21 August 2007

Shelter from the storm?

By Eric Jansson
on FT Alphaville, 21 August 2007


How will emerging markets respond to the evolving global crisis in financial markets? The question was posed today on Alphaville, the FT’s blog for market banter. Alphaville notes uncertainty as to whether emerging markets could become safe havens during the current storm. It also notes that local risks complicate such markets, giving as an example a spike in kidnappings in Columbia.

The question Alphaville poses is worthwhile. However, it is also indicative of the tendency among fund managers in highly developed economies to view EM as a homogeneous investment zone, whereas, in fact, EM is an extremely heterogeneous area of investment.

The temptation in the current crisis, as always, is to oversimplify in order that the response can be kept simple. Investors in EM prefer large-cap investment vehicles large-cap, that is, within the context of EM economies and they tend to analyse market behaviour accordingly, with a focus on macro trends. By contrast, the example of a spike in Columbian kidnappings implies that micro factors "on the ground" can also become driving forces. This is a fair point because a big challenge in judging EM performance is understanding the interplay between solid macro and fluid micro factors.

EM macro-micro interplay is frequently irrational. EM across the board often feel pain when risk-aversion grows in highly developed markets, despite continuing improvement of local fundamentals. Why? Because developed-market investors in EM stocks and bonds often categorise their EM holdings as "high-risk", and broadly these investors move out of high-risk investments globally when risks in their home markets increase. This phenomenon can amplify risk in EM capital markets. It also magnifies the difficulty of understanding local market volatility and reacting to it profitably. Likewise, micro to macro, when local micro problems spike under globally risk-averse circumstances, EM frequently experience a degree of foreign capital flight.

Beneath the froth of foreign capital investment, obviously, EM reactions are diverse because markets are diverse. The important question today is how important this froth is in each individual market, and how well each market can stand on its own if that froth starts to evaporate or curdle.

In smaller emerging markets, as the current credit crisis plays out, the reaction might well be small; froth is minimal in such markets because large-cap vehicles are scarce there. By contrast, some froth is likely to evaporate or curdle in larger emerging markets, yielding a measurable reaction (note the Asian and Russian reactions) yet at the same time local capacity to weather the storm can ultimately prove greater in large markets with substantial local capacity.

The only answer, at the end of the day as in the US credit market is to understand individual investments in their real context. In EM, the real context means the local context of specific EM economies, companies and industries. There will be some uniform trends, but impact will be diverse, dependent upon proportional levels of exposure. Meanwhile, for clues, look at the way individual EM stock markets have responded so far. Those least touched by big foreign funds show trends divergent (positively) from those we are witnessing in major markets worldwide. The bad news is that some such markets could be real safe havens, yet some undoubtedly are not, and data describing exposure to froth is scarce.

Such are the realities of economic interdependence in a complex world.

14 August 2007

Keepin' it real with Jesus

Sermon at St Cuthbert's Church, Norham
12 August 2007


Dear Lord, I pray that what I say now may be of true service to these my brothers and sisters in Christ. Inspire our hearts, forgive our errors and fill us with your Holy Spirit. Amen.

Perhaps you heard this past week about Pat and Sheena Wheaton. They are a couple of New Zealanders, and they have a new baby boy. There’s been a little problem over his name. Pat and Sheena thought long and hard about it. Somehow, after deliberating, they decided that they would name him “4Real”. That’s a name: “4Real” – the number 4, R, E, A L.

This might have passed unnoticed, but there was a public ruckus about it. The New Zealand government registry refused to accept “4real” Wheaton’s given name, because it had a number in it, and names – the registry said – are to be made up of letters only.

This sparked a public debate. Pat and Sheena Wheaton got upset. They said they would never give up, that no matter what the registered name might be, they would keep calling their boy “4real”. But the registry held its ground.

So they called him “Superman” instead. (No word yet on what they are calling Superman in the privacy of their own home.)

I am pretty conservative when in comes to names. Laura and I chose pretty straightforward names for our children. But still, I sort of hope that Pat and Sheena still call their boy “4real”. It is a terrible name, but it’s very hip, and it seems to give a nod to one of the ideals that looms very large in the popular consciousness nowadays. That ideal is authenticity.

The way we value authenticity can be tracked, like almost everything else, by whether or not we are willing to pay for it. And it seems, increasingly, like we are willing to pay for authenticity – or at least for appearances of authenticity. One of a thousand examples: more and more people will pay for “organic food” because it seems to them more real, more authentic – untainted. And there is even a name for this amongst people of my generation, especially people who like rap music. They say that they are “keepin’ it real”. To those of you who don’t know, a rough translation of “keepin’ it real” is “staying down to earth” and not pretending to be something that you are not. Of course, the way this plays out in an image-driven consumer society has very little to do with “keepin’ it real”, for real – it’s about projecting an image of plausible authenticity. Try to get your head around that one.

Our three readings today are not just about projecting images of plausible authenticity. They are about REAL authenticity. The stuff that lasts forever, that remains even when our final defences collapse and scatter in the wind. The scary stuff.

● First we have Isaiah. He prophecies about God’s demand that our worship be real, our prayers genuine, and our religion true. There is worrying stuff here for religious people:

“New moon and sabbath and calling of convocation –
I cannot endure solemn assemblies with iniquity.

Just to remind you, we are told this is the voice of God:
“Your new moons and your appointed festivals
My soul hates.
They have become a burden to me,
I am weary of bearing them.
When you stretch out your hands,
I will hide my eyes from you;
Even though you make many prayers,
I will not listen;
Your hands are full of blood.”

Strong words! So what does God want instead of religious graces?

“Cease to do evil,
Learn to do good.
Seek justice,
Rescue the oppressed.
Defend the orphan,
Plead for the widow.”

Isaiah says God wants us to walk the walk, not just talk the talk.

● OK, next we had St. Paul, writing to the Hebrews. Again, the message is about authenticity. Paul writes about keeping the true faith even in barren, hostile circumstances. His example is Abraham and Sarah. Paul writes that Abraham was so old he was “as good as dead”. Sarah was barren. They lived on the move, in tents – but they believed in God’s promises. They believed in a “city that has foundations, whose architect and builder is God… a heavenly country” and God gives them a start, with the birth of Isaac. Even after that, of course, Abraham’s descendants live as “strangers and foreigners on the earth – people seeking a homeland”.

In other words, they are keeping it real. They want to live in a way that does not compromise their faith and hope, despite all the troubles found in this world. Many of us might call this unrealistic, naive. But because they long for such a life, “God is not ashamed to be called their God; indeed, He has prepared a city for them.”

● Finally, our Gospel reading – Jesus, as recorded by St Luke.

Here Jesus talks about living for eternal things, but he makes crystal clear that living for eternal things means living practically – with freshness, immediacy, urgency, even fear. “Be dressed for action. Have your lamps lit!” he says. “The Son of Man is coming at an unexpected hour.”

What a great trio of readings. We are listening to total harmony here. St Paul is in harmony with Jesus. Jesus is in harmony with the prophet Isaiah.

So what!– It’s only natural these readings are in harmony with each other. They all come from the Bible! Jesus was a Jew. He agreed with the prophets of the Old Testament, no doubt. He read them as a child. As He grew up, He taught these prophecies in the synagogue, and He looked for their fulfillment. Naturally Jesus is in harmony with Isaiah. And then, St Paul: of course Paul is passing on Christ’s teaching, right? Simple. So what!

But no. Not “so what”. The harmony is much, much better than that. This is not merely the same song sung by three different singers – Isaiah, Jesus and Paul. It’s not even just variations on a theme. Each one is fulfilling the last. Think about it like this instead: Isaiah sings a song – he sings about an entirely new kind of music than the one that Jews knew at the time. Then Jesus comes: Jesus is the new music. Then, Paul. Paul is dancing to the new music. Why? At the time St Paul was writing, the whole Church was just learning to dance to the new music, and in his letter to the Hebrews, Paul is telling his fellow Jews how to do it, how it came to be and how it fulfills the ancient hopes of Abraham and Sarah.

And it does.

Perhaps it isn’t said frequently enough: Christianity isn’t really about Christ’s teachings. I am skating near thin ice here, but this is still solid: the core teaching of Christianity is not the things that Jesus said. His teachings matter a lot. They matter hugely. They are indispensable to our faith. But the core teaching of Christianity is Jesus Christ himself. Not just what he said, but what He is and who He is.

Christianity is about The Authentic Man, the divine incarnation. It is our effort to embrace the whole challenge and opportunity that the divine incarnation poses to the human race.

Our faith is about Jesus’ birth, His life among us, His murder – and then about the way in which He overcomes sin and the grave so that we can be reconciled with God, in Him. At its highest point, our faith is about the Resurrection. If you have doubts about Easter, than you should have doubts about everything we are doing here today, too, because Christianity without the Resurrection is not Christianity. So our faith is not, at root, about Christ’s teaching – it is about what God accomplishes through the real life of his Son. “Keepin’ it real.”

And Jesus, like no one else, is great at “keepin’ it real.”

The spirit of our faith is very different from what our instincts might suggest it should be. Our instincts tell us that what is good is also pretty mild. We like “nice”, because it is unthreatening. Almost instinctively, in this age anyway, when people think of “spirituality” they think of quiet spaces – they might think of meditation: dim lighting, some candles, deep thoughts and so on. I love it when people say, “He’s very spiritual.” Or “Wow, she’s so spiritual.” We mean something important when we say such things, but in some ways we are talking nonsense. We are ALL spiritual, ALL the time! ALL aspects and moments of human life are spiritual: the notion that somehow a person can flick the “spiritual” switch on and off is a fallacy of modern secularism. In a way, it’s just like the mistake we like to make about Jesus: we think Christianity is about His teachings, in isolation – no it’s about the whole Man. It’s the same way with every human being: our spirit is not found in what we say alone, or in how we behave – our spirit is wrapped up in our whole being – it has a grip on us… we cannot just think or act our way out of it.

So it matters very much. Each of us needs to ask: What’s driving me today? Is it the Holy Spirit? If it’s not, then by definition it is some spirit that is not holy.

But Jesus is the ultimate holy man. Really, the ultimate holy man. But he’s not “spiritual” in the dreamy – forgive me, in the “hippy” far out “spiritual” kind of way. In fact, He is terribly direct. He is an arresting guy. He is not “nice”. Love is far greater than “nice”. Jesus is Love, and yet sometimes He seems to be doing just about everything a man can do to wreck His reputation with the powers that be, and He does not mind. The Beatitudes are often remembered as His grand statement about the nature of the Kingdom of Heaven – it is our world upside down: the first are last and the last are first, the meek inherit the earth, the poor in spirit get blessed, and so on. Well, you might have noticed that in our Gospel reading today Jesus is at it again.

We love to call Jesus the Lamb, the Shepherd, the Son, the Lord – all true, all excellent, deeply honest and accurate ways to describe Him. But here Jesus takes an opportunity to describe Himself, and to whom does He compare Himself? Does He compare Himself to a King? A Shepherd? Does He say, “You know, I’m so gentle and sweet – I’m as gentle and sweet as a Lamb.”

No, Jesus does exactly the opposite. He says, “I’m like a thief.”

He’s going to crawl through the darkness. He’s going to break through the windows of our souls and, when we’re not expecting it, the light is going to switch on. He’s going to rob us of our clothes; today in this church we should be as spiritually naked before God as Adam and Eve were in the garden, after they first sinned. Jesus strips us of our pride – not just our pride but our very ability to feel pride in anything or anyone other than Him, in whom everything can be perfected, in whom everything can be redeemed.

Our reading from Luke ends at chapter 12 verse 40. But if you read further, you find out that Jesus is not just like a thief – He is also an arsonist of sorts. He’s going to set our old house on fire, and let our sin burn away in the inferno. “I have come to bring fire on the earth, and how I wish it were already kindled!” That’s what He says.

Christ, we should remember, comes with the refiner’s fire. This is what it means: your wretchedness, your inner pain, the horrible sins you have left behind and cannot ever imagine acknowledging in public now, the sins that are painful even to recall to yourself in private, the pride that makes you fearful, that tendency you have to grasp onto perishable things just for a moment’s comfort – ALL those things will burn away in the refiner’s fire.

And you ask yourself… can I stand it?

Evidently it’s not going to be easy, because sometimes we are too much like the people described in Isaiah’s prophecy.

There is this tendency – I mean, I have this tendency, and I know I’m not alone – to go to Church and then just go through the motions. It’s grotesque, but Christians so often succeed in making Christ seem boring, in making Him seem inauthentic. You know what that is? It’s dead religion. It’s the same thing Isaiah describes, and God abhors it. “Trample my courts no more. Bringing those offerings is futile.”

But the true practice of our faith is not futile. Christ is not boring. If you think the Son of God is a drag, then you need to be reintroduced to the Man Himself.

Our whole existence – any shred of justifiable hope that we have in this life – is justified not by ourselves, or by the goodness of Creation, but by Jesus’ self-sacrifice – the sole offering that God, by definition, will never abhor – that one offering that can never become empty or idolatrous, because it is the authentic, perfect sacrifice, accomplished in the holy humility that characterizes eternal glory.

You and I have an opportunity today, right now, to keep it real. We are going to celebrate Holy Communion together. Let’s not do this as dead religion. Let’s do this, truly, in Jesus Christ – with the acceptance of His sacrifice in the front of our minds, with urgent humility and repentance in our hearts, with the Holy Spirit defining our relationships with each other, and with acceptance of what all this will mean for us when, after the end of this service, we walk out the door. With God’s help, we can do all this, and I pray that we shall.

So let us pray:
Lord, you plead with us through your prophet Isaiah,
You confront us in the person of Jesus Christ,
You challenge us as your Church –
to keep it real,
to give up niceties and replace them with authentic grace, real and unscripted love.
Give us your grace.
Continue to teach us in the ways of your true love.
Be with us now in this service
And as we prepare to come to your table.
Amen.

08 August 2007

Like Katrina, Britain's floods sink homes — and Conservatives

By Eric Jansson
Published by the New York Sun, 7 August 2007


NEWCASTLE, England — Lake-size puddles glimmer in low-lying fields. Corrupted floorboards and ruined furniture pile high on sidewalks. Far from New Orleans, this is the scene of Britain's worst floods since 1947, which left three dead in July and are predicted to cost insurers up to $6.6 billion, according to Risk Management Solutions, an American-based catastrophic risk modeler with a European headquarters in London.

Observers' early comparisons to Hurricane Katrina, which ravaged America's Gulf Coast in August 2005, ultimately proved wildly disproportionate. Katrina left more than 1,400 dead in Louisiana alone and cost insurers more than $40 billion, according to the Insurance Information Institute. Yet as the last floodwaters drain away, one comparison to Katrina holds up: the peculiar distribution of political cost.

Just as Katrina boded ill for President Bush and his Republican Party, with critics accusing the federal government for falling far short in its emergency response, floods have left Britain's top conservative politician stranded in a sea of criticism.

In the latest sign of crisis for David Cameron, the leader of the Conservative Party, one of the party's biggest donors Tuesday said he was withdrawing financial support. Sir Tom Cowie said Mr. Cameron's handling of the floods and other matters had left the party looking "arrogant." "All I can say is I am very, very disappointed with the state of the party. I will not mince my words: I shan't send them any more money," he told the Guardian newspaper.

As the rain fell, a different outcome seemed likely. Prime Minister Brown and his governing Labour Party appeared susceptible to criticism, having reacted hesitantly to years of warnings from flood-defense experts at Britain's Environment Agency. Mr. Cameron donned rubber Wellington boots and tromped through the neighborhoods of his submerged West Oxfordshire parliamentary constituency, where he offered praise for the "grit and determination" of ordinary folk, local journalists reported.

Mr. Cameron's reward? Jeers in the national press and the most vigorous speculation yet over whether he can lead Britain's biggest opposition party back to power after Labour's decade of dominance, first under Mr. Blair and, since June 27, under Mr. Brown.

"As Gordon Brown's bounce gets ever higher, Mr. Cameron appears to be cowering under the trampoline," an article in the Daily Telegraph said.

After the floods, a poll published by Conservativehome.com — considered a key barometer of enthusiasm among grass-roots Conservative Party activists — found that confidence in Mr. Cameron's potential to become Britain's next prime minister had sunk precipitously, to less than 50% from 77% last January.

But the news is not bad only for British Conservative Party members. Britain's summer floods offer the latest example of how right-of-center politicians can get battered by natural disasters.

Unlike Mr. Bush, bitterly criticized for staying far from hurricane-affected areas in the immediate aftermath of Katrina, Mr. Cameron plunged straight in. Yet after sloshing through floodwaters with Martin Ivens, a columnist for the Times of London, Mr. Ivens mocked him as "Dead-in-the-water-Dave." Similarly negative assessments rang throughout the British press.

The flood damages sustained by Mr. Cameron stemmed in part from his decision to keep a foreign trip on his schedule, a whirlwind visit to Rwanda that invited accusations of aloofness.

Yet Mr. Cameron got plenty wet before he flew to Kigali, and he returned soon thereafter to his constituency. A deeper explanation for the Conservative leader's woes flows from his decision to focus on flood victims' resilience. By emphasizing private initiative over the government's role, Mr. Cameron held true to his party's ideological foundations, but he bypassed what party loyalists saw as an opportunity to criticize the government — a common charge.

"Pick up a newspaper and it is full of this administration's failures, most of them directly linked to Brown's role when chancellor. Yet the Conservatives are not calling the prime minister to account," Michael Portillo, a Conservative former government minister, wrote in the Times of London.

Mr. Brown, who for the past decade as chancellor managed Britain's purse, has so far polled well as prime minister. Yet Mr. Cameron faces an immense challenge in re-engineering Britain's political climate, in part because the weather literally might be against him.

In contrast to the Bush administration, accused by critical European governments of too slowly embracing the politics of climate change, most British officials — Mr. Cameron and much of his Conservative Party included — have done so vigorously. Releases of statistical data from the Met Office — the government's weather bureau, which is part of the Ministry of Defense — are routinely embroidered with warnings about climate change.

For example, a Met Office press release issued at the height of the floods on July 26 described the record level of rainfall seen between May and July before concluding with a note that "we all need … to meet the challenges posed by climate change." Similarly, an earlier Met Office press release issued after this year's unusually dry, hot April described record average temperatures that month within the context of "temperature rise … being experienced on a global scale."

The dry, hot April had earlier yielded predictions of a dry, hot summer and long-term projections of a "Mediterranean" climate for Britain. The exceptionally wet, cool summer that has followed has not dashed such expectations. Peter Stott, a Met Office climatologist, folds the apparently contradictory phenomena into a unified global warming hypothesis. "With a warmer climate, there could be an increase in extreme rainfall events despite the expected general trend toward drier summers," he said.

Nigel Lawson, a Conservative former chancellor under Margaret Thatcher, the former prime minister, is one in a small but determined chorus of voices that has noted with growing concern the politicization of Britain's weather.

In a speech last year at the Center for Policy Studies in London, seen as an important address by British skeptics of global warming, Mr. Lawson warned that the country's climate change politics increasingly resembled that of "primitive societies" in which "it was customary for extreme weather events to be explained as punishment from the gods for the sins of the people."

Under such circumstances, an opposition leader who declined to lodge meteorological complaints against his opponents in government might be charged with timidity or disengagement — precisely the charges that Mr. Cameron now faces.