the new york times (nyt) – 2008 year in ideas

  And always my favorite newspaper in the world prints one of my favorite articles in the year.

Begins with “Airbags for the elderly”….

Elderly people reasonably dread falling: falls are the leading cause of death from injury in adults 65 and older.

Perhaps they need not worry anymore. This month the Japanese company Prop begins selling a wearable set of air bags to protect against falls. The device looks something like a fishing vest with a fanny pack attached. When its built-in motion sensors detect a fall, it inflates two air bags

All I ask of you … is tell me an idea in 2008 that you think should have made this list……

Boeing boeing gone! Boeing may bow out of Kc-X tanker deal

Ok…ok.. I hear the applause, thanks all. I did call it right that Boeing was going to bow out of the KC-X tanker deal after some ritual noise. And they just are on the brink of doing so.

Read my prediction here from March 2nd 2008:

Boeing flies on fumes as Northrop-Grumman (EADS) tops it up?…..More to the Pentagon Aerial Tanker deal than meets the eye.

Then read this article in the St.Louis Business Journal from 11th August 2008:

Report: Boeing considers bowing out of tanker contract bidding

Will be good to see what finally happens after the meetings on 12th August between Boeing and the DOD and between Northrop and the DOD.

And for the rest of my predictions from 2nd March – the French join the F-35 program!

LiveJournal tags: boeing, kc-x tanker, kc-45, northrop grumman, DOD, air-to-air refueling, French, F-35

Stay tuned.

- Deepak

The Triumph of Good

Technorati Tags: Olympics,Israel,Iran,Ahmadinejad,Tikkun,Commentary,Sharon,Boys from Brazil,Meir Kahane,Arafat,Fuhrer,Berlin Olympics,Palestine

I often wondered what in Leni Reifenstahl’s monstrous classic “The Triumph of Will” kept audiences including  Jews and Gentiles, Hindus and Muslims alike, rapt in attention – even seven decades later – as they watch serried ranks goose-step in torchlight. Perhaps it points to what lies beneath most of us – the “inner tyrant”, the “inner prison guard” and the “inner thug” always ready to be summoned by the “greater cause” – and as was so ably demonstrated in the recent Balkan wars.

I never understood either why so many of us including I watched and continue to watch in fascination cable TV reruns of WWII news and documentary footage, endless edifying analyses of German weaponry or genius. We all have our excuses. I am an aviation buff and an aero engineer by training – so I used to love watching all those drawings of jets that were eventually never built by the Nazis.

Now I watch kids doing the same thing – glued to the TV  watching those reels yet again of carpet bombing cities and images of Nazi order and precision.  I was never convinced then and never convinced now as  why it was ok to do that. After all was this not a war that was truly about right and wrong, about good and evil. Shouldn’t such documentaries come with disclaimers like cigarette ads – highlighting the difference between technological success in free societies versus totalitarian ones? Are we creating a new generation of war-ready, multi-ethnic, environment friendly, “Boys from Brazil”? How do we tell them – hey this is not just about war games – it is about values that are right and wrong? Would we find it ok to see how Serbian genius supposedly used a Czech anti-stealth radar and downed an F-117 Stealth Fighter, without ever mentioning Srebernica?

Of course not all the fleeting black and white images of liberated war camps could put me through what Schindler’s List did, a movie I had to watch over several sessions as I was too overcome with rage at a world that stood still for too long.

Perhaps it is not too bad an idea if we have public service ads at the end of each of these war documentaries, ads  where civilian genocide survivors – women, children and old, Jewish and Gypsy, Armenian and Christian, Albanian and Serb, Lebanese and Israeli, Hindu and Muslim – tell us how it really was. (Please do comment in this blog if you want to start a write in, I am happy to start one).

And it did take me a long time to get rid of the pre-programmed views on Israel and the territories that the socialist ‘non-aligned’ India of my birth wired me with. And it was yet another decade before I realized that sure as there was a crazy Jewish right, there was a brilliant Jewish center and a crazy Jewish left. And when I did read them, I learned to read between the brilliant lines of Tikkun and Commentary magazines.

I always held free societies and free people to a higher standard in armed conflict. So my standards never applied to the thugs at the PLO – in hindsight many of us now know they always were corrupt thugs. I must say I also never understood Meir Kahane or the concept of Eretz Israel and while I liked Sharon’s approach to shooting first, questions later, and never forgave him for letting Arafat off in Lebanon – I could never comprehend his unseemly, self-destructive blood lust of later years.

It is also sad and yet hopeful, to see in Israel and Palestine – all the sorrows, the complex emotions, the obviously bad guys, the not so obviously good guys, the wounded kids and desperate folk on all sides, – and the macabre shadow dancing of leaders and emissaries timing their moves every eight years to the exit of lame duck American presidents. But I digress.

Nothing prepared me for the emotions this evening as I returned from a visit to the doctor (yes all is well, a mild flu). I was browsing the headlines when I bumped into an Olympic story that gladdened my heart.

That brings me full circle to where my rambling began. See the only Jew ever allowed to participate in the 1936 Berlin Olympics was certified as half-German and allowed to have a go at it. India and Britain refused to give the Nazi salute when their teams marched past the Fuhrer, though I believe the US complied (we, the US have more than made up for that oversight, so I am sure it is all forgiven).

The article i read simply said – Iranian swimmer quits Olympic race against Israeli. “………An Iranian swimmer at the Beijing Olympics who withdrew from a race that included an Israeli did so because he was ill, authorities said Monday. ……..Four years ago, at the Olympic Games in Athens, an Iranian athlete pulled out of the opening round of a judo competition that included an Israeli………….the Iranian president was quoted as saying the athlete’s actions would be “recorded in the history of Iranian glories” and declared that the nation consider him to be “the champion of the 2004 Olympic Games…..”

Indeed 2008 is a wonderful shift from the world of 1936. Today, the openly intolerant, the openly bigoted and the openly hateful among us feel compelled to drop out of a swim meet in the face of free nations, free people and free societies.

Imperfect, unjust, work in progress, corrupt, all that it may be accused of – but Israel is a free society. And that is something Mr. Ah-MAD-inejad, can never buy with a million centrifuges. He was forced to retreat today without a single gun being held to his muddled head. He ordered a retreat in the face of ideas that will eventually overrun him – as sure as the sun rises over his wonderful oppressed people every day. And that will be the ultimate Triumph of Good over the amoral Triumph of Will.

I agree, I ramble.

- Deepak

The China Syndrome – try decouple this.

This blog post is in response to yet another poorly researched article (which is a surprisingly new trend) from the Economist.

http://www.economist.com/finance/displaystory.cfm?story_id=10808782

Assuming, as the Economist suggests, that decoupling was indeed a likely possibility ( I don’t agree)…  and assuming we go along with it and agree that China’s economy is very closely coupled with the rest of the world. Then, as the article glaringly ignores, any short term risk to China’s own economy could spill over far beyond its borders. Even if it were decoupled fron the US. 

My comments are in two parts. In Part 1, I focus on a China slowdown / meltdown and its impact assuming China and the US were indeed decoupled (which in my opinion they are not). In Part-2 I anchor my thoughts from an incisive comment that I came across in the comment section of the Economist article.

Part A 

While China has managed very well with an almost free society and an almost free market, there will come a day of truth. And that day is not far off. Good, factual, independent and evenly timed disclosure is a cornerstone of free and fair markets. In its absence, investor judgment becomes the first casualty, followed a close second by market nervousness. China stock market is anything but transparent and with large government holdings, is heavily stage managed. And in market such as this, the malaise progresses, undetected – leading to a mood that is always one shock away from descending into fear, uncertainty and doubt.

This is indeed one worrying backdrop against which China has to deal with the reform of its banking system and the unavoidable float of the yuan.

Runaway lending practices have left China’s banks with a high percentage of bad debt (guesses welcome… see link), a significant portion of whose debtors are likely dependent on exports. That is in itself a coupling effect that is unsettling at best. For more read this article on increasing percentage of bad loans expected in 2008: http://en.ce.cn/Industries/Financial-services/200802/22/t20080222_14606885.shtml  Reform is not going to be an easy task and the extent of bad debts will not be apparent at first. Do bet on the fact that skittish shareholders will head for the doors at first signs of trouble.

As if that were not enough – historically the world has not seen as large an export dependent economy as China’s, stuck with state mandated exchange rates. That has created structural creaks and groans in the gold laden flagships of China’s “treasure fleet”. A free floating yuan while desirable and unavoidable bears more short-term risks for China’s economy. Its predicted appreciation on float, will come about in a weak dollar world, further pressuring China’s exports and affecting revenues from export and pushing up costs of imports. That would affect both export led and internal consumption.

This is one state managed show that is heading for short-term trouble. So watch out for what happens after the Beijing Olympics. No gold medals for anybody then.

For those of you who don’t buy the decoupling theory – I agree with you. Here is why: 10 years ago, 30% of global consumption was accountable to the US – the same percentage as it is today, Except the percentage of US consumption coming out of Chinese production has grown dramatically in the last 10 years. We are coupled, we are very coupled.

Part B.

Also for those celebrating the early demise of the US as a world power, read these comments of DaBoom further down in the list of comments against this article. This guy gets it. Nice work DaBoom.

I excerpt it here… in full.

Or you can read this link: http://www.economist.com/members/persona.cfm?econUId=1779271

When you are a poor shoe shining boy, your only alternative is to shine shoes. So you are dependent on selling your service. When you are a rich shoe shining boy, you have more alternatives. (1) You can invest in yourself and get an education, or even buy a shoe shop, increasing your future income potential. (2) You can do (1) and in the mean time get an ipod nano for yourself. Or (3) You can get an iphone.
Of course, if you are stupid enough to choose option (3) (a lot of people did actually, think Africa), then too bad, you are doom to be a shoe shining boy forever. But even (3) is better than option (4), which is to lend money to the ipod salesman so he can continue to pay you to shine his shoes.

If the Chinese government, by holding the yuan and buying US bonds at ridiculously low interest rate (AND depreciating principal base’s falling dollar!), is not taking money from the shoe shine boy and giving it to the ipod seller, I don’t know what is.
Addition: By holding down the yuan, what the Chinese government is effectively doing is taking say 20% of PRC’s people’s wealth and buying US dollar denominated bonds. The worst part is, the US dollar fell 40% in the past 4 years.

** USA really have some wisdom here. Not only can it pay back its loanes with pennies on the dollar now. It has been able to use those money to invest in FDI that earns positive returns. It sounds a lot like those Hedge Fund using leverage. Okay, maybe they bought an iphone on the way too, but who doesn�€™t want to buy an iphone when it�€™s on a 40% discount.

Boeing flies on fumes as Northrop-Grumman (EADS) tops it up?…..More to the Pentagon Aerial Tanker deal than meets the eye.

The winning proposal gives the military “more passengers, more cargo, more fuel to off-load, more availability, more flexibility, more dependability and it can carry more patients,” said Gen. Arthur Lichte, commander of the Air Force’s Air Mobility Command.

 

Background

After a long wait and several twists and turns, the Dept of Defense awarded a $35 billion dollar contract for the next generation of air to air refueling tankers, named the KC-45 (KC-X)  to a consortium lead by Northrop/Grumman the US defense giant and EADS – a European defense giant. The deal would have the tanker built around the base airframe of an Airbus A-300, a company that EADS is a significant shareholder in.

The deal has done more for cross-Atlantic relations than any Condie hugging fest, although it has run into a perfect storm at home. This is after all an election year in the US set against the backdrop of a recession. Politicians have already uttered the O word (outsourcing) accusing the DOD of shipping jobs to Europe, where EADS and Airbus are based. Read background

On the face of it, the deal seems to say many nice things for how business is conducted in today’s Pentagon. In a previous go of the contract a few years ago, a former Pentagon official and an ex-Boeing CFO improperly exchanged information and are serving jail terms for it. At that time Boeing was unfairly awarded the deal as a ‘fat-cat’ lease agreement and not an outright buy. Lest we forget, no less than ,John McCain, the likely Republican candidate for President, led his Senate committee in a spirited investigation into the original sweet heart deal with Boeing.

But besides the usual sound bytes and photo-ops such issues provide our elected officials, I believe a more careful analysis reveals the making of a deal much wider than what has been reported. No conspiracy theory here, but just educated guesswork that only time will tell is right. Read on.

 

Insights

 

In the high stakes game of quid pro quo among nation states there may be more to the deal than meets the eye – Here is my take on it….

 

Sarkozy 1, Aribus 0

Unlike many of his predecessors who have unsuccessfully meddled with Airbus let alone fix it, Nicolas Sarkozy seems to be adopting an approach with a higher likelihood of success. Based on recent history, convincing the labor unions, Airbus’ moribund middle management and their German partner of the need for painful restructuring will take more than the will of a French President and of EADS – one of Airbus’ largest shareholders.

The KC-45 / KC-X deal hands Sarkozy and EADS just that stick to beat Airbus with.

Where previously restructuring by fiat, decree or even consensus had proved impossible, the $35 billion contract – a deal potentially creating jobs in France, Germany and the UK – lets them do just that. And I guess EADS will have worked enough wiggle room in the deal to allow it to continue turning the leverage the deal on Airbus for a while to come.

That is not all.

Cash from the KC-X deal may be just what Airbus needs most to bail out the troubled A-380 program as they it may have more penalties associated with delivery delays, faces a recessionary downturn in air travel and make up for lost state subsidies.

With this deal, well-worn arguments by Airbus to continue receiving  state subsidies – primarily from France and Germany, will no longer hold. Airbus and its investor countries have justified for the longest time to the European Trade Commission and the WTO that they were  right in being subsidized by their Governments because arch rival Boeing was being subsidized by contracts from the US DOD. Awarding the KC-X / KC-45 deal to Boeing would have perpetuated a subsidy model that no longer finds favor in Paris or Washington D.C. Awarding the contract to EADS ends any basis for continued state subsidies to Airbus.

 

Boeing Likes the deal too.

In that most twisted of ways that only the big guys seem to get, losing may be preferable to winning – especially when you are after a bigger prize. My guess is that Boeing’s management may not be feeling all that bad for lack of a KC-X deal.

Had they won, the deal would have been bitterly contested, risking its market reputation and the possibility of it being overturned again – fate worse than not winning the deal. In a presidential election year, where John McCain is one of the candidates and you don’t know which horse to back, defending a contract award could  get pretty tricky.

In Boeing’s favor, unlike Airbus, they do not lack for the ability to get focused and fix things. the KC-X deal would at best have been a $100 billion distraction and risk lulling the company into complacency at a time when they need greater focus on the Dreamliner – Read about Boeing’s Mr. Fix It.

 Besides, not having the deal allows Boeing and the US Trade Reps to make a stronger, almost watertight case to the EU and possibly WTO against continued state subsidies to Airbus. A ruling in Boeing’s favor could have much greater long term impact than the KC-45 contract.

This deal could also solve another problem for Boeing – that of its C-17 military transport, whose production line is on the brink of closing. The line is being kept open with some sweetheart deals from Australia, the UK and now a planned NATO airlift capability. The KC-45 deal could possibly imply a French quid pro quo support for more C-17 buys by NATO, possibly even by France itself.  The Airbus A400M, really a C-130J equivalent is also delayed and a C-17 buy by France, though in a different class than the C-130J, could be somewhat justified.

Uncle Sam

For Uncle Sam – the deal makes a lot of sense in more ways than one.

It is also clear that the excessive emphasis on the A-300′s carrying capacity, over that of Boeing’s platform is smart planning for an alternative fuel future. For the uninformed – me included, the Pentagon is potentially the largest alternative fuel customer in the world. In fact, over the life of the KC-45, some of the more exotic fuels may need more volume to be carried, or more cooling/insulation – reducing the usable volume to that of Boeing’s KC_X alternative. 

The contract also holds out promise of more Pentagon carrots to allies that would be more incented to toe the line a little more. Besides, having the US Government as your largest customer means you are that much more vested in the trans-Atlantic defense relationship, less likely to criticize its ongoing adventures.  It also delivers a clear message that at first, friends such as Sarkozy, will be trusted and even rewarded. Then – they have to remain friends to get more.

And finally the deal makes even more sense when the lack of competitiveness and increasing irrelevance of European defense technology leaves the US with little choice in what it outsources to Europe – limiting it to deals that are largely low-tech (such as the tanker deal) or the low-tech components of a high tech deal (such as in the F-35 JSF effort).

 

Prediction – the French partnership in the JSF

 

I also believe the decision to award the KC-45 contract to Northrop/EADS presages French participation in the JSF (Joint Strike Fighter) Program. Here is why.

 

Apart from a few expressions of desire (read blog article), France’s own Dassault, is strangely silent on a 5th generation replacement for the Rafale. The truth is – neither the French nor Europe can afford to build a F-35 class fighter. China has its own plans. With India and Russia are taking a shot at it as well with the PAK-FA, their 5th generation fighter, the challenge cannot be ignored either.

For Dassault, it is going to be hard to form a European team, having previously snubbed  potential partners over the Euro-fighter Typhoon project and going it alone with the Rafale.

With UK, Italy, Turkey and the Netherlands firmly in the JSF camp, that leaves Germany and possibly Sweden as the only possible partners. Definitely not enough demand or money to go around.  The only other partner candidates for stealth – Japan Israel will mostly end up opting for the F-35, or maybe even the F-22.

That leaves France with no choice  – and for Sarkozy perhaps a happy one. Politicians love nothing more than having circumstances make the case for them – which is to join the JSF program as a Level 1 partner.

Lockheed Martin could just as well do with another Level 1 partner in the JSF program – helping infuse cash at a time of strained DOD budgets and likely reduced orders for the JSF.

Only time will tell – but I think the KC-X announcement is the first in a series of trans-Atlantic deals including more consolidation.

Everybody’s happy

So everybody’s happy – Northrop Grumman / EADS with the KC-45 deal, Airbus, the French Government, Uncle Sam and very very likely – Boeing and Lockheed Martin.  Nice play – all around.

Comments welcome._________

Technorati Tags: KC-X,Boeing,Northrop Grumman,EADS,aviation,John McCain,KC-45,Sarkozy,A-300,Lockheed Grumman,ethanol,alternative fuels,JSF,F-35,Joint Strike Fighter,A400M

Youtube, Pakistan and Weapons of Mass Diversion

Five people die in Pakistan protesting Danish cartoons. And a cleric announces a reward of a million dollars and a new car for anyone willing to take a Danish cartoonist on a one way trip to heaven. (story). It should just have been yet another day when the pace line for freedom moves between those who fight for their right to offend, and those who fight for their right to be offended.

But it was different. For Pakistan’s government, in act of state sponsored vandalism, issued its ‘fatwa’ against YouTube, and diverted the routing of requests for the site in a manner that denied access to net users worldwide. Even more remarkable than the act itself, was the almost universal lack of comment from leaders of free societies. Perhaps because blocking YouTube has now become all too common … with countries from Brazil to Thailand having had their go at it. (Lede.. NY Times)

It wasn’t different for its use of precision munitions down a vent shaft, nor for blocking ports in a nation’s firewall. Nor was it a Net era jammer blocking the Voice of America. Instead, it was different because it was the first use of a Weapon of Mass Diversion (WMD) by a nation state.

In what is still largely a feudal society it should come as no surprise that a master’s whim usually leaves the serfs scurrying to do his bidding. Pakistan’s only too eager ISPs complied with Musharraf’s fatwa and at first, diverted all requests for You Tube to a virtual cul-de-sac (tech analysis). And that would have been that except for another strange twist.

Pakistan Telecom’s network engineers accomplished a rather odd act of (c)omission. They let slip this ‘diversion’ to the ‘virtual cul-de-sac’ onto the servers of their ISP, Pacific Century Cyberworks (PCCW). And then as they say – the rest was history. In the copycat world of internet routing tables, where one server copies the best paths to a resource from other servers, this act of (c)omission was copied over and over again till Musharraf’s fatwa made itself felt in desktops where no extremist wrath had ever reached before.

And the rest will indeed be history. I am sure the lessons from this sorry event will not go unnoticed by the many enemies of freedom – from Damascus, to Pyongyang to Tehran. Will this singular act of vandalism portend many others? Will we be heading soon to a world with many internets – one for the free – safeguarded by liberal values and another for the rest?

Comments welcome…