Cyreenik Says
2010 was not a good time for cool-headed thinking in Congress, and the Frank-Dodd law is the shining example. Congress was thinking, "Bank failures? Never again!" and designed this law with that in mind. Since this was a from-the-heart process, it wasn't too surprising that other from-the-heart issues got added as amendments, but this one about mining "conflict minerals" in Africa was way, way off the main topic. And, being just as from the heart, it was just as off target about succeeding in its main goal.
This 15 Sep 14 WSJ article, Dodd-Frank's Collateral Damage in Africa A rule aimed at 'conflict minerals' hurts economies in 10 nations—and harms U.S. public companies. by Rosa Whitaker, talks about one part of the damage being done today by the hasty choices made as that law was assembled in 2010.
From the article, "Reminiscent of the racially discriminatory practice of "redlining" neighborhoods, a little-known measure in the 2010 Dodd-Frank law, designed to stop the trafficking of "conflict minerals" from the Democratic Republic of Congo, is not achieving that goal. The measure also discriminates against the DRC's regional neighbors and is hurting U.S. companies and consumers."
And further, "In addition to being discriminatory, the Dodd-Frank measure has a highly debatable effect on the flow of conflict minerals, given that private U.S. companies and foreign firms and their subsidiaries are not covered by the provision. Indeed, the law hands those companies a distinct competitive advantage over public companies in the U.S.
The chain reaction of unintended results does not stop there.
U.S. companies subject to Dodd-Frank already are saddled with heavy compliance requirements governing complex anti-corruption and export-controls risks. Many of the companies are voting with their feet, leading to a de facto boycott of mining in 10 African countries by some of the world's largest consumer-goods companies."
This is a not-too-surprising result of hasty from-the-heart legislation based on the concept that big companies are bad companies. And also not too surprising, the ones getting hurt the most are those whom the law was designed to protect.
Decreasing social mobility is a big "not good" trend in the US. It is one worthy of taking big steps to reverse. (big right steps, that is) This is another one. It was a problem revealed to me when I read this 30 Aug 14 Economist article, Corporate settlements in the United States The criminalisation of American business Companies must be punished when they do wrong, but the legal system has become an extortion racket, which talks about how US regulators are shaking down US businesses to the tune of hundreds of billions of dollars. The big problem here is both the magnitude and the murkiness of what is happening.
From the article, "WHO runs the world’s most lucrative shakedown operation? The Sicilian mafia? The People’s Liberation Army in China? The kleptocracy in the Kremlin? If you are a big business, all these are less grasping than America’s regulatory system. The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details). Then repeat with another large company.
The amounts are mind-boggling. So far this year, Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and other banks have coughed up close to $50 billion for supposedly misleading investors in mortgage-backed bonds. BNP Paribas is paying $9 billion over breaches of American sanctions against Sudan and Iran. Credit Suisse, UBS, Barclays and others have settled for billions more, over various accusations. And that is just the financial institutions. Add BP’s $13 billion in settlements since the Deepwater Horizon oil spill, Toyota’s $1.2 billion settlement over alleged faults in some cars, and many more."
The article points out that this is a hundreds of billions of dollars phenomenon and the settlements are taking place behind closed doors. This murkiness means that anything can be happening and it can be repeated. Not good. This is an area where transparency and rule of law both need to come to the fore again. If they don't, the incentive to become disenfranchised and game the system stays huge... for both businesses and regulators.
This, like declining social mobility, is something that we should be putting a lot of thinking and effort into fixing. It's a big, expensive problem that is making our lives worse in a sneaky way.
Not the same, but related, this 14 Sep 14 WSJ article, We're Number 32! A new global index highlights the harm from the U.S. tax code., which ranks the business attractiveness of the US tax code.
From the article, "The index takes into account more than 40 tax policy variables. And the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD).
With the developed world's highest corporate tax rate at over 39% including state levies, plus a rare demand that money earned overseas should be taxed as if it were earned domestically, the U.S. is almost in a class by itself. It ranks just behind Spain and Italy, of all economic humiliations. America did beat Portugal and France, which is currently run by an avowed socialist."
ISIS has beheaded Number Three, and the media is keeping right up on this hot news item.
I haven't watched any of the videos, so I'm not up-to-date on what ISUS hopes to gain from this gruesome advertising. But whatever they are after, the formal news media is giving them full exposure in the human interest sort of way. There has been lots of coverage of the martyrs and what their friends and relatives have to say about them.
My take on these atrocities is: This is yet another symptom of how much what is going on in Syria/Iraq is a proxy war. There are many interests who are putting in lots of money to many sides in this war. And as is true of any proxy war: Those outsiders supporting these various sides suffer little; the people living in the proxy war zone suffer a lot. The other thing to keep in mind is the war will end when these outsiders get tired of funneling in more money, not before then. So if you want to know when this war will end, watch the outsiders. When other events start to concern them more, the war winds down.
The other interesting thing is how many idealistic foreigners are getting involved as mercenaries on the various sides. This 14 Sep 14 Chicago Tribune article, Islamic State attracts female jihadis from U.S. heartland by Alistar Bell, gives some details of US men and women heading over, although interestingly much of what is reported in the article is hearsay. As I have written about earlier, this phenomenon is strongly resembling what happened in the Spanish Civil War of 1936. In some ways, I find this a curious contradiction -- we have a mix of idealistic warriors and gruesome beheadings, and these idealists don't seem to be having a problem with that. I suspect this is a mystery that these idealists will explain in the many tales they write starting a few years after the war ends.
Update: An interesting 15 Sep 14 chart in The Economist, Jihadist friends and foes, showing how complex the relations there are.
Update: This 18 Sep 14 WSJ article, Australia Foils Alleged Beheading Plot Linked to Islamic State Sydney, Brisbane Raids Lead to Arrests of People With Suspected Ties to Islamic State by Rob Taylor, talks about Jihadist problems in Australia.
From the article, "Australia has been among countries with the largest per capita number of people traveling to fight for Islamic State and other radical groups such as the al-Nusra front in Iraq and Syria, police said."
There is a mania in progress today. Watch out for the coming bust. Russia under Vladimir Putin is exhibiting a leadership style I call ruthless leadership. He has been quite successful at it for over a decade now. From military adventures in Georgia (on Russia’s southern border), to Olympic adventures in Socchi, to further military adventures in Crimea and Ukraine, Putin has been shaking up the world. One of the fallouts of his success is an increasingly mania-centered Russian culture. This is affecting markets: quiet, bubbly investing is happening. Although it hasn't happened yet, I expect a surprising bust when the Putin Era ends. According to my mania and markets model, after the crash Russia won’t be going back - it will be moving on to something new, and so will the other markets twisted by the mania.
This 30 Aug 14 Economist article, Popping property bubbles Choosing the right pin House prices in Europe are losing touch with reality again. Deflating the bubbles will not be easy, talks about rising property values in Europe. This could be a form of quiet, bubbly investing. The distinctive clustering of investing in capitals makes it look even more possible.
From the article, "To make matters more difficult for policymakers, Europe’s property booms tend to be concentrated in capital cities, which are growing for the most part, even as other regions stagnate. Ireland provides an especially garish example. It is still full of ghostly developments of never-occupied houses. Yet in Dublin, which needs 8,000 new homes a year, fewer than 1,400 were built last year. That has helped to drive local house prices up by 23% over the past year, even as the property market in the rest of the country rose by a modest 5%."
This 2 Sept 14 WSJ article, Subzero Eurozone Yields Point to ECB Power, Problems by Richard Barley, describes that Europe's bond market is still wildly twisted as well.
From the article, "Lending money when it's a losing proposition from the start sounds like an odd thing to do. That's not stopping bond buyers in the eurozone government bond market.
Two-year yields on bonds from five countries—Germany, the Netherlands, Austria, Finland and Belgium - are in negative territory, according to data from Tradeweb."
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