The Courage to Listen

This note was originally published at 8am this morning, November 17, 2010. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.”

-Winston Churchill

 

For those of you unfamiliar with the story of Aung San Suu Kyi, she is a widely admired opposition politician in Burma and a former General Secretary of the National League for Democracy in her country.  The ruling military junta has oppressed Suu Kyi and her allies in order to maintain political control of the country. 

 

I am not a student of South East Asian politics but in the past few days I have found Suu Kyi’s story fascinating to delve in to.  What is most striking is her unwavering courage and commitment to serve her country; she refused to leave Burma for fear of being denied reentry by her political opponents.   After spending fifteen of twenty-one years in captivity, that courage and commitment is still as strong as ever. 

 

Upon her release from nearly 15 years of house arrest, Suu Kyi was quick to focus on making progress, saying of junta leader Senior Gen. Than Shew, “We have got to be able to talk to each other…real genuine talks, not just have some more tea or this or that”. 

 

Needless to say, Suu Kyi could offer a lesson in leadership to many politicians in the rest of the world.  Coincident with events in Burma, politicians throughout the West have been hastily passing blame, prematurely accepting plaudits, and wantonly pleading ignorance in accordance with the direction of the political winds.  From the Irish and Greeks to the Americans, it has been a tough time for political leadership in the Western Hemisphere. 

 

We have now witnessed a “compressed crash” of 3.87% in the S&P 500 since 11/05 and the carnage is even worse in some of the commodity markets: 

 

(1)    Gold -4.22%

(2)    Corn -10.26%

(3)    Oil -5.19%

(4)     Wheat -13.56%

 

The three worst performing sectors have been:

 

(1)    Financials -5.30%

(2)    Materials -5.09%

(3)    Technology -5.06%

 

The “compressed crash” is partly a function of the “blow off QE2″ euphoria that has been building since Bernanke’s speech in Jackson Hole, the David Tepper CNBC interview and the embarrassing Bernanke op-ed in the Washington Post which was nothing more than the FED admitting their intention to manipulate the stock market --no matter what the consequences.   

 

Following an open letter from a group of stock market practitioners and economists that was published in the WSJ demanding the FED to end QE2, the FED deployed two of its most senior officials to defend its policies on TV.  Both Janet Yellen and William Dudley (Federal Reserve Vice Chairwoman and President of the New York Fed, respectively) dismissed concerns that quantitative easing was aimed at Burning the Buck or that it could ignite inflation. 

 

It’s truly embarrassing what we are witnessing from some of the leaders of this country.  The perfunctory denial of what has been shown in real-time market prices for weeks now is a disgrace and an affront to our intelligence. 

 

The QE2 debate has been divisive in this country but its implications are global.  If it were solely another example of partisan politics why would Germany, China and Brazil all oppose the move too?  What is even more embarrassing is Representative Barney Frank having accused Republicans of “lining up with China and Germany in opposing the Fed’s credit easing!”  You couldn’t make this stuff up even if you wanted to! 

 

Overnight China declined 1.92% (now down -7.51% from 11/05) as Premier Wen Jiabao is now drafting measures to curb inflation, which means higher interest rate and slower economic growth in China.  I don’t think Wen picked up the phone to call the republican leadership to seek counsel on his inflation problems.  This becomes a problem for the USA because our “sick” economy cannot survive a slowdown in the economic engine of emerging markets.

 

We shouldn’t feel special, though; our friends across the pond are receiving the same treatment.  European Unity, the dream of Jean Monet, lies in shambles as “fellow Europeans” are turning out to be fair-weather friends with fingers pointing en masse across the once-again obvious borders that divide the 27 nations.  Whether it’s Greece “reclassifying” statistics or Ireland clinging to hope of retaining some vestige of autonomy throughout this episode, tensions are fraying.  Unelected politicians in Brussels are most distressed; Herman Van Rompuy, President of the European Council, struck a tone of desperation yesterday when he said “we’re in a survival crisis”. 

 

From a U.S. perspective though, the spotlight will be back on America’s problems soon enough.  Obama, by the sheer volume of the message the American people sent him from the polls earlier this month, has been forced to become somewhat more conciliatory in tone.  The Republicans, for their part, have been emboldened by their recent success, which is likely to be detrimental to getting anything accomplished in Washington.

 

Sadly, America’s ills are grave and should take precedence over the perpetual campaign for fame that politicians are now engaged in. 

 

These are important days for the United States and the ability of the country’s leaders to inspire confidence for a sustained period of time will be imperative for any real recovery to stand the test of time.  While the history of American Leadership is not without its blemishes, it is true to say that this country has been fortunate to find, more often than not, great leaders at the helm of political and social movements in times of national strife.  Abraham Lincoln, Franklin Roosevelt, John F. Kennedy, and Ronald Reagan are just a few of the Presidents that come to mind when one thinks of courage in a time of difficulty.

 

Sadly, our political system is broken and it seems gridlock is what we are faced with.  Gridlock is not good for equity prices.  Since November 2006, voting in Congress has become more and more tied to party lines.  There is no political leader with the courage and the backbone to bring together the needed cooperation to enact the change that can right size the listing ship. 

 

I will end with a thought from Jean Jacques Rousseau, a man who lived through times of crises: “The inflexibility of laws, which keeps them from bending to events can in some cases render them pernicious, and through them cause the ruin of a State in crisis”. 

 

From the FED, to Congress, to the White House, “politicking” is making a difficult situation very grave indeed.  Sadly, none lack the courage to speak.

 

Function in disaster; finish in style,

 

Howard Penney

 

The Courage to Listen  - HP EL


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