when Larry Bird was winning championships with Celtics. Bird was so dominant and so good, it was said, that he could tell his defender exactly what he was going to do--and then do it anyway. "First I'm going to move here," Bird would say. "Then I'm going to move here. Then I'm going to shoot in your face and win the game."
The Blackstone version of this might be, "First we're going to make billions. Then we're going to make more billions. Then we're going to sell you the top tick and win the game."