USA vs. UBS – Gooooo Swiss!

“…ZURICH/MIAMI, July 8 (Reuters) – A judge ordered the U.S. government to say whether it was prepared to shut Swiss bank UBS AG in the United States as part of a battle to learn the identity of 52,000 secret accounts suspected of being used by Americans to avoid taxes.

U.S. District Judge Alan Gold, set to preside over a hearing Monday of a suit seeking to force UBS to provide the information, asked specifically Wednesday about ‘receivership and/or seizure of UBS’ assets within the United States.’…”

Full Story

Go Team Swiss!

Thoughts on the Crisis, in an email to a Friend

…If you’re not familiar with the details of Political Risk Analysis, there is a good background piece here. I don’t trust politicians in the least, which is why there will always be a need for political risk analysis. I hope to specialize in the Latin American markets, though with the current Obama administration in the USA, one could argue that investors here would be wise to consider political risk b/c of this new government’s penchant for voiding contracts (AIG) and forcing-out CEO’s from public companies (GM). It is a strange time we live in.

Here [Pittsburgh] the effects of the econ-fin. crisis are not as apparent as in other parts of the USA. For example, there was little speculative action in the housing market in Pittsburgh, Pennsylvania, unlike California or Florida, so there are relatively few foreclosures compared to those areas. Pittsburgh was previously dependent on its manufacturing base (steel) but in the early 1980’s had to completely reinvent itself to survive economically…we’re now a regional leader in the field of health care and university research.

In time, though, the recession will become more significant in its effects. Unfortunately, the people – both the citizens and the elected officials – want to pretend that everything is OK, rather than preparing for the inevitable crisis. SO that is why I buy this pen now, while I can still kind of “afford” it, because I believe that the worst is yet to come. My friend has lost 40% of the value of his retirement account, and is every day worried about his position…but he is in a different part of the country. He works for the firm xxxx and they are seeing a NOTICEABLE slow-down in business. 😦

Not good times.

I am scared for the country, and for the global economic system in general. I am very moderate in my political beliefs, and I am an economic liberal (meaning that I support capitalism with few interventions by the state and certainly not in the form we’re now seeing), but I fear that there will be a POPULIST BACKLASH and the government will regulate and regulate and tax and tax to the point that they strangle the economy and impede world trade. A great crisis is brewing.

What are your thoughts and experiences on this?

best,

Joe

Response to a Fan

Thanks for taking the time to write, and for sharing your perspective and personal experiences. Your email demands a thoughtful reply, and I am in a difficult two days, but I feel compelled to respond now.

I want to thank you for sharing your own experiences, and trusting me to respect your humanity. Hopefully my thus-far “tragic” story will have a happier ending. I know that I’m not where I want to be right now, I know that my own mistakes and bad decisions have cost me opportunities that most people never even have a chance at, and I know that I let a lot of people down – not least of all my poor mother.

But when someone like you takes the time to write me, it gives me a big boost to keep fighting, and pushing through these stormy times in hopes of finding the same kind of peace, tranquility and harmony I enjoyed on the bike. Cycling was sublime…heck, cycling IS sublime, and far more important to me than victories was the opportunity to travel the world and write about it so that others could share the journey. I loved to win, no doubt, but this battle I’m fighting now to right myself and ameliorate the negative fall-out stemming from my actions is harder than any race or training session. I would give anything to go back in time and not make those mistakes, but since I can’t, I try to hold on to the positive memories, but still be honest about what I did that was wrong.

On paper, I’m a pretty smart guy, and even have the chance to get an MBA now that I’m back in grad school. But I often failed to show common sense, as when I turned down the dark road of doping. I was never concerned about the health risks, b/c I believed that could be controlled for, so the anti-doping education at the time totally failed to impact me (the main message then, and now, was “don’t dope, because it puts your health at risk”). There has been a slight change now in that USADA is also talking about concepts like ethics and morality, but I still don’t think that is the most effective way to dissuade kids – AND ADULTS – from illegal performance enhancement.

What absolutely would have worked in my case, and why my story will hopefully serve as an example to others – a warning – is the fact that doping means that you’re in a milieu of dishonesty, cheating, unethical and sociopathic behavior and sometimes criminal activity. It profoundly corrupts your soul, even if actually making your body stronger, and if you fall foul of the testers and are exposed, it’s not just a possible suspension from sport and loss of a result that you face – there is the chance to have your life destroyed. Imagine having a goal about which you were passionate outside of sport, and intending to work in a particular field when you retired from biking – but then being forever barred from that employment because of the ethical “cloud” that hangs over you for cheating. Even in the most glorious, self-centered, live-for-the day moments I had on the bike (I’ll attach some pictures for you from a few of those sublime moments), I always knew that I’d have to stop racing one day, but was comforted by the fact that I had two very strong professional goals – working in international affairs either for the State Department or the CIA. International affairs are like football for me, and I follow the latest treaty signings and bilateral agreements, military threats and economic developments with the same fervor of some of my fellow Pittsburghers who are fanatics for the Steelers football team. I was lucky enough to have two passions in life: sport and international affairs. And now neither is accessible to me at the professional level because of profoundly bad choices I made without intending to harm myself or others.

To know that you’re “genuinely pulling for” my success means a lot – more than you might realize. You say that you’re just a random guy from South Carolina (beautiful state, by the way)…well, I’m just a random guy from Pittsburgh (born in Ohio) who was “bike crazy” from an early age and who possessed just enough talent to race professionally at the lowest level of the pro ranks in Europe, and at a higher level in Latin America. And I sympathize with how you must feel having to compete against riders who may be doping – because I was in the similar situation in 2001 but didn’t have the courage or moral compass or guidance to follow the right path and stay clean. In my eyes, that makes you someone who I’ll look up to…someone with the fortitude and perspective to continue in a sport he loves, even though the playing field isn’t always level. And to do it while raising a family and building a career – heck yeah I look up to you!

What stinks about doping, is that, unfortunately, the products work and they can transform an athlete…even a great athlete becomes god-like and that feeling is intoxicating. Use EPO? Figure a 10% improvement in your functional power threshold. Add products that help you reduce body mass (without costing you power) and your watts/kg goes up and you can soar up mountains. Throw in some HGH and you’re a dominant sprinter. It’s not difficult to understand how all but the strongest (mentally) and most morally-grounded athletes who are tempted with dope often give in. It’s been approximately 32 months since I last raced, and not a day goes by when I don’t yearn to be back in competition. But when my sanction expired in August of last year, I didn’t even take out a license. I think I might this year, in hopes of regaining enough fitness to compete locally later this summer – but any return would be with a hugely-different perspective and with radically different goals.

Congratulations for resisting the temptation to dope, and for helping others (like your kids) to develop the ability to make ethically-sound decisions. We need more of that in the world today and you should take comfort and satisfaction from the fact that you understand the complexity of the doping issue but are committed to clean sport.

I’m glad you contacted me, and I would invite you to correspond regularly – don’t hesitate to write if you have more specific questions, philosophical insights, requests for advice, or you just plain want to shoot the breeze. As I said before, I’m crushed with school work and am not as efficient right now as I was on the bike, but I’ll always respond eventually. And so that you’re aware, I do continue to make myself available to groups, clubs, teams, associations, corporations, educators, etc as a speaker (with an obvious focus on telling my story in the context of a presentation tailored to the audience’s topic or area of interest). I only note this because I’m presently in negotiations with two cycling clubs in Canada to address them, and find the activity to be very cathartic and incredibly beneficial to my own recovery…

Be well, thank you so much for your support, and please enjoy the pictures.

Lessons from Banja Luka

When a survivor of the fighting in the Bosnian city of Banja Luka approaches your German sedan carrying “Poison” but promises to get you back on the road in a jiff because, to quote him, “I love this car,” what reasonable person wouldn’t stand aside, take out the CrackBerry, let Kemal get to work and snap some photos and video?

Kazakhstan Seen Preparing To Devalue Currency

Radio Free Europe Reports:

Worth less than meets the eye?

It’s become a familiar story. An oil-fueled boom now rapidly running out of steam as commodity prices plummet.

Billions of dollars’ worth of government help for banks struggling in a liquidity crisis.

Foreign loans that were cheap to get in the good times, now increasingly hard to refinance.

Ukraine’s hryvnya, Russia’s ruble, Hungary’s forint. Currencies in Central and Eastern Europe have been among the most battered by the fallout from the global economic crisis, with falls of more than 25 percent against the dollar in just a few months. And now another emerging-market currency looks ripe for a devaluation: Kazakhstan’s tenge.


The global financial crisis has hit Kazakhstan hard — but throughout it all, the country’s central bank has held its currency relatively stable. By intervening to support the tenge, the National Bank kept it within a range of between 120 and 121 per dollar throughout last year.

But recent depreciations of other currencies in the region — including the hryvnya and the ruble, which has been allowed to weaken more than 30 percent against the dollar — have made Kazakhstan’s exports less competitive, and prompted growing expectations of a tenge devaluation.

Analyst Paul Biszko of RBC Capital in Canada says some kind of economic adjustment is inevitable — either through a recession, a currency devaluation, or a bit of both.

“The government wants in most cases to prevent complete economic Armageddon, so they usually opt for a mix of both, so an economy that feels some pain but maybe not to the same degree as it would if they had managed to keep the currency more stable,” Biszko says. “But a currency adjustment is almost inevitable in such circumstances, to soften the blow from economic adjustment that needs to take place.”

So perhaps it was not such a surprise when Kazakh Economy Minister Bakhyt Sultanov said earlier this month that the tenge could depreciate by up to 10 percent this year.

The appointment last week of a new central bank chief, Grigory Marchenko, further fueled expectations of a weaker currency. The last time Marchenko was put in charge, Kazakhstan had just experienced a huge devaluation in the wake of Russia’s financial crisis of 1998.

Biszko says authorities will likely follow Russia’s recent example and let the currency slide gradually. But he says he believes a bigger tenge devaluation will be necessary — of some 25-40 percent — though no official would say so, of course, for fear of sowing panic.

Some signs of, if not panic, then “dollar fever” are already visible.

Almaty resident Yedige Isabayev, on his way to buy dollars at an exchange bureau, says ordinary people are worried and want to know how to protect their savings. He says he was prompted to act by seeing a television interview the previous day with an official who failed to reassure him.

“What [Kazakh lower house Finance and Budget Committee Chairwoman] Gulzhan Karagusova said…triggered fears,” Isabayev says. “In fact, it was a reason for anxiety among the society, because the person who actually controls budget and finance could not tell us anything about the currency.”

A tenge devaluation would be a headache, too, for banks and companies that have borrowed in foreign currency, making it more expensive to service such debts. This year, banks’ foreign-debt repayments are expected to reach some $11 billion.

“A significant change in national currency exchange rate in any country would increase the exchange-rate risk for companies that have debt in foreign currency,” says Vitaly Tomsky, an analyst at Kazakhstan Stock Exchange. “In our situation, for the Kazakh market, this risk could apply mostly to commercial banks who were quite active in getting credit in the west in past years. Naturally, any increase in risk would scare off potential investors from buying shares in companies like these.”

There’s another worry, too: that a gradual depreciation, once begun, might get out of control if it prompted speculative attacks on the currency.

Biszko says Kazakh authorities might eventually loosen the reins and move toward a “dirty float” — allowing the currency to trade freely, but occasionally intervening.


With no snowboarding to be done today, I’m left to ask if anyone is up for launching a speculative attack on the good ol’ Tenge? Maybe we can bring down the government as an added bonus?

Where Are the Civilians?


Before I messed up my professional life by marrying a Cuban, getting involved in all facets of doping in sport and generally ensuring that I wouldn’t pass the US federal government’s insanely-invasive background investigation for my security clearance, I wanted to be a diplomat. In fact, besides being a pro cyclist, it was all I ever wanted to be (well, to clarify, I wanted to be a diplomat as cover for working for the Agency). I still read The Economist and Foreign Affairs, and would like to share this article with you, which asks the question:

Where Are the Civilians?
By J. Anthony Holmes
From Foreign Affairs, January/February 2009

“When the State Department threatened to forcibly assign U.S. Foreign Service personnel to Iraq in late 2007, many diplomats read about it in the press before hearing about it from their superiors. The rank and file were irate. On October 30, 2007, the director general of the Foreign Service, several hundred employees, and union representatives held a meeting that quickly degenerated into a shouting match. A journalist’s surreptitious recording of the gathering was widely publicized soon afterward, conjuring up an image of disloyal, cowardly diplomats, which stood in stark contrast to that of brave soldiers protecting the United States abroad. By stripping away the complex and highly political context surrounding the presence of civilian government officials in Iraq, the media made Foreign Service officers (FSOs) appear unreasonable and unwilling to serve.

In fact, the Bush administration had effectively engineered the dispute in an effort to publicly embarrass the diplomatic corps. By demanding that FSOs take on the unprecedented, open-ended, and fundamentally impossible challenge of nation building under fire without adequate training or funding, the White House was continuing a myopic tradition of shortchanging the civilian institutions of foreign policy while lavishing resources on the military. Furthermore, the Bush administration’s general efforts to stifle dissent and to reward those serving in Iraq with promotions and choice assignments has led to the unmistakable politicization of the Foreign Service.

Before the Iraq war, Washington’s priority was to get diplomats out of war zones on the understanding that diplomats had to be protected and preserved for when the fighting was over. (Pentagon veterans such as former Secretary of State Colin Powell and former Deputy Secretary of State Richard Armitage felt particularly strongly about this when they ran the State Department from 2001 to 2004.) During the Bush administration’s second term, however, the imperative to protect was trumped by domestic political considerations. In late 2005 and early 2006, an ugly “Who lost Iraq?” game played out inside the administration. In an effort to escape blame, the Pentagon argued that it had won the war but that the State Department was losing the peace. Secretary of State Condoleezza Rice, determined to avoid the charge that the State Department had not “stepped up,” responded by ramping up staffing both at the embassy in Baghdad and on the newly created Provincial Reconstruction Teams deployed throughout the country. Abandoning traditional State Department practice, she dramatically increased the number of U.S. diplomatic positions in Iraq when the level of violence was at its worst. The U.S. government began carrying out a largely unnoticed and little analyzed shift in policy, assigning large and growing numbers of unarmed diplomats and aid workers to Afghanistan and Iraq, despite security conditions that often made it impossible for them to do their jobs.

The controversy over mandatory assignments to Iraq — which quickly dissipated as volunteers stepped forward to fill all 327 State Department positions there — was merely one episode in a broader pattern of neglect and mismanagement of the United States’ civilian foreign policy institutions…”

Read the full text here, thanks to my subscription to Foreign Affairs.

New Year’s Day Reading – Selections from The Economist

I read The Economist from cover-to-cover, so you don’t have to. Here are my recommendations from the past two issues (chosen based on my own personal interests, of course):


International man of mystery – Flying anything to anybody
Dec 18th 2008, From The Economist print edition

The rise and fall of Viktor Bout, arms-dealer extraordinaire, shows a darker side of globalisation. Article.


Venezuela – Socialism with cheap oil
Dec 30th 2008 | CARACAS, From The Economist print edition

Hugo Chávez embarks on a race against the impending impact of world recession. Article.


The Cuban revolution at 50Heroic myth and prosaic failure
Dec 30th 2008, From The Economist print edition

All the Castro brothers have to celebrate this week is survival. But that in itself is a remarkable achievement. Article.


Cuba’s economy – Ill winds
Dec 30th 2008 | HAVANA, From The Economist print edition

Hurricanes have added to the woes of the downturn. Article.