THE SLANTED ARMENIAN-AMERICAN PRESS

[khodja]

Have any of you ever seen an article in an Armenian-American publication on Anna Eshoo, a moderate 1/2 Armenian-American Congresswoman? Or the late Adam Benjamin, another 1/2 Armenian, 1/2 Assyrian Congressman. Or have any of you heard of Richard Hatpootlian, Democratic Leader of South Carolina? Is it because Eshoo and Benjamin are Catholics or Harpootlian Protestant? No! It is because they are DEMOCRATS. The AGBU publication published a full page on former Republican Congressman Steve Derounian, who has been a judge for many years, but not these others. So much glorification of Armenian conservatives and ignoring of moderates and liberals. I have yet to see a biography of Cher in any Armenian publication, yet obscure Republican speechwriters like Aram Bakshian get full page spreads. THE ARMENIAN-AMERICAN PRESS IS TOTALLY SLANTED!!!

[Boghos]

I watch with great amusement this Armenian-American Republican vs Democrat debate. If we can call it that. I can´t quite figure if this is some kind of accusation of some form, but it sounds more like some sort of 60s type fingerpointing of the "you are the bad guys", manicheism.

 

It should be no surprise that most Armenians of the diaspora are located between the center-right to the extreme right. Even if the don´t call it that or are not aware of their political label. There have been, of course, small socialist and even communist groups in the diaspora. But most Armenians are small businessmen or the offsprings of such people. They tend to be more conservative.

 

As to the Armenian press, the only qualification I have for the great majority of it is: a joke. I do read many Armenian papers and a few magazines. I list them under satyrical, even if they are not intended as such.

[MJ]

Dear Boghos,

 

But who is the "debate" with?

[Boghos]

Dear Martin,

 

good question...but not only that, what is the debate about, anyway ?

[MJ]

Boghos,

 

First I think it is an editorialized monologue. As to the content of it, let's not be too demanding, since it may be inhumane.

[khodja]

The conservatives in US have taken their ideology to go far beyond fiscal, pro-business conservatism. When they were pro-business conservatives I was a member of theri party. Now it is all about mind control, turning American into automatons who will follow every wish of the corporate and ecclesiastical hierarchy. No freedom to think for oneself, only complete subjugation to the will of the conservatives. Sounds like fascism to me.

[Boghos]

Ah, if you are mentioning the fact that the September 11 incidents have produced a major swing to the right, or actually further to the right, I couldn't agree more.

 

I don't think that the Republican hawks ever expected to accomplish so much, in such a short time span, so easily. Indeed democracy is taking the back seat.

[khodja]

Bogos,

 

As you state this process was accelerated beyond their wildest dreams by the events of September 11, but it was in gear long before September 11. Ken Maddy a very pro-Armenian California State Senator was eased out of his job as Majority leader by one of the far-right zealots. These guys will not stop until they have total control of every move of the American public. We shall see how the American public responds in next year's elections.

[MJ]

What's the manifestation of it, Boghos?

[Boghos]

There are a few:

 

- tax package to benefit corporations in a very nasty manner, essentially just filling up the coffers of such "needy" companies as IBM (actually the government should never support corporations this way)

- curtailing civil rights

- weakening the SEC and a number of fair regulatory practices of capital markets

 

Essentially reducing the fairness of the free enterprise - civil rights combination that has made the American economy so succesful.

[MJ]

- tax package to benefit corporations in a very nasty manner, essentially just filling up the coffers of such "needy" companies as IBM (actually the government should never support corporations this way)

 

I am not aware of this. Could you give some details?

 

- curtailing civil rights

 

Is this about the Military Courts trying the Al-Qaida members or something else?

 

- weakening the SEC and a number of fair regulatory practices of capital markets

 

Could you give some details about this, too?

 

[ November 22, 2001: Message edited by: MJ ]

[Boghos]

Here are just two links, there is much more. But have a look, and let me know what you think.

 

On the stimulus package / tax cuts, there is an interesting Washington Post editorial: http://www.washingtonpost.com/wp-dyn/artic...-2001Oct31.html

 

On civil rights, for example, an article from the New York Times (free registration, but necessary) http://www.nytimes.com/2001/11/18/politics...rchpv=past7days

 

On the SEC and capital markets in general, there are numerous announcements that show that regulation has become a secondary issue, that the most important thing is keeping the markets "stable". far from it, it is allowing corporations to get away with irregularities that will down the line will come back to hunt investors. I shall write in much more detail about this topic if it is found to be necessary.

[MJ]

Thanks. Will look at it over the weekend. Now have to run.

[MJ]

Dear Boghos,

I read the Washington Post Article on the Tax Cuts. Will get beck to you with respect to the other article when I read it.

I am not impressed at all by the article. I think its material is selective - along ideological lines. It gives no specific information about the bill, its provisions, etc., but just interprets it in a way, which sounds arbitrary to me. (Let me tell you in advance that I am not familiar with the details of the bill at all).

Basically, the idea of the article is that tax cuts (especially corporate ones) are bad. I disagree with it. They are good for the economy, assuming that the spending caps are observed. US economy has been going down for more than a year, now (taking with it the World Economy or the opposite way). The events of 9/11, in my view, have as much relevance to the "opportunity to move to the right," as they have transferred the economy from a declining mode to a recession mode. Clearly, something drastic had to be done.

It is obvious, I think, that one of the primary factors stimulating economy is the consumer confidence, which has been very law, due to low expected corporate earnings which, in turn, has sent the primary financial benchmarks such as Dow Industrial, S&P500, NASDAQ, down. I think we both will agree that it hits not just the rich, but also the ordinary people, the middle class, even the lower class people. If nothing else, most of the Pension Plans, Retirement Plans, etc., are either directly tied to S&P500 of are strongly and positively correlated with it. Therefore, pushing the economy up is prerogative for everyone - not just the rich. Moreover, the direction of economy, as we both know is not very relevant for the rich. They benefit from both directions - the poor have no ability to short-sell in the market, or their such ability is very limited.

Obviously, the reduced corporate taxes increase the expected corporate earning, which push the indices like S&P500 and NASDAQ up. The upward indices inspire more consumer confidence and more consumer spending, which guarantee increased cash flow into the industry, which is very good for everyone until the market saturates for another cycle.

Therefore, I really do thing that the Corporate Tax Cuts are positive phenomena. I think that the imposition of Alternative Minimum Tax was an immoral and harmful thing in the first place, and I hope it would be eliminated, and the Tax Code would be simplified - it is a mess, now.

As far as IBM's benefiting from the current Tax Cuts is concerned, I don't know where did the author of the article get the information. My understanding is that no one can tell it till the fiscal year is over for IBM. Logically speaking, it implies that IBM was supposed to pay high taxes regardless of its returns, if not for the elimination of the Alternative Minimum Tax. I understand that it is an assumption. However, I don't see again why is it bad to cut the unfair Taxes of IBM, GE and the likes. Vast segments of the population will benefit from it – from students to grandmothers, to consumers.

My understanding is that Corporations (at least C-Corps) pay 33% tax on their returns. Why is it not good enough, and why should they pay Alternative Minimum Tax regardless of their returns?

I am also puzzled again to see the traditional "tax cuts for wealthy" liberal line in this article. Tax cuts are for tax payers. More money people make, more taxes they will pay due to the volume, and not necessarily due to the rates.

And these things were in the pipeline for long time. I don’t see the 9/11 being the triggering mechanism for them. The elimination of the Alternative Minimum Tax was being pursued for quite some time, as well as the Capital Gains Tax was. Moreover, reportedly, there was a consensus on Capital Gains tax way before the 9/11.

I know that a lot of things that I hectically tried to convey here are things that you know much better than I do. What I would appreciate if you explain is which arguments of the author of this article do you agree with and why, even if we assume his reporting is accurate?

[MJ]

Boghos,

 

I also read the NY Times material about civil liberties curtailment. I am of more positive opinion regarding this material. I think it is more objective, and its internal logic is more consistent.

 

However, short of some Arabs being unduly targeted, I don't see problems, as much as my civil liberties are important to me.

 

It is a very difficult situation. There are operating terrorist rings within the US, among other countries. The terrorists don't have a special mark on their forehand. They blend easily with the general population, which is indicative of the tolerance of this society. People are scared. As simple as that.

 

As you know, I travel extensively. I drive sometimes, and I fly sometimes. And I don't necessarily look like an everyday WASP, you know... I was wondering if they would give me hard time when flying. Tuned out - absolutely not. My wife looks more like the general populice of America than I do. She was individually searched in the Airport when trying to fly.

 

I was stopped by the police due to speeding, lately. First I wondered if the guy is going to pick up at me because of my "looks and my accent." Not at all.

 

So I didn't feel that there was anything abnormal going on in terms of the civil liberties.

 

As far as the military tribunals for Al-Qaeda members are concerned, I welcome them. They are war criminals. Why should they be judged by civilian courts? Additionally, I expect you are aware of the OJ Simpson trial. I can guarantee you that if, per se, Usama Bin Laden is tried in a civilian court, it would turn into a more outrageous show than the OJ's trial was.

 

I also understand that sometimes some people's liberties may temporarily be undermined. It is too bad. I personally would be outraged if it happens to me. But I can also understand the circumstances.

 

P.S. I owe you an opinion on SEC's latest rullings, but have no idea what is it about. If I have time, would do some research on it.

 

[ November 22, 2001: Message edited by: MJ ]

[Boghos]

Dear Martin,

The Washington Post editorial is just an opinion, all the underlying supporting facts are not mentioned but are implicit.

I have to disagree with you on the effectiveness of the tax cuts on consumer confidence. Corporations are supposed to be rational actors, they will invest, in other words spend, if they see reasons for that (a decent return on dollar spent). Currently, all surveys point to a lack of desire t invest in most sectors. Why ? Simple, overinvestment in the past. We are currently undergoing the normal but painful process of downsizing after a major expansionist cycle that lasted the better part of 15 years. So, even witn very low interest rates, tax incentives and an amazing expansion in the money supply, only time will allow for past exaggerations to be cleaned out of the system. that's why unemployment will most likely keep growing, and this will be the most important factor affecting consumer confidence. The process of deleveraging will be a painful one, personal debt levels are very high, even if one counts the sizable appreciation in family equity that was a result of the real estate appreciation.

My point is that it is not by sending IBM a check (note, this is not speculation, this is a fact) that you´ll stimulate the economy. What is happening is that the government is paying back a number of very large businesses using the economy and Sept. 11 as an excuse. I hope you don't buy the idea that government and the economy are run by uninterested professionals. That has never been true, and of course will never be true.

Even Friedman, one of teh very few serious liberals in America has spoken against this stimulus package. It is tantamount to waste.

[MJ]

Dear Boghos,

 

I have two types of comments:

1. As far as the Washington Post Editorial is concerned, I think its last sentence characterizes the article very well. Here it is:

 

“The Democrats have an alternative that would expand unemployment insurance and help the unemployed maintain their health insurance. That's what this bill ought to do. If they can't do that, they should just go home.”

 

While I have no objections to the premise of his expectation, and I think there are serious problems with the US Health Insurance system (as a self-employed person I bear its consequences), and while I think the US unemployment insurance system by in large is adequate, I would like to notice that this had nothing to do with the economy or its stimulation. In the traditional spirit of the left, I think this sentence, more precisely its positioning against the tax cuts is indicative of a commonly shared by the left feeling paraphrased as “I hate you for having money. Give it to me.”

2. I would definitely be much more welcoming of a discussion, even if it is non-compromising, on the principles of the economy and the differing underlying conceptual paradigms. In this context, I’d like to say that I didn’t mean that the tax cut is directly leading to consumer confidence. But let’s have a little geek-conversation.

Company’s stock is a long call option on the assets of the company struck at the level of its liabilities. Reduced Taxes lead to reduced liabilities, therefore to lower strike prices, thus making the option more in the money, therefore more valuable. This is one of the components pushing the stock prices high. (I base my arguments on Robert Merton’s implementation of option’s theory in corporate finance).

The second component is the increased earnings expectation. Earnings of the company do depend on the consumers’ confidence to spend. Clearly, more confident the consumers, more they are open to spending. Therefore, the consumer confidence also leads to higher stock prices.

However, one may argue, as you do, I think, that high stock prices are not necessarily indicative of actual future earnings, and they may be based on much rosier expectations and lead to over-investments, as it has happened in the last six years or so. No doubt about it. If the consumer confidence anticipates too much a risk premium, sooner or later the market is going to take them (as it has happened last couple of years) to a correction cycle. However, the lack of consumer confidence would definitely lead to decreased expected earnings. Furthermore, if one can argue that the consumer confidence may be “inflated” and not necessarily lead the market towards growth over the long-run, Tax Cuts are an assured way of boosting the markets up with a potential of triggering consumer confidence, which in turn may trigger better expected earnings, since I would conjecture that the consumer confidence is positively correlated to the indices referenced above. But as I mentioned previously, and as you indicate in your note in a slightly different way, this goes on for a while till we reach another cycle of saturation of the market, leading to a correction cycle.

In the context of sending IBM a check… I don’t see the Tax Cut as sending IBM a check. I rather see it allowing IBM to keep its money, thus increasing its actual earnings while reducing the liabilities – a win-win situation in terms of boosting their stock prices, which would take a long the S&P500 and NASDAQ indices up for ride.

I am aware of high levels of individual debt around. But I think it is not (at least directly) tied to the tax cuts, but it is related to the borrowing cost, which is artificially being brought down. In this sense, I welcome the tax cut, but I oppose the artificial lowering of the short-term interest rates, because it is at the expense of the long-term national debt.

Obviously, there is a threshold that one has to be able to carefully calculate so that not to overplay the “hand.” But this is the harder thing to do than to conceptualize the issue. This is where, I believe the opinions may differ.

As far as Freedman is concerned, I do think highly of him and accept his authority. But from your comment I understand that his is opposing the “stimulus packages.” Is it about the tax cuts or is it about the bail-outs?

As far as the interests of governments and professionals are concerned, I think governments are interested in upward markets (even the leftist ones) and the professionals are interested in maximizing shareholder value, according to the given risk tolerance appetites. This is good, I think.

 

So much of a geek-talk for now.

[alpha]

My humble input for the geek show

 

The available capital after tax cuts will not lead to investments by corporations, since in this ailing economy the risk is not justified by projected returns. Fed is lowering the cost of credit, but it’s not working because there are not many people who want to buy credit. Current slowdown has been caused by rosy expectations and glut of inventory. I think there has been over extrapolation of demand which has caused major inventory glut. As inventory starts to clear the warehouses, that’s what the latest reports show, the true survivors will emerge, and failing companies like Xerox or Lucent, which have major liquidity problems will become major targets of acquisitions. In some ways it’s good for the long run because it will get rid of the inefficient part of the economy.

 

Consumer confidence will increase if consumer debt decreases. You can not ask American consumer to spend when unemployment is lingering, it’s burdened by debt and faith in future is not bright. The investment will be stimulated by giving money not to corporations, but to people who will spend the money and will create demand for goods and services. The cost of credit is so low right now that if there is a viable project out there the available capital will not be a major hindering factor.

 

It’s natural that stock market has declined, because the fixed costs such as insurance and security cost, has dramatically increased. These are not value added expenses that corporations undertake, therefore will increase the cost of their products and services. This directly impacts their cash flows and thus their stock prices. The goal should not be “high stock prices” we had that in late 90’s, but stock prices that accurately reflect discounted cash flows.

[Boghos]

Dear MJ,

In order to make justice to your post, I should also write a fairly long one. But circumstances do not allow me to do that (it is a very nice Saturday).

 

I think we do see with similar eyes, but the issue is the nature of the tax cut. If it is a one off, or if it is a permanent lowering of taxes. Results on a macro and microeconomic scales are quite different. I was writing more towards the motivation of tax cuts, a political issue.

 

Friedmahas indeed spoken against subsidies to industries, you are quite right. But that also means attacking the nature of tax cuts. If they are meant just to keep cash at the till, than they fall into the same category.

 

Thank God (and I really meant it) that the US is going into recession under a favourable fiscal position. That may change, but still it is the best one can hope for. Fidgeting with interest rates will only cause more confusion since the government attempt to manipulate the long end through the announcement of the end of the 30 year bond has been, after a while, met with skepticism, proving that it is very hard to play around with the cost of money unless it is done in a structural manner. The other issue is the growth in money supply...In any case a temporary artificial change in the cost of money just delysthe inevitable, that is a healthy correction in the relative prices off assets that opens up the possibility of a more efficient allocation of resources. Not what the Republicans are proposing or doing (not necessarily what Democrats propose or would do either).

[MJ]

Alpha, that was good. Now I know how to get you out of your hidout. Just kidding.

 

I think the available tax cut would lead to investments by corporations, since with the low interest rates three is no incentive to store the cash. If the corporations don’t invest directly, they will pay the cash to their shareholders through dividend payments and their shareholders will invest somewhere.

 

On an unrelated note, Xerox has already sold several divisions. Their problems started not from the glut of inventory, but an idiotic marketing system their new (at the time) CEO introduced, which took the company apart – from one of the most successful companies to a company at the verge of bankruptcy. As a result of their new marketing system, they lost the track of billions of dollars of inventory sold for credit to their counterparties, and cannot identify where is their sold equipment. I know this from my brother, who still works for Xerox but is currently looking for job since their division got sold. Know any good jobs for electrical engineers in your area?

 

I would put your statement about consumer confidence a little differently – the consumer debt may increase when the consumer confidence is on the rise. Clearly, the consumer confidence is negatively correlated to the unemployment rate. Additionally, the unemployment rate is correlated to the major equity indices, which are driven by stock prices of companies like IBM. So in this sense, I think the high stock prices drive high consumer confidence at least for the “grandma” investor types.

 

I think the money “given” to corporations one or another way, ends up in peoples' pockets – a very vast segments of people – even those who don’t own stock. But I would like to make a correction again that the issue here is not giving money to corporations, but allegedly letting them to keep their money. I think there is a major difference here.

 

Otherwise, I feel we both (actually all three of us) are in agreement.

 

[ November 24, 2001: Message edited by: MJ ]

[MJ]

Dear Boghos,

 

Contrary to you, I don’t enjoy a nice Saturday. Here we have the first rain of the season since yesterday.

 

I am not familiar with the nature of the current tax cuts. My understanding is that the bill is still under scrutiny, and has not reached the President’s desk, yet. Don’t know about the political issues. I just know that the [permanent] tax cuts accompanied with strict spending caps are good for the economy.

 

As far as the details are concerned, with my traveling schedule, accompanied with my part-time job at the Hye Forum, haven’t been able to follow what’s going on beyond the war efforts.

 

[ November 24, 2001: Message edited by: MJ ]