REVIEW: The Audacity of Hope - Barack Obama

As many of you know, I'm an avid West Wing watcher. I've probably seen every episode a few times. The reasons are many. For one, the acting is wonderful. The writing is exceptional and plots are both realistic and fantastic. Most of all, however, I find myself continuously intrigued by the many forces that pull on politicians at the highest ranks in their effort to serve both their constituents as well as their own ambitions. Mr. Barack Obama's book, The Audacity of Hope, provides a similar view on such forces and, similarly to the fictional President Bartlet, makes one yearn for a political candidate that seems to truly represent the many feelings most of us share about politics.

The Audacity of Hope is not what I expected. When I cracked open the book I looked to find one politician's manifesto - written to advance his bid for the next office. Instead, I found a cross between a biography and window on political life ...interspersed, of course, with tidbits of political speak that refer back to Mr. Obama's platform. On the whole, however, the book is both well written and interesting; one that you will want to finish once you start. 

Just like the reasons for which many believe The West Wing was so popular, it provides the reader with hope for what our leadership could be. It provides us with hope for what government can be. I don't agree with everything for which Mr. Obama argues in his book, but I did find myself marveling at his ability to empathise and play devil's advocate on many of the issues he does address. It is this simple act that attracts me to him as a candidate for the American Presidency.

I am naive, or so I've been told. It's likely true. I always like to believe that people are good and that what they say are either true or are believed to be true when said. Mr. Obama never made me feel otherwise. Politicians, of course, are known for speaking the words and ideas that their constituents want to hear - I am not so naive to not acknowledge this. I will say, however, that I have found that Mr. Obama convincing.

When speaking on subjects in which we don't truly believe or understand, there is a tendency for anyone to speak in broad generalities and use metaphors to relate the listener or reader to the ideas presented. When we speak on subjects about which we truly believe, however, we have a tendency to use our own experiences from which we learned the lessons we hope to share with others. Mr. Obama's The Audacity of Hope comes across as the latter and if his words are only partly representative of the President he may become, then it is no wonder that he has been so successful in organizing such broad support for his campaign cost to coast.

Fooling Some of the People All of the Time

CNBC just had a great little interview with David Einhorn, the president of Greenlight Capital and author of a new book: Fooling Some of the People All of the Time: A Long Short Story. I haven't read it yet (just learned of it), but I think that it's going on my reading list. Why? In the interview, Mr. Einhorn suggested a fairly simple idea to help avoid the sorts of financial problems that he saw at Allied and that we're seeing today with CDOs and mortgage-backed securities: why not mark-to-market all securities?

Marking-to-Market is simply the idea that your portfolio should accurately reflect the value of your investments even if they are not yet realized. For example, if you sold a call option (sold the option to buy a stock/security to someone else), then you have the obligation to deliver that stock or security if that call option is ever exercised. Now, let's further assume that you sold that put right at the money and it has since declined by $10. Since options are marked-to-market, your broker may require you to place the $10 in your cash account as a security against the $10 that you will be obligated to pay upon the exercise date. Sure, the exercise date may be months away and the price may very well reverse in the meantime, but the concept of marking-to-market ensures that those investors issuing those securities have the assets to finance them. From the perspective of the big banks doing the same thing, the marking-to-market would clarify the value of their balance sheets and make retail investment in those banks that much safer.

So why isn't Marking-to-Market not done all of the time? Well, the principle reason is cost. Marking-to-Market on some securities can require a great deal of monitoring expense that would undercut the earnings investors were collecting from those investments. This is a valid point, but like most things in life, there should be some compromise. Moreover, as the digital age advances, our financial transactions are increasingly computerized. As some of you know, however, at least part of the problem with the CDOs and mortgage-backed securities is the documentation: it's a mess. Marking-to-Market of such securities would undoubtedly increase the cost of these assets, but it would also require the financial institutions both issuing and purchasing them to keep very accurate records of their value.

What I like most about this idea, as Mr. Einhorn explains, is that it doesn't require more legislation or regulation besides requiring companies to do what they already must do on other (similar) securities. Even monitoring by the government and its agencies would be simple. I'm going to have to think this idea through further, but for now... it's a very interesting idea for both its simplicity and effectiveness.