CORPORATE CULTURE WILL CRUSH CHRIS CHRISTIE’S CHANCES

Last week’s most inescapable story involved New Jersey Governor Chris Christie and the unfolding scandal dubbed ‘Bridgegate’.

How could anyone miss it? Christie hosted a 108-minute press conference to answer and exhaust a hungry press corps. That was likely the longest press conference anyone could remember dating back at least a half-century. Hell, America had a shorter press conference to announce the end of World War II.

Bridgegate will ensure that the rotund governor from the State of New Jersey will never see the inside of the Oval Office, that is, unless a sitting president invites him over for a drink or a meeting.

Why?

Some believe that Christie will survive this disaster and after all, 2016 is a lifetime away. NBC’s Chuck Todd almost put his finger on the answer. The left-leaning Todd said that Christie’s press conference made him look like “just another politician.” Before going further, I want to note that Todd’s statement about what constitutes “business as usual” is a terrible truth about the reality of what passes for “politics” inside the Washington Beltway these days. But there are bigger truths that Christie can never overcome.

And that is this: Christie is the leader of one of the largest states in the country—one that sits right next to New York City and is considered to be very strategic for a host of reasons. Christie is finished because he is stuck in a Catch-22 that will bury him no matter what happens from here.

What Catch 22? One of the following has to be true, and either way, it spells doom for the New Jersey Governor:

1. Everything he said in his press conference was the truth. He had no knowledge of anything before he saw it on cable television the morning before his press conference [right after he had his workout].

2. Christie is lying: He knew something that we will eventually find out. Nixon showed us four decades ago that the truth always comes out, no matter what. You can’t erase the truth like some tape. There are now permanent paper trails, thanks to today’s technology. Even without a smoking gun, we have yet to hear from all of the people who surround Christie—-particularly the insiders he fired.

Which of the above is more likely? #2, but even if he knew nothing until the day before his press conference, it is difficult to believe that he knew absolutely nothing about the Bridge-related events—and this excuse does not pass the smell test. Christie—prior to this crisis—has been a no-nonsense, rude, but very strong leader (Hurricane Sandy showed us that). This is a guy who runs a ship as tight as any in the country which explains, at least in part, why he just won re-election in a landslide. His culture is “do it my way or I will cut you to pieces” (or stop traffic so that it backs up into your town). That was the culture he fostered over months and years. I have always asserted in all of the books I have authored, especially the Jack Welch books, that culture is something that takes months and years to build, not days or weeks. It is almost impossible to fathom that people under Christie’s leadership would do something that is not in accordance with the thinking and method-of-operation of this hard-charging leader.

And that is why Christie is finished.

Because both #1 and #2 above are career-ending realities. Either he was a clueless putz or he promoted this type of petty, dangerous politics. Think about it for a moment: If you are working for a boss who has a tight reign over his or her department, chances are you spend your day thinking how to “please the boss.” I have had tough, but good bosses and that was the way I always viewed my job. As long as I was never asked to compromise my values then the boss’s goals came first— Even before my own. So that means that the people under Chris Christie felt like they had a green light (pardon the pun) in doing what they did. And that is why Christie deserves to be finished. Bridgegate wreaked havoc on thousands and thousands of people each day lanes were closed on the George Washington Bridge, ostensibly due to some mythical traffic study. People were late for work, kids never got to school, and most important, first responders could not get to the people who needed them.

There is the story of the 91-year-old woman who died before the ambulance could ever get to her. The woman’s daughter said that it was her time to go. But what about the stories we have yet to hear? I believe that this will eventually lead to criminal prosecution and the end of any chance Christie had to become the 45th president of the United States. [His chances were never that good, in any event: his bullying-antics would play poorly in states like Iowa and South Carolina.]

Perhaps history will show this to be a watershed moment that revealed the feet of clay of someone who had a chance to be leader of the free world. Better to know now, while stuck in traffic, before the same person responsible for that traffic practices his dangerous tactics on a worldwide scale.

—Jeffrey Krames, January 12/13, 2014

Why Obama’s Second Term is Doomed to Mediocrity

In the last few weeks, as we have all witnessed the absolute meltdown of the Obamacare Website, there has been much talk—mostly by President Obama—about the “best and the brightest” he has brought in to fix the problem. That term, “best and brightest” was made part of the leadership vernacular not by Obama, but by another president, JFK.

It was Kennedy’s “whiz kids”—the best of academia and industry—who became associated with the term “the best and the brightest.” JFK of course had his brother, Bobby Kennedy, as his attorney general. There was also Ted Sorenson, Kennedy’s special counsel, adviser, and legendary speechwriter, and Arthur Schlesinger, Jr., the Pulitzer Prize Winner who served as special assistant and “court historian” to JFK, among many others.

However, all of this talk about the best and brightest by Obama, did get me thinking about JFK (precisely one month away from the 50th anniversary of his assassination). I am afraid Obama is no JFK, but truth be told, JFK was not quite the legendary JFK we have built him up to be. He was beloved and charismatic, but intellectuals like Peter Drucker asserted that his legislative feats were not quite as impressive as he was.

Before I wax on too long, this piece is about the 44th president, not the 35th.

When Obama trod out the words “best and brightest,” I immediately thought of Kennedy and instantly knew why things have gone so wrong for Obama since he was sworn in for his second term. It got me to think about Obama’s presidency in a much broader sense than a failed healthcare Website or a misstep or two.

It hit me. Like a ton of bricks. The answer was so obvious.

In his first term, Obama took great pains to bring on the smartest, most capable people he could find. He even appointed his foes, if he felt that person was the strongest candidate for the job. He hired the best, and not only in his cabinet, but in other key posts as well. I thought back to the people he surrounded himself his first time around as president: there were outstanding leaders like Secretary of State Hillary Clinton. But as important, he made sure to have the best political advisors of his day. There was the two Davids—Plouffe and Axelrod—two of the greatest political minds of his day (Plouffe was so good that he was later paid $1.5 million+ for a political non-fiction book).

The “Davids” not only helped Obama to win elections, they advised him on a great number of things. Obama also had the feisty, but imminently clever and ruthless Rahm Emanuel as his chief of staff for most of his first term as well.

That really got me wondering about one recent specific event in particular. When Obama was on the verge of launching missile attacks against Syria [for using chemical weapons on a massive scale], he took a 45-minute walk with his “new” chief of staff Denis McDonough. According to the official White House Website, Obama said that “Denis has played a key role in every major national security decision of my presidency…from ending the war in Iraq to winding down the war in Afghanistan.”

Could it be that it was the same man that helped Obama to end two wars that talked Obama into calling off those strikes at the last minute? I wonder about what would have happened if that walk was taken with ruthless Rahm Emanuel instead. Whether it was good policy or not, it was Obama’s own “red line” that was crossed and his inaction diminished the United States in the eyes of the rest of the world. The buck stops with him, not his chief of staff. But advisors can play huge roles in the success—or lack thereof—of any leader.

When Obama failed to take action in Syria, after declaring that red line, He looked weak and indecisive. And that was not only the view from foreign capitals, it was the view from inside our borders as well. And for any leader, especially the one at the helm of the free world, there is great danger with looking weak and indecisive.

It invites miscalculation—both home and abroad.

Could it be that the Republicans—who felt that Obama would back down as had been his method of operation up to that point—would not have shut down the government had Obama had a reputation for standing up and doing exactly what he said he was going to do? Of course, we will never know the answer to that, but it certainly gets one thinking. And regardless of who is responsible (and the American public mostly blames congressional Republicans), it is Obama’s economy. And in his economy, the U.S. dollar is not worth as much as it was worth before the 16-day shutdown and near default of the full faith and credit of the United States. Not when Chinese leaders come out—and they never come out—to call for the “de-Americanization” of the world.

Right now we are in the thick of the Website disaster that is the face of Obamacare. The optics for the president are disastrous. But the Website is merely a symptom of a much larger, systemic problem. And that is that Obama has surrounded himself with a cabinet—and a team of advisors—that rates no better than a “C” and really much closer to a “C-.” How else can you explain the fact that no one even bothered to tell the president that the Website for his one signature piece of legislation was in trouble before he could do anything about it?

I need not name names (and of course there are exceptions like Secretary of State John Kerry—his speech arguing for the bombing of Syria was a portrait in courage), but there isn’t a doubt in my mind that Obama is in trouble. Between the lack of action in Syria and the latest budget debacle that took us right to the brink of insolvency, this is a White House in crisis, whether they know it or not.

Is crisis too strong a word?

No. We are a country that has been weakened by this president. There is a crisis of confidence that has attached itself to this administration like the stench that sticks to a particularly odorous garbage landfill.

Let’s take Saudi Arabia as an example of how leader’s minds are changing across the globe toward the U.S. The Wall Street Journal reported that Saudi Arabia would no longer cooperate with the United States on arming and training Syrian rebels. That declaration came after Saudi Arabia surprisingly renounced its seat on the U.N. Security Council. The delegation explained it away by saying that it was upset with the Security Council’s lack of action toward Syria, but Prince Bandar Bin Sultan al-Saud allegedly told others that “this was a message for the U.S.”

The lesson is clear: the bigger the job, the greater the need for top minds and top talent. Hire people that do not measure up and your leadership will be crippled—and once you lose it, there is simply no place to go to get your reputation back. And this lame duck president still has three years to preside over a crippled America that he himself cut off at the knees with his own poor decision-making. Peter Drucker taught me a great deal [when I interviewed him for my book Inside Drucker’s Brain]. He told me that the best leaders know how to hire, who to fire, and who to promote. If you measure second-term Obama against those Drucker leadership criteria, Obama fails on just about every level.
—-Jeffrey A. Krames, October 23rd, 2013

The War in Washington Rages On—Does it Matter?

Deep Divide Lingers After Impasse Ends
“Pessimism Greets Lawmakers as They Start Negotiations on Broad Budget Deal”

Wall Street Journal, December 18, 2013

I will do anything to stop the train wreck of Obamacare.”
—Senator Ted Cruz (Texas-R)

We Won’t Back Down on ObamaCare
—Jim Demint, President, Heritage Foundation, in th Wall Street Journal, October, 18, 2013

As we end this eventful week, I think it useful to spend a few minutes to look at what lessons were gleaned from the $24 billion government shutdown and debt ceiling showdown—and what those lessons tell us about what may happen in the months ahead (when a new bi-partisan budget is due—and the dreaded Debt Ceiling deadline returns once more).

From the view on Wall Street, much of this comes down to three critical questions:

1. Can the government be shut down again?
2. Can the debt ceiling threaten the full faith and credit of the U.S. again?
2. How likely is it that #1 and #2 [above] will actually happen?

As you can easily discern from the quotes above, the far right wing of the Republican party is not going away anytime soon. You would think that waging a fight that they could not win, while badly tarnishing the Republican brand would be enough to deter another budget and debt ceiling stand-off, but you would be wrong. The Tea Party is so fiercely determined to take down Obamacare—and Obama—they will stop at nothing to achieve their goals. In fact, the rhetoric and pronouncements coming from the Tea Party leadership has only been ratcheted up in the days after the government shutdown ended.

There is no doubt that their is a raging civil war in the Republican party, the likes of which we have not seen in decades.

In today’s Wall Street Journal, former governor of South Carolina and current President of the conservative think-tank Heritage Foundation, Jim DeMint, published an Op-Ed that embodies the current thinking of the Tea Party. The piece is entitled:

We Won’t Back Down on ObamaCare
Fighting a law that is unfair, unworkable and unaffordable is reasonable and necessary.”

Now that the government shutdown has ended…it’s worth explaining why my organization, the Heritage Foundation, and other conservatives chose this moment to fight—and why we will continue to fight. The reason is simple: to protect the American people from the harmful effects of this law.”

Other publications have also come out to show just how determined the far-right is to go back into battle. In a just-off-the-presses Bloomberg/BusinessWeek cover story, the magazine features a creepy-looking, distorted-devilish- depiction of Ted Cruz. Here is an excerpt of that story:

Say this for Tea Party Republicans: They don’t back down. No apologies for triggering a partial shutdown of the federal government, then refusing to raise the debt ceiling without concessions. Condemnation rains down on them from the White House, from foreign capitals, from public opinion polls, but the Tea Party rages on.”

We even heard from the intellect of former Vice-Presidential candidate Sarah Palin: “
Those that can’t stand strong to defend our Republic…heck yeah, they have to be ‘Primaried’ or we’re going down
.”

Yes, the Tea Party even turned “Primary” into a verb—a very dangerous one at that.
To “Primary” someone means that if any Republican who is up for re-election won’t play Tea Party-ball, then the far right will find a candidate in their district more in keeping with the fractious Cruz-like leanings. And we are seeing that in several districts already.

What does this far right war mean for the financial markets in the near-term?

Absolutely nothing.

Nothing? Why nothing?

Allow me a quick story to explain that answer: in 2003, I had the privilege of sitting in the living room of Dr. Peter Drucker, who since passed away. Drucker is regarded as the father of modern management and the grandfather of the modern day business book. He is also credited with coming up with such phrases as “management strategy” and “post-capital society.”

Dr. Drucker, then 93 years of age, had invited me to him home in Claremont, California, to interview him for a book I was writing (Inside Drucker’s Brain). In that interview, he told me something that will stay with me forever:

I never met a CEO who could manage more than one priority at a time.”

While Dr. Drucker was describing the attention span of leaders, he might as well have been talking about the attention span of Wall Street and its participants. On Wednesday of this week, for example, all of Wall Street was focused on one thing: getting the budget deal passed by midnight. When it appeared that would happen the stock market shot up 200 points (despite some bad economic numbers that came out that day).

Today, Wall Street is focused on one thing: earnings. At least now they are focused on the right things, for nothing is as important as earnings. After weak reports from such companies as IBM and eBay, we now have much better earnings numbers from Google and GE. It is those reports that will likely determine the price action of today’s market. However, Wall Street ceases to surprise me: yesterday, for example, NASDAQ had a very strong day in spite of IBM’s weak sales numbers and eBay’s poor outlook.

Does this mean that the Tea Party’s dogged determination to dominate the headlines does not matter? Not at all. They do matter, and I feel that we will be right back in the soup in about two months. But they don’t matter today, or next week. They only matter when Wall Street’s attention is once again focused on them.

However, there is one exception that could alter the calculus: if that Fitch downgrade comes over the weekend or next week, which is very possible, that will underscore the severity of the problem that we know as “the new normal,”—Washington dysfunction. Then all bets are off as earnings will take a back seat to the realization that the greatest threat to Wall Street and our economy is the fact that the greatest country in the world can no longer govern itself with any more assuredness of a banana Republic.
—-Jeffrey A. Krames, October 18, 2013

Obama Wants his House Back—and He Might Just Get It

“It is easier to get into something than to get out of it.”
—Former Secretary of Defense and Architect of the Iraq War, Donald Rumsfeld, in Rumsfeld’s Rules

In 2002 I penned the first book ever published on then Secretary of Defense Donald Rumsfeld—A New York Times and Washington Post bestseller entitled The Rumsfeld Way: Leadership Lessons from a Battle-Hardened Maverick (Ironically, in 2008 and 2009 I did some work with Mr. Rumsfeld on his own memoir, Known and Unknown, Sentinel, 2012).

In researching my book, I had the good fortune to interview such figures as Dr. Henry Kissinger. But, despite the fact that Rumsfeld was the youngest Secretary of Defense (under Gerald Ford) and the oldest (under George W. Bush), there was almost nothing published on the man. For example, no major encyclopedia at the time even mentioned his name, never mind detailed his accomplishments. So how was I able to write such a book? By examining Rumsfeld’s own words—his speeches, his interviews and some of his own writings. It was then that I found “Rumsfeld’s Rules,” which consisted of more than 100 axioms that Rummy had written in the 1970s and updated from time to time.

Today, in the wake of a government shutdown entering its third week and a more-than-credible, unprecedented looming credit default of the United States, one of those rules stands above the rest to explain where we are today and how we got here:

It is easier to get into something than to get out of it.”

Now, for those of you that have read my recent postings, you know what I think of the elitist, yet cowardly senator Ted Cruz. No one—except Cruz himself—disputes that it was Cruz that got the Republican party to shut down the government by insisting on some defunding or other alteration of Obamacare (The Affordable Health Care Act). The fact that this was a flawed strategy from the start should cannot be over-emphasized. For better or worse, this was Obama’s signature and sole piece of groundbreaking legislation. It has been passed by both houses of Congress, signed into law by the President, and upheld by the Supreme Court. There was always a zero chance that Obama would agree to any degree of blackmail by agreeing to diminish his signature bill to get a lifting of the Debt Ceiling or a re-opening of the U.S. government.

The result?

Obamacare, which had had embarrassingly-horrendous roll-out since it has gone live, has actually gone up in popularity by seven percentage points (so says the Wall Street Journal, hardly a bastion paper of the left). Obama can thank Mr. Cruz for that—since Cruz has now become such an abhorred figure of both the left and the right—that he single-handedly did precisely the opposite of what he set out to do (and something that Obama could not do himself. I think the junior Senator from Texas has forgot that Obama not only went to Harvard, he headed its Law Review).

Conservative writer and broadcaster Charles Krauthammer put Cruz’s strategy into proper context by calling it “nuts:”

This is nuts. The president will never sign a bill defunding the singular achievement of his presidency. Especially when he has control of the Senate. Especially when, though a narrow 51 percent majority of Americans disapproves of Obamacare, only 36 percent favors repeal. President Obama so knows he’ll win any shutdown showdown that he’s practically goading the Republicans into trying.”

Yet, remarkably, Cruz still thinks himself a hugely popular figure despite the fact that it was his opinions, and more important, his actions, that has practically brought the #1 world economy to its knees. Cruz, the de facto head of the Tea Party, is now half as popular than the Democratic Party (despite the fact that the Democrats popularity has also gone down during this manufactured crisis). Cruz will become no more than a footnote to this emerging history, since he will go the way of such disreputable figures as Joseph McCarthy and Spiro Agnew. It was Cruz’s deeds and his Harvard/Princeton “strategy” that has brought the popularity of the GOP to 24 percent, an all-time low, and Obamacare, shooting in the other direction.

Now, let’s turn the tables and ask this question: What is the Obama strategy—what does he really want? This is where things get really interesting. Is it true—like Rand Paul has stated repeatedly—that he wants the unconditional surrender of the Republicans? No—he actually wants more—much more—and before you say that sounds like “nuts,” let’s look at history.

On this day, Sunday, the 13th of October, and four days before the potential default of America, following a Saturday evening White House budget discussion among Harry Reid, Charles Schumer and the President, comes new news: Obama not only wants an unconditional raising of the debt ceiling, he also wants to end the sequestration budget cuts—something that was unthinkable only a few days ago. Obama was pressing his advantage by opening up “a third front” and insisting that he not only get his “clean CR”—but more. This time he moved the goalposts. But you do not get to be president of the United States without being one of the most competitive people on the planet. And now that all attention is on the Senate and the talks between Senate Leader Harry Reid and Minority Leader Mitch McConnell, there is a new dynamic in place. Stay with me a bit longer as I once again rely on history to predict the way forward.

It was during Obama’s first term as President that Mitch McConnell stood on the Senate floor and declared that the first priority of his party was to ensure that Obama never got a second term. How did that go, Mr. McConnell? Now the fate of the country and the global economy rests, in part, on the man who vowed to kill Obama’s career—at a time that Obama holds every card in the deck and then some. This smells like a bad move by the Republicans. Did they forget that McConnell vowed to deny Obama a second term? The most competitive man in the world is not going to let this pass without exacting some degree of revege (“a dish best served cold,” and it is now ice cold, but no less important to the 44th president). And now we know how he intends to get it.

Before the Wall Street Journal polls that showed the Republicans at an all-time low, Obama would have been more than happy to get a clean Continuing [budget] Resolution [CR] and a lifting of the debt ceiling. Now we learn, following the Saturday night Democratic revenge-fest in the White House, that Obama has asked for more with what we’ll call his “third front strategy:” he now wants a lifting of the debilitating Sequester-level budget cuts—in essence, a blank check. All along, Obama has been playing chess while the Harvard/Princeton educated Cruz party has been playing checkers with all the skill of a four-year old. And it is pitiful figures like Ted Cruz and Mitch McConnell who are about to find out how badly they under-estimated the 44th president.

However, with that “third front strategy,” Obama may have shown us his cards. He may indeed be showing us how he intends to end this dangerous stalemate at the last minute and appear to be the “deal-maker-in-chief.” Since it is unlikely that Republicans will give in to this latest “demand” to lift the Sequester-level budget, he may be setting the stage for an 11th hour “capitulation” of that demand. This way, at least he can say that he gave the other side something. As for the timing of this, I do not see this happening until Tuesday, the 16th.

Obama has backed the Republican party into the worst corner in their history, and then has pulled the corner out from under them. With each passing “government shutdown” day the Republican party becomes less popular, and why shouldn’t it? After all, it was their strategy to defund Obamacare and shut down the government.

We all know it was a fool’s errand at best, and political nuclear war at worst, a war in which the GOP lost before they took the battlefield.

Obama will not give the man who declared to deny him a second-term any quarter. His goal is what Jack Welch, the former Chairman of General Electric, would call a “stretch goal” since the chances of achieving it is so remote: he wants to take back the House, a near impossibility. That is, unless he can play a role in lowering GOP popularity to crater to say 15 to 18 percent. If he can manage that, I believe he does have a chance to take back the House in 2014 and achieve new and important legislative feats, such as background checks for gun owners and new legislation on immigration.

Let me be abundantly clear: it is not spite that carries the day for this president, it is the hope that healthcare not be his sole legislative accomplishment. However, taking back the house in the mid-terms would be an incredible feat of brinksmanship, and will require Obama to put as many House Republicans on the unemployment line as possible.

The next five days will be like some terrible car-crash, difficult to watch but impossible to take your eyes off of. And lest Obama declare victory too soon, let’s remember that this is his economy. History always remembers the president in office when things go off the rails—they seldom remember the lesser-lights who helped things go afoul. But Obama knows that, too.

So what lies ahead? Unless I am dead wrong, we will see the Dow lose several hundred points—or more—before Obama gives an inch. He can afford to: after all, under him, the Dow more than doubled between early 2009 and today. Five hundred or a thousand points, which can be recovered quickly if the ship is righted before Thursday at midnight, is a small price to pay for a president who sees a chance at getting his House back.

This is a fast-moving event so please stay tuned for frequent updates!
—Jeffrey A. Krames, October 13/14, 2013, 9:45 a.m.

Crisis Countdown, Republican Style

Here we are on day 11 of a U.S. government shutdown, and less than 130 hours from a Debt Ceiling Dooomsday due date. Despite those realities, yesterday the financial markets partied all day when it sent the Dow soaring for its biggest one day gain of 2013—a 320+ point rally. That party continued into Friday with a near 100-point gain (despite the fact that the Senate Republicans have just met with the president, which could result in a myriad of outcomes, yet to be disclosed). In fact, the 400+ point gain in the Dow is truly astounding, at least to me.

Why?

Because despite the fact that a few “kick the can” ideas have been floated and discussed, there is no evidence that any budget deal is imminent. Remember, we do not have only one “challenge,” to put it mildly, we have two impending threats to U.S. growth and our global economy. We have the shutdown of the government, and we have the looming Debt Ceiling stand-off—although the Debt Ceiling stand-off could be ended shortly. In all of the excitement on Wall Street yesterday, one fact is getting lost: and that is that House Republicans are still demanding “things” before they give in on anything, something that the president has rejected for months. And he means it. Really. He will not negotiate with a gun to his head or the heads of the American people. Yet they insist on demanding tax cuts and other GOP “favorites” like entitlements before they will agree to turn the government back on. Given that we are looking at the beginning of Week 3 of the shutdown next week, this is a very dangerous proposition. That’s because there is still much room for miscalculation, especially when you take into account the cast of characters, cuckoos, and egos involved.

So what has been the fallout of the government shutdown which rages on to this day? What happened to the GOP brand in all of this? That is where things get truly interesting. According to multiple polls, including Gallup and a Wall Street Journal/NBC poll, Republican approval has sunk to an all time-low—the lowest in 24 years (since Gallup started tracking these numbers). But what did House Leader Boehner expect? You should not be surprised when you give the keys to your car to an unpredictable, unruly, rebel without a boss-like-teenager, and find yourself mired in a deep ditch.

Consider these numbers:

* Less than one in four of the American electorate approve of the Republican party—worse than Watergate!

* Only one in five Americans approve of the Ted Cruz-led Tea Party

* Well over half of Americans blame the Republicans for the problems in Washington

* Less than one in three Americans blame the President for the shutdown

So what is the moral of the story? The Republicans have placed themselves in a huge box and then decided that the best thing they could do next was to assemble into a circular firing squad. In other words, we may be watching a truly historic event. The near-death of one of the two political parties of the United States—or at least a re-definition of one. Before I go too far down this path, however, historians like Douglas Brinkley have correctly pointed out that things like government shutdowns are quickly forgotten within a few years after they are repaired.

But this time could truly be different.

Yesterday I spoke to a very smart economist from the U.K. He told me what I already knew: that the rest of the world looks on at the lone super power that is America and is dumbfounded. How can such a powerful and rich and free nation be held hostage by heinous politicians that consistently put their own political needs above the needs of the American people? In fact, 70 percent of Americans feel that Republicans have put their own selfish political whims above the wishes of their constituents and the American people. It is that selfishness that stands between a budget deal and a proper functioning of the U.S. government. So the Senate Republicans will meet with President Obama in a couple of hours. My prediction is that this will not end in any resolution of the Government shutdown, even though it could result in an to the Debt Ceiling overhang.

Which means that the tiny faction of the worst part of our government still may have the power of getting their way by keeping the government shut down.

But only time will tell.

Please stay tuned for frequent updates!
—Jeffrey A. Krames, October 11, 2013, 12:30 pm EST

Up the Creek Without a Battle (or this is where you end up when leaders don’t lead)

Here, on the 8th of October, 2013, we are about 200 hours from defaulting on the full faith and credit of the United States, an incredibly perilous place to be. And not only for America, but for every country that holds any significant amount of U.S. debt. And that is many, many countries around the globe, as the U.S. dollar is the world’s currency and our Treasuries are the most important paper in the world. Oh, and let’s not forget developing nations, which are too many to name here, that also rely on a stable global economy and a stable U.S. currency, lest they crash and burn with the rest of the world’s developed economies.

And if that is not enough on our political plate, we have entered Week 2 of a government shutdown, with no off-ramp in site. In fact, both of these dangerous situations are beginning to merge into a single incoherent argument—another potentially disastrous scenario as the possibility that neither situation gets settled by the doomsday deadline of October 17th (now nine days away and counting). If the Dow drops a couple thousand points before the 16th, then I predict that the House will put a Resolution on the floor that will kick the proverbial can down the road for a few weeks. But, that would only add new uncertainty and delay the crisis for a few weeks, hardly a desirable outcome given how much markets hate uncertainty.

Let’s back up and take these crises one at a time, because while both are bad, one is just terrible (the shutdown), and the other is calamitous (reneging on our bills—which means not raising the Debt Ceiling). However, if you listen to certain GOP members, some do not think a default on our debt as a crises—in fact, some seem fine with it. People like Ted Cruz and Rand Paul have gone on the record saying that a default is no big deal.

Having closely observed the financial market meltdown and the debt ceiling debate in 2011, I can tell you without equivocation that the defaulting on our debt has incredibly horrendous implications. We lost 2,000 Dow points—a 16% haircut—-when we almost went over the deadline in August of 2011. Let me put it another way: financial markets—which serve as an external scorecard for what goes on inside the beltway—basically crashed when we did not go over the deadline. And that was when there were far fewer schmucks in both chambers of congress. More on that later.

Back to the government shutdown: with one week already behind us, given the vitriol of the Beltway rhetoric, I think it is safe to assume that the shutdown will last at least one more week and join its twin disaster without settlement until October the 16th at the earliest. No one knows for sure, and I am no economist, but I feel that the financial consequences of a continued shutdown have been under-estimated. We could easily shave most of a full percentage point off of our GNP (Gross National Product) if things go south, and at the worst possible moment—when our recovery is weak and the Fed is about to decrease its monthly bond buying purchases.

However we got here, this is the key: it doesn’t matter who got us here (e.g. Cruz & company), it’s who will get us out that counts.

And pondering that outcome is what makes this an incendiary situation that burns hotter by the day. It is not only that there is no adult in the room, it is that there is no room (and no adults). As Speaker Boehner said on Sunday, “there may be a backroom somewhere, but no one is in it.” Let’s call it the empty room scenario—and that is what is causing me to lose sleep and rethink so much of what I hoped for the American economy in the 4th quarter and the early part of 2014 (remember, I see much of the world through the lens of the financial markets since I manage several of my family’s stock market portfolios–and right now, I am adding to my “shorts” every day).

Now, let’s get to the all-important leadership question. Because when you speak of huge enterprises, whether a multinational corporation or the U.S. government, everything ultimately comes down to leadership. Or more aptly, anti-leadership. The fact is there are no leaders in the House of Representatives. That’s right—none. And the most important—well, the one that at least has the title—John Boehner, is the greatest “mis-leader” (a Drucker term) of all. Why? Because he has completely lost control of both the debate and the control of his caucus. Let’s look at how this happened.

First, we recently learned that in the first week of September, Speaker Boehner shook hands on a backroom deal with his counterpart in the Senate, another mis-leader, Harry Reid, majority leader in the Senate. Boehner admitted that if Reid agreed to a $988 billion “sequester level” budget, Boehner agreed to put a clean bill (CR—Continuing Resolution) on the House floor. That means that there was a deal in place that if the Democrats backed off of their number of $1.058 trillion and gave in to the Republican number of $988 billion, there would be no default. All would be settled, even though the Democrats thought the $988 billion number too low: “We didn’t like the 988 number. We didn’t like it but we negotiated. That was our compromise,” Reid said. “The exact bill that he now refuses to let the House vote on. That was our negotiation.”

When asked about that deal, Boehner did not deny it. He said on Sunday that “his” caucus (although I do not think it is his anymore) basically changed their minds. Leaders—particularly in times of crisis—do not have the luxury of changing their minds. The cost of doing so is simply too high, as we are seeing today. Effective leadership depends on keeping one’s word and displaying “ruthless consistency.” Boehner has shown us the opposite. First he gave the keys to the House to Ted Cruz by doing something he said he wouldn’t by allowing the government to shut down, even though he said he would not permit a shutdown. But the Wall Street Journal, recently reported that the Tea Party executed this shutdown with precision. That’s right—this was a Tea Party/Ted Cruz plan all along. Many Democrats wanted to set the funding level in the continuing resolution at $1.058 trillion, rather than at the sequester level of $988 billion. But Boehner reneged, and he did it by delegating leadership to the Tea Party.

I know I have said this before, but it is the key: leadership cannot be bargained away or delegated. That is a ruinous path and Boehner walked straight into it with eyes wide open. Now he has no exit plan. At least no good ones and none that he has talked about since he refuses to put a clean CR (Continuing Resolution) on the floor.

So what happens now? Especially if you are like me—a stock market trader? First, do not count on any resolution to either the shutdown or the Debt ceiling crisis until October 16th, at the earliest, and not even then. There is only one thing that can end the stalemate sooner, and that is a disaster in the financial markets as discussed earlier. I do not see anything else that will end this stalemate without some huge external event like a stock market mini-crash.

History shows this time and time again. When a leader delegates his responsibilities, the unintended consequences are severe. Boehner has lost control of his conference and he has no one to blame but himself. If you give the keys to the car to a freshman idiot who cares only about his own political ambitions, you should not be surprised when the car ends up totaled—wrapped around some telephone pole in the middle of nowhere. That is where we might be heading unless someone blinks. And right now that seems like
more wish than a reality. So fasten your seatbelts, protect your stock portfolios, and hope that some form of leadership returns to our nation’s capital. And stay tuned by coming right back here for frequent updates.

—Jeffrey A. Krames, October 8, 2013

Beltway Bitchin’ & The Death of Leadership

“We’re not going to be—I mean, we’re not going to be disrespected. And so that’s where we’re at today, where we have to get something out of this. And I don’t know what that even is.”—Representative Marlin Stutzman, Republican, Indiana

We are now five days into the first government shutdown since 1996. Now at least we know what it is about, thanks to the remarkable candor of the honorable Marlin Stutzman of the Hoosier state of Indiana. The Republicans, #1. Will not be disrespected, and #2. Want something out of this before they are going to do the right thing and end the misery that is affecting millions of Americans. Before you dismiss this as some kind of grim, tongue-in-cheek joke, let us take a closer look at these demands.

First, some history. The “We want Respect” comment is more pertinent that you might think. In 1996, when the government was shut down under President Clinton, his opponent, House Leader Newt Gingrich later admitted that the way in which Clinton disrespected him made him demand more to end the shutdown. Perhaps that was why that was the longest shutdown ever—21 days. [Let us hope and pray that we don’t beat that record, because that will take us careening into the debt ceiling Armageddon due date—a discussion I will end this posting with].

So, how have we gotten here and why can’t we get out of it? Those answers are obvious. We got into it because House Leader John Boehner was unable to lead his caucus. And why was that? Because—and excuse the language—the junior Senator from Texas, the putz Ted Cruz, Tea Party ring leader, wanted to shut down the government. Hard to believe, isn’t it? but it’s true. Just ask another congressional Tea Party genius, Michele Bachmann, who remains under investigation by the House Ethics Committee, which may be why she has decided to retire at the end of the year (I count the days—85). What has she said on camera, incredibly enough? “We have never felt more motivated and energized,” [by the shutdown].

Unbelievable. People—millions of Americans—are suffering, and the United States is quickly becoming the laughing stock superpower that could not shoot straight (Syria), nor negotiate its way out of a paper bag (the shutdown).

With “leaders” like these, no wonder we are where we are. Ted Cruz is the single most dangerous, disingenuous, and disastrous senator since Joseph McCarthy (it was McCarthy who saw Communists in every corridor of Washington and Hollywood—he even went after Lucille Ball, for Gods sake). However, Cruz has miscalculated (a JFK favorite word). He wants nothing less than the presidency, but he is—and never was—a viable candidate. Cruz will go, in my opinion, the way of Michele Bachmann. Something terribly embarrassing will end his career sooner or later, as I am a strong believer in karma. He may even put the Tea Party out of business single-handedly. He has certainly diminished the Republican brand in a very real and enduring manner—although he went on national television to declare how he is simply representing the wishes of the American electorate. How stupid does he think we are? The only person Ted Cruz is capable of representing is Ted Cruz. Period.

Put another way, Cruz will burn out, and if he does not go the way of Bachmann, buried by some well-deserved Senate investigation, he will find his own hellish route to disrepute (I think he is there already, and I know I am not alone in that conclusion). Let’s not forget that at different times, characters like Herman Cain and Donald Trump were at the top of the polls on the Republican side of the presidential ticket, albeit briefly. Hell, the only thing congressional members agree upon these days is their burning hatred of the junior senator from Texas—Ted Cruz.

While Cruz gets his own special place in hell, there is plenty of “anti-leadership” to go around. After Cruz, the next poster boy for that label is John Boehner. Why finger him? Because Boehner cannot control his own Republican conference in the House. One distinguished Senator, Charles Schumer of New York, has called Boehner “a puppet in which Ted Cruz holds the strings.” That depiction is correct. Cruz is the current de facto leader of the House. The selfish and destructive faction he leads is holding the entire country hostage. But, and this is the key, Cruz could not do this alone. He needs co-conspirators, and I do not mean only the Tea Party extremists under his “hypnotic” powers.

The House Leader himself, John Boehner, is not only not leading—he is following the very worst in his party, no—the very worst in our country. He could stop the shutdown at any moment he chooses by simply putting the Senate CR (Continuing Resolution—-meaning the bill to open the government) up for a vote. He would have enough Democratic and Republican votes to end the shutdown. Why won’t he? Because it would almost surely end his leadership. In other words, he is putting his own leadership—not even his job, he would still be a congressman—above the needs of the country, and above the constitution (how can one pursue happiness when they have no paycheck or face cancer with no hope for help, and on and on). This is a sad state of affairs. Boehner is to be blamed, and while this is not an excuse, he is stuck between a Cruz and a hard place. But ultimately, John Boehner is the only Republican in the House with the moniker “Leader” in his title. No matter how we got here, it is his responsibility to get us out.

On October 6th, 11 days before the Debt Ceiling Armageddon date, Boehner is still sticking to “I won’t bring anything to a vote unless the President sits down and has a serious conversation with us” mantra. That is what he told ABC News George Stephanopolous on the Sunday morning This Week program. But Obama did negotiate in 2011 and that led to a huge loss of confidence in the American economy, a stunning 15 percent loss in the Dow, and the downgrading of the U.S. Credit Rating from “AAA” to “AA.” All that damage and the U.S. never did breach the default date. God knows what will happen if we do indeed go past the 17th of October with no new budget being passed. However, negotiating did not work for Obama last time out, and I don’t think Obama wants to repeat that 2-year old miscalculation again. History will tell us if he is right or wrong this time around.

That is why the dearth of leadership does not end with John Boehner. President Obama deserves his fair share. Not for what he has done, instead more specifically what he has not done, but how he has not done it. Obama often has a leadership tin ear. Why, for Peet’s sake, do you invite the Congressional leadership to the White House so they can have an awful meeting in which he repeats his mantra “I won’t negotiate.” He knows that Boehner and company will simply go out to the waiting microphones and mimic his “I won’t negotiate” mantra. That is awful optics for the president. Don’t misunderstand me. He should not negotiate over the debt ceiling. That tactic almost brought down the economy in 2011. But he can be far more clever in choosing how he won’t negotiate (more on that in a later blog posting).

So where are we? After this weekend, the government will be no closer to re-opening than it was on Day One of the shutdown. That creates a new and far more explosive possibility. The potential of the defaulting of America, something that has not happened in our 237-year history. Once the financial markets open Monday, Obama will still have the shutdown on his hands, but then our problem multiples because we will only be about 230 hours from the Debt Ceiling drop-dead date (October 17th) and the defaulting of America. So plan on seeing that countdown clock at the bottom of every cable news channel by sometime this next week.

And all economists agree that if default is allowed to happen, we will immediately be thrust into a recession that could be worse than the financial meltdown of 2008-2009. And not only the United States, I am talking about a deep and biting recession that will spread around the world faster than any infectious disease. A recession might happen anyway because we are surely losing several hundred million dollars a day in revenues, thanks to the shutdown. If we do not open for say, another ten days, we will likely lose about half to three quarters of one percent (or more) of our Gross Domestic National Product (GNP). And this to an economy that is merely treading water—with an unemployment rate that is much higher than reported (because so many people have given up on looking for a job—-called “non-participants”).

So, let’s hope that some sanity, and some leadership, will somehow return to our nation’s capital. This time, the stakes are way too high for anything else. But given the personalities involved, I fear the worst. Even though Boehner has said privately that he will not allow America to default, there are simply too many crazies running the asylum (and besides that, Boehner promised we would not shut down the government so his prognostication skills are as weak as his leadership).

And that is why I fear that this could be another “Tarp” moment. Smarter people than I say I am dead wrong and I pray they are right. The last time the congress (this time the 112th Congress) voted against a bill to save Wall Street, we lost 777 Dow points in a single day, and more than 15 percent in two weeks in August of 2011. That is why I sure hope that this time, the past is not prelude.

Please stay tuned for frequent updates as we navigate through this terrible situation.

—Jeffrey A. Krames, October 5/6, 2013

Why this Goverment Shutdown Will Wreak Havoc

Last Sunday—the 22nd of September—I predicted that if no action was taken by Congress to avert a possible shutdown by Friday (the 27th), the stock market would shed 300-600 points last week. That prediction was pretty much spot on—but much closer to the low end of my prognostication.

I figured that if no action was taken by Friday, the do-less-than-nothing 113th Congress would not get their act together and financial markets would sniff disaster in the air and react accordingly. I must confess that I thought the market sell-off would be far more disastrous. But that was not to be. In fact, none of the major banks or institutional money managers panicked and we only lost about 70 Dow points on Friday. I still wonder why that I was in the minority about the prospects of a black Monday.

Now fast forward about 30 hours: In the early morning hours of Sunday, September 29th, the divided-amongst-themselves House voted to add a rider to the funding bill that basically said “delay Obamacare or we will shut down the government.” Never mind that both the Senate Majority Leader, Nevada Democrat Harry Reid, and the President both promised to “veto” ANY BILL THAT DELAYED OBAMACARE. Yes, we are back to insanity land as I described it in the blog posting below.

The “Greatest Gall Award” of the weekend goes to California House Representative Darrell Issa, who, when asked by a reporter “…When this fails…”—Issa went a bit unhinged on a very competent reporter:

“How dare you assume failure. How dare you! How dare you! How dare you?!

How dare he? Once again, we have another member of this confused Congress unable or unwilling to face reality. I can only tell Representative Issa with respect that the reporter who asked the question isn’t the only one to “dare” assume failure. By the time he jumped down that reporter’s throat, every reputable news organization and any CSPAN watcher knew it was over. Failure was inevitable. So, Congressman Issa, before you take your anger out on a reporter merely doing his job, I ask you to take a deep breath and look in the mirror.

Now, lastly, why do I think this shutdown will have such a disastrous outcome? First, a bit of history.

In the last four decades, there have been 17 shutdown of the United States government, with six in the 1970s, each lasting longer than eight days. However, the longest shutdown happened under a Democratic president’s watch, under Bill Clinton in 1995-1996, which lasted precisely three weeks. The government said that shutdown cost the American taxpayers more than one billion dollars.

This shutdown may not last that long, but any shutdown of more than a couple of days will wreak havoc in our nation and reverberate around the world. Why? The capital markets have never been more inter-connected or more global in behavior. That means that the effects of this shutdown will likely begin in Japan tonight [and the rest of Asia], which are the first major markets to open tonight, Sunday, at 8 pm Eastern Standard Time. That will be followed by Europe and then the U.S. Monday morning. This means financial markets around the globe will almost assuredly lose tens of billions of dollars of value, with the worst effects to be felt here, in the U.S. This will mean that people’s IRA’s will suffer, as well of course any other stock market accounts holding people’s savings.

The stock market is only a small part of the ill effects of a shutdown. Tens of millions of government workers will be “furloughed,” and may or may not ever recover that pay. At a time in which our recovery has been weak, this is absolutely the worst thing that could happen now. wait—I take that back.

The worst thing that could happen comes in about 18 days if the Congress and the president fail to pass a bill to pay our debt by raising our debt limit. The last time we came even “near that cliff” was in August of 2011.

The effect?

The stock market dropped well over 600 points in a single day (and that followed a 500-point down day a few days earlier). In all, the stock market surrendered a whopping 15 percent in two weeks, the worst performance since the fall of the House of Lehman which sparked the financial crisis of 2008-2009. And remember, that time we averted a disaster because the Congress voted to pay our bills, albeit in sloppy fashion in the final moments. But even though we averted that cliff, Standard & Poor’s still downgraded our credit rating, which was what really sparked the disaster in the financial markets.

So we watch and wait. Full disclosure: I have a number of large short positions in the stock market because nothing that has happened this weekend came as a surprise to me. However, it is important to note that there are many, many people smarter than me that feel that I am making a tempest out of a teapot. Time will tell. But with this Congress—and a president who won’t mind a shutdown all that much, since it means that Republicans will likely lose ground in the 2014 mid-terms if any shutdown tales place—I bet my money on red. That is, we will see a great deal of red before the bouncing ball falls back into the black.

Stay tuned for frequent updates!!
—Jeffrey A. Krames, September 29, 7:30 am CST

What Is the Definition of Insanity (a.k.a. Will the Government Shut Down)?

Insanity: doing the same thing over and over again and expecting different results.”
—Albert Einstein

I can’t believe the Congress, more specifically—the U.S. House of Representatives—has done it again. For the 40-something-time, the House has voted to pass a law ONLY IF ObamaCare (The Affordable Care Act) is de-funded. Since the chances of that happening is absolutely zero, there is no getting around this fact: this was an act of crazy people (not a word I have ever employed in my writings). These are the people that are well paid to represent the will of the people, and obviously shutting down the government is not what we sent these people to Washington to do. Yet even cautionary notes from people like Karl Rove and the Wall Street Journal Op-Ed page (not exactly bastions of the left), could not convince them to take a saner path. And they don’t even know—or care—that the choice they have just made may just shut down the U.S. government.

However, that is precisely what I believe the House has just set in motion. And if that happens, it will cost the U.S. much more than the $100 million a day it has estimated.

Before explaining how, here’s a few “fun” truisms. The smartest people I have ever known—people like Jack Welch and Peter Drucker—insist that leaders must “face reality” (that became Jack Welch’s mantra and his first rule of leadership). It is apparent that the 113th United States Congress can’t do even that. Never mind that both chambers of the current Congress has gotten less done than any other Congress since the earliest days of Thomas Jefferson’s tri-tiered vision of government (and much less than the so-labelled “do-nothing Congress” that served under Harry Truman from 1947-1949).

Conventional wisdom—as expressed by pundits and politicians on the Sunday morning shows—is that the Congress will right the ship and reach a last-minute deal before October 1st. But what they fail to realize that even if that happens, much damage would already have been done. In fact, I assert that some damage has already been done.

How? Let’s look at the events of the last 48 hours to find the answer.

On Friday, September 20th, the House actually applauded themselves on their vote to defund ObamaCare.

Unbelievable.

Leave it to this House to celebrate the politics of suicide, as most Americans will blame Republicans if the government shuts down. Although, ultimately, it hurts us all, but I expect it to reap its greatest damage on the GOP in the 2104, mid-term elections.

On that same day, last Friday, the U.S. stock market—as measured by the 30 stocks in the Dow Jones Industrial Average—fell by almost 200 points, making it one of the worst days of the year (this in a year when the S&P index is up nearly 20 percent). And nearly half of that selling on Friday took place in the last half- hour of trading—after the House vote. So, if you believe Isaac Newton’s law: “To every action there is always opposed an equal reaction,” then the stock market likely fell on Friday because of the uncertainty set in motion by the House vote. All stock market participants know that the stock market hates uncertainty. That is why the market fell by well over 700 points in early August of 2011 when the U.S. lost its triple “A” credit rating (and not only has it not gotten it back, Congress has the chance to take it down another notch or two in the next 40 days). And we have not even got to the Debt Ceiling debate set for early-to-mid October, one more land mine likely to trip up this obstructionist chamber of Congress.

One point of clarification: it is not only the House that has crazies. The biggest, most dangerous individual in either chamber is not the save-my-own-hide-no-matter-what House leader John Boehner, but the junior Senator from Texas, Ted Cruz. That is the man that has vowed to spare no action in tearing down the Affordable Care Act, which he knows was voted into law by both chambers of Congress, the Office of the Executive, and upheld by the highest court in the land. He is only too happy to play scorched earth politics, while secretly (or not so secretly) plotting a run for president in 2016 (please say it ‘aint so).

So now we wait and watch. If I am correct, or even if there is a last-minute deal, the stock market will be the ultimate scorekeeper of the Kabuki theater taking place inside the District of Colombia. If a deal is not reached by 4 pm Eastern Standard Time on Friday, September 27th, then the stock market will likely lose another 300-600 points between Monday and Friday of this upcoming week. And for one, I am betting heavily on my own blog posting by shorting the market in a big way. I have lost a lot of money over the years, but not once by betting heavily against the likely acts of an irrational chamber of our government.

—-Jeffrey A. Krames, Sunday, September 22, 2013

Note to Obama: Never Negotiate from a Position of Weakness

Not negotiating from a position of weakness is one of the first rules of brinksmanship. However, if one chooses to do so, then that individual has only one weapon left in their arsenal to turn the tables, so to speak: And that is to walk away when met with an unreasonable response or intransigence.

I have had the good fortune to negotiate for a living for three plus decades. My father— Barton “Baruch” Krames—who built up a successful business from nothing, did so because he is a first rate negotiator. I am sure I got the “negotiating gene” from him. It is also the part of my business that I enjoy the most—negotiating the best possible terms for my very valuable clients.

This posting, like the previous half a dozen, is not about publishing but about Syria and how the U.S. had decided to negotiate with Russia in order to obtain a U.N. resolution to remove and destroy the huge Syrian stockpile of chemical weapons. When Secretary of State went to Geneva to negotiate with his Russian counterpart, Russian Foreign Minister Sergey Lavrov, he went with a weak hand. President Obama missed his best chance to deal a blow to the Assad regime two weeks earlier. That is when he made the worst mistake of his presidency by deciding that instead of leading, he would delegate a major leadership decision to Congress. We now know what I correctly predicted then: Congress would falter and not support their Commander-in-Chief. Obama learned a valuable lesson that he should have already known: leadership can never be delegated. The War Powers Act of 1973 gave the president ample authority to attack Assad with missile strikes without congressional approval.

There are half a dozen instances of that precedent, starting with Ronald Reagan and most recently used by Obama himself against Libya!

That is why I was so utterly dumbfounded and devastated two weeks ago this day when Obama declared that he would go to Congress for “permission” to attack Assad. He should have known that the wars waged by Bush in Iraq and Afghanistan were too fresh in the minds of most Americans and congressional leaders to grant President Obama anything like a blank check to attack Assad’s war-making targets. Of course, Obama was requesting much less than a blank check.

But no matter. The “mindset” of congress was stuck on the Bush wars and they could not stomach another one. History is full of “fighting the last war” miscalculations. The greatest example is Hitler. He knew that the mindset that existed in the leadership of other European nations [due to World War I] was too vivid for any country to pick up arms against him until he attacked Poland in September of 1939.

Back to Syria. Obama and Kerry should never have agreed to any U.N. resolution that did not include automatic missile strikes if Syria fails to comply with the agreement. First of all, why should Russia or Syria have a problem with that? All they have to do is make sure that they keep their word. And that brings us to yet one more rule of negotiating. Do not negotiate with bad-faith actors that have revealed themselves to be liars and cheaters at every opportunity. Put another way, Kerry is fighting an unfair fight: even though only Russia was in Geneva with him and his team, Assad was in the background making unreasonable demands on Russian television during the negotiations. That is what happens when an honest broker goes up against two dishonest brokers—both which are enemies of the United States.

As I have been writing this piece, word has come that Secretary Kerry has reached an agreement with Russian Foreign Minister Sergey Lavrov over the Syrian affair. In the agreement Syria has one week to account for all chemical weapons. That is an unexpected “win” for Kerry—right? After all, Assad wanted a month. But, like every aspect of this negotiation, something stinks in Denmark (well, Geneva). The only reason Kerry won that “concession” was because Assad has already moved his chemical weapons—to more than 50 sites by some reports. And since no one really knows how many weapons he possesses, he can “make it up” [the accounting and the location of the weapons] as he goes along.

Assad also knows that it will be nearly impossible to secure and destroy these weapons during his brutal civil war [he has not agreed to cease the war so that inspectors could do their job]. The magnitude of the task and the action on the ground make the logistics of the elimination of those weapons impossible. And even if inspectors get in there, they will need 2,000 inspectors (that many does not even exist) and tens of thousands of troops to protect them in the midst of a war that has already seen Assad slaughter 110,000 people using conventional weapons (which of course are not even being discussed by the U.S., the U.N., or anyone else that have any power to level the playing field).

So what have we learned: the deal just hammered out in Geneva does not include any threat of force if Syria does not live up to their part of the “bargain.” Alternatively, it includes an agreement to agree to revisit the subject of force if Assad does not comply. But any lawyer will tell you that an “agreement to agree” does not constitute anything binding. So while, in the early going, the agreement is being hailed as a “win” for the United States, I beg to differ. I see the entire exercise as a ruse and a stalling tactic that will likely allow Assad to keep a good chunk of his weapons no matter what and allow him to continue to kill thousand more of his own people, albeit with bullets and bombs rather than chemical weapons.

The one key lesson of all negotiations should have been exercised by Kerry: he should have walked away from the negotiation when the opposition failed to agree to our key demand. As soon as it was learned that the threat of force would not be in the resolution Kerry should have gone to the microphones and declared the negotiation “over.” But he simply couldn’t. His hand was too weak. And that is what happens when leaders fail to lead and inaction wins out over action.

I am afraid that history will judge this entire Syrian mess to be a low-point of American leadership—adding to the perception of a “weak America” and an even weaker super power. For what good does it do us to be a super power if we fail to use that power when the world—and the helpless—need it most?
—-Jeffrey A. Krames, September 14, 2013

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