Saturday, September 20, 2008

McCain’s Quagmire – His war with the media.

Despite all the speeches and promises, most voters have very little to go on in terms of predicting the type of president the nominees might be. However, their relationship with the public, and the media in particular, can reveal telling methodologies and personality traits that have a high probability of translating to the oval office. After all, most of what the public sees of the POTUS is what the media captures and delivers to our homes and computer screens. The free press as is an integral part of the democratic system. This is the same press that McCain has decided to wage war against. Below are a few reasons why he is losing this war.

Going to war for the wrong reasons:

McCain’s declaration of war with the media was an attempt to connect to “everyday” people at home. McCain could have doubled up his interviews, gotten people to see his “softer side,” or even done more work to appear more approachable. Instead, he decided he needed a war because in his opinion the best defense is offense.

Lack of diplomacy or restraint:

A lack of diplomacy got McCain to this position in the first place, but rather than “talk to the enemy,” McCain (and his VP choice) decided to use cowboy diplomacy filled with bravado and spite. The RNC’s main theme was “Bring it on!” to the media, a rally for the crusade of the conservative right. The overall message: “If you aren’t with us, you are against us – U-S-A!” Rather than inspire fear in the enemy, he rallied them, as indicated by the money raised for Obama that very week.

No understanding of the enemy:

McCain’s war focuses on the networks and the editors of the major newspapers. What he doesn’t understand is that the definition of media has completely changed over the last decade. The people are getting their information from both 24 hour cable news shows to Comedy Central’s “The Daily Show” and “The Colbert Report.”

Even the radio waves are no longer a safe heaven, as Talk Radio programs like Air America are increasingly popular with the disaffected public.

Perhaps more importantly, he has underestimated the power of the blogsphere and of social networking. McCain was not prepared for the onslaught from the underground online masses. Never in history has the common person had the ability to easily express individual beliefs and information and share them with thousands of people instantly. When people like Perez Hilton can become political commentators, McCain’s enemy is no longer clearly defined. The enemy becomes endless, faceless and ever growing.

A weak coalition:

McCains best allies in this war are those who most hurt him. When his top economic adviser Phil Graham calls people struggling in this economy a nation of whiners, Carly Fiorina says he and his running mate aren’t qualified to run a public company, when a spokesman insists McCain invented the Canadian-made Blackberry, when Karl Rove criticizes the “truthiness” of McCain commercials, when his own VP candidate places herself on the top of the ticket, it shows the lack of cohesiveness of his own coalition.

No Exit plan:

Perhaps the greatest shortcoming of McCain’s war is he has no strategy for peace. He needs the media and he knows it. Without them, McCain must spend his money promoting his own message via commercial channels, which will cost him much more than the 85 Million he has in his campaign to use. This is probably why the Campaign is looking to test to limits of fundraising under the rule limits. Should he win, he will need the media to recapture the hearts and minds of half of America, and have at least the semblance of a honeymoon period in the White House.

Instead, McCain accuses commentators (wrongfully) of being Obama supporters, shows visible testiness on air, and even limits their access to his VP, only allowing interviews at their discretion and when Palin is practiced in her talking points.

This is no way to plan for an end to his war. The last thing McCain needs is to delve into a perpetual battle with the Media, or whatever gains he achieves, even that includes the White House, will be short lived at best.

Best hope – a surge.

His only chance at winning this war is with the surge he gained by picking the moose hunting hockey mom who calls herself various types of aggressive animals. The Surge, at first glance seemed to be working. His polls went up, his based was energized, and for a while, he seemed to have an upper hand. But he has squandered this surge with lies and questionable tactics.

McCain is looking for another surge, a way to keep the media on defense so he can push his agenda through. He tried with the “lipsticked pig” controversy, which backfired. McCain’s best chance to victory is to claim victim and get his people to be angry at supposed unfair accusations. His strategy is to pick a fight, a reason to be angry because he hopes it produces the attention he needs.

His war continues to expand:

McCain is now expanding his war from the media to wall street, first by calling for resignations of the SEC chair (of which he has no jurisdiction), than trying to connect his opponents any way he can to the fall out. People have begun to see the pattern emerging – rather than find a solution to a problem, McCain looks for an enemy to destroy.

There can be no victory without the people:

Eventually, McCain will need to end his campaign against the media, in victory or defeat, he will move on. While he is busy battling the media, the people continue to struggle. As was evident this week, he can distract people with his surges for some time, but the reality on the ground will keep taking forefront.

By continuing to fight, he risks not only his chance at the presidency but his legacy. McCain risks being seen not as a maverick but as a marauder, and may very well go down in history as a man who, in order to win an election, lead himself into his own personal quagmire.

Wednesday, September 17, 2008

On The Wall Street Meltdown

In 2006, around the middle of November, I was working at a one of the largest brokerage houses on Wall Street, which shall remain, for this exercise, nameless. I had been working there for close to 8 years in various functions, the latest of which was as a junior middle market institutional sales guy.

I was at a party for my friend’s birthday, and at that party after a few drinks, we were talking about what normal Latino educated “elitists” talk about after a few drinks – politics and the economy. During that conversation I said to my friends “CDOs. That is going to bring this market down.”

To be sure I knew very little of what I was talking about at the time. CDOs were all the rage, and at my firms, they were THE premier product to sell, due to it’s high margin and apparent ability to return high yield with little risk. My friends asked me why, and I didn’t have a real answer, but I did say – “No one knows what these things are. But they are being sold like hotcakes. Clients have no clue, the banks don’t really have a clue, but as my boss made it clear to my team, “if you aren’t selling structured product, you ain’t sellin’”

It wasn’t till a year later, after I had left my firm and had attended that year’s version of the same event, did one of my friends bring up my apparent premonition. Now, I am no Miss Cleo, so this isn’t about that conversation. But this is about the last two years and how this crisis was waiting to happen.

There are going to be a lot of smart people, economists, politicians (except the ones running for president apparently) who will dissect this event and attribute it to a lot of causes. Regulation or deregulation, greed, the housing crisis, lax credit, etc. I will let them battle that out because most of this is “above my pay grade.”

There isn’t much I can say in terms of specifics of my experience during my last years in Wall Street, mostly because I’m sure I signed something that limits what I can say. But I will say that in general, the banks were ravenously competitive and struggling to maintain quarter over quarter and year of year growth, while the fees they could charge for most of their basic products, selling equities, bonds, mutual funds, etc, were in a perpetual free fall. Sell side research was, to put it mildly, difficult to value, and more clients could transact for next to nothing with online or prime brokers. In order to stay competitive and in the black, brokerages across wall street became more and more dependent on selling exotic securities, structured products like CDOs, credit swaps, etc, because they were high margin products (meaning lots of hidden fees) and couldn’t be bought and sold in the general market.

In a seemingly separate observation, Wall Street is generally known for its high turnover, but post millennium, that turnover became the standard. Entire sales/trading teams from other firms were poached along with their client lists, and restructuring of middle management seemed a constant. Loyalty to firm seemed a useless value, as most senior management came from other firms. There was a general joke that it was easier to move out than up, and I was given advice multiple times that if I wanted a significant pay raise at my firm, I’d be wise to leave, spend some time at a competitor, and than come back.

Another thing to mention was the business unit structure. For many at large brokerage firms, competition was heaviest not with other firms, but with other desks within their own team. To drive margin, P&L (profits and losses) were measured on a desk-by-desk, day-by-day, team-by-team basis. Any business coming from clients where credited to the desk. This often caused units to fight over clients especially when firms began to silo teams by product group rather than client. In my opinion, this produced a situation where short term wins and profitability overshadowed long term risk of a product or the market. It was about that day’s wins, and that team’s revenue. Not much else mattered.

To me, the combination of a virtually illiquid product understood by too few, sold by people with little institutional memory, who’s goals were about short term profitability over long term risk, spelled trouble. I think that was what drove me to start thinking that the future looked bleak.

A year later, the mortgage crisis is in full swing, and it was a matter of time before the underlying components of most of the structured products started to unravel. Most of the firms who did well selling these products did so in part by saying to clients they would always make a market in a security. Which usually implies (though not overtly due to regulation) “if you need to sell it, we’ll buy it back.” No one intended to actually HAVE to make a market during a crisis on everything they had previous sold to customers. But lo and behold, that happened. The structured desk who had produced superstars where now dragging the profitability of the entire firm, and with the amount of product that was in the market, it was a matter of time before these banks were crushed under the weight of their own making.

How this will play out is anyone’s guess. If I had to make a guess, stand-alone brokerages will be a thing of the past, gobbled up by mega banks and if they are lucky, able to function as subsidiaries.  But for me, this is very personal. I had drinks with a former colleague in a crowded bar filled with distressed looking suits. She told me how international clients were frantically removing all their exposure to US counterparts. She wondered if her function would survive in this post merger world, just as she was preparing to plan for children. A cousin who now lives in Miami told me she worked at one of these firms for almost 10 years and the money she set aside in her 401K was now all but gone. Another family member is sure to be unemployed. None of these people are the 335K salaried Wall Street royalty the newspapers like to portray. While that number may be the average salary, just like in the US, that number is heavily skewed by a decimal-percentage of people at the top, with the vast majority of people making much, much less a year.

Where do we go from here? We will see, however, I find it interesting how in a crisis many of the Wall Street leadership begs for government intervention, while they vote and lobby for Republican ideals of deregulation and tax breaks. It’s like the atheist who, now on a raft in the middle of the ocean surrounded by sharks, decides he had better begin to pray.

Those who vote with the conservative right talk about how they don’t want their tax dollars to pay for other people’s health care, yet here our tax dollars are paying hundreds of billions of dollars to bail out firms who’s demise was caused by their own risk/reward miscalculations.

Despite all this, no party can claim that they have a full grasp of these events or their ramifications. This is a tragic event on all accounts, as one of the pillars of America's service based economy is in the middle of a very public unravel.  We are truly in a precarious position when one of the foundations of our global strength can no longer hold its own.

Tuesday, September 9, 2008

Obama's Brass?

In March, during the primaries, I wrote: “So it’s a good thing to see that Obama's got some teeth as well. And I think the masses need to see that as a good thing as well, and not be all dejected and "oh my god, Clinton ruined the race ‘cause now Obama's got to be negative..." Pllleeeaaaasssseeee.”

In that note, I was commending Obama for showing some teeth and fighting back on some of the things the Clinton’s were doing during the campaign. At the time I supported Hillary, mostly because I thought she was the better fighter. I called her a “Mongoose” ready to take on the snakes of the Republican Party.

Obama of course won that contest and like I promised, I am supporting him 110%. I’ve donated, I’ve signed up to make calls and even travel to a battle ground state, as long as the state is Florida ;-).

But now with the nomination behind him, Obama seems to have sort of chilled out – And with McPalin gaining steam I ask again – Obama, let’s see some teeth man!

One of my favorite movies is Glengarry Glen Ross, and in particular, the monolog by Alec Baldwin as Blake, the superstar salesman who opens up the movie with sound advice to the main characters.

“You want to know what it takes to sell real estate? It takes BRASS BALLS to sell real estate.”

So it does to become the POTUS, and go toe to toe with the Rove machine. Nobody campaigns like the Republicans. Their whole mantra is play to the crowd, keep it simple, and attack, attack, attack. This is not a “ten paces turn and shoot gentlemen’s duel he’s having. This is backyard UFC type of stuff, complete with folding chairs and ladders, meaning quite frankly, there ‘aint no rules.

The Clintons know this very well and have the scars to prove it. They are after all, the only team since 1992 that’s beaten the GOP machine. Obama can do well to learn some tricks. Perhaps that will be the subject of discussion during his lunch with Bill on Thursday.

Obama’s got some spunk when he wants to show it. Coincidentally enough, he used the lipsticked pig reference (are you reading my blog, sir?) just today, which brought the Republicans to an uproar. That’s what I’m talking about. Make ‘em mad, because when they are mad, they make mistakes. For example, as they try to twist the pig reference to claim victim, the only thing they do is show their own hypocrisy and penchant for whining.

We need more. We need to see some podium pounding, brow wrinkling declarations like “We will not let the Republican’s trick us again!” “McCain and Palin are two sides of George Bush!” “Palin is a liar and a cheat!” Obama needs to release his own pit bulls from their pens and on the talk shows including “Fox” to raise the necessary objections. He can’t rely on Keith Oberman to do all the work – I love that big guy, but he’s starting to sound silly.

Also, Obamaniacs everywhere (myself included) need to see energy and emotion coming from Obama/Biden. They don’t need to see thoughtful and civil responses on the Sunday talk shows. We need some “bring it, busters!” to get people fired up and motivated. He can’t laugh this off as I’ve seen him do when a talking head describes to him the latest junk from the GOP. The dismissive laughter at the crazy McPalin tactics can come across as condescending, which is an arrow in the wrong quiver. He needs to take them to task.

Start with Obama’s stump. He needs to get the energy up during the attacks because that’s what makes the news. He needs to defend his policy on the war with a backdrop of veterans. He needs to challenge McPalin to come up with actual details of their tax plan. Most of all, he needs to remind everyone that McPalin is anti-choice, anti gay and anti-environment every chance he and his crew get. As for the interviews, he needs to show that he’s upset at the smears, and it’s got to stop.

In the very near future, Obama needs to step it up a notch. People are looking for him to show that he’s got “the brass” to get the job done.

Monday, September 8, 2008

Putting Lipstick on the Pig

Before my current job, I spent close to 10 years at a major brokerage house on Wall Street. My early years were during the bubble and the subsequent fall out.

Around 2002, there was a commercial that hit the airwaves that alluded to unethical practices by many of the top brokerage firms during the IPO craze, selling companies with little or no fundamentals in order to fill the ravenous need by investors to catch the next internet superstar.

The commercial was by direct online broker Schwab and it focused on a room full of brokers preparing for the next selling campaign. In it they admit the lack of fundamentals of the subject of their sale, but are more motivated by selling incentives etc. The rallying cry to the "pretend" sales force was “Let’s put some lipstick on this pig!” and it became an instant classic. Publically, brokerages were outraged at what the commercial did to ridicule investment professionals and how it eroded investor trust. Privately the line became the inside joke of almost every campaign in the foreseeable future. You know when I started hearing that joke again used regularly? When CDOs became the product du jour. I kid you not.

Palin’s “Pitbull vs. Hockey Mom” brought back memories of this line, as it should have any person who was on or dealt with Wall Street during the turn of the century. I wondered how quickly the comparison would come up. But it didn’t. Strange. It seemed so very obvious – animals with lipstick? Com’on guys…nobody? Not even the great John Stuart? Wow.

The media is still licking it's wounds from the "pitbull's" attacks and her handler's accusations. They are being overly careful with their comparison so as not to appear sexist or unfair, even if that means not stating the obvious.

Thank goodness for bloggers, eh? Before I go on, for P.C.'s sake, let me state early on that this is not about Palin the woman. This is about the McCain/Palin the ticket, and the new “Maverick” mantra. Is this newly re jiggered campaign of McCain/Palin simply more lipstick on the pig of a campaign being run by the Republicans? From what I can gather, nothing has changed. Why has the campaign gotten such a bump? "Service" was boring and "Country First" was pretty dull, but the "Maverick" team? Now there is some smart marketing. Change the packaging to sell the product that didn’t sell before – the essence of the "lipsticked pig."

Even the new team seems like more of the old team. The Vice Presidential nominee is a former governor with no national or international experience, who comes from oil country, is a disciple of the Christian conservative right and has a great smirk and “awe shucks” demeanor. Doesn’t this sound a lot like George W circa 2000? What’s the difference here? Lipstick?

And the platform – has that changed at all? There seems to be no change of policy concerning Iraq, taxes, choice, immigration, healthcare or the economy, other than maybe to go more towards the right. This is the same platform that this country is now trying to dig itself out from. How has this escaped the minds of so many people who are now so eager to support the people in power who are responsible for the last 8 years?

But just like during the tech bubble, most people are not paying attention to fundamentals. The fault of the overexuberance of the internet bubble lies with both the stock peddlers as well as the greed of the individual investor. I remember brokers telling me that despite clients having a low risk tolerance assessment when opening accounts, if their portfolios didn’t perform in the double digits, the clients would transfer their money to brokers who promised he/she would. It was impossible to convince clients that fundamentals were more important than comparing returns at the country club.

Republicans are good history students. That, and they expect very little of people. They believe, rather, they are relying on the belief that people don’t listen to fundamentals, that they would rather “feel connected” to a candidate than pay attention to policy. Based on the recent bump in poll numbers - could they be right?
Before the convention, McCain was the keeper of a lonely and unwanted pig. Now with this new, lipsticked GOP ticket, it seems the Republicans have gotten more people to ignore the smell.

Thursday, September 4, 2008

How Not to be an "Elitist"

I’ve learned something very valuable from the RNC these last few days. For many years, I never truly knew what an elitist was. Thank you RNC for clearing it up for me. I don’t want to be an “elitist,” so by watching your convention and what you define as elitists, I’ve written the following steps to avoid for myself and others like me.

  • Don’t come from a major metropolitan area
  • Don’t work for NBC, CNN, the BBC or any other media network except FOX News
  • Don’t loose your regional accent
  • Be educated, but not too educated. One degree’s enough for you
  • Don’t show you’re well read unless you can do so in a regional accent
  • If you volunteer for something, it has to be connected to something that directly benefits you and/or your family. Helping strangers is verbotem
  • Speaking of foreigners, don’t know any foreign languages. Speak American, because you are in America. And don’t let any foreigners think you are cool, especially the French or Germans.
  • Don’t write a book, or if you write one, don’t get rich off it.
  • Marry up. If not, she had better be a teacher, nurse, or some other expected profession, and not someone you met at your haughty-taughty job
  • Make sure you have sons, and that they go to the military. Otherwise, what’s the point
  • Don’t be seen with other successful friends that look like you if you don’t look like the rest of America. One “elitist” is enough for any picture thank you very much
  • Don’t mention you can understand someone else’s point of view. Fair discussions are for elitists
  • Never change your mind even when you change your mind
  • Don’t move up too quickly from your born economic status. If you do so within your own lifetime you are an elitist
  • Don't give pretty speeches. Unless you are attacking someone.
  • Most of all, have a gun. Be sure you have pictures with dead animals.

I hope I can do these rules justice in order to gain your "good opinion."


Sorry guys, I couldn't resist...

On Palin and the Real Republicans

We have much to thank Governor Sarah Palin for this morning. What we have seen is the soul of the Republican Party. Her speech, riddled with ridicule, sarcasm, condescension and spite (and they have the nerve to call us the “angry left”?) has let the cat out of the bag in terms of what is hiding behind McCain’s party.

The ultimate wolf in sheep’s clothing, Palin’s “awe shucks” accent and diminutive stature did little to hide the ferocity of her demeanor. For the unbelievably homogenous crowd at the RNC, her speech was the proverbial “red meat” they desired. That meat was bloody Alaskan game, and the frenzy it produced was worthy of a discovery channel shark week special.

But the rest of us have something to thank her for as well. Because for some time, the Republican Party (the REAL Republican Party) had been uncharacteristically and reluctantly hiding behind the not so extremist views of their standard bearer McCain. For the most part, it was difficult to argue that McCain was a typical Republican, because he isn’t. It’s the reason he was getting luke warm support from his own party. Over the last few years, he’s been paddling his way back to the right-wing to get their support, and Palin is that guiding light to their shore.

Her personal family issues aside, Palin should scare this country out of its complacency in this election. Palin is a Buchannan disciple, and she has brought the culture war back into this race. She will try to bring back the old favorites to wrestle away the discourse from change – Democrats will raise your taxes, take away your guns, steal children from your wombs and have gays getting married in your living rooms. She attacked Obama with the glee of a high school cheer leading captain berating the chess club kid, favoring style over substance and going for crowd reaction over reality. The fact that she pounded on Obama so hard on being a “mere” community organizer in his 20’s (while she was doing what, PTA?) shows the callousness she and her party have of the efforts of others to help the very same people they try to say they identify with.

This is the Republican Party we’ve come to know and hate. To start, it reminds us of the hypocrisy of their cultural snobbery – the reason Palin’s daughter is of such interest to the media is not because they want to attack her kids, but because her pregnancy is such a glaring antithesis of Palin’s “abstinence only” stance of sexual education. It reminds me of Marcia Cross’s character in "Desperate housewives," who’s culturally conservative rigidity forced her to banish her gay son and "fake" a pregnancy to cover for her teenage daughter. I am not saying Palin did the same, but it shows how ironic and uncontrollable life can be to those who wish to control life so much.

The other reason Palin best reflects the Real Republicans, is because of their ability to confuse the debate with their cultural demagoguery so that voters will vote against their economic and social best interests in order to adhere to the fundamentalist code of right wing morality. They laud “service” as if no other party has ever served or died for this country. They shout “USA! USA!” not out of pride, but out of defiance, both to the world and to those who disagree with their beliefs, hijacking patriotism to conform to their limited view of what it means to be an American. They belittle the masses of people who are suffering under their watch and try to equate change in leadership with some type of apocalyptic scenario where people no longer “know their place” and “the good people of America” will be overrun. They are the first to wrap themselves in the flag as if the appropriation of those colors shields them from criticism or debate. They do the same with the military, hiding behind “supporting our troops” to assail those who would criticize them for placing these troops in harms way.

Best reflecting what is behind the horned-rimmed glasses are the speakers who warmed up the crowd, Huckabee, Romney, and my favorite hypocrite and political opportunist – Rudy Giuliani. Along with Palin, they now constitute the four horse men of the Republicans leading this new charge.

The problem is that many will not see past the mommy machine and the cute kids to what lies underneath. A work colleague of mind who I don’t consider overly conservative said his wife cried during her speech because she could relate to her as a mom. What? Being a mom is universal and all parties have them. The Nazis had moms. The fact that the Republicans flaunt this part of Palin but protect her from criticism by pulling the sexism card is typical hypocrisy, but may work in their favor. The media is scared and doesn’t know how to proceed, a position they were bullied into by the cadres of conservatives who last night openly mocked the only thing in this country that continues to keep the powerful in check in both parties. It is because of the press that the Republicans struggle, not because of bias, but because they shed light on the scandals, cronyism and ineptitude that came to characterize this administration and era of Republican leadership.

The challenge for the Democrats is that they must realize they no longer fight for the presidency but for the soul of this country. This is a tougher fight then they can imagine, one the Clintons (I feel) had anticipated all along. Now that Obama is the leader, those who support him need to show their true worth by not loosing focus and maintaining the energy and drive that brought him this far. Those who support Hillary must join the fray as equals, because they can best combat the Republican’s anti-intellectual, anti-media war. Hillary needs to join the fray – Obama needs her more than ever or he WILL lose Middle America. Biden will do his part no doubt, but Hillary is best suited to battle Palin for the hearts of the “working class,” (AKA "White folks").

As far as McCain is concerned, he has in essence, made himself irrelevant with his “maverick pick.” His party is no longer thinking of 2008, but of 2012, when they can promote their star cheer leader to the top spot. They can now truly ignore him (poor man) and focus on their moose hunter. Palin is the true reflection of their party, and we want to thank her for reminding us.