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The "People" We Lost - End Of 2014

by John Jazwiec

Barack Obama Supporters 

The last time I counted there was only me and the Reverend Al Sharpton left. Next year, I fear we are going to lose a lot more Americans. White people who are willing to admit they voted for him in the first place. 2008. Yes, we can. 2015. No, we didn't?

 

The "Rescue Hall And Oates" Mission

This mission admittedly was going to be harder than finding plane crash survivors in an ocean. Finding any men with big hair and perms was daunting enough. But trying to find songs like "Rich Girl", "Kiss On My List" and "Private Eyes" playing on the radio is impossible. Their last BillBoard Hot 100 was "Out Of Touch". In retrospect, that should have been a big clue they didn't wish to be rescued.

 

The Gun Control Lobby

I stopped lobbying for gun control in 2014. And started lobbying for bullet control. If bullets cost $10,000, most people could only wave a gun at me, and threaten to save up enough money to kill me someday. Also when that day came, it would cost too much money for any innocent bystanders by me to be killed. And I would have an advantage. If someone came by my McMansion and thought about killing me ... they probably would just say "wow, that dude can probably afford more than one bullet ... I better start to hightail it and run".

 

Sony's IT Department

 

welcome hackers sony

Personal information about celebrities, embarrassing emails from executives, internal memos and leaked movie scripts have added up to one major headache for Sony Pictures. It's not rocket science, it's called having firewall security and making sure it is updated. And apparantly Sony's IT Department was not the only thing lost. By pulling the movie "Interview", Sony also lost their nerve. Maybe they might get it back if bullet control was passed. 

 

Uber's Investors

 

worst tech uber

 $40 billion invested in a company that can't certify it's subcontractor's behavior? Uber might as well have rolled out their product in Afghanistan. What's next? StUber-Survival. Identifying the nearest car with a driver in a drunken stupor? If you make it to your destination, the ride is free?

 

16,000 HP Workers

worst tech hp layoffs

It's called innovation. It's not enough to just have it on your tagline. Just how many HP 12C Programmable Financial Calculators did HP think they could sell anyways?

 

"Sons Of Anarchy" Fans

Talk about bullet control. "Sons Of Anarchy" set a record for the least amount of protagonists killed per-bullet-fired over 7 seasons. Not to mention a record number of musical montages with no point. And the ending? An anti-hero protagonist killing himself looking like a swan, just like Leonardo DiCaprio looking like a swan killing the movie "Titanic". "Sons Of Anarchy's" 2014 Jax was "Titanic's" 1997 Jack.

 
 

 


State Of The Stock Market - End Of 2014

by John Jazwiec

The S&P 500, on Wednesday and Thursday, had its best two-days in three years. But other than dovish comments by the Fed (not looking to raise interest rates until April at the earliest); it's not apparent to me what macroeconomic factor is driving US economic growth. 

But P/E values are 19.99. Nowhere near the over-valuations (P/E of 50) before the 2008 stock market crash.

And the VIX (CBOE's index that measures "fear" - the price people are willing to pay for calls and puts to protect their stock market position) stands at 16. A way to view the VIX Index is that it implies a 68% probability that stocks may fall by its square root as a percentage. The S&P stands at 2060. So a 4% fall or an 82 point drop is implied. The VIX was well above 50 before the 2008 stock market crash. The current VIX of 16 is the historical average. 

What all this means is investors in the stock market don't seem to fear the downside of the stock market. What they do seem to fear is a lack of returns in sticking with US and corporate bonds. 

Besides no apparent macro-economic factor driving US economic growth - 70% of US GDP is consumer spending - and that is not rising even with higher employement due to low wages - the affects of the recession in Europe, Germany's growth coming to a stand-still and a contagion affect of investment in Russia are being ignored. 

I don't know where the stock market is heading. Nobody really does. But one thing can't be ignored, is that stock market investors, are not prepared for a sizable market correction. And if they aren't prepared, a sizable market correction, could lead to enough panic - selling at any cost - for the market to crash again. 


Pakistan's Historical Tripod: Does Reality Mimic Art?

by John Jazwiec

Unless the reader, has spent as much time as this writer, understanding Pakistan; it is difficult to make sense of this part of the world and its context within the war on terror. 

Pakistani politics and policies, since its inception, has stood upon a tripod of (a) protecting itself from their mortal enemy India, (b) Islamic fundamentalism and (c) support by the US. And like any country such as the US, it's politics and policies are based more on history than on a changing reality.

Pakistan, from a growth stand put, is the world's fastest growing nuclear arms producer. Which effectively has eliminated India as a invasion threat. But Indian and Iranian money are being spent on influencing some of Afghanistan's many tribes. And Pakistan doesn't have the same kind of money. So it has been forced to look the other way and let the Afghanistan and Pakistan Taliban run free, matching India and Afghanistan money, with the Taliban as assets by proxy. 

Furthermore, rising Islamic fundamentalism, requires a level of acceptance for Pakistan and the ISI, in order to survive. Which means that the first leg of the stool is obsolete and the second leg of the stool's ascendancy has eaten into the third leg.  The net result of which, is that Pakistan isn't as much strategic, as it is a broker of managing disparate crazy people. 

The danger of this policy of managing crazy people, isn't an exact science. As Hillary Clinton famously said, "if you keep snakes in your backyard ... you shouldn't be surprised when they bite you back". And the Pakistan Taliban did just that yesterday. Not just killing hundreds of children in school; but children from military families. Along with Pakistan's own rising Islamic fundamentalism; the snakes are clearly not just interested in Afghanistan regime change, but also Pakistani regime change.

It's trite to say, but Pakistan is now at an inflection point. Their historical tripod isn't balanced, it's falling down and in the process, it's taking down the Pakistani establishment. 

Which brings me to art. Specifically the show "Homeland". It is supposed to be Obama's favorite show. This season of Homeland has focused on Pakistan and their complicated relationship with their crazy allies. I highly doubt Obama is watching the show for its cinematic escapism. More likely the show is being influenced by the administration to educate the public on Middle East complexity.

A TV show - even dumbed down - is a better tool of persuasion than some policy paper. Last year's "Homeland" focused on improving Iranian relations and foreshadowed a US diplomatic path. It's likely this season's "Homeland" is being used to teach American's the complexity of Pakistan and an undeniable truth as old as Vietnam. Namely the Americans someday have to leave. But the Taliban that reside in Afghanistan and Pakistan - are never leaving - because it is their home. With ISIS as the new front on the war on terror, the administration seems to be preparing Americans that the US may have to accept a treaty that returns the Taliban to power with the US maintaining some semblance of influence. 

Events around the world are complicated for Americans to understand. That's because the US is separated by two great oceans and two peaceful borders to its north and south. The rest of the world doesn't enjoy that kind of simpleness and security.

Countries like Pakistan are surrounded by threats. India, Iran and China to name a few. Iran is surrounded by Pakistan and Saudi Arabia. South Korea is surrounded by North Korea, China and Japan. While the US has the luxury of picking enemies thousands of miles away; the rest of the world doesn't get a choice of enemies close to their borders. The US is innately safe. But the rest of the world is not. 

Balancing enemies, proxy wars and relations with terrorists is a tightrope Americans don't have to live with. But countries like Pakistan do. Getting the balance wrong is a clear and present danger. And Pakistan paid a large price yesterday for falling off their tightrope. 


Unintended Results From Russia's Ruble Decline

by John Jazwiec

Before today's markets opened, Russia raised its interest rates from 10 to 17%. Under normal circumstances, the value of a currency, is largely dependent on the value of holding it. Under normal circumstances, sovereign country national banks move interest rates by 0.25 or 0.50%. Russia moved its interest rates by 7.0%. That's not normal. That's a move of desperation. 

Russia isn't really an economy. Its more like a fossil fuel exporter that subsidizes its citizens with a portion of the profits. The lower the price of fossil fuels; the less people can be subsidized. And at some point, there is no money to distribute. 

Which brings me to Russian alternatives. There is a growing movement of Russian exiles in Kiev, preparing a government to take over if Putin falls. The problem is the exiles are as diverse as the population of Russia.

There are exiles that insist on Crimea being part of Russia after they take over. There are also Chechen and Georgia exiles with some level of radical Islamic views.

Russia's incredible large land mass is made up of many nationalities. There is no history to be found, where Russia has been stable, without a strong central power. The Czars held it together. The Soviets held it together. And the strong Russian Federation has held it together under Putinism: an elimination of democracy, free press and dictatorship. 

The Ruble's decline and the desperate moves to prop it up are deeply destabilizing. So is a an economy that is sensitive to world wide fossil fuel prices to maintain social order.

If you don't like Putinism; you need to be aware of the unintended consequences if Putinism falls. Only three things can happen if Putin falls: (a) Russia ramps up its militarism so people rally around the flag and that will negatively impact Europe, (b) disparate exiles take over and Russia becomes balkanized or (c) Russia's secret state leads a coup and tries to reform Russia ... just enough. 

What is not debatable is that Russia is teetering on the edge. And we need to be careful for what we wish for.


Grassy Knoll Falling Oil Prices Conspiracy: Saudi Arabia Or US?

by John Jazwiec

http://nypost.com/2014/12/14/saudi-arabias-oil-war-against-iran-and-russia-2/

There's nothing people like more than an conspiracy. They are almost always wrong, because they assume a level of competency that governments simply don't have.

The New York Post - the link above - says oil prices are falling because of Saudi Arabia. The meme goes something like this: Saudi Arabia (Sunni) fears the US will not stop their enemy Iran (Shia) from attaining a nuclear bomb. They also don't like Syria (Shia) and the Russian's support of Syria. Hence falling oil prices is the best economic sanction to destabilize both nations.

Well if we are into inventing conspiracy stories; why not substitute Saudi Arabia for the US. The US is currently trying to reign in Iran and Russia through economic sanctions. The US has always had close ties with the Saudi's. Perhaps Saudi Arabia is taking orders from the US.

The Saudi's don't care as much about Israel as the US does. A damaged Iran benefits Israel. Also the New York Post mentions Venezuela. Why would Saudi Arabia care about Venezuela? The US does. See the Monroe Doctrine. 

Occam's razor - the best explanation is often the simplest - applies to conspiracies. The simple explanation for falling oil prices is (a) there is now a world-wide free market for oil, (b) fracking is adding supply to the market, (c) existing legacy oil wells have little to no marginal cost per new barrel and (d) demand for alternative energies is decreasing demand for oil.

It is as simple as that. 


Everything You Need To Know About Christmas

by John Jazwiec

Christmas. Christians celebrate the birth of Jesus on Christmas.

The Origin of Christmas. The Gospel of Mark was the first gospel. Mark doesn't write anything about the birth of Jesus. Jesus is introduced through his baptism by John the Baptist. Subsequent gospels added the nativity scene. Theologians - professors that study the bible - agree that any first source is the most accurate source. 

The Role Of History Two Thousand Years Ago. Most people two thousand years ago couldn't read. And even if they could, they weren't interested in history. They were only interested in what things meant. They were subjected by the Roman Empire. And were looking for signs when their subjection would end. 

The Jesus Of The Gospels. Jesus of Nazareth lived and taught a rejection of materialism.

The Road To December 25th I. The Jesus movement started out as one of many sects of Judaism. Paul of Tarsus - who was a Jew that persecuted the Jesus sect of Judaism - was converted. He began his missionary work on the "God Fearing"; people who went to temple but were not Jews. Then he converted Gentiles; people who believed in the deity of Roman Caesares and their pagan gods. He ended up being executed in Rome. After Paul's execution, St. Ignatius created a Christian hierarchy - to replace independent home worship - along the lines of Roman hierarchy to become better organized for survival. Bishops had the same authority as Roman governors. 

The Road To December 25th II. Persecuted Christians survived within the catacombs of Rome. But the catacombs of Rome were also used by Romans to hold picnics for their dead relatives. It was within these catacombs that Romans were converted to Christianity. Constantine - a governor of England - captured a Rome that had descending into ruin. He used Christianity to help unite its people to rebuild Rome. In order to do so, he fused Christianity with pagan gods. The celebration of the birth of Jesus was fused with the pagan celebration of the Sun God - the re-birth of the Sun into ascendancy after the winter solstice. 

The Exit Ramp Of The Christmas Season. The date of the birth of Jesus - who lived and preached austerity - is now a commercialized Christmas season. And it is judged in business terms, like "it looks like a great Christmas season" or "it looks like a disappointing Christmas season". Change the words around and it all seems ironically absurd. 

"Well it looks like the Jesus season is going to be disappointing. Perhaps we can make it up by the Crucifixion". 


Falling Oil Prices And Deflation

by John Jazwiec

Again, falling oil prices are not just supply-driven; as they have been for the last 100 years. They are also demand-driven. For the reasons expressed in yesterday's post. 

There are a number of conditions that lead to deflation - a confusing term that needs to be defined as a condition where consumer prices fall - but the largest two are caused by falling commodity prices and individual expectations that waiting to buy something tomorrow is cheaper than buying it today. 

Thus the first condition for deflation - falling commodity prices - is happening now. And that is exacerbating the second condition. 

When the means of production (manufacturing and distribution) continue to fall - in this case from the hyper-competition from globalization, a radical change in productivity due to seismic improvements from new technology and a lower cost of transportation from falling oil prices - consumer prices automatically fall. 

Case in point. Deflation occurred in the US - pre and post the Civil War - with the advent of the telegraph and the intercontinental rail system. This period of history could be called "Web 01.0". Goods could be ordered by telegraph (see Sears and Montgomery Wards) and delivered by rail. A dramatic rise in productivity - requiring no brick-and-mortar stores and dramatically cheaper costs of transportation; combined with higher sales volumes from linking a consumer with supply thousands of miles away - dropped the means of production. And consumer prices fell. Along with the productivity of the advent of the automobile, this deflationary cycle really wasn't broken until monetary policy could be enforced by the Federal Reserve Act of 1913 and fiscal policy beginning in 1933. 

From a monetary standpoint, the Federal Reserve today, woefully lacks the ability to attack deflationary forces. While lower but positive interest rates can combat deflation; negative interest rates can't. That's because negative interest rates lower the value of savings and investment capital. 

The US has only two ways left to combat today's deflationary forces: one they are already doing and one they are not.

The US is helping to perpetuate a continued flight to safety of capital. This allows the US to maintain low but positive interest rates. Or said another way, sovereign capital, can chose to remain within their deflationary origin or park it in the US for low but positive interest rates. The third option is to park it in China. But see my post on December 9th (by scrolling down). Countries and large institutions can't trust China's banking system. And if they could, a lack of history in working with China, as opposed to a long history working with the US, still trumps a China option.

Which leaves fiscal policy; which is the tried and true way to fight deflation. Why? More government spending offsets the deflationary habits of consumers waiting to buy tomorrow than buying today. More debt? The continued flight to the safety of capital - foreign nations buying more US Treasury bonds - renders the risk of more debt as a zero-risk proposition. 

The US Stock Market this week had its worse week since 2011. The largest concern on investors minds is the fear of deflation. Continued austerity, becoming more and more politically entrenched, is not allaying investors fears. Nor mine.


Is OPEC Doomed To Fail II?

by John Jazwiec

On November 25th, I put forward an hypothesis that OPEC was doomed to fail. At that time oil was trading at $73 a barrel. Now it is trading at $57 a barrel.

http://www.johnjazwiecblog.com/2014/11/is-opec-doomed-to-fail.html

Wealthy OPEC countries could bet that maintaining supply, would lead to lower prices. And since their marginal cost would be next to zero, fracking at some point would become unprofitable. Other less-wealthy OPEC countries - that depend on crude oil being $80 to $100 per barrel - would have increase oil production and the only way to do that would be to drill new oil wells (barrels times price = monthly income and at lower and lower prices the variable of barrels has to be increased to equal needed monthly income). The latter's marginal cost would be the opposite of zero. And that schism would lead to a break up of OPEC.

OPEC's strategy has always been to create a planned market that would transcend free-markets. With the advent of fracking and private-equity backing, the crude oil market, is now a free-market. That's something OPEC never had to consider.

But the problem goes beyond a free-market for crude oil. 

OPEC has always depended on a bet - that when alternative methoids of extracting oil out of the ground is faced with lower prices, importing countries would simply stop alternative methods. But that is not happening now. 

OPEC didn't foresee demand decreasing. In part, due to world-wide macro-economic deterioration; and in part, due to 35 years of the West buying smaller cars, raising MPG standards and cars using alternative energy.

OPEC also couldn't predict the strength of the dollar due to capital flight. Roughly 10% of the price decline - oil is a dollar-based commodity - has come from a strong dollar, weakening OPEC income from currency conversion.

Even the wealthy OPEC members are probably in trouble. They depend on oil prices being high enough to provide a social safety net for their disenfranchised majority. When that "bribe" is no longer affordable, civil unrest is likely to ensue. 

For all of these reasons, the question of whether OPEC is doomed to fail, is getting more certain to this writer.


China's Economy - The Tricky Way The US Played The Debt Card

by John Jazwiec

The World Bank recently came out with a report claiming China is now the largest economy in the world. 

Not everyone understands the difference between the World Bank and the IMF. The World Bank is US-controlled and the IMF is European-controlled. 

By releasing "China Is Number 1!", the US flushed out China; and the Chinese had to disclose the tip of its debt problems. 

The Shanghai stock market slide 8% - akin to the Dow Jones dropping 1,500 points - as China's security clearing house disqualified risky bonds (junk bonds) as collateral for repo's (short term loans up to 182 days). The classification of what is a risky bond is 60% of the Chinese repo market. 

The US knows this is the tip of the iceberg. In the US, and western countries, assets that are worth less than debt, are written down. If something is worth $80 and debt is $100, the banking system and GDP reflects a 20% write-down. There is no such mechanism in China. 

Not only does China's repo market look risky, but so do the municipal bonds that have funded Chinese city's high rises and infrastructure. These municipal bonds mature in the next year. 

So why did the US flush out China? Because the US depends on being the safe haven for capital. US safe haven for capital is required to keep US interest rates low and US treasury bond prices high. If the rest of the world, begins to understand that China's financial infrastructure is not up to par and not disclosed, it blocks capital flowing to China and drives it toward the US. 

There is little doubt that China has to potential to eclipse the US as the largest economy in the world. But it hasn't really happened yet. And besides China's shadowy finances, something more risky looms between now and the cross-over point: can China's economic growth be sustainable, which requires consumption growth, by "bribing" subjugated consumers with low interest rates? 

At some point the Chinese Miracle ends because artificially low interest rates create hyper-inflation. And hyper-inflation requires US 1980-like high interest rates to fix. It worked in the US due to democracy.

But what happens when subjugated people are stripped of their "bribes" and have to revert to going back to being hungry? One billion people going hungry to be exact. 


How Inquiring Minds Now Read

by John Jazwiec

Simply putting up news and magazine print on the internet assumes an outdated "front to back" or "vertical" reader. Now inquiring minds start with subjects of interest and read horizontally.

Or said another way, today's inquiring minds don't enter URLs. They type specific and often complex interests and a search engine organizes a multiverse of different URLs. "Push" journalism has been replaced by "pull" journalism.

Having said that; an hypothesis is still critical as a straw man.

What print media never understood - even forty years ago - was hypothesis commentary was exponentially more valuable than simple UPI-like news. But the latter dominates the space.

Inquiring readers have always read print hypotheses, compared and contrasted, and then formed opinions based on veracity (the power of conveying what is truth). A premium is placed on as many different views as possible.

Non-inquisitive minds withstanding; the days of identity hypothesis is over. One only has to look at polls to see that people no longer fit into static groups of liberal and conservatism. The new majority is independent.

Thus the major print empires, in the digital age, are only worth as much as its best hypothesis writers and their diversity and the ability for one to socially participate. If the major print empires really understood this; I would be reading well-written hypothesis and there would be banner ads.


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From athletic scholar and satirist to computer programmer to CEO success, John Jazwiec brings a unique and often eccentric perspective to business and supply chain challenges. Exploring how they can be solved through the leadership and communication insights found in untraditional sources. This CEO blog demonstrates how business insights from books on history to the music of Linkin Park can help challenge and redefine “successful leadership.” Read Jazwiec’s Profile >>

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