Friday, April 25, 2014

Triangular Diplomacy

Politicians, mostly but not entirely Republicans, urge President Obama to adopt a more “muscular” foreign policy. There are headlines to be won with hawkish talk, and members of Congress, especially those who are considered Presidential hopefuls, are not averse to headlines. So there are those who chide the Administration for taking a “wimpish” stance on Syria and Ukraine. At times the President and his Secretary of State seem to be bending with the wind and threatening tougher sanctions against our presumed enemies.

Who are these enemies? Russia heads the list, and seldom a day passes without Obama or Kerry delivering a volley of threats against Putin and his associates. China is not far behind. The President’s trip to Asia this week is designed to reassure Japan and the Philippines that we will back up their territorial disputes with China with our muscle.

It is time for a reality check. There are three major powers in the world: the United States, Russia, and China.  We can out-muscle Russia or China, but we can’t take on both of them. If we threaten both, we will simply drive them to join forces in an attempt to defeat us. In a new Cold War, not just against Russia but against Russia and China combined, we would either (a) lose or (b) win at a cost that would leave the world in shambles.

Henry Kissinger, in his excellent book Diplomacy, outlines the background of Nixon’s “opening to China” in 1969:

Nixon decided to concentrate on the broader issue of China’s attitude toward a dialogue with the United States. Priority was given to determining the scope of the looming Sino-Soviet-American triangle. If we could determine what we suspected – that the Soviet Union and China were more afraid of each other than they were of the United States – an unprecedented opportunity for American diplomacy would come into being.

So it’s time, hawks, to decide whether to make nice with Russia or China.  Threatening both just doesn’t make sense. It’s idiotic. Decide whether some islands in the East China Sea are more important to the United States than Crimea, whether North Korea’s nuclear ambitions are more important than NATO’s interest in extending its reach.

Of course, best of all would be a world in which the United States is friendly with both Russia and China, but that seems highly improbable.

Whatever else one might think of Nixon, his trip to China was a master stroke. In these turbulent times we need more negotiations, less bluster, more give-and-take, less "you do this, or else."  We need triangular diplomacy.


Wednesday, April 23, 2014


A few days ago I talked about the demalling of America.  Today I heard a rebuttal on TV from a booster of shopping malls. She said that on-line shopping is not replacing trips to the mall; it is replacing catalogs.  I am not convinced.

Another transformation that’s happening before our eyes is the slow but inevitable disappearance of the movie multiplexes that, like shopping malls, were overbuilt at the end of the 20th century.  The last few times I went to a movie theater, there were an average of about six people scattered in a space that held about 200. All right, they were afternoon trips, but still…..

Why go to the theater?  Home TVs are getting bigger, while the multiplex screens are getting smaller. At home, you control the environment; at the multiplex, your neighbors may talk, rattle their popcorn bags, or use their cell phones. Then there are the interminable previews and the inane pre-movie quizzes and commercials.  I have it on good authority (my children) that some showings of some movies are packed, but it seems to me that there is a shrinking cohort of people who absolutely, positively, definitely must see the latest Matt Damon or Johnnie Depp movie NOW. 

Then there is the fact that the hours spent on the iPad and the smart phone and the electronic games have to come from somewhere, since no one has figured out how to squeeze more than 24 hours into a day.

Finally, there is the cost of converting the film projectors to digital format, a substantial sum. I read that many theater owners just can’t afford it, but the trend is clear: celluloid is on the way out – and so are movie theaters.

Actually, I think the fade-out of the movie theater is sad.  I remember warmly the nights I used to accompany my parents to the Codman Square Theater (“the Coddy”) to see a Fred Astaire musical, a “B” picture, previews of coming attractions, Movietone News, and a cartoon. They are great memories. But, as they used to say in the movies, “Time Marches On.”

Tuesday, April 22, 2014

The Entertainment Wars

Netflix did two things the other day: It officially opposed Comcast’s proposed acquisition of Time Warner Cable, and it announced its decision to hike fees on new subscribers by a dollar or two a month.  Netflix stock soared (up more than 27 dollars a share) on the announcements – and on the fact that Netflix earnings and new-subscriber count both exceeded the market’s expectations.

All of which causes one to consider whether, in the three-way competition among the cable owners (the pipes), the movie studios (the content owners), and, increasingly, companies like Netflix and Amazon (the streamers), who holds the strongest hand.

The truth is, all three need each other. Without content, the pipe owners are helpless. Without pipes, the studios can’t reach our homes.  And the streamers need both content and pipes.  Wireless technology may eventually replace coaxial pipes, but that’s a long way off, and anyway, the new pipe owners would be wireless companies.

Still, certain facts cannot be ignored. The first is that content, unlike the installed base of hardware, is mobile and will flow to where the money is.  Kevin Spacey was drawn to Netflix’s House of Cards by money and is free to leave Netflix when someone offers more money. So content is king, in a way that pipes are not. However, viewers (especially people in the cherished 20-to-35 age group) are a fickle and unpredictable bunch, as Hollywood and the TV networks find out every week.  Certain talent is bankable until it is not; and while content is a crapshoot, the pipes are not. A length of coaxial cable is a length of coaxial cable, and it can be depended on to deliver both quality content and garbage.  So the owner of the pipe is king.

On the other hand, there is no question that the trends favor streaming. Netflix has about 50 million subscribers in 40 counties, and it adds more every day.  The market values Netflix at over $22B, which means that it can afford pricey talent. So Netflix is king, which exactly is what the Netflix bulls are betting on.

In other words, I don’t know how the contest will play out. I don’t know whether Comcast’s takeover of TWC will be approved. I don’t know whether Netflix’s next show will be as successful as House of Cards or a turkey.  In short, any bet on any of these stocks is a pure gamble.

Friday, April 18, 2014


Thanks to Edward Snowden, we now have some idea of how awesome the NSA’s power is. The spooks there and at the CIA can monitor every phone call we make, every e-mail we write.  If we “like” something on Facebook, or buy something on Amazon, or search for something on Google, chances are that someone somewhere will know it.

So why can’t our government, which certainly has the technology, protect us from robo-calls?

Today I received about four or five of these calls, from, according to my caller ID, “Out of Area,” “Anonymous,” “800 Service” and other aliases.  I didn’t answer any of these calls, but sometimes I search the calling number on-line and read angry reports from dozens of people, some of whom took the trouble to identify the callers, many of whom are political parties.  Therein lies the tale.

When politicians authorized the FCC to give us the Do Not Call Registry, which presumably shields us from such garbage, they exempted certain classes of callers from the DNC embargo. Among these are charities and (surprise, surprise) politicians and political parties.  The Do Not Call Registry is aimed at telemarketers, not politicians – which happen to comprise most of the calls we get these days.

Thus we are protected from the private sector, but not from the public sector. Hmmm. The Do Not Call Registry offers no protection whatsoever from the Democratic or Republican National Committee, individual office-seekers, Citizens United, and advocates who just want to talk to you about ObamaCare.  

Some people answer these calls, bent on chewing out the callers. Others leave the phone off-hook until the caller realizes he or she is being had.  Best bet is simply not to answer.  Picking up the phone simply verifies that your phone number is good. Moreover, some calls, which may be from overseas, initiate a scam designed to extract money from your bank account.

Some phone services offer blocking programs that allegedly intercept designated calls and serve as your private do-not-call list.  But robo-callers are sneaky, changing their numbers periodically, so any list of blocked numbers could prove a moving target.

If you want to rid your life of these nuisance telephone calls, your first step should be to demand that your congressman eliminate the exemption that politicians, political parties, PACs, etc. enjoy in the law that authorizes the Do Not Call Registry.

Good luck with that.

Wednesday, April 09, 2014

The Demalling of America

Once upon a time, not so long ago, when you shopped for non-food items, you went to a mall. Malls were everywhere, often just a few miles apart, and your basic shopping decision was which mall to go to.  Now, if you haven’t noticed, things are different.  You buy things on-line – not everything, because that would trigger panic in the retail community, and there are no signs of panic.  But the trend is clear.

In Biddeford, a small city near here, a new mall opened a few years ago. It was the worst possible time to open a new mall, compounded by the fact that the mall was hopelessly misdesigned, with traffic patterns that defy motorists to choose the correct lanes to drive in.

So, in a breathtakingly short time, stores began failing. Lowe’s and a Best Buy, both large stores, were among the first to fold, but they were not the only casualties. Several restaurants closed or were sold to new franchisees.  A Market Basket supermarket replaced Lowe’s, undaunted by the existence of three supermarkets nearby – including a Super Wal-Mart and a Shaw’s within a half mile. A Target store still stands hopefully in the mall, next to the vacant Best Buy, but few people expect it to become a mecca for shoppers.

I’m not picking on Biddeford Crossing. The same thing is happening across America.
There is a sea change underway in consumer shopping patterns. The old, brick-and-mortar stores are under siege, and it’s hard to see anything that can change the trend.  Those stores that have successfully added an on-line shopping option will do better, but the question remains: What will become of all that brick and mortar?

The effects of the demalling of America will be felt in many quarters, including employment (that new Market Basket, it is reported, employs 450 workers!) and investment. Best Buy and Target, notwithstanding recent bounces, sell for about 15 times earnings, while Amazon stock sells for 75 times 2015 earnings estimates! 

What will become of all that brick and mortar? Stores will fail, and malls will disappear. The process will be painful for many employees and investors, but it is inevitable. Technological change is often painful, but those who play it wisely will do well.