Republican Party: Two is Company, Three is a Crowd

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Republican Party: Two is Company, Three is a Crowd

This post should be short and simple.  When there is a battle/negotiation between two parties, the one with that is stronger wins.  With three parties, unless one is stronger than the the other two combined, the negotiation may take some time until a coalition with a majority of power emerges.

Republican Party

In the present statement in the House of Representatives, I suspect the solution is that a faction of 20 or so liberal/moderate Republicans defect to the Democrats, and pass a clean bill that goes to the Senate.

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Now, that’s not assured, and I think more broadly than many.  It is possible that the Republicans in the House will not raise the debt ceiling.  I’m not saying it would be a good thing, just that it is possible, and it might not be as bad as the worst outcomes of Y2K.

But think of Syria, and other places in the Arab Spring.  The calculations might be easier if it were simply this versus that.  But in Syria, you have the existing government versus two rebel groups, one of which is more doctrinare about Islam.  Such a situation will not be easy to solve, and US foreign policy will be challenged to choose a right and effective course of action.  (In this case, it probably means doing nothing.)

My main point here is that when there are multiple factions, results can be messy.

Because of gerrymandering, the US has mostly polarized their parties — that makes agreement difficult.  Gerrymandered districts produce ideologues.  Far better to set districts by computer, minimizing the length of internal boundaries, subject to substantially equal populations in each district.  That would produce fairer districts with more moderates.

I’ve written about this before, and better than this evening:

  • On Redistricting
  • On Game Theory and Politics

The main thing to remember is that reconciling multiple party disputes can be difficult; structural change, such as creating districts in a way that avoids polarization could help us avoid disputes like that in the House in the future.

As it applies to conflicts arising out of the Arab Spring, I would only say: think hard before rebelling, and analyze what other forces might be released by rebelling — there is no guarantee that you can beat the government, or the other forces you release.  Better the devil you know, than the devil you don’t.  Better negotiated change than change that springs from the chaos of war.

And, that’s all for now.

By David Merkel, CFA of alephblog.com

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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