On Sunday, September 20, 2009, the US President asked to be interviewed on five political news channels in one day: CNN, ABC, NBC, CBS, and Univision.

This followed his request to address a joint session of Congress on September 9, 2009 (preempting prime time advertisers) and preceded his scheduled hour-long appearance on the Monday, September 21, 2009, David Letterman show — the late-night comedian who recently gratuitously trashed Sarah Palin’s underage daughter.

	A hard sell for the main stream media ...

Although the precise count is uncertain, Barack Obama is, relative to his time in office, now the most publicly exposed President in US history.

At the same time, he is, paradoxically, the President whose prior record and personal views have been subject to less critical media scrutiny than any of his predecessors.

Important issues, such as the future of the dollar, the recovery of employment, a potential trade war with China, the future of NATO, and the outlook for inflation are now tied directly to Obama’s popularity.

In the minds of many, the lower Obama’s popularity, the more favorable the outlook for the future of the United States.

In turn, seemingly unable to change course and abandon his far-left, radical supporters, the President’s waning popularity depends now, almost entirely, on the continued enthusiastic backing of the Mainstream Media.

This quote from Bloomberg puts Obama’s Sunday Blitz in context:

The first person to appear on five Sunday shows was William Ginsburg, who was the lawyer for White House intern Monica Lewinsky at the height of the sex scandal involving then- President Bill Clinton in 1998. The last was Clinton’s wife, then-Senator Hillary Clinton, now Obama’s secretary of state. She hit the shows, including Fox, on Sept. 23, 2007, as candidate for the Democratic presidential nomination. The main topic: her plan for overhauling the health-care system.

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Professor Igor Panarin of the Russia Diplomatic Academy in Moscow, has predicted for a decade that the United States is facing a crisis of moral and financial instability that will lead to civil war and a break up of the nation into six pieces by 2010.

	Igor Panarin ... Seer extraordinaire

If this is true, Barack Obama will be the last US President and the US dollar is finished as a global currency.

According to Professor Panarin, there is now a 75% chance that doomsday will arrive in less than a year.

Igor Panarin’s book on the collapse of the US is a best seller in Moscow and his theories have been carried by major US media, from CNN to Fox News to the Wall Street Journal.

Crack-pot or visionary?

When I first heard of Professor Panarin’s theory of the collapse of the US, in January 2009, his ideas seemed preposterous — a crack-pot fantasy of a weird Russian nationalist indulging in wishful thinking after the breakup of the Soviet Union.

The Wall Street Journal had this to say about Panarin’s forecast:

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

“When I pushed the button on my computer and the map of the United States disintegrated, hundreds of people cried out in surprise,” he remembers.

Here is Professor Panarin’s map of the disintegrated United States:

	The dismembered US, according to Igor Panarin ...

Does the KGB understand capitalism or US history?

Here are some reasons to dismiss Professor Panarin’s predictions out of hand:

1. Unrealistic breakup pattern: When the Soviet Union broke into pieces, the new republics went their own ways, seeking independence, rather than join up with some foreign power. Furthermore, areas like the Ukraine, Georgia, and Kazakhstan, which had been bound together by the Soviet dictatorship, had strong historical and cultural reasons to form independent countries when the opportunity arose, often based on language or religion. The pattern of breakup predicted by Professor Panarin for the US is ludicrous. Why would anyone think that Tennessee and Kentucky would join up with New York and Vermont, rather than with Georgia, Florida, and Texas? Why would Arizona put its lot in with California, rather than Texas? Why should Kansas join up with Canada, rather than with Texas? Maybe the Professor’s computer had a GIGO problem.
2. Economic stress does not usually lead to the political breakup of democracies.: Countries have often faced severe economic stress (like Indonesia in 1997 and Brazil in the 1980s) without breaking up into smaller nations. Although composed of a mishmash of national origins, races, and cultures, The United States is far more homogeneous than Professor Panarin seems to realize. The Constitution is the binding force, not geographic proximity.
3. It is easier to vote Congress out of office, than to break up the US: If all the states are pissed off at Washington, as Professor Panarin predicts (not unreasonably), it would seem that the likely solution would be to kick out the incumbents using the ballot, rather than civil war and secession. The rapid growth of the Tea Party movement in the first half of 2009, indicates that this seems to be still true.

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This is the ninth article in the series about Post Modern Security Analysis.

Operational versus financial information

In the classic 1934 text, “Security Analysis” by Benjamin Graham and David Dodd, the emphasis was on financial analysis (balance sheets and income statements) and the analysis of the terms and conditions of securities.

	Operations: the How and Why of markets ...

Over the next seventy years, capital markets became vastly more complicated, with greater cross-border investment flows.

At the end of the century, the Internet brought an explosion of information and new investment tools.

Today, financial analysis is still the focus of security analysis, but complexity and internationalization has created a need for this focus to expand, bringing in new areas such as economic conditions and legal protections in foreign markets and operations of capital market supporting institutions (such as central banks, development banks, securities and derivative exchanges, clearinghouses, and central security depositories).

There is also greater need to include research in the area that Capital Market Wiki calls “Operations” which is defined as including the following:

Operations: The “How” and “Why” of markets

What passes for “full disclosure” in registration statements and company reports under regulatory regimes around the world is determined by the laws of each jurisdiction.

Mandatory disclosure generally does not include an explanation of the laws, rules, and other legal constraints that govern an issue. The public is usually presumed to know such things — although this may be unreasonable.

Nor do disclosure documents contain thorough descriptions of complex operations and institutional methods that may effect risks and rewards.

For example:

	Backoffice procedures may be important ...

• Disclosure documents on a closed-end REIT fund in the United States will not ordinarily explain the laws that govern closed-end funds, nor the tax regulations that constrain REIT operations.
• Feeder funds that support Bernard Madoff’s Ponzi scheme were not required to disclose and explain in detail the “split-strike conversion strategy” that supposedly explained the extraordinary stable, high-returns of these funds.
• Auditors’ notes on major banks that were speculating in over-the-counter options were not required to contain an explanation or evaluation of the counter-party risks inherent in such trades.
• Prospectuses for the hundreds of municipal bond funds that were leveraged by auction market preferred shares (AMPS) did not contain careful explanations as to how the liquidity of such instruments was to be preserved.

	Financial statements can't explain everything ...

Information of this type, however, is often available on the Internet or in university libraries.

However, such information is not necessarily found in a compact, convenient format in a single location.

Sometimes knowing the “how” and “why” of investment operations can be more important than audited financial information about the issuer.

For example:

Prior to the collapse of the AMPS market in 2007, Moody’s generally gave AAA ratings to auction market preferred shares and thousands of investors were misled into believing that AMPS were safe, short-term investments.

What was missing was operational information about exactly how and by whom liquidity in these shares was guaranteed or assured. After the fact, we can see that there was no assurance of liquidity and that the AMPS auctions were fundamentally flawed. Furthermore, operational information that warned of this unsatisfactory situation was available, all the while, on the Internet. However, by focusing primarily on financial statement analysis, these dangers would be overlooked.

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