CheetahhhhhhhBlog Mark III

I’m bringing my family here in January, and so I have pondered the security situation very carefully, and I will now give you my assessment, which is based on the empirical evidence I see around me (ie not what Obama says, or the New York Times writes).

#1 the Taliban does not have an army. They are a bunch of guys in the mountains with AK47s, and a few extremists in villages who blend in with the villagers. But they do not have an actual army. Should by some magic they should suddenly mount an army, the US Army would eagerly and quickly destroy it. The point here is that the Taliban is not actually capable of mounting an assault on Kabul, much less capturing it.

#2 suicide bombs are scary but they are an indication of desperation. All other means have failed them. While I’m afraid of suicide bombs, they also tell me that the Taliban is growing weaker.

#3 the interference of Pakistan in affairs here doesn’t affect me. Pakistan wants to continue to have a virtual monopoly on exports to Afghanistan. Not my problem, don’t care. Pakistan also wants to counter any Indian influence here. Again, not my problem, doesn’t involve me or my family.

#4 I bet you the withdrawal of American troops scheduled for June will be largely symbolic.

#5 I have spoken with US Army commandos at the embassy. They tell me that US trained Afghan troops are, contrary to media reports, increasingly competent and effective.

#6 I have encountered not the slightest bit of hostility from anybody. So at least in Kabul, Americans are not entirely unwelcome.

In sum I’ve concluded that the security situation, while bad, is not likely to deteriorate more. Indeed I’d predict it will improve. Further I have concluded that the actual risk to my family is fairly minimal. Now, mind you, I’m talking about Kabul. The situation may be totally different in other cities.

Watching “Intelligence Squared” on Bloomberg TV. The topic of debate is the use of interrogation techniques against terrorists (or, if you prefer, “enemy combatants”.)

I’m getting up on my soapbox. Feel free to skip this post.

I have lived in places where I was a direct target of terrorism. Specifically, Saudi Arabia and Afghanistan. This is also true in parts of the Philippines (terrorists operate in the mountains above Capoocan). In South Africa I was a target of what I’d call racial economic terrorism. In all cases, the threat to my physical safety was very real. So I’ve lived close to terrorism for a long time, and the American response to terrorism is something that directly affects my physical safety.

I have one simple response to the issue. This is not a conventional war for a piece of land against a uniformed foe. Rather, this is an ideological war. When we, the Americans, give up the moral high ground, it diminishes us as a people. It alienates us from Washington and Jefferson’s grand idea of America. Let’s be clear about something: America is an idea. The idea is freedom and equality. This idea is still in 2010 a rather revolutionary one. I have lived all around the world, and have not seen a lot of freedom and equality. The American idea is unique and special. So I’d say we should take a good hard look at precisely what it is we are trying to defend. We’re not actually defending a special plot of ground. The soil of America is no more special than any other soil. America could exist on the moon, it could exist on Antarctica; it would still be America. So, we are not defending the North American continent per se in this “war on terror”; rather, we are defending the idea of America, which is a collective idea of freedom, equality, and the rule of law. So when George Bush tries to argue that the rule of law does not apply in Guantanamo, it… well, it flabbergasts me. He forgot what he was sworn to protect. He narrow-mindedly did not take a look at who, precisely, he was fighting. For example there were just recently elections in Afghanistan, and the Taliban attacked voters and election officials. The Taliban does not want people to have the right to vote. Think about that. The Taliban does not want people to have the right to vote. This is what we are fighting. This is a war of ideology. If we abandon our ideology, we have already lost.

Everybody, including Osama Bin Laden himself, requires due process and transparent detention under law (not these ghost prisons the CIA has in Thailand and eastern Europe). Perhaps giving a terrorist his Miranda rights (the right to remain silent), perhaps this means another terrorist event could occur. I will say without hesitation that I am OK with that. And mind you, I write these words from Kabul. I have, in this blog, since this ridiculous war on terror began, lamented the deterioration of the rule of American law, and, more to the point, the brushing of fundamental American values under the rug. #1, we do not have one set of rules for one group, and another set of rules for another. That is not how we operate in America. Didn’t we learn something from “separate but equal”? Didn’t we learn something from detaining American citizens of Japanese descent during WWII?

#2, we do not have transparent oversight with one group, and zero transparency with another. Again, not the American way. Transparency in government and law enforcement is a fundamental value which we abandon at our peril. I think history teaches us a few lessons about this, such as Soviet gulags for example.
If we do not follow American values, we do so at our own peril, because we diminish ourselves. And again, mind you, I write these words from Kabul, so I would argue my opinion carries a little weight in the matter, more than some desk jockey in Washington who doesn’t have to worry on a daily basis about suicide bomber attacks. And I bet if we had not given up the moral high ground in the first place, these suicide bomb attacks probably wouldn’t be occurring in Kabul today. This is an ideological war, and bullets will not win it. This was in Afghanistan has ground on for 9 years now; bullets alone are not going to finish this. And I hate to say it, but the Taliban and Al Queda recognize that this is an ideological war, and manipulate propaganda among Muslims in a very clever manner. The majority of Muslims refuse to believe that El Queda orchestrated the 9-11 attacks, for example. Think what a clever piece of ideological manipulation that is. The people in Washington need to wake up and realize this is an ideological war. Shooting a few more Taliban isn’t going to end this.

OK, I’ve stepped off my soapbox.

(1) Gold has had a hyperbolic rise, sparked primarily by major currencies being devalued. The reasons for the devaluations are complex, complex to the point that I’m not even trying to understand it more, I think you would need a PhD in economics from Harvard to really understand. There is however talk on CNBC etc of a “race to devalue”. The sum of all this is that over the past 2 years, gold has accumulated value as people have seen the value of the dollar, euro, sterling, etc. deteriorate. There has been a lot of marketing of gold as an investment, companies selling gold coins etc. Just today some guy on CNBC said something along the lines of “I advise everybody on earth to buy gold” which should set up a big red flag for any intelligent investor. This is bubble-about-to-burst language.

(2) The various factors which have caused gold’s parabolic rise are likely to continue in the short time, until some event (news event, buyer exhaustion, etc) occurs and we see a statistical reversal of gold’s trend.

(3) This statistical reversal will likely occur when/if the SPX breaks above its current range, which it appears somewhat likely to do. Gold will generally trade in an inverse relation to the SPX. The rise of the SPX is unpredictable at the moment for many reasons, not the least of which is the tendency of the market to fall to yearly lows right around Halloween. The fall of gold and the rise of the SPX are not necessarily highly correlated at this exact moment, however, because of unusual economic conditions, specifically heavy government interference worldwide in financial markets.

(4a) Because of the above unpredictability, I have the following plan. First, I will look for gold to reach a hyperbolic top, a move on huge volume, which would be indicative of a buying frenzy. When this occurs, I will buy about a 20% position of DZZ (double short gold).

(4b) The first statistical reversal will likely be short. Likely, buyers will jump in to “buy the dip”. I will watch and my prediction is that gold will not breach its prior highs. When it becomes apparent that gold will not breach resistance to a higher level, I will increase my DZZ exposure to 50% position.

(4c) I will then watch for gold to make a lower low, which will be indicative of a downtrend. At this point I will increase my gold exposure to a 100% position.

(5) Note when I describe a 50% position (etc) I mean 50% of the assets I have dedicated to this particular venture. I do not mean 50% of total assets. An investor must judge his own position sizing based on his ability to stomach loss. Because I view the venture as somewhat risky, I am making my position sizing here smaller than usual.

Had to go to the US embassy. Needed to add pages to my passport. This is the second time actually, that thing’s turning into a novel. Needed to do it now so the ministry of labor (or whomever) can stamp my passport with a residence visa.

Anyway #1 the US embassy in Kabul is locked down tighter than Fort Knox. Not a surprise. Nevertheless I thought we had quite a security operation at the university. As it turns out, we got nothing. Went through five checkpoints, I think. Armed Marines everywhere. Nobody is messing with that embassy.

And then #2 I had an appointment at 11AM. Because of Kabul traffic I had to get up around 9 and get on the road around 10. This was tremendously irritating for me. I’m going to be blunt with you. I’m going to blunt it out. Here it is. I got nothing here. My wife and children are in Manila. I’m eating cheese sandwiches and frozen pizza from Pakistan. The only thing I do have is that I can sleep as long as I want in the morning. So yesterday the US embassy’s computerized appointment system interrupted the only real pleasure I have. And as a result I was rather irritated from the start.

So, I get into consular services, and I walk up to the bullet-proof glass window, and there I can see three employees. I can see their computer screens. They’re all on Facebook. I ring the bell. Nobody even looks up. I wait a few minutes. Ring the bell again. Nobody looks up again. I actually couldn’t believe what I was seeing. Finally after about 10 minutes I just started getting pissed off and started banging on the bell. Finally one woman looked up. She stood, minimized her Facebook screen, and then shot me the dirtiest “How dare you interrupt my Facebook” kind of look I’ve ever received.

And this is what my tax dollars (which admittedly I don’t pay) are paying for? And FYI additional pages cost $82 which is outrageous.

I’m watching CNBC and there was just a piece about higher education in the Gulf. Just talked about how my former employer, George Mason, failed. Apparently Michigan failed in Dubai. NYU is having a good go in Abu Dhabi apparently but are heavily subsidized by the sheikh of Abu Dhabi.

We (the staff) were kind of hoping for a little election excitement, because then we’d be on lockdown, and that would mean no work. However the elections passed with remarkably little violence by Afghan standards. One car bomb went off. The police found a bomb under a bridge and a policeman was injured trying to defuse it. The Taliban also kidnapped about 30 election officials out in the provinces.

The Taliban apparently refuse to participate in the democratic process. I guess they think people should not be able to make their own decisions. This would seem to fit the Taliban persona and the whole religious extremist mentality.

Anyway as I said, remarkably peaceful elections by Afghan standards, and this is a very positive sign. I read the New York Times this morning and they don’t paint a very rosy picture, focusing on closed polls, etc, but they’re missing the point. The point is people didn’t start shooting at each other. That’s a damn good sign. Things, I venture to say, are settling down.

Elections tomorrow, so everybody is expecting excitement. The Taliban is ideologically opposed to elections, or some nonsense like that. So we are all on lockdown. However there has been no excitement. Just a few minutes ago the house started shaking, and I thought, “Hot damn, here we go,” and I rushed outside to see what might be exploding or burning. Nothing. It was just a small earthquake.

Not a lot to say because we have been on such high security alert, so I haven’t even gone to the grocery store.

I am, however, immensely enjoying Sean Russell’s “Moontide” books. Really good stuff. You do need to read his “River Into Darkness” first however. Russell is very talented and surprisingly underrated. The stories take place in a fictional 18th century Europe. The plot is that there are 3 or 4 actually bona fide wizards living in the world. Through their ability to use magic to see the future, these wizards see the 20th century, with WWII and atom bombs, and they are horrified with this future. So these 3 or 4 wizards decide to train no more in their craft, and destroy all their knowledge. The world enters an essentially static technological state. Predictably, some people try to piece together the lore of these now-extinct wizards. Others plot to stop them. Maybe sounds hokey but the story is really original, and it really grips you.

I still regard the investment environment as rather risky, however risks are going down. I tend to think the markets will still trade in a range for an extended period. However, I have commented upon gold many times in this blog. We have seen a parabolic rise, and there are still traders and external factors that may push it higher. But gold is the next bubble that’s going to burst and EVERYBODY who knows anything about finance know this for a fact. So I’m going to short gold soon. Not immediately, but I’m watching, and it will probably be within a week or two. This will be a long-term short; I expect gold to decline significantly over the long term. I’m probably going to buy DZZ.

As always I could be completely wrong.

OK I had a really frustrating day. As I mentioned in the previous post, we had closed a deal for a condo. We had signed the papers and written a check. This morning, the seller backed out of the deal. I’m not clear why. I was just crazy frustrated this morning. Now, tonight, I’m… well… still kind of pissed off… very frustrating. As most of my readers probably know, finding and buying a house is very difficult and complicated. I had thought we were finished. This is actually the second time a deal has fallen through. Twice we were willing to buy, and had actually met the seller’s price, but twice now the seller has backed out. So maybe, I’m thinking, maybe God is telling us it’s not the right time… or something… I don’t know. But I’ll tell you, if I had a bottle of rum at home, I’d be having a few drinks tonight. Very frustrating day.

Electricity went out at 10PM and now again at 11AM. I don’t know what the frakkin problem is and don’t want to know. I just would like the electric company to get its act together. Please. For the love of God. Get it together. I manage to perform my job on time on a daily basis. Could you please do the same. Thank you.

Now you’d think with me living in Kabul, my life would be all full of action and adventure. Actually no. I live under such tight security that I really only see my office and my house, and occasionally the grocery store. Some people go out on their own. I know a few people who go out frequently. God bless ‘em, and if I didn’t have children to feed I might do the same. But as it stands, I am reducing my statistical risk of being caught up in a suicide bomb attack. Right now my risk is almost zero. I’m going to keep it that way. And if you think about it, what is the statistical probability of somebody living in Chicago getting caught in violent crime? Low, but it’s there. Now me, with a driver and guards, my risk is actually even smaller, as in, almost zero. People always say “be safe” to me, which almost makes me laugh, because there’s not much opportunity for me to NOT be safe.

We appear to have closed a deal to buy a condo at our current place in Manila. The apartment we’re buying is about 1/3 bigger, which is nice, though even still… Manila is like New York. You live in small spaces. But it’s exciting and we’re happy. Over the last few months we’ve both put in a lot of time searching around for a place to buy and I’m glad it’s over, and I can worry about other things.

So it’s 9/11, and we’re all staying inside, just in case somebody is sparked up about the date.

I see that Obama has enacted middle class tax cuts. Finally something I can really approve of. And this is purely disinterested on my part, as I do not actually pay tax (as an expat).

I’m watching my TV with my morning coffee, which is a first. After a month with no TV, I just kind of forgot about TV. So I’m catching up with the news.

Some knucklehead in Florida wants to do a Qur’an book burning. This is stupid partly because one would have thought book burnings went out with the Nazis. But more to the point, this knucklehead is putting me personally in danger. This is knucklehead is doing exactly the kind of thing that will get suicide bombers all sparked up. It’s like the worst possible affirmation of their perceptions of us.

There are elections next week (or sometime soon) and our security operation has warned us repeatedly that things might get a little violent. So far, nothing. It is however Eid, which is like the Muslim Christmas. I can imagine a few suicide bombers having a last Eid with their families before they go off to implement their insanity.

One thing I have learned is that suicide bombs are more likely to go off in the morning, and their targets are generally government and military, so it is safest to avoid central Kabul in the morning. Luckily we live nowhere near the town center and I teach at night.

I see lots of articles in the Wall Street Journal and the NYT about the impotence of the Karzai government. He does appear to be in control of Kabul, but my students told me that if you drive down the street for a mile, the Taliban is in control.

I cannot speculate whether the situation will stabilize or not. There are all kinds of rumors floating around. I will however give an educated guess. NATO, the UN, and the US cannot afford to let the situation destabilize here, both because of the billions already invested, and because of the political disaster of a failure. So for example as an investor, were Afghanistan an investment, I would view the risk inherent in Karzai’s Afghanistan as high, but not junk-quality. Equivalent to Citibank perhaps.