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demonstrations in LDC’s

Monday 1 May, 2017

I had my 1st “international incident” experience Friday night, & it left a deep impression. I was locked up in the consulate & forbidden to leave because it was too dangerous for me to go home. After finally finding my way home, I realized our security people were not kidding-this was serious, & they were correct for not allowing me out in it.

What happened was, the PT, or Workers Party (Partida dos Trabalhadores) planned a general strike on Friday to protest the imposition of 2 new laws: 1 to OK the outsourcing of work that had not been allowed in the past that will give Brazilian businesses the flexibility to contract out even core activities of their businesses, if they so choose, which was forbidden in the past; & 2. to change to the terms of the pension/social security system to eliminate benefits for some retirees, which are simply financially unsustainable. For example, judges, the military, & other public officials are given pensions covering up to 80% of their wages that can be transferred to remaining spouses and handed down to descendants for generations, which will end up costing the Brazilian government money that it can’t afford to pay in the future.

As I was sitting in my office @ ~5:30 p.m. surveying the evening’s musical choices, 1 of the marines came in & told me to check with their guard station before I leave. I thought that a little odd because I was never told to do that before. When I went to leave @ 6, I was summarily told that I was not allowed to leave, that it was too dangerous for me to leave the building @ that time. They showed me the footage from 1 of the security cameras that displayed some tires that had been set on fire outside the consulate. I returned to my office thinking, “These guys are paranoid.” I had walked past some demonstrations around Cinelandia in the past, & they were no threat to me, or anyone, as far as I could tell. I assumed this 1 would be no different. In the next hour I could smell the stench of the burning tires and heard what sounded like small bombs going off. When I returned to try to leave @ 7, I was told it still wasn’t safe enough to go out, so I went back to my office for another hour. I tried to leave again @ 8, but was still told “No go.” Then @ 8:15, they made an announcement that we were free to go.

What I encountered outside the consulate’s door was breathtaking. The windows to the banks Bradesco & Caixa had been smashed, & I’m told thieves had tried to steal the cash from the ATM’s. The metro stop @ Cinelandia was closed, so I had to walk to the next station @ Gloria, about a 20 minute walk away. As I approached Sala Cecilia Morrelles, a nice venue where I’d seen a number of concerts, I came across 9 burned out buses which had been set on fire. Walking a little bit further down the street, a few trucks filled with military police drove by, guns @ the ready, prepared to aim & shoot. When I finally got the Gloria station, my eyes started burning & I couldn’t breath because of tear gas that remained in the air. I realize it sounds trite to say “Tear gas is nasty stuff,” but you can’t realize how nasty it is until you experience it. Like when I visited the concentration camps when I was in Poland 20 years ago, it’s the smell that leaves as deep an impression on any of the senses…it’s inescapable.

Lesson learned: when the security guys say “sit tight” listen to them.  While they may seem overly protective at times, they know the risks & are only looking out for our own safety.

For more details check here http://www.bbc.com/news/world-latin-america-39753849

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awe-inspiring paralympic athletes

Monday 12 September, 2016

I checked out the women’s paralympic triathlon & couldn’t help but write about it. These women are so inspirational, they are beyond description, but I’ll give it a try. I’ve done a lot of sprint triathlons in my day, but I haven’t overcome a fraction of what these women have. What I saw today blew me away.

Let’s start with the swim. The 1st race was for women who are physically challenged, so swimming with 1 arm or 1 leg is difficult, but do-able. The tough part is getting in & out of the water, so they had helpers get racers to their prosthetics coming out of the water. The 2nd race was for blind racers, so they had to do the whole race, swim included, tethered to a guide. That has got to be tough.

Then they move to the bike. This portion probably has the fewest differences between Olympic & Paralympic athletes for the physically-challenged. However, the blind racers rode on tandem bikes, so a strong guide could be a big advantage.

In the run, we get to the hard part. We have a long way to go to get prosthetics to work well. I don’t know how Oscar Pretorius did it-the prosthetics these women used didn’t allow them to run anything like a normal runner. Their gaits were very unbalanced, which puts lots of strain on the leg that does function normally. The breakdown over time must be very difficult to deal with & they must suffer from overuse injuries galore.

There was 1 runner who stuck out to me: Rakel Mateo Uriarte of Spain. She came in dead last @ 1:40:33-the distances were shortened from the “Olympic” distance, so this was essentially a sprint triathlon-but she was still a winner to me because she was the only athlete who had the impairment she did. The International Triathlon Union says she was in an accident in 2001 which left her left leg paralyzed.  She hadn’t participated in triathlon before her accident, but picked it up to keep moving. I didn’t see her come out of the water on the swim, but the result of her challenge was that she couldn’t pedal the bike with both legs, which meant she had to pedal the whole race with just her right leg.  To top it off, she did the whole run on crutches…& she did the race in about the same time I do my sprint triathlons.  Granted I’m a slow old man, but completing races with her challenges blows my mind.  The mental fortitude this woman must have must be incredible.  I can’t imagine the strength & endurance she must have to complete these races.

The USA did well.  American Grace Norman won the PT4 race.  The Americans swept the PT2 race, with Alyssa Seely winning the gold, Hailey Danisewicz taking the silver, & Melissa Stockwell bringing home the bronze.  The PT5 race was a heartbreaker for American Elizabeth Baker, who came so close to earning a medal, but just fell short, literally. She came out of the water 6th, then moved up to 4th on the bike.  Then on the run, with 100 meters to go, she had pulled into 3rd place, primed for a bronze medal, but then the Brit Melissa Reid overtook her, when Elizabeth unceremoniously fell, sealing her 4th place finish in the race, after Reid.  She might not have known that Reid was catching up on her.  She couldn’t see her because she’s blind, but I would bet her guide was keeping her fully informed along the way.  My heart goes out to her, & falling was the final indignity, but their exciting finish got the most applause of the day.

I realize these paralympic races are fodder for platitudes, but in this case, I think the praise is warranted.  I do these races, so I know how hard they are.  I can recognize the difficulties they must overcome to compete at the level they do.  These women have inspired me & I’ll keep their challenges in mind when I start to bitch & moan about my next race almost a month from now in October.

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my $.02 on Rio2016

Monday 22 August, 2016

Now that the Rio2016 Olympics are done & the Olympians & fans are heading home, it’s time to reflect on how it worked out for Rio de Janeiro. When I arrived in Rio a year ago, the prognostications were not good. The Globo newspaper media empire spelled out 5 Grand (large) Obstacles:

  1. Metro/subway-the new subway line which was being built to provide transportation to & from the Olympic park was planned for completion only a month before the games were to begin, a small window to correct problems, if required. Then a few months ago, that window was further reduced to just 5 days before the Olympics start, making any last minute changes of any consequence impossible. Remarkably, the subway opened, took passengers to the events, & was little problem @ all.
  2. H2O-much has been made of the quality of the water in the lagoon and Guanabarra Bay where the rowing & sailing events were held, respectively. The goal was to clean 80% of the water by the time the games begin, but sanitation only advanced to clean 50% of the waste being dumped into the water supply. That’s much more than was in the past, but short of the goal of 80%. I only read of 1 Belgian Olympic sailor who became ill after falling in & possibly ingesting some water, hardly an epidemic, & arguably within statistical norms. While the water quality is still @ an unacceptable level, it didn’t result in any calamities @ the Olympics.
  3. 4, & 5 Stadia for cycling, rowing, & track & field: were behind schedule, but completed on time without incident.

Since that article was published, a few other issues arose which impacted Rio2016 significantly:

  • zika virus: despite not rising to the levels of recent past epidemics & being out-of-season by the time the Olympics arrived, zika was deemed a threat to the health of all who dared to come to Brazil to watch the games live. There was no outbreak & zika seemed to be a non-issue during the games.
  • political crisis: President Dilma Rousseff was impeached, which created lots of political stability & the threat of uprisings, etc. during the Olympics. While Brazil will continue to be in a holding pattern until a new president is elected in 2018, there have been no major repercussions from this calamity.
  • economic crisis: as a result of the political crisis, Brazil’s economy has taken a nose dive, as indicated by a fall in the currency, the Real, of 30% in 6 months, from R$3.2/US$ to R$4.1/$US. investment has fallen, & unemployment has spiked. This made financing the completion of the projects for the games questionable, but again, all venues were completed on time.

True to form, the Brazilians pulled it off, by cramming @ the last minute, but they got it done.  The question is “What will be the long-term outcome of the Rio2016 Olympic games?”  Will Rio become another economic success propelled by the Olympics, like Barcelona & Seoul, or create a lot of white elephants, as in Beijing or Montreal, or even worse, lead to an economic downfall, as has been hypothesized about Athens, Greece.  London took the Olympic opportunity to rehabilitate an underdeveloped part of town to rejuvenate it & make that area a desirable place to live.  When I lived in Munich, they left the Olympic housing as residences for college students.  Rio will leave a different legacy.  While the subway extension & rejuvenation of the Praca Maua port area will benefit all of the population, the Olympic village is being converted into luxury condominiums for sale to the highest bidder.  Many of the venues were temporary structures, probably being deconstructed already as we speak.  The economic development organization of the Rio city government, Rio Negocios, held a series of events highlighting different industries in & around Rio, but I think they were probably disappointed with the international level of interest in their events.  The aftermath of the 2014 World Cup does not bode well.  New stadia now stand empty & a number of infrastructure projects were never completed, in some cases creating risks with what does remain.

I enjoyed being in Rio while the games were taking place: see pix:

…& I hope that Rio recognizes many positive benefits as a result of hosting the games.  I’m just skeptical that enough change will have taken place for the rest of the world to appreciate what a beautiful place this can be.

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Where is the global market heading?

Monday 17 November, 2014

Nouriel Roubini, a professor @ the NYU Stern School of Business presided over Keiko Tashiro, the Chairperson/CEO of Daiwa Capital Markets America Holdings, Inc. to discuss this topic @ the Japan Society in New York.

It’s been an anemic recovery, & the only change has been the decelerating growth in the emerging markets.  The question is how strong & resilient will they be?  The recovery has been so anemic because the crisis was brought on by extreme leverage.  The fiscal stimulus that was implemented to combat it has led to an accumulation of debt that will take 5-10 years to de-leverage.  Emerging markets need robust growth of 5% , not 1-2 1/2 % less their debt.

To get 1-2% stronger growth in the industrialized countries, we need:

  • fiscal consolidation, except in Japan
  • advance de-leveraging to create better balance sheets with lower debt ratios
  • lower risk probabilities by keeping the Euro together, not falling off any fiscal cliffs, avoiding conflicts, etc.
  • keep low inflation, as the velocity of money has collapsed as stocks are in search of markets.  There is still slack in the employment market, so there is no wage inflation.  Central banks can be less conventional.  The Fed won’t start tapering until 3-4 years from now.
  • Japan needs to create a virtuous cycle with structural reforms, which should be a gradual process.  There is a risk with monetary easing in asset inflation creating a bubble.  The central bank has been able to keep bubbles @ bay by keeping inflation & interest rates low for now.

Emerging markets are devaluing their currencies to spur growth.  Internally, macroeconomic policies are granting excessive credit.  State capitalism causes them to move away from free markets.  The most fragile are China, India, South Africa, & Turkey.  With elections, growth falls.  Now the risks are much lower because of less currency mismatches, debt ratios are better, & Argentina, Venezuela, & Ukraine are now the problems.  China’s hard or soft landing is fragile.  Fixed investment is too low as is consumption.  Banks have made too many bad loans.  They’re lowering risks, but it’s open to question as to whether they can implement changes quickly enough.  Growth is decelerating from 7% to 6 %.

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European economic update

Tuesday 30 September, 2014

The European American Chamber of Commerce organized an economic update which featured James Bullard, CEO/President of the St. Louis Federal Reserve Bank, Nicolas Veron, Visiting Fellow @ the Peterson Institute for International Economics & Co-founder/Senior Fellow @ Bruegel. The panel was moderated by Sassan Ghahramani, President/Ceo of SGH Macro Advisors.

Bullard stated 3% growth should be achievable for the US in 2014.  Unemployment of 6.6% is still too high, but the Fed won’t start raising interest rates until unemployment falls below 6.5% or inflation rises above 2%.  Normal unemployment will drive a more normal interest rate policy.

Veron maintained that the issue today is not what the central banks do, rather it’s which countries have the most dysfunctional political processes.  The EU crisis continues to test financial systems & architectures.  The tests for EU institutions need to be redefined.  Watch for EU parliamentary elections to see if citizens are dissatisfied & how the European Central Bank (ECB) is transforming EU banking, which will hopefully create an opportunity for trust to return to the system.

Panel Q&A

Because we work with seasonally-adjusted data, the weather does not affect risk, but we have no model to evaluate this past year’s weather, so it’s OK to be suspicious.  This hasn’t received enough attention.

The reduction to 6.6% unemployment is a dramatic reduction unexpectedly soon, so now we must adjust our thinking.  Labor force participation is a long standing trend of long-term structural decline.  The drop in unemployment is a good sign & was faster than anticipated, & is remarkable in an economy that’s only growing @ 2% per year.  It’s a result of state decisions, not data conditions.  Interest rates won’t move until unemployment has moved well beyond the threshold of 6%.  Normalization of policy dictates that qualitative policy & judgement shouldn’t be tied to a particular number.

The 2012 contagion was a result of a combination of factors.  Banking union is becoming more important.  Political evolution in Germany is key, not to allow any country exit the Euro.  If there is deterioration, the ECB will act.  There are no immediate legal developments, but the relationship between Germany & Europe counts. Germany’s jurisdiction over the German Bundesbank affects the ECB’s ability to work.  The Bundesbank has been clumsy in attacking the ECB’s autonomy, & thus the ECB won, while the Bundesbank lost.  The constitutional court was smarter in trying to avoid frontal conflict.

The Fed pursued the policies of the 7 faces of  peril & was the biggest advocate for flow.  It worked well with more analysis of interest rate policy.  Quantitative easing is a powerful tool & moved markets, so now we can taper back to normal.  We won’t see a normal economy until we raise interest rates.  The committee doesn’t address specific issues of quantitative easing.  The Fed will raise interest rates fairly quickly.  The alternative is to stay @ 0% longer & lift faster.  Global interest rates are still low & this is expected to continue.  Inflation is still a puzzle & wildcard, & could force the ECB’s hand.

There is still much disenchantment in the non-German Eurozones.  Germany imposes it’s decisions on others, but Germany is still pro-Euro & pro-integration.  Other countries have different foci (focuses?).  Spain is not all skeptical, but separatism sentiments continue in Catalonia.

Politically, although there are more anti-system parties as mainstream parties decline, not all Europeans are anti-EU & anti-Euro.  Not everything can be seen through the Euro lens.  Cooperation is changing as policy makers are getting more defensive.

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Venezuelan update

Wednesday 24 September, 2014

I attended this event @ the Council of the Americas awhile ago on Venezuela’s economy. The panel consisted of Alehjandro Arreaza, economist @ Barclays, Aaron Freedman, VP/Sr. Credit Office @ Moody’s, & Francisco Rodriguez, Director & Sr. Economist @ Bank of America/Merrill Lynch, & moderator Christopher Sabatini, Sr. Director @ Americas Society/Council of the Americas.

Generally, inflation is leading to devaluation of the currency, which leads to inconsistent fiscal policy. The exchange rate is unsustainable. They need to change course, but can’t devalue. The exchange rate subsidy doesn’t help their constituents-it just gives fiscal rents to importers. Inflation is up because they are just printing money instead of devaluing the currency. There are arbitrage opportunities with devaluation while the politicians get richer. The problem is as import prices go up, demand goes down, to there is no politically expedient solution.

The government also doesn’t recognize the magnitude of the level of debt. Declining oil prices make things difficult for Venezuela. They must address these imbalances.

It’s tough to get money out of Venezuela these days. There is a black market, but that’s dicey. Auto makers there have fallen off a cliff. Unfortunately companies can no longer repatriate profits & pay for imports. Strategic & essential industries can get preferential access to currency.

Another problem is with an overvalued currency, you can’t tell which are bad imports. The system is impossible to administer. The exchange rate is limited to maintain control, like in Cuba.

There is a difference between a low income economy like Cuba’s, & Venezuela. Macroeconomic distortion has simply led to financial disintermediation. They must address all imbalances-devaluation is not enough. Venezuela won’t necessarily default-that probability is only 10%, but they are suffering a death by 1000 cuts. If the price of oil destabilizes, watch out. Oil production has declined, but it’s unsure if they’ve reached the bottom. Consumption is up, but that’s distorted.

Q&A
Despite a devaluation a year ago, nothing happened. It’s not likely to get better. Capital flight is $20M/year. They need a more flexible exchange rate system.

Venezuela is rated 1 notch below Argentina in credit ratings. Both have balance of payments problems. Venezuela is more combustible.

How long this can go on is a political & economic question. Regulation is no good in a volatile economy. Argentina tried & failed. Another problem is you can’t increase spending after a devaluation.

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do big sporting events really help local economies?

Thursday 8 May, 2014

I checked out this event sponsored by NYU’s Sports & Society’s department @ the School for Continuing & Professional Studies “The Lasting Impact of Sports Greatest Events.” The panel contained a veritable who’s who: Lisa Baird, CMO of the US Olympic Committee; Greg Ballard, mayor of Indianapolis-“amateur capital of the US; Greg Carey, sports finance specialist @ Goldman Sachs; Richard Florida, author of “Who’s your City?”; Kevin Hallinan, SVP of security of Major League Baseball, Constantine Kontokosta, of the NYU Center for Urban Science & Progress; Mary Pilon, New York Times sports reporter; David Rousseau, who sits on the Salt River Project board in Arizona.  The panel was moderated by Arthur Miller, Chair of the Sports & Sociey department @ NYU.

Indianapolis used sports to build the city into the capital of amateur sports in America, in which the citizens have a great sense of pride.  Rockpoint analysis determined the General Fund Effect was $40M.  Phoenix feels it’s getting an amazing reward from similar investments. These things bring prestige, like luring a major symphony orchestra.

The motivations for these things have changed, to achieve global city status.  The 1984 Olympics in LA made it an economic development game, but now the temporary economic impact doesn’t justify the long-term investment any longer.  The question is the impact on infrastructure.  Sports have become an excuse to do what should already be done.  For example, after the Olympics, what are they going to do with the bobsled run in Sochi?  There is little talk of what happens afterwards.

The Olympics are all about the athletes.  Sebastian Coe left a legacy in London, having built up the west side & put the para-Olympics on the map.  He’s created social good, while the economic impact hasn’t been measured yet.

There is a lot of ego involved, & differences between who embraces sports & those who do not.  The downside can be displacement.  These projects have to be about more than the game because stadia (stadiums) now cost a lot more:  San Francisco’s cost $1.3B.  Now security is primary & drives up costs, as Atlanta’s Olympics proves.  Terrorism & gay rights could have been issues in Sochi.  The Dept. of State was assuming safety would prevail.

Goldman Sachs actually invests in sports infrastructure & is bullish about this business, but admits these are not always good investments for cities.  The key is whether the investments are in good or bad infrastructure & whether it’s public or private investment.  Rio is building lots of infrastructure for it’s Olympics, but it’s been disaffecting & the security challenges will be unbelievable.   Public safety & public works are the highest priorities.  Cities must look @ expanding their tax bases & the opportunity costs of making other comparable investments.  Indianapolis did it right.

Baseball’s world series is a nightmare for security because the sites aren’t known until a few days before the series starts.  When Pres. Bush attended a game, an extra umpire was actually a Secret Service man. At the 1st Mets game after 9/11, there was a line almost all the way to Manhattan to get in & all the fans said “Thanks for being safe.”  The Super Bowl in New York attracted lots of prostitution, which reflects the best/worst, good/bad these events bring out.  There is a distinct relationship between the Super Bowl & sex traffic.

The economic benefit of the Super Bowl being held in New York/New Jersey was estimated to be $600M, but is actually complete BS.  The hotels are normally only @ 50% capacity, but were full for that week, but there is also a crowding out effect of others who stay away, called displacement tourism.  Theatre attendance is down 20%.  The merchants on Super Bowl Blvd. were dying.  Super Bowls are better held in warm climates, although Minnesota is getting 1.

There is a developmental economics aspect to all this.  Rio is building infrastructure which is building capacity.  The downside is the IOC requires moral obligations, but the city may be stuck with the bill.  Athens is still paying the debt for their Olympics.  Montreal just paid off their debt for the 1976 Olympics.

Sponsors get involved for different reasons, such as branding, ROI, relationships developed as long-term investments, i.e. Coke has been an Olympics sponsor since 1928.  LA changed the model when it was the 1st Olympics to show a profit in 1984, but even it had very few high-priced sponsors.  To stage sustainable games is a tough task.

Different games have left different legacies.  Barcelona used the Olympics as a tool.  Seoul, Sydney, & Montreal had a plan, but the Athens Olympics may have started the crisis there.  It’s definitely not 1 size fits all.

Arizona had to pay the NFL $30M in obligations to get the Super Bowl, which was paid by local corporations.  They will sell their local competitive advantages; good weather & a positive business climate.  But there are unintended consequences too.  To magnify the legacy:

  • you must know who you are
  • focus on branding (London was the 1st games where every country had at least 1 woman on each team)
  • security partnerships help
  • share lessons learned
  • get away from gigantism