Opinion

Felix Salmon

What the decline of stocks means for you

Felix Salmon
Feb 15, 2011 15:29 UTC

Tim Duy asks me whether “the public is being pushed into a retirement dead end,” and “how the average investor should manage their 401k plans in this environment.” I have two answers to this; one’s facile and the other’s quite important.

The facile answer is “I’m not an investor” — don’t ask me, because the one thing I know for sure is that my investment calls have generally turned out pretty badly, I don’t have the courage of my own convictions, and insofar as I’ve managed my own personal finances in a non-disastrous manner that’s more been a matter of luck than judgment. I could try to give you investment advice, but it wouldn’t be worth very much.

The more important answer is “I’m not an investor” — and neither are you. Just because you have a 401k plan does not, ipso facto, make you an investor. This is a serious problem with defined-contribution pensions in general: they place an onerous set of responsibilities onto individuals who are wholly unqualified to discharge them in a sensible manner. Already, such plans tend to have far too many choices, many of which are expensive long-only mutual funds which seem like a pretty bad idea for just about anybody. Trying to add alternative investments in private equity or hedge funds to the mix would almost certainly be disastrous — the dumb money coming in at just the wrong time, just like it always does.

So your 401k is going to be made up of stocks, bonds, and cash, just like it always has been. Those asset classes are, it’s true, only a subset of the full range of investment opportunities available to sophisticated investors. But you’re not a sophisticated investor, so there’s no point in feeling aggrieved. It’s possible that you might be able to invest some of your 401k funds in Pimco’s Total Return Fund, which is an active and sophisticated investor, and which happily uses very sophisticated derivatives on a regular basis to get extra return and to make money in down markets. But generally speaking, people with 401k plans should stop at big-picture asset-allocation decisions: beyond that, they’re way out of their depth.

It’s possible to argue ad nauseam about the equity premium and whether it exists; I’m very sympathetic to those who say it’s smaller than you might think. But if you’re talking about retirement money you’re not going to touch for at least a couple of decades, then stocks do look a lot more sensible right now than bonds or cash, neither of which are going to do anything for you. Are they expensive? Yes: everything’s expensive. And at some point stocks will surely drop alarmingly. But at least the earnings yield on stocks is vaguely reasonable, and you can expect those earnings to rise over time as the economy grows. And you’re certainly not sophisticated enough to try to time the market and buy on dips.

The good news about 401k plans is that you put a more-or-less identical amount of money into them every month, which means you’re dollar cost averaging quite impressively. And ultimately the best way to save up lots of money for retirement is the same as it’s always been: to save up lots of money for retirement. By far the most important number here is the total sum of dollars that you’ve put into your retirement funds over time; the annualized rate of return on those dollars is secondary. So the more comfortable you want to be in retirement, the more money you should save while you’re working. Don’t expect the market to come to your rescue, and you won’t be disappointed when it doesn’t.

There’s no point in blaming the world for its unfairness. Sure, it would be nice if you and I could buy hot pre-IPO tech companies — or at least it would be nice if we were able to pick the winners. But again, Sod’s Law says that if we could do that, the returns in that space would turn negative pretty fast.

And it’s possible that we’ll have a resurgence in the stock market, if and when the US economy starts making things again. Dorian Taylor sent me a thought-provoking email this morning which said that one of the reasons we’re seeing fewer companies tap the equity capital markets is that we’re in a phase where all of the buzz and excitement is in what he characterizes as “networked information services.”

“Relatively speaking,” writes Taylor, “these companies don’t really need a huge amount of capital at any given time because they aren’t buying stuff with it; they aren’t making or building or physically shipping anything.” (Yes, I know that datacenters are expensive, but this is broadly true.) Taylor continues:

I suspect emerging industries for which production (eventually) eclipses R&D (i.e. physically consumes stuff to make things) may still do well in the stock market. Metamaterials, space tourism, alternative energy or tissue engineering perhaps. Just not information services.

If the greentech (or any other capital-intensive) revolution ever arrives, in other words, maybe the stock market will step up and become relevant again. And for the time being, those of us with 401k plans should just continue to put our money into stocks, or target-date funds, or the like. Because we literally don’t know any better.

COMMENT

I make my living managing money for other people and I’ll still be the first one to advocate that any college/vocationalschool educated adult can and should take a keen interest in managing their money. Anyone unwilling or uninterested in doing so deserves whatever retirement (or lack of one) they get.

Step one is truely simple… sign up for your 401k plan. If your job dosen’t provide you with a tax advantaged savings plan then step 1a is to find a new job.

After you’ve signed up for your 401k and maxed out your company match then it’s time to open your online brokerage account and put an automatic payroll deposit in place in that as well.

If you feel like you don’t make enough money to do a 401k and an IRA then again… the most imporntant financial advice anyone can give you is not to buy this stock or rebalance to that asset allocation… it’s what changes can you make in your life to earn $22/hour instead of $11.

If the average wage earner on the street can say “I’m not an investor” — and neither are you”… then let me bolt on another part…

“I’m not and investor, -neither are you, -and that’s why this country is headed straight off a cliff.”

After I’ve made my 1st billion I’m putting up billboards on the nations most congested comuter-routes saying the following:

“Wake up to the absolute truth that 3 billion people would break the law and risk their lives to take your spot as a lower middleclass wage slave.”

If you don’t want to own a little peice of the coal mine than pick your shovel up and get back to work digging.

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Counterparties

Felix Salmon
Feb 15, 2011 05:34 UTC

Is it true that the South Street Seaport Museum has closed down Bowne & Co after 182 years? I very much hope not.

Mohamed El-Erian’s moving and heartfelt column on Egypt — FT

Did Ticketmaster really sell only 1,000 LCD Soundsystem seats on the on-sale date when there are 13,000 seats in total? — Lefsetz

Everybody link to the Content Farm! We need to boost its PageRank!

Iran opposition protests — Reuters

Battle of the credit-card concierge services, Valentine’s Day edition. You might be surprised by the winner — NerdWallet

President Obama will present Jasper Johns with the Presidential Medal of Freedom at the White House — LA Times

Ivan Oransky reveals the name of the idiotic press officer: it’s the University of Manchester’s Aeron Haworth — Embargo Watch

Why small IPOs are important, and why they no longer exist — Urgent Speed

Mark Miller has a great column on Social Security scaremongering. It’s not in crisis, people! — Reuters

Mike Elgan: Why Nokia is toast — Computerworld

Bill O’Reilly is Internet Meme du Jour — Geekosystem

COMMENT

Oh, just add further to the ticketing thing – I’ve been suspicious of the artist/promoters ever since an incident in 2008 where I snatched up an impossible to get ticket for Billy Joel’s Last Play at Shea. I thought it was really strange to have a concert on a Wednesday.

Sure enough, 2 days later he came out blasting scalpers for denying fans a chance to get tickets. And as a courtesy to his fans, he was going to have 1 more day – on a Friday.

How convenient.

Posted by dtc | Report as abusive

Why you can’t see great video

Felix Salmon
Feb 14, 2011 22:31 UTC

I spent a large chunk of Saturday looking at The Clock. Christian Marclay’s video masterpiece is currently on show at the Paula Cooper gallery in New York, and is also part of the British Art Show, which is touring the UK and will open in London on Wednesday.

Still, like a lot of excellent video, it’s very hard to find. Wayne Rooney’s bicycle-kick winner on Saturday is out there, although the copyright holders were being very aggressive in taking it down from YouTube for most of the weekend. And the Grammy performances from last night are still pretty much nowhere to be found.

In the case of expensive entertainment media, I kindasorta understand what’s going on — or at least I would understand, if they had any strategy for profiting from the viral nature of these videos themselves. But in the case of the artwork, I’m just depressed.

Marclay’s work is truly magnificent — but it’s 24 hours long. It’s basically the world’s most expensive clock, laboriously pieced together from thousands of film and TV clips, each of which tell the time in some way. It’s synced to the actual time where the film is showing, so that if a clock shows 3:45pm on screen, that means it’s 3:45pm where you’re watching.

It’s an amazing work, beautifully edited. Like much high-end contemporary art, it marries a striking conceptual purity with a no-expense-spared perfectionism when it comes to technique — the film quality is first-rate, the edits are carefully put together so that you get whole sequences which echo each other and create mini-narratives within the narrative-free whole. And while it certainly works extremely well in a gallery context, one can’t help but think that its ideal presentation would be as a permanent clock, on the wall in one’s house, where you’d look over to tell the time and then get completely distracted and be late for whatever it was you were trying not to be late for.

After all, the main reasons that the piece is so hypnotic has nothing to do with the gallery setting. Instead, it’s just the nature of what’s known as “tick-tocks” in financial journalism: the deep-seated human desire to know what happens next, and which explains why so many people got all the way through Too Big To Fail. The film is comprised mostly of high-end Hollywood product, made by people who know how to keep you watching. Which creates a kind of surfing sensation: you never find out what happened after any given clip, but you’re already engrossed by the next one. According to one of the gallery assistants, people tend to spend a huge amount of time between getting up to leave and actually leaving: they can’t quite bring themselves to tear themselves away.

I would dearly love to be able to have a copy of this piece at home, getting to know its nuances — look, it’s the sequence with a whole series of dropped-in bits from Sam Raimi’s Spider-Man! — and looking out for the more subtle or hidden clocks and watches in scenes where they’re not immediately apparent. It wouldn’t be too hard, I don’t think, to set up a website where the film was constantly streaming in various timezones, and which you could just play, full-screen, in any web-connected home. And the amount of pleasure and wonder that website would generate would be enormous.

But I doubt that’s going to happen. The Clock is being sold in an edition of six, to museums around the world who will sometimes have it on show but who normally won’t. And museums, for all that they nominally serve the public, still like to jealously guard their work. Noah Horowitz, in Art of the Deal, tells the story of Anri Sala’s Intervista, a 26-minute video projection which was sold to the Musée d’Art Moderne de la Ville de Paris in 2001. When the museum found out that Sala intended to release a single-channel edition for private use, in the form of 220 VHS tapes, the museum worried about its own version’s “diminished singularity, reinforced by the disparity in price the museum would be paying for the installation versus that spent by owners of the single-channel VHS edition. In the end, the museum won out, with a final contract annulling the proposed edition.”

Marclay and his gallerists want to cement his position in the institutional art world, and as it’s going to be unnecessarily difficult for the world to enjoy The Clock – just as it’s unnecessarily difficult for people to see Lady Gaga’s Grammy performance from last night. At some point, we’re going to break through these barriers. But it’s not going to happen any time soon.

COMMENT

Likewise, nobody gives a horses ass about your comment posted on the web, hipster or not!

Posted by MPH | Report as abusive

Pimco datapoints of the day

Felix Salmon
Feb 14, 2011 18:28 UTC

Pimco’s $240 billion Total Return Fund is, by most measures, the largest fund in the world. A handful of sovereign wealth funds are larger, but none of them trade nearly as actively or aggressively as Bill Gross. Check out these two datapoints: in August 2010, the fund was 51% invested in US Treasuries. By January 2011, that number had declined to 12%. Which means that the Total Return Fund on its own liquidated over $90 billion in Treasury securities over the space of five months.

What happened, narrowly, is that Bill Gross changed his base view from worrying about deflation to worrying about inflation. But more broadly, he showed that he’s more than capable of repositioning his supertanker of a fund as easily and aggressively as if it were a hundredth of its size. He can do that because the Treasury market is the most liquid market in the world, and because he employs some spectacularly good traders.

Gross also showed, of course, that anybody following an “I’ll do what Bill’s doing” strategy is doomed to underperform. The holdings of the Total Return Fund are emphatically not what you should hold if you’re looking to work out your asset-allocation strategy over the medium or long term: instead, they’re held on an I-can-sell-these-at-any-time-I-want basis by arguably the greatest bond trader the world has ever seen. Which is why investing in the Total Return Fund (minimum investment: $1 million) makes a lot of sense. Copying it, by contrast, or trying to position yourself in light of Gross’s public pronouncements, makes no sense at all.

COMMENT

Now that the Total Return Fund is trailing 84% of its peers year-to-date, I think a reassessment of your recommendation is in order.

http://money.cnn.com/2011/08/30/markets/ bondcenter/bonds_pimco_bill_gross/

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Why the stock market is increasingly irrelevant

Felix Salmon
Feb 14, 2011 15:22 UTC

I’m sad that my NYT op-ed on the decline of stock exchanges went to press too late to include the bonkers rhetoric emanating from Chuck Schumer:

The New York Stock Exchange is the cradle of American capitalism. It is a national treasure. In America, we start each day in our Congress and in our classrooms with the Pledge of Allegiance, and we also start it with the ringing of the bell on the floor of the stock exchange.

The NYSE is in no sense the cradle of anything. A cradle is a safe place for the young to develop until they grow up and become more self-sufficient. Y Combinator is a cradle. The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else. Since then, I get the feeling that the big capital raises on U.S. exchanges have been by financial institutions, rather than the real economy; maybe someone can find a breakdown for me of which sectors raised the most money in primary and secondary offerings over the past ten years.

As for the idea that the NYSE is a national treasure akin to the Pledge of Allegiance, well, yes. Which is to say, its value is symbolic, and rooted in the days of old, when “allegiance” meant something more than who you’re friends with on Facebook, and when institutions were judged on the size and weight of their Corinthian columns.

There’s one other point I would have liked to make in my piece, which is that the tax code is a large part of the reason why the stock market is bad at capital formation. Look at the trillions of dollars cash on corporate balance sheets: why aren’t those companies paying it out as dividends to their shareholders? In an efficient capital market, they would do just that, and then raise new equity capital as and when they needed it in future. After all, sitting on billions of dollars in cash is hardly a core competency of most exchange-listed corporations.

But companies don’t do that. It’s partly because they fear that the money might not be there when they need it. But it’s also because the cost to shareholders of dividending out money now and then getting it back again in future is enormous. For one thing, the underwriters of the secondary offering are likely to require a hefty seven-figure fee when you ask them to raise that money for you. And more importantly than that, the shareholders you send the dividend to are going to have to pay income tax on it, at rates in the region of 35% to 40%. There’s no way that can be efficient.

I’m not saying that we should abolish the income tax on dividends. But it does help to explain why U.S. capitalism can be very inefficient, and why the stock market, broadly speaking isn’t working very well these days when it comes to its core function of capital allocation.

COMMENT

Sir, how _dare_ you!

LOL.

Was there ever really a golden age of allocative efficiency?

Isn’t the goal of most private equity strategies to eventually dump their stock, to cash out, even if it means paying big-board fees? (Did I say “dump” – I meant, lovingly “share”, pun intended).

You ignore the role of price discovery. Apple may not have issued since forever, but they sure like the currency of a highly valued stock, even more so when everyone can see just how big it is.

Posted by AmicusAlso | Report as abusive

Counterparties

Felix Salmon
Feb 14, 2011 05:19 UTC

Nathan Myhrvold’s 30-course tasting menu — WSJ

About 6.2% of potential female births are aborted in India because ultrasound reveals the sex. That’s 480,000/year — Bristol University [PDF]

These are the worst charts the NYT has published in, like, ever — NYT

Me, on Reliable Sources, talking HuffPo — CNN

Nate Silver on The Economics of Blogging and The Huffington Post — 538

David Segal’s fantastic Google/SEO story — NYT

Londoners are insisting on secure bike parking, lockers and showers before agreeing to switch employers — Standard

Hosni Mubarak used last 18 days in power to secure his fortune — Telegraph

What happened with LCD Soundsystem tickets? LCD Soundsystem, AVClub

COMMENT

You might find this analysis of the LCD Soundsystem incident interesting: http://lefsetz.com/wordpress/index.php/a rchives/2011/02/12/lcd-soundsystem-fiasc o/

It’s right up your alley due to its focus on markets.

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The decline of the public stock market

Felix Salmon
Feb 14, 2011 05:13 UTC

That was quick! Barely had my NYT op-ed on the decline of public stock exchanges hit the web this evening than Ira Stoll was ready with a trenchant reply.

Stoll is sanguine about the fact that the number of companies listed on U.S. exchanges has declined from 7,000 in 1997 to 4,000 today. “Suppose that the number went to 4,000 from 7,000 because many of the 7,000 companies merged with each other to become even larger and more dominant,” he writes, “and that the current 4,000 listed companies have three times the sales and three times the market capitalization they did in 1997.”

Actually, let’s not suppose that and instead let’s look at some numbers. I don’t have sales numbers, but I do have market capitalization numbers, from the World Federation of Exchanges. At the end of 1997, U.S. exchanges had a total market capitalization of $13 trillion; by the end of 2010, that had risen by about 24% to $17 trillion. Which in real terms actually works out as a slight decline in market cap. Meanwhile, GDP grew from $8.3 trillion in 1997 to $14.7 trillion in 2010 — that’s an increase of 76% in nominal terms, three times the rate of growth of U.S. stock market capitalization.

But more broadly, Stoll is making my point for me — that the U.S. stock market is increasingly made up of enormous and dominant companies and features ever fewer of the smaller, fast-growing companies which really drive the economy. When public companies are acquired or delisted or go bankrupt, there’s not nearly enough in the IPO pipeline to replace them. The result is a market of dinosaurs.

I also claim that the market is doing a bad job at allocating capital efficiently — after all, the market hasn’t allocated any capital to Apple since 1981. I don’t for a minute think I have a better idea than Steve Jobs what to do with Apple’s cash pile and in fact have said quite explicitly that it shouldn’t be paid out in dividends. But when investors buy Apple stock, their money doesn’t go to Apple, but rather to the other investors that they’re buying the stock from. The stock market becomes a money-go-round for speculators, rather than a way of directing capital at companies.

Finally, the “ultra-rich elite” I’m talking about is not the broad universe of people who are considered accredited investors by the SEC, but rather the tiny group of individuals who are given the opportunity to invest in private companies. If you’re well connected in Silicon Valley — if your name is Ron Conway or Vinod Khosla — then you have loads of such opportunities. But the rest of us don’t, whether we’re formally accredited investors or not.

I’m not making any policy recommendations in this piece — I don’t think that the rules about accredited investors should be weakened further, or that all Americans have some kind of automatic right to be able to buy a piece of Facebook. But I do think that the public stock market is less important now than it was in the past and that its decline is going to continue in future decades just as it has done since 1997.

COMMENT

Our public equity markets are designed not just for companies to tap into capital on the cheap. That’s just part of it. They are also supposed to give the common man (by man I mean people, but just trying to speak a little poetically here) an equal opportunity to take part in one of the single greatest wealth creators in world history–our public capital markets. If more and more young growing companies are tapping into private capital markets, then more and more of the outstanding wealth creation opportunities are going to an elite group of the already super-wealthy. This is not good.

http://alatazerka.wordpress.com/2011/02/ 10/whats-going-on-in-exchanges-today/

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Should bankers fly to China?

Felix Salmon
Feb 14, 2011 03:13 UTC

The advantage of being pseudonymous is that you can be honest. Here’s TED:

The most egregious example was the time I had to fly 18 hours, on short notice, from a mid-sized European city to Beijing for a two-hour pitch and fly right back to London for business the next day. In terms of cost-effectiveness, best use of senior bankers’ time, and sheer expense, this was pretty ludicrous.

And here’s James Gorman, showing what bankers have to say if they’re speaking on the record:

I pitched for 450 client meetings last year. I flew to China for a 20-minute meeting and then got on a plane and flew back. It was right for me to do it, and we got the deal.

It’s conceivable that both are true. I’m pretty sure that TED was flying commercial while Gorman was flying privately. That makes a huge difference in terms of productivity, especially while airborne. On the other hand, Gorman’s logic is pretty flimsy. He seems to think that if Morgan Stanley got the deal, then flying to China was obviously the right thing for him to do. But in fact it’s a bit more complicated than that.

As TED notes, the expenses incurred on Gorman’s trip were pretty big. Cash costs of course were huge, but opportunity costs were larger still: there was surely a significant number of meetings that Gorman didn’t make because he was stuck on a plane going to or from China, where he could have added value for the firm. On top of that is the basic probabilistic calculation: what is the probability that Morgan Stanley would have got the deal had Gorman not travelled to China? And what are the chances that Morgan Stanley might have lost the deal even after Gorman showed up for his 20-minute meeting?

Then there’s a bigger question still: what are the chances that getting the deal is going to end up being a good thing for Morgan Stanley? John Hempton has a post today about Guanxi — the way that Chinese business deals are generally based on personal connections and relationships.

In the United States the Guanxi guys will work for single-digit millions annually and think they are well paid. That is all they are entitled to. Such limitations on entitlement do not exist in Asia – and the Guanxi guys are likely to see Western funded private equity shops like Carlyle as piggy banks to loot… And the looting will not be a million or two dollars here and there – it will be for every penny they can extract…

The whole point of private equity is that by pooling capital you can get insider positions and you can run the company for cash – for the benefit of your investors. But if your “insider position” doesn’t even allow you to spot the business does not exist then your insider status is worthless…

Only after the collapse of network capitalism will the system be cleaned up and capital be allocated on the basis of analysis rather than connections.

It’s possible that the deal Gorman flew to China for was a purely advisory one which didn’t use Morgan Stanley’s balance sheet at all. But I doubt it. And as a result, no one will know whether the deal was a good one for Morgan Stanley for many years yet. If the likes of Hempton and Jim Chanos are right, then in hindsight just about every flight to China these days could turn out, with hindsight, to have been a very bad idea indeed.

COMMENT

… “And the looting will not be a million or two dollars here and there – it will be for every penny they can extract…”

That’s for sure. And it doesn’t stop there; aided by the willfull assistance of Standard & Poor’s and Moody’s Investors Service, China has shed $260 billion of its foreign debt obligation:

http://www.istockanalyst.com/article/vie warticle/articleid/4548858

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How an investment banker thinks about cricket

Felix Salmon
Feb 14, 2011 02:05 UTC

Anshu Jain — yes, that Anshu Jain — has filed a lovely column for Newsweek on the subject of the cricket World Cup. Even as a magazine writer, he still behaves like the investment banker he is:

My picks for the Cup? I’ve learned always to heed the ineffable wisdom of market pricing, and only then to essay my own view… Here are the odds at the time of writing (from Bet365.com): India, 3.75; Sri Lanka, 5.5; South Africa, 6.0; Australia, 6.5; England, 7.0; Pakistan, 8.5; and the West Indies, 21.0.

I find Australia, Pakistan, and particularly the West Indies good value at those prices…

My perhaps parochial pick is India playing Australia or Pakistan in the final.

Jain has managed to name four different teams, here, as his picks; if you take Bet365.com’s pricing, the odds of one of those four teams winning the Cup are about 59%. So, he’s not exactly going out on a limb here.

I’m also fascinated by this:

West Indians will, more than a little wistfully, recall “Super Cat” Clive Lloyd’s 102 in the inaugural cup in 1975… I doubt there’s an Indian across the spectrum of caste, age, and language who doesn’t thrill, still, to the images of a feline Kapil Dev sprinting 30 yards to catch Viv Richards and set India on course for its only World Cup win, in 1983.

Jain is old enough to remember both of those events, but it’s worth noting that most of the people in India and the West Indies weren’t even born in 1983, let alone 1975. And frankly you had to be there: those thrilling images of Kapil Dev are pretty grainy and mundane taken out of context and presented on YouTube.

But that’s sport for you. As Jain says, the World Cup will render a billion and half people agog, while the rest of the world is oblivious. Still, that’s more than enough to value the broadcasting rights at some $2 billion, and to force a large chunk of the US population to shell out $149 for the ability to watch it on DirecTV.

COMMENT

And I will be one of the watchers, via Willow TV on the net. Not that most Americans care or even know about this. I was snagged by cricket during a holiday trip to New Zealand four years ago, making me one of the few US-born cricket fans… I imagine there must be others, but I’ve never met any. Everyone who knows about the game here was born in one of the Commonwealth countries.

To misuse an engineering term, cricket has more “degrees of freedom” in its modes of play than other sports. That is, there are more elements which can change the course of the game in more surprising ways.

Along with that is the great and deep literature of the game (led by indisputably the greatest cricket book of all, Beyond a Boundary by C.L.R. James, as much a meditation on the changes in a globalizing world as on the inner workings of the game), the completely unique idiom of cricket terminology and commentary, the fierce devotion to statistics and high-tech tracking devices well ahead of anything American sports can offer, and a penchant toward exercising all the Seven Deadly Sins and occasionally provoking a minor international incident or two, creating turmoil in national politics, but also building bridges and easing international political tension.

The game on the field has all the elements of gladiatorial combat and three-dimensional chess, with long periods of apparent tedium while players move about in mysterious formations to incomprehensibly named field positions, interspersed with moments of excruciating disaster, high drama, humor and triumph. Sometimes all within a matter of a single over.

The scoring, of course, is impossible for Americans to understand, and that’s even before getting to the business of run-rates-required, two wickets, two batsmen and two gloves for the wicketkeeper, oval fields with no foul lines, and the mysteries of leg-before-wicket, not to mention there are now three major forms of the game, including one specifically boosted up to compete directly with Bollywood in the subcontinent market. All of which attracted a lot of Bollywood money to where this new action is.

Cricket, of course, has always been about money, including the wagering kind, ever since “gentlemen in top hats laid stacks of guineas on the green.” Outright gambling has long been banned on the field, and this week the constabularies are chasing bookies out of major Indian cities to ply their trades in obscure smaller towns. But as always, the syndicates and tough guys circle around the action and the betting handles will nevertheless easily exceed $100 million for many of the World Cup games.

Yet, even more than other sports, the essence of cricket lies well beyond the monetary realm.

My friend who moved to New Zealand from the US couldn’t understand it at all. “How can you take seriously any game where the players wear sweaters?” he said. Cricket lives in some post-postmodern state, simultaneously rooted in a mythic past, a frantic now and a serene future. It is both an escape from the world and a mirror into it.

As for the 2011 World Cup, South Africa, India and England are the teams on form, and Australia is still quite strong after falling from unreachable heights only a few years ago. My Black Caps seem poised to continue their unfortunate era of NZ underperformance, despite the versality of the veteran Dan Vettori and the agility of the up-and-coming Ross Taylor.

All that said, with the slow, turning pitches and sultry weather of the subcontinent, I will pick balanced and focused Sri Lanka to take it all, with the ageless Jayasuriya and the incomparable Muralidaran bringing home the honors.

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