June 29, 2007

100% organic pure corporate vanilla bonds.

Sir in your “Global credit woes” June 29 you mention that “subprime problems need not cause a wider market slump and this agrees well with what Tim Bond of Barclays Capital says in “View of the Day” of the problems being more the excess leverage of the lenders, not of the borrowers. As I see it any corporation that in the future wants to issue a wholesome 100% organic and all the fibres included and no risk return deriveated away pure vanilla bond, might find a market much willing to give up some on some returns just in order to lay their hands on something they can understand better.

I can’t stand the suspense.

Sir, I once saw a balance sheet of a hotel corporation where they had registered on their balance sheet among their fixed assets the cost of building the hotel rooms but since they had also issued user rights valid over a very long period of time for each of those rooms, and were selling these out as timeshares, they also registered as current assets the inventory of unsold timeshares, valued at the price they were selling them at, and all this duly audited by a recognized name. As you can understand, this have your cake and eat it too balance sheet looked extremely solid and paid bonuses to the executives, while it lasted.

This memory came to my mind when reading Richard Beales’ and Gillian Tett’s “Real risks emerge when Pandora’s investment box is opened” June 29. If what I recounted above could happen with open and transparent audited statements (albeit in a developing country) then what limits could there be to what you could hide in black-box algorithmic proprietary trading models. I pity those judges that tomorrow will have to try to understand the issues, as I pity those that though perhaps totally innocent will be sentenced to jail just because they can’t get anyone to understand their models.

Having said that it is clear that we must face the real possibility that all of our economic numbers could be fictitious since we could already have incurred in real big losses but that are mercifully covered by a lot of untested hot air. When those boxes are opened up who will appear? A beautiful girl or someone with a machine-gun… I can’t stand the suspense, though I must admit that the bliss of ignorance has also its attractions.

June 28, 2007

But the Venezuelans will not get their gasoline.

Sir, in your editorial “Chávez gets his oil” June 28 you mention that with current oil prices “it scarcely matter that the amount of oil produced has declined in Venezuela” and I would suggest you read Najmeh Bozorgmehr’s report in FT the same day on how “Fuel crisis increases pressure on Tehran” where Iran’s fuel rationing crisis is described.

For your information, according to projections based on the current sales of vehicles, Venezuela a country with only 26 million inhabitants and a GNI per capita of less than US$ 5.0000, will in the years of 2006 and 2007 have placed a total of 750.000 new gas guzzlers on its roads, partly thanks to the craziness of a domestic gasoline price of under 3 US cents per liter. Can you imagine what will happen when you have to start to adjust gasoline prices? One of the first symptoms of the existence of a purely populist government is that all planning gets thrown out the window and you live day by day.

Whistling in the dark

Sir, Gillian Tett wrote in “Collateral values thrust to the fore by woes at Bear Stearns” June 21, about the problem of discovering hidden losses in assets that are rarely traded and that are valued through financial models when they have to be sold and most especially if in the case of a fire sale. In the respect I would like to make two innocent questions? First, how much value do these assets that are rarely traded and only valued by models represent? Through the answer we might get a better appreciation of what could happen if real life came around and forced upon us its usually brutal mark to market.

Second, are these gaps not what used to be registered as losses? With all the derivatives and hedge funds flying around is not really our problem that the financial crises, while already been happening have not been noticed as they have gone underground or informal.

If it could be said that Italy based only on its formal growth rate would have long since disappeared but that they are alive and well thanks to the informal sector, could not the opposite be held; that the formal sector that looks to be doing well could in fact have disappeared because of what is going on underground? Thinks are indeed quite scary, and so we better keep on whistling in the dark!

June 27, 2007

Consumers...hedge your energy bets

Sir in “Potential Energy” June 27, you state as a fact that Europe’s citizens would best be served by full liberalisation. I agree, but although you bring up two minor caveats, I must warn you that the final results has a lot to do with how that liberalisation is implemented and how later all the market imperfections are managed. In case you are not that certain of the final results, you could also suggest all the European consumers that they hedge their bets and take a position in the resulting energy companies, with the caveat to make certain that all the potential benefits are not captured by the financial intermediaries. Capicce?

There’s just been a change of shackles.

Sir, Martin Wolf writes so intelligently about the “Risks and rewards of today’s unshackled global finance”, June 27, that I almost feel ashamed about raising the question of whether the global finance really has been unshackled, as I believe that it has only had a change of shackles.

We have shackled much of the market to the opinions of some few credit rating agencies; we have shackled the market into the belief that risks can actually be derivated away and will not reappear elsewhere; and we have shackled the financial reward structure to something more akin to the time-share industry, rewarding those that are in fact restructuring the long term realities of our portfolios with success fees paid out immediately, based on the vendors own valuation models, and which most certainly do not bear much relation to our true long term results; and finally, the mother of all the shackles, the mind-boggling financial positions that have been built up around the world without really knowing how to get out of them, in an orderly way.

The champions of gluttony

Sir I read Jamie Whyte’s “Spread the word about the benefits of advertising”, June 27, and since I presume that he is in the advertising industry, and though he references himself to be the author of a “Guide to Clear Thinking” I conclude that he must be even more confused than what I normally am, when he basically washes his hands and places the full burden for responsible behaviour squarely on his own clients shoulders, for instance in the case of the increased consumption of junk food.

He is also exquisitely politically incorrect when he argues the defence of his industry in such terms as motivating you to drink more in order to save you from the risk of not knowing the fun of being drunk although in this as a “desire for more” inspirer he has a clear point, since we should ask ourselves what would happen to our economies if our regulators convinced us all that we have had enough, of everything.

It is we that have to learn the lesson from the rating agencies handling of Enron.

Sir Dr Len Rosenthal in his letter “Ratings need to learn lessons from Enron”, June 27, gives many good recommendations for how the rating agencies could perform better their jobs and avoid the risks of being “hoodwinked”, but he makes the fundamental mistake to presume that the Enron’s of this world are detectable and avoidable. This could be since as he belongs to a Department of Finance of a college he might have a vested interest in selling the gospel that all risks can be derivated away. I on the contrary find it not so hard to accept having to live with the risks of the Enron’s since as individual risks they could all be digestible but what I really find unacceptable is the systemic accumulation and or hiding of the risks that is embedded in having to follow the advice from some very few credit rating agencies, and this no matter how many courses they take with Dr Rosenthal.

Cutting out short term data will not fix it, more important is sending out the right long term signals.

Sir, of course that US economic long term competitiveness could be harmed by the companies and markets excessive short term focus but to believe that US economic long term competitiveness could somehow be helped along by cutting quarterly guidance is to be completely out of focus. Do not get me wrong, I am all for scrapping the quarterly guidance, although there are people making a living out of them, but what I mean is that for the US to be able to link more responsibly with the future, much more important is to start out sending the right long term signals. For instance, may I suggest a gasoline tax that prices gas at the pump at US$ 7 a gallon?

June 26, 2007

One for the short list

Sir, I do not know if you favor a competition between your columnists for the best article of the year, as some of those who predicate competition now and again show signs of apprehension when competition gets too close but, if you do, allow me then to nominate Gideon Rachman’s “Europe ditches clarity and embraces obfuscation”, June 25 for the short list. What a great article! Seems that few things beats a bar at 2 am for inspiration.

Laziness and arrogance

Sir, In “Lots of unknowns”, June 25 you write that now the Bank for International Settlements, the central banker’s central bank, says that “our understanding of economic processes may even be less today that it was in the past” but this is something they should have discovered long time ago had they not been so busy taking credits for the counter inflation benefits brought about by globalization; and driving banking risks out of banking to such an extent that so many of the risks were forced to hideout in the more informal world of the hedge-funds and in the algorithms of some derivatives. In order for them to be able to monitor the world’s financial flows, from their desks, they reduced the relations between borrowers and creditors to digital data, and they chained much of the world’s financial flows to the opinion of some hired credit rating agencies.

Now, when crisis is breeding around the corner, the most important thing to ascertain is that when the fire breaks out we do not send out the firemen who installed the sprinkler system and that are more interested in covering their shoddy piece of work.

Boy, were they arrogant. Even a World Bank was ordered to shut up and harmonize with the International Monetary Fund, one of the most famous clubhouses of the central bank’s bankers.

FT, keep cool!

Sir, I understand perfectly well the sentiments that you express in “Europe abandons the sanity clause” June 25, where you complain about the EU is dropping the principle of “free and undistorted competition”. Having said that I believe that you should be very careful sounding too principled on this issue, not only because most facets of competition will one way or another always be present in life, no matter the wording of any Treaty, but also because so much of the free competition preaching has lately gone hand in hand with the very strong intellectual property rights assertion trend, and that in many cases has signified a much more serious obstacle to” free and undistorted competition”. Therefore, may I suggest you take it easy and keep cool, as we truly need FT to be very clearheaded on this issue.

June 25, 2007

The growth of global finance is not that free or muscular.

Sir, all you say in “Why finance will not be unfettered” June 25, might be indeed be right but nevertheless you say it wrong. Yes the market has grown tremendously but if you truly believe that this has more to do with “seeking out pockets of undervaluation” than the exploitation of new instruments for temporary overvaluation, you are a true optimist. Unfortunately when the marking to the market of today’s almost incestually benign models and conditions need to be marked to the markets of the future, and we begin discovering where the risks have been hiding out, will probably find a lot of fat and very little muscular tissue in the growth. And to talk about “liberation of finance” and “unchained financial capitalism” when you have forcibly chained so much of the market to the opinions of some very few credit rating agencies reminds me of when Arthur Koestler describes how he as a young and utterly illusioned student, was able to see freedom in the communist Soviet.

June 22, 2007

About the low cost of equity and the need of Chinese “sovereign” walls

Sir, John Plender in “An unseen risk in sovereign wealth funds” (from China) June 22, mention that they might lead us “from unusually low interest rates to the conundrum of an artificially low cost of equity capital”. It sounds correct but then when later reading, that same day and just four pages away, “One door opens…” by Francesco Guerrera and James Politi that describes Blackstone’s core business as “buying companies and assets, loading them up with debt and selling them for a profit; and Ben White’s “A banking flotilla offers safe passage” that indicates a proposed Blackstone valuation of “about 26 times last year’s pro-forma economic net income, Plender’s risk prediction becomes more a reporting of facts. Also, given that China’s willingness to keep on continuing financing the market will have an impact on interest rates one cannot help but to think of how to adapt the corporate concept such as a “Chinese wall” which separates traders with conflicts of interest to a sovereign environment.

June 21, 2007

Whistling in the dark

Sir, Gillian Tett wrote in “Collateral values thrust to the fore by woes at Bear Stearns” June 21, about the problem of discovering hidden losses in assets that are rarely traded and that are valued through financial models when they have to be sold and most especially if in the case of a fire sale. In the respect I would like to make two innocent questions? First, how much value do these assets that are rarely traded and only valued by models represent? Through the answer we might get a better appreciation of what could happen if real life came around and forced upon us its usually brutal mark to market.

Second, are these gaps not what used to be registered as losses? With all the derivatives and hedge funds flying around is not really our problem that the financial crises, while already been happening have not been noticed as they have gone underground or informal.

If it could be said that Italy based only on its formal growth rate would have long since disappeared but that they are alive and well thanks to the informal sector, could not the opposite be held; that the formal sector that looks to be doing well could in fact have disappeared because of what is going on underground? Thinks are indeed quite scary, and so we better keep on whistling in the dark!

June 18, 2007

Caveat emptor rules in derivatives too

Sir, Mr Harvey L. Pitt in “Subprime confusion that leads to a lack of confidence” June 18, (graciously?) agrees with “loan modifications” in individual mortgages that allow subprime debtors a better chance to service their mortgages, but lashes out at “market manipulation” that artificially alters the underlying cash flow to credit protection buyers, which could happen either by supplementing or replacing these flows. Mr L. Pitt sounds very much like someone who has just discovered a small print clause that shows there is risk in risk coverage too, and I guess he is just a trailer for the avalanche of surprised investors we will soon see as a consequence of the boom in the hide-and-seek-risks game provided by hedge funds, primarily through derivatives. Since Mr L. Pitt mentions he was a Chairman of the Securities and Exchange Commission (2002-2003) he should be quite familiar with the term Caveat emptor. Next time he takes a position in these derivatives he might choose one that does not allow for these specific set of “market manipulations” but he could then also discover that any risk coverage this way comes with a quite different price tag attached.

Do you know of any reputable Judiciary Independence Index?

Sir, you publish June 18 a long letter that signed by the Director of the Department of Information, Press Division, Ministry of Foreign Affairs, Bangkok, Thailand, purports that “Thai judiciary is independent” and I must confess I have no idea of how much credibility I should assign to it. Would you know about any reputable Judiciary Independence Index that I could use? I mean if I where able to get a grasp on where Thailand stands on this issue when compared for instance to my homeland Venezuela it would indeed be quite helpful.

June 15, 2007

Aren’t we always in the intersection of autonomous and accommodating flows?

Sir, Tony Thirlwall in “US consumers are the global gluttons” June 15, makes a reference to Nobel Prize winning James Meade’s differentiation between “autonomous” and “accommodating” flows while trying to sort out the “savings glut” or “money glut” discussions initiated by Martin Wolf’s “Who are the villains and the victims of global capital flows?” June 13. I am not sure how much this really helps, as we are always in the intersection of the autonomous and the accommodating flows, without being much wiser for that.

Please let us learn instead and not believe more in the pure blessings of using credit rating agencies

Sir, Gillian Tett ends her “Confidence in CDO rating system showing signs of strain”, June 15, with “Let us hope that the rating agencies and regulators can find a way to make us true believers again” though what we really should be learning is not to believe more in the possibility of a system whereby through the use of some few designated rating agencies we think we can help to direct the world’s financial flows without setting it up to some dramatic systemic risks. Would not using credit rating agencies to more bank crisis and other problems? Perhaps, but that way we would at least vent the system and not allow for the systemic accumulation of risks that can only build up to a truly horrendous explosion. By the way since in these discussions there is mostly a mention of the credit rating agencies when they miss by giving a too high rating, let me also remind you of their equally intrinsic and real cost when they give a too low rating. Any credit not given because of a bad rating, could in, sys fact be the best opportunity missed the world has ever seen.

June 14, 2007

But what about a bachelor degree in being happily unemployed?

Sir, as you say June 14 happiness lessons might not be a subject to add to the national curriculum, but perhaps some core course in how to be an unemployed with socially acceptable behaviour could be useful in times of so much outsourcing and migration.

What is at risk is our freedom to do what needs to be done.

Sir, Vaclav Klaus in “What is at risk is not the climate but freedom” June 14, is both wrong and right. Wrong in the sense that the fact that people could be ordered by governments to build levees and do things do protect themselves and their children for the future has nothing to do with “replacing the free and spontaneous evolution of mankind by a sort of central planning” and sublimely right in that an abusive exploitation of our environmental emergencies by an often hypocritical green clergy could definitely infringe on our freedom to do what needs to be done.

In immigration, more than barriers new riverbeds are needed

Sir Clive Crook in “How to untie the immigration knot” June 14 gives a glimpse of what is needed by arguing that instead of working on how to solve the 12 million stock of illegal immigrants the US would be better served by first working at the flow control valves. Doing that it is important to remember that the best way to control a flow is not always by building a barrier but sometimes by finding new riverbeds where it could run more orderly. It is in this respect that I believe FT’s readers could be interested in hearing about an initiative of trying to have private insurance companies stepping up to the plate and offer to guarantee the payment of a substantial indemnity to the US government for each worker who being favored by a temporary visa program does not return home in a timely fashion.

June 13, 2007

In search of answers on search engines

Sir, the discussion around Google issues as in Denise Kingsmill’s “Google’s market power warrants an inquiry” June 13 and Maija Palmer’s FT front page report that same date with respect to the “European fight over storage of personal data” naturally befuddles many of us.

Clearly a search engine should mostly be valued in terms of the services it offers to the searchers but in this case it is actually the searchers that become the searched and this leads to some very strange signalling effects. In fact I would not mind if Google was allotted, by the system, to perform a maximum of free searches, let us say 20 per cent of all the searches on the web during the last 24 hours, and thereafter, in order for a Google search to be allowed, a searcher would have to demonstrate Google’s search worth, by being willing to pay a substantial amount to Google for their service.

Also, with respect to privacy issues, we suddenly read about a possible compromise that would have Google cookies expire after only 18 months instead of 30 years, as if privacy had anything to do with time. On the contrary, if privacy was indeed the case, then one would perhaps be able argue that it is only after 30 years that Google could be allowed to use any personal data.

June 12, 2007

Why do you not sit down and talk instead?

Sir, Mr Vito Stagliano argues that “Opec’s threats prove sense of promoting alternatives to oil” June 12. There might be a thousand reasons for developing alternatives to oil but the only thing that the Opec threats really prove, is the need to sit down with them and talk about the whole issue. For instance if in 1998, when the price of a barrel of oil was $11 and according to some pundits like the Economist heading for $5, someone would have offered to buy the barrel of oil in a long term take up contract centred around $30 with some flexibility on the up and downside, then perhaps we would not be going through the current circumstances. Someone must have a vested interest in the oil issues not being solved by talking.

Immigration policies should not be a Noah’s Ark.

Sir, you are absolutely right when in “Small steps needed on US immigration”, June 12, you insist on the need to build credibility, which is exactly what some of us are trying to do by for instance developing a private insurance programs destined to guarantee that workers with visas issued under temporary programs will return in a timely way, or else paying some very substantial indemnities. What is not that clear though is why you think that creating bureaucratic biases in favour of high skilled workers is a naturally good thing to do instead of allowing the market to signal its own and very dynamic relative worker shortages. One thing is a Noah’s Ark in times of flooding and quite a different thing when it remains in the same spot, on dry land.

The explanation lies also in the absence of the normal “shavings”

Sir, I would absolutely side with Martin Wolf when he favours the “saving glut” (the US as a helpful consumer bumper) over the “money glut” (the US as an abusive imperial money printer) in “Who are the villains and the victims of global capital flows” June 12, as the main explaining factor for the compression of risk spreads and financing of the robust growth of US consumption. Having said that I would like to remind that there are many more characters to this story.

Over the last decade, much the result of the Basel regulators’ efforts to drive out banking risks from banking, many of the financial risks have gone into hiding, frequently with the help of derivatives and credit rating agencies, and the world has therefore not suffered as many of the financial shavings that crisis and bankruptcies traditionally produce. You might mention Enron and the likes but the fact is they add up to almost nothing when compared to the tsunami dimensions of the flows. At the end of the day we will perhaps find much of the global capital flows evaporate into hot air when risks begin to show their face again and as perhaps has already started with the subprime mortgages in the US.

June 11, 2007

Spanish sayings and subprime woes

Sir, there is a Spanish saying that goes “we were many and then granny gave birth”. It came to my mind when reading Michael Waldorf’s letter “What Paulson and others are concerned about is manipulation of the market” June 11, in reply to some articles in FT that put forward the unkind possibility that some hedge funds could be against “loan modifications” that help mortgage payers, since they have a vested interest in the defaults (a short position). I say this because the market manipulation here denounced by Waldorf, namely that some credit coverage sellers (a long position) are buying up defaulted mortgages at par in order to keep up the value of their portfolio, only indicates another factor to be added to the current messy confusion that surrounds the subprime-affair. Seems that while some do not mind increasing the number of homeless, others are more concerned that we would notice it. The much rumbling and mumbling we hear also reminds of another Spanish saying that says “when the river sounds it is because it brings stones”.

June 09, 2007

Odious debt revisited

Sir, I must confess I was blown away when reading your editorial “Young, gifted, poor”, June 9, in which Junior, with reference “to the old saying that rather than inheriting the planet from our ancestors, each generation borrows it from the children” now wants to see “some collateral on the loan”. I mean, it sort of puts the whole issue of “odious debt” in a totally new and frightful light.

Honestly, the more I see what we are up to, the more certain I become that sooner or later our whole generation of baby-boomers could be kindly invited to take a field trip to an “ättestupa”, meaning those steep cliffs where supposedly elderly Scandinavians ages ago threw themselves from when they became useless to society.

I repeat again my argument for an urgent revision of our governmental system so as to align them with the true shareholder’s interest. If the average life is eighty years a new born should have 80 votes (exercised by his mother or older brother) someone like me would have 23 votes left, and someone over eighty should count his blessings and be glad if he is allowed to keep one as a memento. I do not want to owe the world too my children, I want to assure their rights as stakeholders and make it all a joint venture.

June 08, 2007

Sir Samuel Brittan’s blackout

Sir, Sir Samuel Brittan in “Towards a true price for energy” June 8, speaks up for the UK climate change levy and ends by saying “And if Opec made disapproving noises we would know that we were really on to something”.

He must be suffering from memory loss. In late 1998 early 1999 when oil was around $11 per barrel and according to some pundits (The Economist) heading for $5, then the distribution at the pump was 85 per cent for the UK taxman, 5 per cent for distribution and only 10 per cent for the producer who gave up for ever the non renewable resource that we should remember oil is. And sure did Opec produce noise, among others oil at $70 and Chavez.

If only at that time, Sir Brittan would have suggested fair long term take up contracts at $30 dollars per barrel, I can almost swear we would not be living the current extreme market tightness, and so reading him now suggest that the “proper reply to threats from Opec against the development of biofuels is to tell them to take a running jump” is just sad.

By the way, on biofuels, for the sake of our children, please let us not take a running jump, just to run our cars a couple of miles more.

June 07, 2007

Let us keep it as much as possible above the board

Sir, years ago, when the Venezuelan state owned oil company PDVSA was a thousand fold more transparent about its activities than it is now under the Chavez regime, I still had to go to their official filings in the US, produced as their debt were publicly listed there, in order to get the best possible information. I must confess that ever since, I am totally biased for public listings. I needed to alert to that fact before commenting on the letter of Javier Echarri the Secretary General of the European Private Equity and Venture Capital Association and where based on their own compilation of research reports he categorically states that “Private equity is fully regulated and benefits the pension funds of millions of ordinary people” June 7.

It might very well be that Echarri is right, but since the reason for taking companies private sometimes sound so similar to why some big chunks of our economies in many countries go underground into informality, should we not at least mention that it surely reflects badly on our society as a whole if we make darkness more valuable than sunlight.

By the way, one thing confuses me with respect to all those investments by pension funds in private equity funds that Echarri mention. As I have understood it pension funds are frequently restricted to the use of investment graded instruments, and so in this case that would signify that private equity companies can be investment grade, for public purposes. Is that not something of an oxymoron? Or do the credit rating agencies have access to some internal information we don’t?

A hidden tax is neither acceptable nor efficient

Kyoto with its system of selling indulgencies for undefined carbon-sins and invest the proceeds in equally undefined carbon-good-deeds, while capping carbon emissions at a globally unsustainable level, is something like building a labyrinth in order to make the search for the exit door for our environmental emergency more interesting. Clive Crook in his “Bush may be on to something…” June 7, presents the alternative of another labyrinth, in this case a national one, that would make it possible to “simulate a carbon tax . . . avoiding the word tax”. Forget it! If we are to find our way out of the very difficult environmental hardships transparency is a must and we have to be able to call a spade a spade. If what we need is a direct carbon tax let us work on that and shame governments into action.

Crook also mentions that the sale of “perpetual permits” would create a constituency with a vested interest in enforcement of carbon caps as that would make the value of the permissions go up. Forget it! If we are to find our way out of our global and public predicaments we cannot afford having the income to ex ante deviate into private rents when so much investment is needed, just as we also must be extremely wary of any signalling risk. Place these “perpetual permits” investors in front of a forest and ask yourselves whether their profit motives would induce them to reach for water to put out a fire… or for the matches.

June 06, 2007

Why not deregulate the banks instead?

Ian Morley from the Alternative Investment Management Association in “Hedge funds and regulators can work together” May 6, tells us that hedge funds are a positive force in markets by providing liquidity while at the same time on the opposite page Roger Merrit, from Fitch Ratings, in “Hedge fund behaviour in credit markets is untested” poses some serious questions about just that, and of course they are both right, for good and for bad.

Having said that when reading Morley’s spirited defence of voluntary regulations and of the fact that regulators should instead help to enforce these instead of coming up with their own I just want to ask where was he when the banking regulators decided for instance to force down the throat of the market, the opinions of a couple of few credit rating agencies. As one could argue that it is the excessive regulation of the banks that has been the main driving force for the hedge fund industry and that banks should in fact be more important than hedge-funds, perhaps what Morley should ask for is some deregulation of banks, but of course that is not what the alternative association is paying him to do.

For a starter defend the right to be unhappy

Sir, Martin Wolf did not seem to be too happy, and rightfully so, when trying in “Why progressive taxation is not the route to happiness” June 6 to review a “new doctrine” on happiness proposed by Richard Layard of the London School of Economics. 

Perhaps this was because in his response he might have focused too much on the outliers of a normal distributed happiness curve, instead of going for that huge middle area where tranquil conformity plays a much bigger role, as there is nothing that attempts so much against happiness than being forced to be happy. 

Wolf is absolutely right saying that happiness is something that should be pursued individually and that governments cannot make us happy but, having said that, I suspect that I am more convinced that he is about that a society where the use of some progressive taxation is deemed as natural, must be a more fertile environment for the individual pursuit of happiness, than an everyone for themselves society. 

Next time you complain about having to pay progressive taxes think of those who have not reached your marginal rate and count your blessings... and think of it as a status symbol. Finally let us not forget that if you never have cried you have never really laughed either and so the first stone on our road to true happiness might in fact be to guarantee the possibility for the broken hearts in our life.

Where is everyone?

Sir, Roger Merritt the Managing Director of Credit Policy of Fitch Ratings, one of the three and only credit rating agencies, now tells us that “Hedge fund behaviour in credit markets is untested” June 6, even though he knows that when you for instance rate the adequacy and safety of a boat you must do that in reference to the waters where it is suppose to navigate. Merritt, in response to a report in FT, now mumbles about some new paradigms in the global credit markets and then goes on to explain some century old facts that we all know and that he should have known. Where are the regulators willing to regulate when we need them?

What is new though, perhaps only because it is so shocking we did not even want to think about it, is that this diversify-your-risk driven market and that I prefer to call the hide-the-risk market has now developed some financial products, formally traded among formal participants, that create a vested interest (which means they profit) in the default of mortgages. What is this? A financial coliseum? Although I do no profess to understand it all (who can) I am no stranger to the fact that this type of derivatives could help people to get easier access to mortgages but now try to explain to someone being evicted that you cannot help him because someone has a legitimate profit motive that stops you from doing so. Where are our leaders when we need them?

June 05, 2007

The Venezuelan TV station’s closure is an infringement on your human rights too

Sir, the Universal Declaration of Human Rights in its Article 19 states that “Everyone has the right to freedom of opinion and expression; this right includes freedom to . . . seek, receive and impart information and ideas through any media and regardless of frontiers. This makes it clear that the arbitrary closure of a TV station in Venezuela although it affects directly the Venezuelan peoples right to expression, it also impairs any other citizen of the world’s equal human right to access information. This is made especially clear by the fact that the most reasonable proxy for true information that the world knows, is the free and diversified creation of opinions.

In this respect I need to ask whether you could ever be satisfied with a rainforest with only eucalyptuses and red parrots. Of course not! Therefore we need your help to conserve the info-diversity in Venezuela. As the indigenous to this small planet earth that you all are, this is your problem too. You do not need Venezuela to join the list of countries with absence of information, such as North Korea.

Investing in people losing their homes?

Sir, June 1 Saskia Scholtes reported of hedge funds' "Fear over a helping hand for home loan defaulters¨ and June 5 Richard Beales says that Fitch ratings could downgrade bonds backed by subprime mortgages if the loan's terms are changed to help borrowers keep their homes. It takes some time for the implications of such news to set in but when it does it really knocks you down. Do they mean that in all the risk diversification (or risk hiding) that has been occurring through derivatives we have now actually created a group of investors with a vested interest in people losing their homes? Sorry, something sounds wrong and this surely must be something more than your regular moral hazard. Can I go long on a nuclear missile index?

June 04, 2007

The sale of healthcare should follow stricter standards than the sale of timeshares

Sir, Brad DeLong in “Obama can remedy an ailing healthcare system” (why only Obama?), June 4, says that “the US spends twice as much as Western Europe for little benefit” but then only continues talking about the need of increasing the health-insurance coverage and which presumably could only increase health-spending. I am a foreigner and no expert in the area of health assistance in the US (probably thankfully) but, from the little I have seen the number of uninsured is large, but so are also the costs they are charged. Whatever you do there should be no place for timeshare selling procedures in healthcare and there should be a rule that states clearly that you are not allowed to charge someone without coverage, more for medicine or any health service than what you would charge a covered patient. By the way, and before you lose all sense of social solidarity, please develop an insurance that covers any additional costs because of what could be discovered in your DNA when gene tested.

De-regulation Italian style

Sir, Wolfgang Münchau, who I do not take for an Italian begs “Italian politics needs to get over the rainbow” June 4, because, if not “over a period of 10, perhaps 15 years, Italy’s economic decline will become unbearable”. Unbearable to whom? Since I cannot under any circumstances profess to being an expert on Italy and I must instead confess always having the need of seeing what Italy could offer the world in terms of tips for better living, I would be more inclined to find in the observation that “many public sector employees never turn up for work” a description of effective de-regulation Italian style, and in the “yet are fully protected against dismissal” a slightly too Germanic observance of the taking care of the losers rule so admonished by the World Bank and others. Capicci?

June 02, 2007

Forget the biofuels and go for a real oil price floor instead

Sir, what do you really mean with your editorial “Biofuels need not leave us hungry”, June 2. You start by mentioning that the US corn based is ethanol grown in Iowa is “eye-watering wasteful”, and there is no one to discuss you on that, but then, though you spell out the arguments of ethanol being only marginal less polluting than oil and that the marginal new production areas of sugar-cane based ethanol lies in the rainforests, you still conclude that EU should drop its tariffs on ethanol…with a dramatic “now before it is too late”

Days ago, May 23, you suggested (for the US) “A price floor for oil” but, since you proposed achieving that by imposing green taxes on gasoline, you were there actually suggesting a price floor for anything but oil. May I instead take you on the word and suggest you try a real price floor for oil, whereby Europe guarantees a take up of oil based on a minimum negotiated price? That would help to bring some real new oil production to the market and, if you then would want to impose some other green taxes on gasoline to finance the cost of that real price floor guarantee or just to further reduce its consumption, well be my guest.

Sir, why does Europe willingly to enter into long term take-up agreements for gas but not for oil?