Pir Sahib on Wall Street (Part –1)

SR #43 Agreed that those whose pension funds were not self-managed cannot be accused of being greedy and putting all their lifetime savings in risky assets. They of course blame the fund managers. I think here the blame lies more appropriately with whoever came up with the brilliant idea of switching pension plans from Defined Benefits plans (i.e. traditional pensions where the pension fund and/or the employer bore the risk) to Defined Contributions plans (i.e. the current favourite of employers, since risks are transferred to the pensioners). Of course, they still have their social security benefits, not to mention other income generating assets, and that explains why we dont see pensioners starting to starve on the streets in the US. Now, if they mess up the social security plans as some people fear...then you have a real problem.

SR #43 I did not realize that derivatives were at $72 trillion. This certainly exceeds the worldwide GNP, but then as I understand it derivatives are claims against future assets, not against today`s income. So they can vastly exceed the GNP. Given my ignorance on these matters, any light you can shed (and see if my understanding about the tenuous relationship between derivatives and the current year`s GNP is correct) would be welcomed.

sr.

thanks for posting a reply to my last post. still dont think that ``the plane falling 25k feet`` is necessarily bad as long as it develops the capacity to rise higher than its previous peak. economic bust cycles in the past have played an important role in insuring the success of american capitalist system. survive or die mentality will insure that things will be no different this time. surviving companies in sectors that have been most effected by the slump are in the process of adapting more sustainable business models. companies like amazon and dell now have a much better model than they did at the height of the boom. similarly, companies that survive the shakeout in the energy sector will be much stronger than their predecessors. the current economic bust has also enabled companies to get a handle on their wage costs. investment banks and tech companies will be the biggest beneficiaries of excess supply in the labour markets.

i also don’t share your assessment that the economy faces systematic risk because of financial meltdown as a result of large-scale defaults by highly leveraged consumers and financial institutions. consumer debt levels can be sustained as long as the economy does not suffers a prolong slump. japan has an extremely high saving rate but it does not seem to grow the economy. probability of large-scale bank default is pretty low as well. by historical levels, non-performing loans at money centre banks are at much lower levels in comparison to the levels seen in previous down cycles. notional levels in the derivatives market don’t indicate much in my opinion. the real question is strategy employed to manage risks. and as the success of credit derivatives market indicates, so far banks have been pretty successful in dealing with risk events like enron and worldcom bond defaults.

i do share your assessment that investors still have an unrealistic expectations of earnings from most of these companies. however unlike you, i believe that joe investor in peoria, illinois is still responsible for feeding the mania. joe investor still continues to believe that information he is fed is accurate despite the spectacular failure of the media to predict and explain anything of consequence that has happened over the last couple of years. on the contrary, joe still thinks that u.s. media is best in the world. one of the most insightful polls i have seen over the last month is the poll that indicated that 2/3 of the people polled believe that saddam was behind the wtc attacks. it is the same unquestioning belief of misinformation peddled out by reactionary republicans and their cronies that will be responsible for any economic hardship americans face in the future. these guys had chance change to throw some of the bums out in the last election but they refused.

on a separate matter, i still think measuring fund managers against a benchmark is an effective evaluation tool. would you pay fees to a manager investing in utilities stock if his portfolio rose 15% while the broad utility index was up by 20%?

re sac # 41:

if i was only paying attention to the market and ignoring the fundamentals, then i would have gone and blown up my raise because at peak my 401k had enough savings to last a lifetime. fortunately, i never bought the market is economy mantra and thus managed to save enough cash to help me in rainy days.

second, even during the boom, i was never in a position to walk in to my boss` of office to demand a raise. i guess one of the many downside of carrying a paki passport.

#44 by DrDr [``...SPY is vaulting. Hope you have the inyestinal fortitude...``]

Thank you for asking, but heavens have been very kind. This is not bad as compared to the Christmas rally of 1999. Like I`ve mentioned in the introductory ``confessions``, I was able to survive the Great Mania because of an eager willingness to take small losses, repeatedly. Discipline is a must for survival. When one has an open position, one must only look at the market action and act accordingly, without waffling. Hope, prayer, denial, wishful thinking, anger or joy have no place in a trader`s life. One has to plan one`s trades and then trade those plans. Those who trade for emotional experiences don`t last very long.

If its excitement that one is looking for, one needs to stay away from trading. One is far better off going to a motor cycle bar and telling that big fat skin head with tattoos that his Harley is a piece of shit. You`ll get all the excitement, but it will be far cheaper.

At this time my S&P positions are closed. They were closed yesterday and day before. The shorts were initiated, just prior to elections and rate cuts, on November 4rd and 5th (at the time the article was submitted, thus the need for disclosure of ``current position in instruments that are referred to in the written piece``). I always initiate positions in increments and get out the same way. The only exception is when I have to hit the ``eject button``. Then (and only then) do I get out of the whole position at once and use `market orders`. Routinely, the orders are always `limit orders` and always incremental.

Now I await a slightly higher push before re-initiating the short positions. S&P range between 925 to 875 seems like where the present equillibrium has settled. These are dynamic equillibriums and have to be watched very closely. Of course, tomorrow is the last trading day for October options, so this could move the range next week. As for the long side trading opportunities in the S&P and Nasdaq futures, I simply sit on the sidelines and let them pass. No opportunistic trades ever taken against the fundamental bias, no matter how attractive.

Reverse, would apply to gold futures, for example. I`ll only trade them from the long side. Same goes for Silver, Canadian dollar, Euro, Corn and Sugar.

...SR

SR,
SPY is vaulting. Hope U have the intestinal fortitude.

tahmed32
Japan`s unemployment rate is 18%? Don`t think so.

re faisaluno #38:

``people are confusing performance of the market with the state of the underlying economy.``

The market IS the economy. Never mind the underlying and the overlying. Why don`t you go ask your boss for a 20% raise? I am sure he or she will be more than happy to oblige. Heck he might even throw in a beamer just to keep you happy.

later
-sac

#39 faisaluno
Thanks for the post. Such news should make every muslim proud.Let`s hope & pray that the ignoramuses in Pakistan, who sneer at anything islamic & muslim as 7th century anachronism, are shamed into admitting their barbarity & ignorance.

Islam rules!
so must muslims...only if they identify themselves and have higher education in their own schools & in their own language.

#37 by tahmed32 [“… anyone who did not keep his portfolio balanced … lost his shirt. Those of us who maintained this balance and did not have dreams … never really had a problem. Thus, … the folks … got a bit greedy. …”]

Ahmed sahib, you are exactly right in what you write, and we couldn’t agree more. I have little sympathy for those who willingly engaged in their Sheikh Chillee style greedy fantasies and thought that they could find a short cut to instant wealth and in so doing lost their shirts. They didn’t plan to fail, they simply failed to plan and wanted to get something for nothing. No, those Johnny-come-lately investors deserved what they got.

My lament is over the millions of others, who were truly victims and are still being preyed on. These are the people who have little or no choice in the matter but perhaps are the biggest losers. These are not the greedy dentists who gambled with their spare cash and lost trying to catch the two-in-the-bush instead of keeping the one-in-hand. These folks are the ones whose insurance companies, pension funds and 401k plans deceived them and cheated them out of their hard earned life-savings.

There is also a class of people between these two extremes of retail investors. These are the people who are trying to be prudent and responsible and investing for their future retirements but don’t have the technical tools and therefore must rely on “professionals”. Unfortunately, in an atmosphere which is full of utter deceit and blatant lies that have come to be built into the system in recent years (more so than the baseline level of deceit which always existed) they didn’t stand a chance and were fleeced. It boils my blood to see that the official propaganda machine is still at work and continues to hoodwink the misinformed who are being set up to lose even further. My wishful thinking over here is that by making as loud a noise as I can, possibly some lay people may listen (Oh, heaven forbid, I’ll never presume to argue with the ‘pros’) and take a harder and more skeptical look at what they are being told. Hopefully, in the process some will take corrective measures to protect themselves.


#38 by faisaluno [“…people are confusing performance of the market with the state of the underlying economy. hence they are being too pessimistic about the future of u.s. economy which so far has held up fairly well in spite of the strong shocks it has received over the last couple of years…”]

You radiant optimism is a breath of fresh air. They say that both optimists and pessimists contribute to civilization. The optimist designs the airplane. The pessimist invents the parachute.

Occasionally, however, airplane engines do fail. The engines of the high flying US economy, in my humble opinion, have just sputtered. It is only prudent to pause and consider that a continuous thrust of the afterburners, even in the best made airplane cannot be sustained for ever.

Perhaps the financial markets are telling us something about the underlying economy to which we may be wise to listen.

You say that the economy “so far has held up fairly well”. A man sitting in a plane that has dropped from fifty thousand feet to fifteen thousand could also make the same argument. “So far” he could argue, “the plane is doing just fine.” He would be right, of course, though he may not be right for very long.

Achilles was a Greek warrior of the Trojan wars who was almost invincible in battle. Metal could not penetrate his skin because at birth his mother, Thetis, dipped him in the River Styx that made him invincible. But Achilles had a vulnerable spot where Thetis had held the baby and thus the water didn’t touch his skin. That was Achilles’ heel. It was there that he was struck by the arrow that Paris shot.

The US economy also has an Achilles’ heel. Its called debt. According to the Bank of International Settlements, 71% of the entire world’s current account deficit is in the books of the US. In 1980, the US was the largest creditor in the world. Today, the total US debt, is by far greater than the sum total of the combined debt of the entire world (minus Japan and Europe).

I have dear friend who lives in a nice place and drives a Mercedes while his wife drives a Lexus and wears big diamonds and nice jewelry while he wears nothing less than Gucci and Bally. Yet, their net worth is way deep in the negative six figures. Is he well off? Everyone in the community thinks so, but some of us know better.

On top of that there is the “river of financial sewage”, as Warren Buffet calls it, in the form of unregulated derivatives with an incalculable counter-party risk.


[“… important lesson … enron … was allowed to fail … experience in japan, germany, s.e. asia and s. asia shows this rarely happens ... as a result capital … gets allocated more efficiently in the u.s. because there are less distortions in the economy…pace of reform is also much faster in the u.s. in comparison to other parts of the world…”]

Totally agreed. But the operating phrase you use here is “in comparison to other parts of the world.” This is the problem. You’ve hit the nail on the head. And this complacency is what I object to. It is also the prevailing mentality that I see through out the mutual fund industry. They measure success in relative, not absolute terms. They tell you that they outperformed their benchmark by 5% and make it sound like they are heroes. What it actually means is that whereas the S&P 500 index lost 20% of its value, their fund only lost 15%. They lose 15% and still call it success. That is exactly what I am screaming about. I cannot lose 15% and pretend that I have won, neither can you, I hope. Yet these ‘pros’ do just that.

Same goes for the present US economic predicament. There is no question that the US has all of those relative strengths that you point out. Yet it does not take away from the fact that for the first time in almost seventy years the whole world’s capital structure and monetary system are at a precarious juncture. If a stampeding herd is heading towards the edge of a cliff, what comfort is it to say, oh well, our horse if not as close to the edge as those other horses are?

Yes, its not the same thing as a nuclear holocaust but it’s a simultaneous, synchronized downturn that we are witnessing the beginnings of and there is extreme systemic risk and we are all much less financially secure than we’re being told. Its bad enough without people being lulled into the false complacency that the next bull market, not to mention the next economic boom is right around the corner.

[“… congress has been fairly swift in creating groups that will monitor … parties responsible for the current mess. the accounting industry will now have to deal with the accounting oversight board while sell side research will be much stronger after restructuring takes place ... the u.s. financial system will be much stronger as a result of current reforms. …”]

Eventually that may well be true, but there is a very long and rough road from here to there. We’d better be prepared for the tough journey. Put on your helmets and seat-belts.

[“… money still continues to flow to the stock market despite the huge destruction in wealth over the last couple of years. yet no one can say now that the average investor is not aware of the downside. this is a good sign …”]

Not only is this not a good sign, it is criminal. There has been a tremendous misallocation of capital in sectors that are super-saturated with over capacity. Sadly, the money is still chasing yesterday’s dream investments and military industry. Today this same money ought to be flowing instead, into development of other sectors such as natural resource base industries (energy resources and fresh water assets, for instance), infrastructure upgrade, environmental and food source sustainability, and conservation etc. But no, Novellus, KLAC, Qualcomm are where the so-called ‘pros’ are pouring other people’s money to gt that high beta effect.

[“…u.s. economy can survive the threat of another 2000-3000 point drop in the dow because of its fundamental strength. … in fact a another precipitous [fall] in the stock markets will provide some of the best l investing opportunity for investors with a long-tern time horizon …”]

Yes, that is what I say also. When valuations will become reasonable it will be a good opportunity to invest in the fallen angels. That time, however, is not today as the official cheerleader would have you believe. It may be years in the coming.

[“… a fairly open labor market allows some of the brightest people to come to the u.s. to utilize opportunities denied to them in their own societies…”]

Also #40 by tahmed32 [“…population of the US … not merely staying relatively young and vigorous. It is increasing, and continuing to attract the best brains to its colleges and from there to its workplace and culture.

These are ``details`` that people dont see when they write about the wall street`s ups and downs. Yet these are details that determine where a nation is headed in the years ahead. …”]

You are right. It is this dynamism that will eventually come to the rescue. But between then and now there is a lot of sweat and tears. Fifteen or twenty years is only like an eye-blink for a nation’s history, but those who are nearing retirement today, they’ll be left holding the short end of the stick.

Every disaster has a happy ending eventually. The Black Death of Europe in the Middle Ages wreaked havoc on a whole generation. But we can argue that it was the best thing that happened. For those who survived it, there was more land per capita to go around and the standard of living skyrocketed.

My concern is about the here and now. There are real people with real lives that are in financial jeopardy today. What manna may fall from the sky in 10 years is not relevant when one may have concerns about securing the next meal.

All these fancy development models are well and good when you are a tenured professor at a university. They also look great to graduate students who build their Ph D thesis on them. But when you take the academic work of a brilliant graduate student, and start building a mountain of highly leveraged derivatives as high as the Everest then you get Long Term Capital Management style fiascoes.

The notional value of all leveraged financial derivatives in the system today is $72 Trillion. Yes, trillion with a “T”. That is more than double of the combined GDP of the whole world. JP Morgan alone is carrying over $20 Trillion in derivative exposure (by far more than any other financial institution). There are REAL SYSTEMIC RISKS to the economy. Who would you rather listen to? Your friendly “professionals” and government bureaucrats who follow econometric models designed by broke graduate students who don’t have a pot to piss in themselves, or to those who really understand the markets.

People like Sir John Tempelton, Warren Buffet and George Soros are all deeply concerned and make no bones about how extreme the risks are that we face. Yes, Ahmed sahib, you are very right in your assertion that “these are the details people don’t see.”

...SR

faisaluno #38 what you say makes perfectly good sense. It is interesting how both Germany and Japan went from one extreme (right wing dictatorships in wwii) to the other (a profoundly socialist environment, with lifelong jobs and all sorts of socialistic benefits). Neither approach has worked, and both economies are today characterized by unemployment rates that are almost 3 times that of the US.
AND they have even deeper problems - Japan has virtually shut the door on immigration. Germany has 10 percent population as immigrants from e europe and turkey, but has traditionally attracted the unskilled workers, and there is a strong anti-immigrant sentiment. Both countries, on the other hand, have rapidly aging populations which means the native population is actually projected to decline to almost 60 percent of what they are today by the turn of this century, and it is uncertain if these countries will ever have large numbers of skilled immigrants (and they dont seem to want any more unskilled workers - some of whom literally live on the dole for years on end, as I saw in Germany once when I was shown a house where immigrants from north africa and the middle east were having their groceries brought to them in a truck by a government-paid company!!).
On the other hand, the US has traditionally attracted the best and the brightest along with the ``tired, the hungry, the unwanted`` to its shores. Once here, they are expected to work, and the ``rags to riches`` creed of the US still remains strong. The population of the US is therefore not merely staying relatively young and vigorous. It is increasing, and continuing to attract the best brains to its colleges and from there to its workplace and culture.
These are ``details`` that people dont see when they write about the wall street`s ups and downs. Yet these are details that determine where a nation is headed in the years ahead.

urstruly, this might be of interest to you

Islamic-Style Banking Finds
New Support in Malaysia

By CRIS PRYSTAY
Staff Reporter of THE WALL STREET JOURNAL


KUALA LUMPUR, Malaysia -- Suresh Singh walked into his local Maybank branch four months ago to take out a mortgage for a new home in the suburb of Petaling Jaya. He walked out instead with an Islamic home-financing package.

``For the longest time, I thought Islamic banking products were for Muslims,`` says Mr. Singh, a Sikh. Interest is sinful in the eyes of Islam, so the bank bought Mr. Singh`s house and will sell it back to him, in fixed installments, for a premium equivalent to a 7.6% interest rate. As few banks have fixed rates on conventional mortgages here, Maybank`s offer was attractive. Other banks offered him variable rates of about 8%. He also signed up for an Islamic current account, which carries no monthly fees.

In Malaysia, where 60% of the population is Muslim, the government has been on a drive to make Islamic banking more mainstream. Islamic banking, which creates products that adhere to religious principles -- such as no interest -- accounts for just 8% of Malaysian banks` total assets.

Bank Negara, Malaysia`s central bank, issued a master plan last year that aimed to have Islamic banking comprise 20% of all assets by 2010. The idea is to offer Malaysia`s majority-Muslim population choices in financial products that comply with the religion`s beliefs and, at the same time, carve out a niche as a global leader in Islamic banking.

The international ambitions are starting to take hold. On Nov. 3, Malaysia, in conjunction with the Islamic Development Bank and central-bank governors from eight Muslim nations, set up the Islamic Financial Services Board in Kuala Lumpur, which will establish global standards for Islamic banking.

Even big foreign banks are scrambling to create Islamic financial products. London-based HSBC offered its first Islamic home-financing package last month. Standard Chartered plans to launch a more competitive version if its existing Islamic home package next year, along with a slew of Islamic retail products.

Maybank, Malaysia`s largest bank, says its Islamic financing business (Islamic bankers avoid the term ``loan``) grew 30% in the year ended June 30 to 8.5 billion ringgit ($2.24 billion), largely from mortgage financing.

And as Islamic banking has become more professional, it also has become more mainstream. More than 50% of Islamic financing now goes to non-Muslims such as Mr. Singh, according to Bank Negara.

Many banks here have offered Islamic-style financing for years. Deposits and financing packages are structured to avoid interest payments or charges to abide with Shariah, Islamic religious law. For example, account dividends are calculated on a profit-sharing basis. In the case of financing, banks act as traders, not lenders, and buy the asset in question, then sell it back to the customer.

But few banks considered Islamic banking to be anything more than a niche business, and did little to promote it. As a result, even many Muslims shied away. ``It has not been an easy sell just because most people are Muslim,`` says Ahmad Fuad Mohammed Ali, head of the Islamic banking division at Standard Chartered`s Malaysian unit. ``At the end of it, people still look at the returns.``

These products are gaining ground now because Bank Negara`s plan has given banks a top-down push, while the rapid growth of Malaysia`s middle class has provided bottom-up demand. ``You have a bigger middle class. They`re looking for choices,`` says Mr. Ahmad Fuad. Standard Chartered plans to use Malaysia as a test bed for products that will be offered later in Asia and the Middle East, he says.

Meanwhile, banks also are raising awareness that these products can do more than satisfy religious mores. Asia Pacific Engravers, the local unit of a German packaging company, took out a two million ringgit Islamic hire-purchase facility to buy equipment last year. Like Mr. Singh, the company was attracted by the low cost -- equivalent to 5%, versus the 6.5% rate attached to a conventional unsecured hire-purchase loan. And the rate was fixed for five years.

``HSBC came to see us, and said, `Take a look at this, you can fix it for five years. And it`s cheaper,` `` said Cletus Stephenson, a company spokesman.

HSBC raised $600 million for the Malaysian government by underwriting the first international Islamic bond in June. In conventional bond deals, the government issues a bond and promises to pay borrowers a coupon, or interest payment.

In this case, Malaysia`s federal land commission sold property to a special-purpose company, which raised money for the purchase by selling trust certificates to investors. That company then leases the assets back to the government. The certificate guarantees investors a stream of income from the regular lease payments and promises to pay the principal back in five years when the trust is dissolved.

HSBC launched a new Islamic trade-financing instrument earlier this month and its home-financing package during October. But Islamic financing comprises just 2% of the bank`s loan book in Malaysia -- a long way off Bank Negara`s 20% goal.

``Islamic banking is still a small business at HSBC Bank,`` says Sulaiman Sujak, executive director of HSBC`s Malaysian unit. But he says it is going ``to play a more significant role`` in the future.

people are confusing performance of the market with the state of the underlying economy. hence they are being too pessimistic about the future of u.s. economy which so far has held up fairly well in spite of the strong shocks it has received over the last couple of years. while the failure of enron and other companies has shown that crony capitalism is very much a part of the u.s economy, the failure of enron does also indicate that there are other centres of power which can check the power of cronies, even if brakes are applied too late. one of the important lessons of the enron bankruptcy is that the company was allowed to fail despite having ties with the strongest political office in the land. as the experience in japan, germany, s.e. asia and s. asia shows this rarely happens in other economies. as a result capital (public or private) gets allocated more efficiently in the u.s. because there are less distortions in the economy. connected to this, the pace of reform is also much faster in the u.s. in comparison to other parts of the world. where would japan be if ldp allowed creation of groups that act as a watchdog over its main supporters? similary, prospects of growth in germany would be much brighter if sdp was able to extract much needed concessions from the labour unions. in comparison congress has been fairly swift in creating groups that will monitor the activities of parties responsible for the current mess. the accounting industry will now have to deal with the accounting oversight board while sell side research will be much stronger after restructuring takes place. while bush and his buddies have cynically tried to hijack the process, the resulting brouhaha has forced them to temper their activity. the u.s. financial system will be much stronger as a result of current reforms.

another advantage u.s has over the rest of the world is that the environment is more favourable to entrepreneurs in comparison to the environment in other countries. this is because americans value economic growth beyond anything else and thus stigma associated with entrepreneurial failure is much lower than the stigma of failure in other societies and similarly the benefits associated with success much greater. money still continues to flow to the stock market despite the huge destruction in wealth over the last couple of years. yet no one can say now that the average investor is not aware of the downside. this is a good sign for entrepreneurs because they know that they will not be ostracized in the future for taking risks and failing. coupled to this, a fairly open labor market allows some of the brightest people to come to the u.s. to utilize opportunities denied to them in their own societies. in my university, the area around the school of engineering was referred to as the india/china border.

u.s. economy can survive the threat of another 2000-3000 point drop in the dow because of its fundamental strength. in fact a another precipitous in the stock markets will provide some of the best l investing opportunity for investors with a long-tern time horizon and a medium level of risk tolerance.

Interesting article, Sohail sahib. Your prediction (or is it the pir sahib`s?) that ``The bottom of this bear market could come sometime between now and the end of the decade. `` is about the max time period for business cycles, so what you say will probably come true (in the long run, everything comes true at one time or another - and of course no one knows WHEN in the 10-20 year period the business cycle will bottom out). And your prediction that the bottom (i.e. the right P/E ratio etc.) would be at 4500 and 3000 will no doubt send tremors in the hearts of those with money still sitting in stocks.
One thing is as true for stock markets as for ponzi schemes - those who lose their shirts got greedy. E.g., anyone who did not keep his portfolio balanced between low risk and high risk assets, as has always been standard advice in the business, lost his shirt. Those of us who maintained this balance and did not have dreams of making a million out of every lousy dollar we invested, never really had a problem. Thus, pir sahib and the folks in Saudi are undoubtedly honest and hardworking, but perhaps they got a bit greedy.

#35 by sac [“… I am curious-have you recently read Gibbon`s ``Decline and Fall of the Roman empire``? Almost everyone on Wall St.(especially those with fat severance packages and plenty of time to kill) seems to be in raptures about it. A sure sign that the herd mentality is alive and kicking. …”]

Have been a history buff for years. Didn’t revisit Decline and Fall since the late 1980s. Did, however, read the whole Masters of Rome series in the late 1990s. That was when the likes of me had a lot of time to kill as they sat on their hands.

Yes, sometimes the herd does catch up and not only contaminates the pristine meadows but also ruins our ursine solitude.

#34 by Urstruly [“… there must be something … to keep the American people well fed and prospered. The easiest answer is the neo-colonialism. Arabs still have some vulgar amount of money in all shapes and forms. .. history is going to repeat itself in … December or … January …”]

You may be right. On Veteran’s Day weekend I happened to be at a gathering where general Hugh Shelton was one of the featured speakers (as a part of my occupation I attend several different dog-and-pony shows and occasionally even return with a useful idea). One of the attendees asked the general about the likely time frame of the coming war with Iraq. He, after mumbling all sorts of disclaimers and qualifiers, said that it would ``have to be before May” of 2003. Accordingly, a speculator would buy call options on crude oil for the May expiration.

…SR

Dear Rabbani

Ok I admit that you managed to scare the bejesus out of me by confirming the feelings I already had for quite sometime. So if internal sources of generation of wealth are failing and interest based economy is something that qualifies as ``chuut-ti nahi yeh kaafir moonH ko laggi hoi`` there must be something that will be needed to keep the American people well fed and prospered. The easiest answer is the neo-colonialism. Arabs still have some vulgar amount of money in all shapes and forms. After the Gulf war they were made to pay through nose not only the ``war expenses`` but also had to share the 30% of the profits from oil sale (and probably they still do). I think the history is going to repeat itself in about late December or early January. This time it is gonna be no holds barred.

re SR #33:

``The US has a sophisticated one-party political “selection system” that is thinly disguised as a democracy``

Nothing wrong with that. The elite should be kept busy in trivial pursuits and let the rest of us go about our business. BTW I am curious-have you recently read Gibbon`s ``Decline and Fall of the Roman empire``? Almost everyone on Wall St.(especially those with fat severance packages and plenty of time to kill) seems to be in raptures about it. A sure sign that the herd mentality is alive and kicking.

later
-sac