Signs of the Economic Apocalypse, 1-22-07

From Signs of the Times, 1-22-07:

Gold closed at 636.10 dollars an ounce Friday, up 1.5% from $626.90 at the close of the previous Friday. The dollar closed at 0.7717 euros Friday, down 0.3% from 0.7738 at the end of the week before. The euro, then, closed at 1.2959 dollars compared to 1.2924 at the end of the previous week. Gold in euros would be 490.86 an ounce, up 1.1% from 485.07 for the week. Oil closed at 51.99 dollars a barrel Friday, down 1.9% from 52.99 at the close of the previous Friday. Oil in euros would be 40.12, down 2.2% from 41.00 for the week. The gold/oil ratio closed at 12.24, up 3.5% from 11.83 at the end of the week before. In U.S. stocks, the Dow closed at 12,565.53 Friday, up 0.1% from 12,556.08 at the close of the previous Friday. The NASDAQ closed at 2,451.31, down 2.1% from 2,502.82 for the week. In U.S. interest rates, the yield on the ten-year U.S Treasury note closed at 4.78%, up one basis point from 4.77 for the week.

With U.S. stocks at all-time highs and oil prices plunging, consumer optimism in the United States rose to the highest level in three years:

Consumer sentiment best in 3 years

By Rex Nutting, MarketWatch

Last Update: 10:18 AM ET Jan 19, 2007

WASHINGTON (MarketWatch) -- U.S. consumers' attitudes about the economy brightened in January, with a key gauge of consumer sentiment rising to its highest level in three years.

The University of Michigan consumer sentiment index jumped to 98.0 in January from 91.7 in December, according to Reuters, which has an arrangement to publish the index. It's the highest since January 2004 and was well above the 92.0 expected by economists surveyed by MarketWatch.

Consumers were more upbeat about the present and future economy. The current conditions index rose from 108.1 to 112.5, the highest since July 2005, just before oil prices spiked higher.

The expectations index rose from 81.2 to 88.7, the highest since December 2004.

The only negative note in the report came from a slight increase in consumers' inflation expectation over the next 12 months to 3% from 2.9%. The five-year inflation expectation remained at 3%.

Economists caution that the consumer sentiment index does not necessarily predict consumer behavior. However, the expectations index is one of 10 indicators that make up the index of leading economic indicators.

The cheery sentiments illustrate the way people tend to view the economy in isolation from anything else. With the Cheney administration pushing World War III as hard as they can, and evidence of catastrophic climate change unavoidable, it’s hard to understand the economic optimism. Most likely it is due to the fact that no one alive in the United States under the age of seventy can remember an economic collapse. And no one alive, period, who has lived in North America their whole lives can really know the consequences of losing a global war.

In the short term, however, the war is good for the corporations:

Raytheon expects jump in Patriot sales
Potential customers lining up amid a rise in global tensions

By Robert Weisman, Globe Staff
January 18, 2007

A week after President Bush said the United States will deploy Patriot anti missile systems to the Middle East as part of its efforts to stabilize the region, Raytheon Co. executives yesterday said they're expecting a spike in Patriot sales as world tensions escalate.

Raytheon has been talking to nine foreign customers about upgrading their existing Patriot systems, and is in discussions with several potential new customers, including Turkey and South Korea, executives from the Waltham company said in a program briefing.

Countries around the Middle East and the Korean peninsula are especially concerned about guarding against missile strikes from Iran and North Korea.

"There are a couple of regional threats around the world that have certainly been a lot more active in the past six to eight months," said Skip Garrett , vice president of international operations for Raytheon's integrated defense systems division in Tewksbury.

In his Jan. 10 speech to the nation, Bush said Patriot systems would be sent to US allies in the Middle East as part of his new strategy for Iraq and the wider region. But he did not specify what countries would receive the Patriots, where they would come from, and whether the Army would buy new batteries to replace those being deployed.

Yesterday, an Army spokesman said the Patriot batteries that Bush mentioned initially will arrive in Kuwait but would remain under control of US forces. They will be sent to the region as part of the USS John C. Stennis carrier strike group and the 3rd Battalion, 43rd Air Defense Regiment, deployed to bolster security, he said. He said the length of the deployment would be determined by the commander in the theater and there are no current plans by the Army to purchase more Patriots to replenish the US stock.

Garrett and Rick Yuse , the Raytheon vice president for integrated air defense, said renewed interest in the Patriots is more a result of rising global tensions than the increase of 20,000 troops in Iraq. Many of Raytheon's existing customers, including Germany, Greece, the Netherlands, Spain, Saudi Arabia, Kuwait, Israel, Japan, and Taiwan, are considering an upgrade to the Configuration-3 system, they said.

Raytheon is the Patriot system's integrator and also makes radar for the anti missile system. The new configuration includes not only upgraded radar and software but also the improved PAC-3 missile, built by Lockheed Martin Corp., to intercept tactical missiles such as the Russian-made Scuds or Iskanders. Thus far, only the US Army has fielded the new model, but the Netherlands and Japan have placed orders and other countries have been weighing upgrades in the aftermath of missile tests by North Korea and Iran in the past year.

"The heightened tension with North Korea and Iran are certainly drivers for sales of tactical ballistic missile defense systems," said Steven Zaloga , senior analyst for missile systems at Teal Group Corp., an aerospace and defense consulting firm in Fairfax, Va.

Raytheon doesn't break out Patriot revenue in its financial reports, and Garrett and Yuse didn't say yesterday how much the company was anticipating in increased revenue. Last year, Raytheon reported Patriot orders totaling $283.9 million.

The company typically sells multiple systems for $1 billion to $1.5 billion per order, and foreign sales must be approved by the US government, said Paul Nisbet , a defense analyst for JSA Research in Newport, R.I. Raytheon itself keeps about 60 to 65 percent of a sale, he said, with the remainder going to Lockheed Martin and other Patriot suppliers and vendors.

Nisbet estimated the Patriot program brought in more than $1 billion a year for Raytheon in the late 1980s and early 1990s. But in recent years the company's revenue from the antimissile system has dropped to about $200 million annually, he said.

"I'm sure they're getting more inquiries now," Nisbet said. "They must be."

The disconnect between financial indicators and true economic and social health illustrates what Catherine Austin Fitts calls the “tapeworm economy:”

Want to understand where our jobs, small farms and small businesses are going? Want to know what or who is draining us and our communities?

In a tapeworm economy a small group of insiders centralize political and economic power at the expense of people, living things and the environment, in a manner that destroys real wealth. A tapeworm economy is one in which it is considered acceptable to make money from our popsicle index going down. In investment terms, it is an economy with a negative return on investment. It is parasitic in nature.

The way an actual tapeworm operates is to inject its host with a chemical that makes the host crave what is good for the tapeworm and bad for the host. So the Tapeworm Economy is adept at using media and education and numerous financial incentives to get us acting against our own strategic interests and instead supporting and depending on the Tapeworm.

The symptoms of the Tapeworm are many - narcotics trafficking that targets our children, runaway exploitive and predatory corporate practices such as the patenting of life, terminator seed and the destruction of our topsoil and food supply, fraudulent inducement of debt to homeowners, students and consumers, suppression of knowledge and renewable energy technology, criminal mismanagement of government credit and resources, black budget operations and the manipulation of currency, financial and precious metal prices and markets. These practices introduce organized crime throughout all aspects of our lives... these transactions drain our families and neighborhoods on a daily basis – much like a tapeworm drains its host.

What would be interesting is an economic sentiment survey of the insiders. How optimistic are they in their heart of hearts?

The unease bubbling in today's brave new financial world

By Gillian Tett

January 19 2007

Last week I received an e-mail that made chilling reading. The author claimed to be a senior banker with strong feelings about a column I wrote last week, suggesting that the explosion in structured finance could be exacerbating the current exuberance of the credit markets, by creating additional leverage.

"Hi Gillian," the message went. "I have been working in the leveraged credit and distressed debt sector for 20 years . . . and I have never seen anything quite like what is currently going on. Market participants have lost all memory of what risk is and are behaving as if the so-called wall of liquidity will last indefinitely and that volatility is a thing of the past.

"I don't think there has ever been a time in history when such a large proportion of the riskiest credit assets have been owned by such financially weak institutions… with very limited capacity to withstand adverse credit events and market downturns.

"I am not sure what is worse, talking to market players who generally believe that 'this time it's different', or to more seasoned players who… privately acknowledge that there is a bubble waiting to burst but… hope problems will not arise until after the next bonus round."

He then relates the case of a typical hedge fund, two times levered. That looks modest until you realise it is partly backed by fund of funds' money (which is three times levered) and investing in deeply subordinated tranches of collateralised debt obligations, which are nine times levered. "Thus every €1m of CDO bonds [acquired] is effectively supported by less than €20,000 of end investors' capital - a 2% price decline in the CDO paper wipes out the capital supporting it.

"The degree of leverage at work . . . is quite frankly frightening," he concludes. "Very few hedge funds I talk to have got a prayer in the next downturn. Even more worryingly, most of them don't even expect one."

Since this message arrived via an anonymous e-mail account, it might be a prank. But I doubt it. For, while I would not normally write an article about responses to an article (it is the journalist's equivalent of creating derivatives of derivatives) I am breaking this rule, since I have recently had numerous e-mails echoing the above points. And most of these come from named individuals, albeit ones who need to stay anonymous, since they work for institutions reaping profits from modern finance.

There is, for example, a credit analyst at a bulge-bracket bank who worries that rating agencies are stoking up the structured credit boom, with dangerously little oversight. "[If you] take away the three anointed interpreters of 'investment grade', that market folds up shop. I wonder if your readers understand that . . . and the non-trivial conflict of interest that these agencies sit on top of as publicly listed, for-profit companies?"

Then there is the (senior) asset manager who thinks leverage is proliferating because investors believe risk has been dispersed so well there will never be a crisis, though this proposition remains far from proven. "I have been involved in [these] markets since the early days," he writes. "[But] I wonder if those who are newer to the game truly understand the impact of a down cycle?"

Another Wall Street banker fears that leverage is proliferating so fast, via new instruments, that it leaves policy officials powerless. "I hope that rational investors and asset prices cool off instead of collapse, like they did in Japan in the 1990s," he writes. "But if they do, monetary policy will be useless."

To be fair, amid this wave of anxiety I also received a couple of "soothing" comments. An analyst at JPMorgan, for example, kindly explained at length the benefits of the CDO boom: namely that these instruments help investors diversify portfolios; provide long-term financing for asset managers and reallocate risk.

"Longer term, there may well be a re-pricing of assets as the economy slows and credit risk increases," he concludes. "But. there is a very strong case to be made that the CDO market has played a major role in driving down economic and market volatility over the past 10 years." Let us hope so. And certainly investors are behaving as if volatility is disappearing: just look at yesterday's remarkable movements in credit default swaps. But if there is any moral from my inbox, it is how much unease - and leverage - is bubbling, largely unseen, in today's Brave New financial world. That is definitely worth shouting about, even amid the records now being set in the derivatives sector.

As the deathwatch for Fidel Castro continues, Latin American socialism has been in the news lately, with Venezuela’s Hugo Chavez stepping up socialist rhetoric with talk of further nationalizations at his inauguration. Interestingly, the most biting criticism this week of Chavez came from the left: Bill Van Auken at the World Socialist Web Site:

The significance of Venezuela’s and Ecuador’s nationalizations

By Bill Van Auken

18 January 2007

Presidential inaugurations in Venezuela and Ecuador over the past week were marked by calls for “socialism” and “revolution.”

During a January 10 swearing-in ceremony in Caracas, Venezuela’s re-elected president, Hugo Chavez, announced plans to nationalize CANTV, the country’s national telephone company, which was privatized in 1991, together with the power industry. He also announced plans to increase state control over the country’s oil fields.

“All of that which was privatized, let it be nationalized,” declared Chavez. “We’re heading toward socialism, and nothing and no one can prevent it,” he added, declaring at one point, “I’m very much for [Leon] Trotsky’s line—the permanent revolution.”

In Ecuador, Rafael Correa assumed power on January 15 in a ceremony in which he announced plans to initiate a “radical revolution” and declared his adherence to the “new socialism” which he said was spreading throughout the region. He has threatened to limit payments on Ecuador’s crushing foreign debt and renegotiate foreign oil contracts. He has also threatened to close down the US military air base at Manta.

Speaking to an audience that included 17 heads of state, including Chavez, Brazilian President Luiz Inacio Lula da Silva, Nicaragua’s Daniel Ortega (the Sandinista leader was himself inaugurated just days earlier), Bolivia’s Evo Morales and Mahmoud Ahmadinejad of Iran, Correa declared, “The citizens’ revolution has just begun, and nothing and nobody can stop it.”

The back-to-back inaugurations accompanied by radical and even “socialist” rhetoric condemning Washington, combined with the Iranian president’s tour of the region in search of allies, sparked a new wave of sensationalist media coverage in the US about Latin America’s “turn to the left.”

It is worth noting that one of Correa’s predecessors, the former Ecuadorian army colonel Lucio Gutierrez, was counted as part of that turn when he won the presidency in 2002 on a platform quite similar to Correa’s. After little more than two years in office, he was driven from the presidential palace by mass protests sparked by his adoption of right-wing economic policies, his embrace of Washington, and the rampant corruption of his regime.

Chavez’s announcement of “new nationalizations” triggered a record fall on the Caracas stock exchange, where CANTV is the largest publicly traded company, as well as a run on Venezuelan-connected stocks sold on Wall Street.

Without a doubt, the events of the past week further substantiate the political shift underway in Latin America, triggered in part by the economic and social devastation wrought by the so-called “Washington Consensus” model of wholesale privatizations and free market policies. It has been further fueled by the relative economic decline of US capitalism in relation to its rivals in Europe and Asia and Washington’s overwhelming preoccupation with its military adventures in the Middle East.

The result has been a defeat for the traditional right-wing parties and the victory of candidates who either describe themselves as or were historically identified with the “left,” not only in Venezuela and Ecuador, but also in Bolivia, Brazil, Chile, Peru, Uruguay, Argentina and Nicaragua.

While these governments have different political origins and disagree widely on policy, they all engage in one form or another of populist rhetoric denouncing “neo-liberalism” and criticizing US policy. They have appealed to popular anger over the staggering social inequality that pervades the continent and, in most cases, have initiated limited social assistance program to secure the support of the most impoverished layers of society.

At the same time, declarations like those of Chavez and Correa about ushering in a “21st century socialism” notwithstanding, these governments have universally defended capitalist private property, abided by the general prescriptions of the international financial institutions, and maintained intact the traditional military and repressive forces of the states they lead.

In many ways, the policies advocated by Chavez—the former paratrooper lieutenant colonel and coup leader—far from signaling a resurgence of socialism, represent an echo of the kind of economic nationalism and military populism associated with figures such as Juan Peron in Argentina, or, in a later period, Gen. Omar Torrijos of Panama and Gen. Juan Velasquez Alvarado of Peru.

As for the new Venezuelan “nationalizations,” there seems to be considerably less there than meets the eye. While Chavez presented his proposals as a matter of Venezuela seeking to “recover its ownership of strategic sectors,” the actual targets for state takeover are of relatively little importance.

CANTV is by no means a telephone monopoly. The company’s land lines cover barely 11 percent of the population, while its cell phone unit, Movilnet, controls just 35 percent of this far more extensive and lucrative market.

The biggest shareholder in CANTV is the US-based Verizon Communications Inc., with a 28.5 percent stake. Last April, Verizon initiated a deal to sell its share to the Mexican billionaire Carlos Slim, owner of Telmex, which has amassed a significant share of the Latin American telecommunications market.

Telmex has faced stiff competition from Spain’s Telefónica, which is a minority shareholder in CANTV but controls its own cell phone company in Venezuela, Movistar, which has captured 48 percent of the market. There is speculation that the nationalization may be, in part, an attempt to derail the deal with Slim and favor Telefónica by protecting the Spanish company from its main rival.

Another motive in taking over CANTV is to remove the country’s largest publicly traded company from the market. The company’s shares, which are traded both in Caracas (for bolivars) and on Wall Street (for dollars), have served as means for Venezuelan financiers to funnel capital out of the country and turn their assets into dollar holdings abroad, contributing to a drain of capital and the country’s 18 percent inflation rate.

As for the takeover of the electric power sector, much of it is already in the hands of two state-owned companies. The main privatized company that would be affected, Electricidad de Caracas, is controlled by the US-based firm AES Corp.

Full compensation to shareholders

Government officials have made it clear that shareholders in CANTV as well as in any power companies that are taken over will be fully compensated from the funds that the state has accumulated from Venezuelan oil revenues. “Shareholders will receive the fair price of the value of their shares,” Finance Minister Rodrigo Cabezas told the Venezuelan daily El Universal.

When it comes to a truly strategic sector of the Venezuelan economy—oil and natural gas—it is clear that what the Chavez government is contemplating is by no means “nationalization,” at least not in the sense that it was practiced even by bourgeois nationalist governments in an earlier period, such as Peron in Argentina or Cardenas in Mexico.

Venezuela is the fifth-largest oil exporter in the world, with proven reserves of 78 billion barrels and potential heavy oil reserves in the Orinoco oil belt that have been estimated as high as 1.2 trillion barrels. The US gobbles up 60 percent of Venezuelan production.

The Chavez initiative in the oil sector has much in common with the “nationalization” proclaimed by President Evo Morales of Bolivia’s natural gas reserves, though Chavez seems to be forgoing the dramatic effect of sending troops into the oil fields.

It is, in short, an attempt to negotiate with the multinational energy companies operating in the Orinoco oil belt—ExxonMobil, Conoco, Chevron and the French firm Total—a majority stake in oil production for the state-owned PDVSA and a bigger share of the profits reaped by their joint ventures.

US-based energy giants are expected to agree to such negotiations in order to maintain their grip—even if it is reduced—on Venezuela’ oil reserves, a source of immense profits.

The country’s oil minister, Rafael Ramirez, made it clear Monday that the government had no intention of making changes to existing natural gas contracts, signed by Chavez’s own government in 1999, when it opened up that sector to private investment and exploitation.

The major Wall Street financial houses took Chavez’s proclamations about “21st Century socialism” and “permanent revolution” with more than a grain of salt.

“We still do not feel Chavez intends to stamp out the private sector altogether in Venezuela; the nationalization of CANTV and other former public utilities carries symbolic weight,” said JP Morgan.

“We do not see an across-the-board abolition of private property,” Merrill Lynch concurred.

The latter is an understatement. Over the past year, Venezuela’s private sector has grown at a rate of 10.3 percent, more than double the growth rate of the public sector. During this same period, there has been negligible growth in the country’s manufacturing sector, with the official unemployment rate standing at approximately 10 percent.

The main growth has been in the financial sector in Venezuela, which enjoys among the most profitable conditions anywhere in the world. As the Financial Times noted sardonically last August, “Bankers traditionally face firing squads in times of revolution. But in Venezuela, they are having a party.”

The article continued, “rather than nationalise banks, the ‘revolutionary’ distribution of oil money has spawned wealthy individuals who are increasingly making Caracas a magnet for Swiss and other international bankers. And it is not just private bankers who are banking on the revolution.”

The newspaper noted that in 2005, bank assets in Venezuela increased by a full third, from $29.3 billion to $39.8 billion.

In other words, notwithstanding the social welfare programs that Chavez has been able to finance with ballooning oil revenues, the commanding heights of the Venezuelan economy remain firmly under the control of international and domestic finance capital.

The increasingly bonapartist character of his government—included in his proposals for his new term of office are an enabling law allowing him to rule by decree for 18 months—reflects the immense social divide between wealth and poverty that still dominates Venezuelan society.

Chavez’s social measures, as limited as they are, combined with his anti-imperialist rhetoric, are provoking increasing ire in Washington. In his testimony before Congress last week on “global threats,” National Intelligence Director John Negroponte described the Chavez government as a threat to “democracy.”

In 2002, Washington responded to this “threat” by orchestrating a right-wing coup that was aborted only because of mass opposition from Venezuela’s workers and poor. It is certain that the CIA is developing plans for another attempt at overthrowing the Chavez government.

Whether Hugo Chavez has any more familiarity with Trotsky’s theory of permanent revolution than having seen the words imprinted on a book cover is not known. Whatever the case, its central perspective holds true for Venezuela and Latin America as a whole.

It is impossible for these countries to free themselves from the grip of imperialism on the basis of a national revolution led by any section of the bourgeoisie or its representatives—including radicalized military officers. That task can be achieved only by means of the independent political mobilization of the working class as part of an international revolutionary class to put an end to capitalism.

The following “contrarian” piece in the U.S. financial press illustrates Van Auken’s point:

HUGO CHAVEZ, THE INVESTOR'S FRIEND

by Mark Turner

Contributing EditorKWR International Advisor

January 10, 2007

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” (Warren Buffet)

PERU (KWR) -– January 9, 2007 -- When Hugo Chavez made his speech to welcome his new cabinet on 8th January, not much was reported to the citizens of industrialized countries. The only news that reached most news wires was that he was about to nationalize the Venezuelan telephone company along with the electricity suppliers. The ensuing sell-off, starting just over an hour before the close of the New York Stock Exchange, took 15% off the market price of VNT in minutes on high volumes before the stock was halted. The next day, VNT dropped as low as $9.46 when cleared for trading, and finished the day down 27.5% at $12.20.

This doesn’t sound very investor-friendly, thus the title chosen for this article seems a little strange at first glance. But once the polemic, rhetoric, disinformation and plain simple lies told by both business reporters and by Venezuela’s president are stripped away, it becomes obvious to the level-headed investor that Chavez and his detractors provide some gilt-edged opportunities to make profits in the stock market.

This latest episode has thrown up VNT, KRY, GRZ and TX as likely targets for the nimble investor. Let us first look at VNT, the veritable eye of the storm. In his speech, Chavez said (in translation), “We must nationalize all that has been privatized.” He then specifically mentioned CANTV, saying, “Let’s nationalize it!”. CANTV, which trades under the ticker VNT on the NYSE, was taken private in 1991 under ex- president Andres Perez. It is currently run by a consortium that includes Verizon (28% of VNT) and Telefonica de España (6%), as well as other minority shareholders.

Headlines on Tuesday were of the robber–baron type. Most commentators assumed that by nationalization, Chavez was simply going to expropriate the assets of VNT and presumably surround its head office with armed soldiers so that the capitalist pig board members couldn’t get to their desks anymore. This, however, is not likely, and allows us to see the opportunity given to the investor that doesn’t swallow the hype surrounding the issue. Any nationalization of VNT would almost certainly involve compensation to the existing investors. Chavez has more than enough money to buy back VNT thanks to the enormous oil revenues currently swelling the state coffers. The argument for expropriation is flimsy to say the least. Expropriation of assets would certainly cause retaliation from injured parties, and Venezuela has far too much international exposure to imagine itself as living in a socialist vacuum. At the present time, it is not in Chavez’s interests to block sales of oil to the US, which consumes 60% of Venezuelan production. It is also worth remembering that 28% of VNT stock is held by Venezuelan citizens and it is highly doubtful that Chavez would leave them holding worthless share certificates. The stock is popular amongst Venezuelans, as it is considered as somewhat a “jewel in the crown” of local shares having risen by close to 100% in the past year. It also has a good reputation for paying juicy dividends ($1.01 on 4th December 2006) and allows locals to invest in dollars, thus avoiding the high inflation rates suffered by the national Bolivar currency.

Chavez has been made out as a crackpot, a fool and a dictator by the western news services. We believe this picture is biased largely by political interests and does not take into account the reality, particularly the financial reality behind this undoubtedly controversial figure. He aims his public speeches towards his party faithful, and rhetoric of the sort seen on Monday is hardly new to dedicated Chavez- watchers. However, his “social revolution” has not turned its back on the ways of 21st century business, and his pragmatic side comes forward when doing deals with capital-driven states and companies. He drove a hard bargain with oil companies, but evidence suggests it has been a win-win situation, as the oil companies are still happy to do business inside Venezuela. The huge revenues accrued by the Venezuelan state are attractive to all arms of the banking world, and anecdotal reports from Caracas say there has never been a better time to set up financial shop in the capital. Chavez is no fool; nobody who gets re-elected in Latin America can be called naive about the ways of the real world.

Potential investors should ask themselves a couple of simple business questions. Does Chavez want to sever relations with Spain? With the USA? Does he want to throw away his market for oil and cut revenues by half? His well-publicized “Bolivarian revolution” will go forward, but there is little chance of him simply stealing property from the rest of the world. Why antagonize his own clientele? The bluff and bombast from the speech podium is certainly not aimed at the business world and should be taken with a large pinch of salt when cold, hard cash is the issue.

…To conclude, the radical move by the Chavez government is real and in motion. His 2006 re-election has given him the mandate to move forward with his grand plans for a social revolution with less fear for a repeat of the coup d’etat he suffered in 2001. However, those companies with exposure to Venezuela have been priced down by panic sellers and sensationalist reporting. We therefore see this present time as an excellent opportunity to take positions in financially excellent companies trading at a short-term discount that will be resolved over time.

Mark Turner is Latin America equities analyst for Hallgarten and Company.

Van Auken’s criticism of Chavez’s brand of pragmatic populist socialism is an age-old one: is it better to obtain the best conditions for one’s people by taking the world as it is now, or is it better to work longer-term for a whole new arrangement? At least to this point in time, the Chavistas can point to a lot of success in contrast to the revolutionary socialist tradition in Latin America (Che Guevara, for example). But that success does nothing to remove the Tapeworm from the world economy. But Trotskyist theory cannot remove the Tapeworm either, because it is based on a false premise that there is only one human race, once which, at least potentially, has a soul. As Andrew Lobaczewski points out in Political Ponerology (see also this review by Catherine Austin Fitts), social or political theory will create disasters if implemented to the extent that they are based on incorrect views of human nature.