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Preview: RealClearPolitics - Articles - Thomas Lifson

RealClearPolitics - Articles - Thomas Lifson





Last Build Date: Fri, 10 Apr 2009 13:17:04 -0600

Copyright: Copyright 2009
 



Obama Doubles Down on the Bow to the Saudi King

Fri, 10 Apr 2009 13:17:04 -0600

The story is officially "in play" now that the White House has spoken, albeit from an anonymous source. American citizens are implicitly asked to view the demi-prostration and decide for themselves. The evidence simply does not support the official position of the Obama administration. Here is a 13 second clip of the bow: Please note the following two freeze frames, which expose the White House spokesman as a liar: Another freeze frame, also showing that the President was not performing a two-handed handshake: So why would the White House lie, instead of just admitting that the President made a gaffe? Well, for one thing, history teaches us that bows between official representatives of nations are a rather serious matter. We live in an age of a Clash of Civilizations (in Samuel Huntington's words), with many in the Islamic world convinced that Western Civilization, ascendant for the last few centuries, is about to be humbled by Islam, the once and future dominant force in the world. No Caliph exists today as head of the entire Islamic world, but the number two slot is amply occupied by King Abdullah, as guardian of Mecca and Medina, Islam's two holiest cities. Over three hundred years ago, another world civilization accustomed to being the largest and richest on earth, faced a challenge which turned into a clash, which turned into a fall. China, the Middle Kingdom, unquestioned as the dominant nation of East Asia, came into regular contact with the Western nations. At the time, the only pattern of diplomatic relations recognized by the Son of Heaven (China's emperor) and his court was that of tributary emissaries to the Middle Kingdom. Japan, Korea, Vietnam, and the other nations of East Asia understood and accepted that China was dominant, and when their representatives came to Beijing, they performed the required prostration acknowledging their (and their rulers') subordinate place in the pecking order. They also brought "gifts" to the Son of Heaven, and were sent home with "gifts" from the Imperial Court, amounting to trade, disguised as nothing so crass as commerce, but rather as a sign of supplication from them and benevolence from the Emperor. In plain English, if you wanted to be received and recognized as legitimate at the Imperial Court, you had better bow down before the Emperor in a kow tow (叩頭), prostrating oneself before the glorious ruler, and touching the head to the floor. This was not an idle matter of protocol, and everyone knew it, especially the emissaries of European rulers who made their way to Beijing, in search of trade relations: tea, silk, porcelain, and other products of China that were of finer quality than anything available elsewhere. One of the most famous incidents in China's history of contact with the West occurred in 1793, when the Earl of Macartney came to Beijing as an emissary of the King of England, carried to Tientsin (the port city for Beijing) on a warship. The Chinese officials deemed the presents he brought to the Emperor from King George III as "tribute", putting the Macartney mission in the context of traditional tribute relations. But when it came to the kow tow, Macartney refused. In the words of the acknowledged dean of American China historians, the late John K. Fairbank of Harvard,[Court officials] urged Macartney to practice the performance of the kowtow. This he stoutly refused to do, and he only went down on one knee before the Chien-lung [the Emperor], as he would have done to his own sovereign. The emperor issued an edict commending King George III for his "respectful spirit of submission" but pointing out that "our celestial empire possesses all things in prolific abundance"... Ben Smith noted a somewhat analogous response from Saudi Arabia, following the fateful bow: Interestingly, a columnist in the Saudi-backed Arabic paper Asharq Alawsat also took the gesture as a bow and appreciated the move. "Obama wished to demonstrate his respect and appreciation of the personality of King Abdullah Bin Abdulaziz, who has made one of the mos[...]



Gray Lady Turns a Deathly Shade of Pale

Mon, 26 Jan 2009 12:30:25 -0600

The terms of the company's $250 million loan from 2 companies controlled by Carlos Slim Helú, the Mexican billionaire the paper once scorned, force the Times to pay over 14% to borrow money. The added interest cost, especially the 11% that is paid in cash (the other 3% gets added to the debt balance, just like a credit card bill that can't be paid in full), is one factor in Moody's downgrade: "In Moody's opinion, earnings pressure and higher cash interest costs will limit free cash flow generation in each of the next two years notwithstanding a significant reduction in capital spending, and the recent 74% cut in the dividend." "Earnings pressure" refers to the accelerating pace of revenue decline, and Pinch's inability to cut costs at anywhere near the same pace as the rate of revenue decline. Only recently has the company tightened some rather lavish expense account practices: * News staff can no longer take each other out for drinks and charge it to the company! They had a great deal going there, going out with your colleagues for drinks and maybe dinner. * New per meal expense limits: $50 for dinner, $30 for lunch, $15 for breakfast. The high end places are now out of bounds. Apparently earlier, they weren't. * And even after the memo announcing expense account cuts was issued, Maureen Dowd wrote a story about "spa guilt" among the rich, deducting the expenses she incurred at a luxury spa. Shareholders have lost between 80 and 90 percent of their investment in the company's common stock over the last 5 years, while the Times journos have merrily enjoyed the elitist lifestyle bubble on the company dime in Manhattan and capitals around the world. Survival There is reason for the heirs to the Sulzberger/Ochs fortune to be concerned for the survival of the business as an independent ongoing entity under family control. I have been warning for years that Pinch's stewardship was on the road to destroying the family fortune, defaulting on the "trust" they so proudly embraced -- keeping the Times an independent voice committed to excellence. Few New York families could rival their patrician status. Materially comfortable in an expensive city and able to move with ease at the highest levels, custodians of the mightiest of public voices, members of the family were pillars of the power elite in New York. Now, they must contemplate financial ruin, or at least handing the company over to their social and moral inferiors, salvaging at best a tiny portion of the vast fortune that once supported them handsomely. Moody's is clearly worried about the company's liquidity, giving it a Speculative Grade Liquidity rating SGL-3. The company faces some substantial debts coming due through 2011. Moody's believes the Slim Money and other sources of cash will cover the 2009 debts, and the majority of a $250 million note coming due in March, 2010. But it has a $400 million debt rollover coming due in June, 2011. To pay that note off, the company will have to scrape together whatever cash it can drag out of its operations, and add money the company hopes to generate by selling (and leasing back) its interest in its headquarters building, and selling its interest in the Boston Red Sox, the New England newspapers, and perhaps -- its last salable asset -- the About.com group. Plainly, the game is survival now. The core newspaper business is struggling for life everywhere, but the New York Times had special assets, including an unsurpassed brand name and a national presence. It might have been possible for a gifted leader to have steered the Times on a better course. Pinch publicly reassured his cousins that "innovative products and services across media platforms" would secure a bright future for the company. But his sweet words have proven to be blather. His strategies have been poorly conceived and incompetently implemented. Pinch paid roughly half a billion dollars for About.com and a few other web properties that do not generate anything like a 14% return (the company's marginal cost [...]



Oligopoly And the Fall of the American Automobile Industry

Thu, 20 Nov 2008 00:30:06 -0600

During the 1950s and 1960s, the Big Three ruled the automotive world and made big profits, as oligopolies often are able to do. Labor gets on board Big three management, arguably the most powerful executives in America and the world, faced a worthy bargaining adversary in Walter P. Reuther, whose United Auto Workers Union monopolized their labor supply. Reuther was a smart, brave and honorable man. He had been beaten by company goons twice in strikes when building the union. Yet he refused to tolerate wildcat strikes during the World War II production effort, and for good measure had thrown Communists out of the American union movement in the postwar years. Reuther took advantage of his monopoly (technically: monopsony) position by playing the three rivals off against each other. He would target one manufacturer at a time -- the one he deemed most likely to cave in. The union would go on strike against that company and drive the market share to its two competitors. Although management would put up a struggle at every stage, wages rose and rose, and benefits multiplied. The company which caved in first knew that its rivals would have to match its concessions, so that giving in didn't mean enduring a competitive disadvantage for very long. In oligopolies, market share is particularly prized because the largest producer typically gets an even larger share of total industry profits. Size does matter when it comes to relative profitability. Under the circumstances, the phrase "buying labor peace" made a lot of sense to management and shareholders alike. The executives who acquiesced in these policies were regarded as wise, even enlightened. They weren't stupid, though later on locking in high labor costs created a lot of trouble when the oligopoly was challenged and broken by foreign competition. Overseas competition breaks the oligopoly The first danger sign came with the growing success the Volkswagen Beetle enjoyed in the American automobile market. Detroit tried to compete at the small and inexpensive ("compact") end of the market, but it wasn't very easy to make money on competing with (then) lower wage foreign labor. The innovative Chevrolet Corvair ran into trouble from Ralph Nader, who alleged it was "unsafe at any speed." Because General Motors stupidly employed a prostitute to try to compromise him, Nader became a martyr, public hostility to the industry grew, and the Corvair languished and was discontinued. To Volkswagen, Toyota, and many other auto makers struggling to catch up to Detroit in the 1950s and 60s, GM, Ford and Chrysler appeared mighty beyond compare. In the mid-1960s, government planners at Japan's Ministry of International Trade and Industry tried to force the much smaller Japanese automobile manufacturers to merge together, in order to be able to more effectively compete with GM and the other giants, as the Japanese expanded into global markets. Fortunately for the Japanese automobile industry, the bureaucrats bullied only two companies into merging -- Nissan and Prince Motors, which went on to lose significant market share to Toyota. Japan's auto industry remained fragmented and highly competitive, if not nearly as profitable as Detroit's. Even before 1973 it was apparent that Detroit was ceding low end market segments to foreign producers, but the oil crisis gave Japanese manufacturers a huge leg up, with their ability to provide plentiful, fuel efficient, high quality small cars. The market share the Japanese won when gasoline was scarce never came back, and the new entrants from abroad moved into more upscale market segments with fatter profit margins. If the oligopolists of OPEC had been able to maintain their cartel as effectively as Detroit maintained its oligopoly following the war, it is conceivable that Detroit might have focused more resources on the fuel efficient segment of the American market. But when oil prices went up, new producers were attracted to drilling oil, and the cartel's hold weakened. Oil prices went down. [...]



Sarah Palin and the Two Americas

Wed, 03 Sep 2008 11:30:20 -0600

A desperate race is underway, with the liberal media scampering to define Sarah Palin to the public as a dangerous religious fanatic and naïve hick, some kind of back woods primitive incapable of effectively discharging the awesome job of president, soon to be thrust upon her as John McCain expires right after his inauguration. Tonight, Governor Palin will have her opportunity to speak directly to the American people, and thanks to the blizzard of critical coverage, she will be no doubt attract an enormous audience. She has the rarest of qualities: authenticity. Media and Beltway types can't fathom what that is. It goes right over their heads. Not even on the radar screen. Her multiple facets -- beauty queen, moose hunter, mother, member of an Assembly of God Church, and ferocious reformer of corrupt politics may baffle sophisticates, but ordinary Americans see all the pieces fitting together, and they recognize a type of person they know and love. Think of Marge Gunderson, the fictional chief of police of Brainerd, Minnesota in the Oscar®-winning movie Fargo, taken as a comic send-up by the swells in New York and Hollywood, with her Midwestern twang (shared by Sarah Palin), funny hat, and kitsch-artist husband. The kind of woman who probably rides snowmobiles with her husband, for crying out loud. Yet in the end, Marge Gunderson solved the murder despite the sneers of her betters in the Big City (Minneapolis), and won the hearts of movie audiences. Americans like their heroines full of common sense and spunk. Sarah Palin is the ultimate All-American Girl, beautiful but not glamorous, powerful but unpretentious, high-powered but down-to-earth, a reformer who speaks up while others cower in fear of rocking the boat. Like Ronald Reagan, she can reach right through the television camera into people's minds and hearts. We recognize one of us. The left, so wrapped in artifice and fakery, are driven crazy by this. Her behavior appears bizarre, inexplicable. In their minds, she is a disaster and they pretend to be gleeful, asking when McCain will dump her. All while panicking, because they can see the energized GOP base and the failure of Barack Obama to garner the ten-to-fifteen point post-convention bounce to be expected after his speech before the multimillion-dollar Greek temple set and fireworks at Invesco Field only 5 days ago. Those who planned the classical Greek theatrical stage never for second contemplated the possibility of a deus ex machina named Sarah. So now they hurl ridiculous, self-discrediting accusations (the fantasy that Palin was not the mother of her baby Trig and was covering for her daughter was published by The Atlantic) and cannot understand that they won't work on a mom who's about to become a grandma while caring for a Down syndrome baby. They regard the public as fools to be manipulated, and know that with the MSM megaphone, they can sell practically anything. They turned Ken Starr from a vigorous prosecutor into a sex-obsessed fanatic, didn't they? The Chicago Annenberg Challenge remains unknown to the vast majority of voters. Sarah Palin, a woman who took down the corrupt politicians dominating her state, may be a tougher nut to crack. She simply doesn't know her place, at least as others have constructed it. She does what's right and tells people what's on her mind. When you believe in the founding principles of the land and see yourself answerable to God, it reinforces an already steely will. If you happen to be gifted with brains, beauty, energy, health, and the charisma of a star, you might just pull off genuine reform. Republicans are thrilled by what they see in Sarah Palin. Reform Republicanism with a younger generation in charge could knock the left out of power for a generation. The genius Bobby Jindal, out to reform Louisiana as Palin reformed Alaska, awaits the 2012 VP nomination with Sarah at the top of the ticket, if McCain wins this election. Suddenly the Republicans have a claim on being the[...]



The Rapid Decline of the New York Times

Thu, 17 Jul 2008 00:43:09 -0600

Pinch represents the fifth generation male heir of the Ochs/Sulzberger family to head the corporation. In 1987, at the age of 35, Pinch became assistant publisher to his publisher father "Punch" Sulzberger, succeeding him in 1992. Today he is also the chairman of the board. Pinch inherited the pre-eminent newspaper in America and arguably the world -- a robustly growing and diversifying media conglomerate. A family trust elects 10 of 15 directors, through control of 88% of the Class B shares of the New York Times Company (NYTCo). Class A shareholders, who supply roughly 90% of the firm's capital, elect the remaining 5 directors. If all shareholders carried equal voting weight, the company would long ago have been a candidate for acquisition or breakup at the tender mercies of Wall Street fund managers. NYTCo has underperforming assets. The core newspaper franchise maintains its residual magic as a brand name; and within the lush niche -- urban professional high income people of sophisticated tastes and liberal politics -- the Times has carefully cultivated, its name remains incomparably authoritative. It remains the best-known American newspaper worldwide. It is focused on its niche and tends to their needs, prejudices, and disposable income. Even those who criticize the media institution's editorial slant - as a recent Vanity Fair piece describes in detail - love to hate it. Buyers with larger and more diverse media platforms, such as Google and Bloomberg (even Rupert Murdoch has been mentioned in a Times blog) could better utilize the information-gathering potential of the existing journalistic organization, while bringing more flair and money to the project of competing in the declining print newspaper business. Two different Wall Street funds have already openly made runs at a proxy fight among class A shareholders, and one group succeeded in forcing the company to allow its representatives two seats on an expanded board. The family still maintains control, but outsiders now have access to internal data. Keeping the family happy But as long as the family supports his tenure as publisher and chairman, Pinch Sulzberger's job is secure. And it appears that he has attended to their needs zealously. Despite collapsing advertising revenues, layoffs, and buyouts, (including a catastrophic $814.4 million writeoff of newspaper properties in New England purchased when the internet handwriting was already on the wall) and downgrades of its debt to uncomfortably close to junk status, Pinch Sulzberger increased the dividend almost a third in March last year, from 17.5 cents to 23 cents a share. Family members hold about 10% of the overall equity through Class B shares, and hold another 19% of the equity via family holdings of Class A common shares, so almost 30% of the $33.3 million in dividends sent out in the first quarter of 2008 went to the family, while the company's equity accounts took a hit for $28.2 million, according to the company's most recent SEC form 10Q. Unfortunately, keeping that enhanced dividend flowing may turn out to be a bigger challenge than Pinch and his CEO Janet Robinson believed. Lehman Brothers last week questioned whether it could be maintained, and the company's efforts to control costs, touted as a source of cash savings, have so far not yielded the forecast economies. In 2007, CEO Janet Robinson announced a planned reduction in their annual cost base of $230 million in 2008 and 2009, excluding the effects of inflation and one-time costs. That works out to $28.8 million per quarter over the two years, yet operating costs before depreciation and amortization decreased less than half of that in the first quarter of 2008. Downsizing expenses Those cost savings are proving very painful and expensive. The company has tried offering inducements to longtime journalists to retire, recognized $11.2 million dollars in expenses last quarter alone. (In addition, as of 3/31/08, the company's [...]