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Posts Tagged ‘Who Is

Who is Sunpu-Opto? / 宁波升谱光电半导体有限公司是谁啊?

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Cleveland is my hometown, my destination for law school, and a city in an economic tailspin. Beginning in the 1970’s, the decline of heavy manufacturing, white flight to the suburbs and demographic shifts to the American west and southwest combined to create a perfect storm of urban decay, throwing what was once the country’s third-most important city into third-tier has-been status. The past three decades have been a combination of abortive attempts to arrest the decline and to shift the city’s development in a new direction. As it stands, Cleveland has perhaps 400,000 residents in the borders of the city, a couple million in the ‘greater cleveland’ area, and no particular focus economically now that the LeBron James economic stimulus package has concluded.

Home sweet home.

The latest scheme to be hatched in hopes of bringing some innovation or at least some new jobs to Cleveland is Mayor Frank Jackson’s plan to award a 10-year no-bid contract for LED lighting to the Ningbo Shengpu Lighting Company, known in English as Sunpu-Opto. The reaction of most Clevelanders was predictable: “WHO? Why award an exclusive, no-bid, ten-year contract on a relatively new product to a relatively, no, completely unknown Chinese company, when General Electric has a lighting-focused industrial park with historic ties to the city, which, by the way, employs 1,200 people? You’re selling our city to the Chinese!”

I can understand the anti-China sentiment. This is a city that knows China chiefly as a destination for what may have once been their jobs or the jobs of their family and friends. There is only a small Asian population and I have no idea how active actual ties are between them and China. In the legal community, two of the major downtown law firms are heavily involved in China, and at least one of the smaller firms is as well, but blue-collar workers, which Cleveland has historically been built upon, have little love in their hearts for China, nor for seemingly ‘unfair’ foreign investment schemes that leave American companies out in the cold. Even given all that background, I think attracting foreign investment to Cleveland is an absolute imperative if the city is ever going to experience growth, let alone arrest its slow and steady decline. Cities in transition need shocks to their system.

However, is this move by the mayor and city council (which apparently supports the mayor, who is the former council president) the best way to advertise Cleveland as open for FDI? Jackson has said he’s advancing a new paradigm of city development: If you want Cleveland to make an investment in you, you need to make an investment in Cleveland. From a purely pragmatic standpoint, that’s not a bad idea. But no-bid contracts have a funny way of hurting people’s feelings, and Cleveland has had such a lovely history with hurt feelings and major benefactors packing their bags and leaving: Rockefeller (yes, 30 Rock could have been in Cleveland, but where would Liz Lemon have gone in the ‘Cleveland’ episode? Milwaukee?), Art Modell and the Browns, LeBron (not yet, but…)…do we want to add GE to that list? Is that even a real risk, or is GE just blowing smoke?

I wonder what Dan Gilbert thinks of this. Where will the HQ be located? Is there a master plan, a way to bring more business in, or are we really just grasping at any opportunity that presents itself? I really want to see more foreign business in Cleveland, and I’m not going to shy away from throwing some serious incentives at companies to invest in Cleveland, but how in the world is Sunpu-Opto suddenly the best or even the only option for this sort of agreement? Another company, Fawoo, has indicated it could relocate its US operations from Akron to Cleveland in Sunpu’s place. Cleveland’s government says they looked at Fawoo but weren’t satisfied. Company officials reject Cleveland’s reasons. Who’s telling the truth? Who stands to gain?

Written by Michael

May 18, 2010 at 4:13 pm

Who is Martin Armstrong?

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The advent of the financial crisis has transformed Wall Street superstars into front page villains, pilloried publicly for their diverse and varied schemes, be they Ponzi or otherwise. Who outside of the world of finance knew Bernard ‘Bernie’ Madoff before he made off with somewhere in the neighborhood of $50 billion? Allen Stanford, who trails him with a paltry $6 billion or so? And nobody has been deaf to the near-hysteria surrounding the gross incompetence of AIG Financial Products, leading to bailout after bailout, while the public seethes at executives still receiving bonuses.

Yet in this emotionally charged and unhappy time, a few such figures have refused to go quietly to the gaol, instead firing back with media fusillades and counteraccusations of corruption and wrongdoing by others, by the government, by the public at large. Mr. Stanford, in an interview with the New York Times, recently denied any wrongdoing, instead blaming his partner and former roommate. He claims that the collapse of his investments and company was based on rumor and hearsay, and made fact by draconian action by the Securities and Exchange Commission. From a different quarter, Jake DeSantis, a former Executive Vice-President of the aforementioned AIGFP, resigned in a public editorial and accused AIG of breaking promises under undue and unjustified public pressure. Sympathy was lacking, but clearly many individuals are not willing to have their names or reputations besmirched by the ongoing crisis. At least not without a fight.

This is hardly the first time the United States has been a large-scale economic crisis, and definitely not the first time the words ‘Ponzi Scheme’ have comingled with pictures of disgraced financiers. I’d like to share some thoughts from another blog, Thomas Neuhaus’s ContraHour. Mr. Neuhaus, who blogs on trends in the stock market and has a number of excellent posts regarding the financial crisis, also occasionally posts essays written by Martin Armstrong, a financier who has been jailed since the late 1990’s, first on a seven-year contempt of court charge (renewed every 180 days), and now on a more substantive charge of defrauding his investors. Mr. Armstrong was a wunderkind who made it big at an early age, and went on to develop complex financial forecasting models with the firm he founded, Princeton Economics International, until he was accused of engaging in a Ponzi scheme and eventually jailed for refusing to produce documents and evidence requested by the court. According to a sentencing memorandum citing his case,

Defendant Martin Armstrong engaged in a seven-year long, $3 billion Ponzi scheme, described
by the government as the “the largest Ponzi scheme in history,” causing losses of $737 million.
(See Sentencing Tr. at 36-37, attached hereto as Exh. 32). Armstrong exhibited no remorse or
concern for his victims. To the contrary, he refused to surrender more than $14.9 million of gold
bars and rare coins he had obtained as part of his scheme. He was jailed for civil contempt, and
spent seven years refusing to acknowledge or turn over his ill-gotten gains. Armstrong never
accepted responsibility for his actions – once again, to the contrary, he spent half an hour at his
sentencing hearing rationalizing his behavior. Nevertheless, the government agreed to permit
Armstrong to plead guilty to a single conspiracy count of conspiracy, effectively capping his
sentence at 60 months, the sentence Judge Keenan imposed (in addition to the 7 years he had
spent in prison for his continuing civil contempt).

Martin Armstrong

Martin Armstrong

Armstrong maintains his innocence to this day and routinely lambasts the government and its lawyers in the essays provided to ContraHour. He cites historical precedent in arguing against the witch-hunt atmosphere which has historically arisen in times of economic crisis:

The Senate investigations in the 1930s turned into a witch hunt. The Senate demanded to know who was short. Many people were destroyed. Mr. Fox, of 20th Century Fox, ended up with so many lawsuits against him because of wild accusations made in the Senate without any evidence, that he went virtually bankrupt. Willy Durant who began General Motors ended up with a job in a bowling alley. The Senate even summoned Rockefeller. No one was beyond their reach. The net result, the grand¬standing destroyed the free markets causing the Dow Industrials to fall by nearly 90% into 1932.

Society reacts blindly and wants retribution for its pain. The Panic of 1869 resulted in dragging the bankers out on Wall Street and hanging them causing the government to send in the troops to suppress the riot. There is always a witch-hunt. Those in power need to blame someone in the public to divert responsibility.

Surely, individuals such as Mr. Stanford would find some common ground with such arguments. Interestingly, Mr. Armstrong also writes of the markets themselves as mimicking a Ponzi Scheme (he does not use that phrase), in that highs are generated by attracting new and previously too-conservative buyers, until eventually, the last holdout is sucked in and there is no new capital to contribute:

When you suck in that last guy who raises the flag and joins the herd, it is over. There is no new source of buyers to keep the cycle going. Just hold your arm straight up in the air. See how long you can keep it there. The weight of your arm will become so heavy and your energy will flee like the wino. Suddenly you will be forced to let it go. The markets function on that same principle. This is why no one can manipulate the business cycle or the world economy.

Armstrong was even questioned in court regarding Darren Aronofsky’s movile Pi, which portrays a tortured genius using mathematics to discover underlying cycles manifesting themselves in the rise and fall of the stock market. Armstrong was questioned in 1999 (Pi was released in 1998) as to whether or not he was inspired by the movie or otherwise drew forecasting knowledge therefrom. He denies this, but one could see how his own life could be cast in terms sharply resembling the experiences of the protagonist of Pi, Max Cohen, who is first worshiped for his forecasting acumen and mathematical genius, and later hunted and persecuted as an outcast because his ability is too dangerous when people discover that it actually works. Armstrong himself believes that an attack on him in prison was a targeted event, writing

It is one thing to have the Government try to claim you are nuts or insane. It is something completely different when they try to portray you as Gold Finger from a James Bond movie capable of controlling the world. The fear the Executive branch has seems to be akin to what Kondratieff experienced with Stalin. If the Executive doesn’t like what the model says, they literally try to kill the messenger. On May 10th, 2007, an inmate was allowed in my cell who attacked me from behind, strangled me from behind, beat me with a typewriter and after I passed out, jumped up and down on my chest trying to cave it in. Others yelled for the guard, but he waited until the inmate was finished and came out proudly announcing he had killed me. To the best of my knowledge, no one was prosecuted and I was taken to Beakman Hospital at NYU. To the Government’s dismay, I survived.

However, for Armstrong, his own predicament takes a backseat to his concerns about the state of the American economy. Armstrong believes that American capitalism is a dodo bird in the crosshairs of an increasingly socialist, know-nothing government that continues to use hare-brained schemes to try and prop up a dying economy. He’s not the only one who believes the current administration is botching the economy, but he’s the only one who claims to have a skeleton key to the mysteries of fluctuations in the stock market. He suggests that the use of technology can save us, control our economy and government, allowing us to suppress and ameliorate the otherwise dangerous fluctuations of the cycle on which he bases his forecasts. His ‘Economic Confidence Model’ suggests a regular cycle of ups and downs based on the world economy as a whole.

While it is difficult to take anyone who claims to have cracked the underlying code of financial markets at their word, it’s not surprising that Armstrong has found a few devotees out there, such as Mr. Neuhaus. Given the state of things, one would be forgiven for resorting to reading tea leaves or reviving the Roman practice of reading the future in entrails, Haruspicy. What makes Mr. Armstrong significant is that unlike Mr. Madoff and Mr. Stanford, who stand at the beginning of a long and dark journey, Mr. Armstrong’s is nearly complete. In a few years, he will be freed and, one supposes, able to practice his art again. It is also possible for us to measure Mr. Armstrong’s accuracy in forecasting. For instance, according to his forecasting model, April 19-20 is the ‘turn date’ for a bear market rally to end, and a continued sinking of the world economy to resume apace. How exactly we are expected to detect the ‘turn date’ is uncertain – Neuhaus suggests that the dollar, treasuries, or the Shanghai index may show signs of topping out, indicating the turn.

Whatever happens, it will be…interesting. Perhaps later I will write a more detailed dissection of Armstrong’s ideas and offer my own opinions, but for now, if you’re sick of reading the mainstream news and want something completely from left field, take a look at Armstrong’s essays.

Note: Armstrong’s charts and essays appear crude and sometimes hand-edited because they are written from a prison cell on a single-spaced typewriter. He is not permitted use of a computer.

Written by Michael

April 21, 2009 at 2:24 pm

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