Good Morning, Vietnam!

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).


Good Morning, Vietnam!
Sent from Hanoi, November 16, 2009

Robin Williams’ movie scenes are nothing like modern-day Vietnam. At 6 AM the streets are already teeming with people, scooters, buses and cars. Many Hanoi city folks gather to exercise in the early morning. Badminton games are everywhere and exercise groups of all types are ubiquitous, almost as ubiquitous as the cell phones.

By 8 AM the workday has commenced and the traffic is chaotic but not truly a “jam.” Somehow it works. There are 3 million scooters in this city of 6.5 million people. Many intersections have neither stop signs nor traffic lights. There is a remarkable order in the how the scooters and pedestrians and buses all seem to accommodate each other. Ask anyone who has been here and they will describe this cacophony to the reader who hasn’t yet put Vietnam on the top of the list of places to visit.

Vietnam is an emerging-market success story. Our GIC (Global Interdependence Center, delegation has visited the stock exchange, where 400 listed companies now trade with a combined market cap of 50% of GDP. We met privately with the chairman of the VN version of the Securities and Exchange Commission. They were formed in 2007 and are dealing with the growing pains of rapidly expanding private-sector markets in a newly emerging country. This looks like a mini-China of a few years ago. Under present plans there will be 1500 companies trading soon, as the government sheds its state-owned industries and privatizes the economy. There is one Vietnam ETF in the US. It was launched in September and bears watching closely. The issue is that half of its weight is in the financials, and therein one finds an ongoing global problem. It also has limited liquidity because of newness. Cumberland hasn’t bought it yet, but it is on the watch list for future positioning in our global portfolios.

Back to Hanoi. Segue to history.

Bill Stone of the Philly Fed is in our delegation. He served in South Vietnam in 1970. I was lucky enough to be assigned elsewhere by the US Army in the 1960s. Our group visited the “Hanoi Hilton” and shared some thoughts about the experience. By agreement, Bill will speak for himself; the following impressions are mine alone.

The visit to war history here is sobering. There is the photo of John McCain on his return visit and another of him lying on a stretcher while he was a prisoner. There are other powerful photos. And there is the story of the war told through the Vietnamese lens. They call it the American War; the obverse of what we call the Vietnam War. The Hanoi Hilton was originally built by the French to be a prison for Vietnamese dissidents. VN war history shows that VN treated their American prisoners better than the Vietnamese were treated by their French occupiers.

We also visited the war museum and saw the defeat of the French in the 1950s. In the next section, Dien Bien Phu history was followed by the memorial to the defeat of the Americans. Yes, we Americans were resoundingly defeated.

In my view and as a retrospective, we were misled by our politicians. There are so many questions unanswered. What if Eisenhower had responded positively to Ho Chi Minh? Would HCM have sought out the communist Russian alliance, or was that his last resort to escape what had been brutal French occupation and colonization?

Remember, this history here is told through the Vietnamese lens. It is clear that the internal story of Vietnam is one of repelling conquest by China or France or America or others. Vietnamese youth are taught that they have always resisted the invader and that they have never aspired to conquer others. That is the first message one hears here.

The second, and my personal one, is a feeling of good luck. I wasn’t sent here. I didn’t die here. Many Americans were not and are not as lucky. “There but for the grace of God, go I” has resonance to this writer as he stands and looks at the history with his own eyes.

Lastly, the sense of the futility of war is very powerful here. Why are politicians so engaged in these acts of madness? Was Kennedy convinced because the southern part of the country was dominated by a Roman Catholic minority in power, and they prevailed on his religiosity and that got us into the Vietnam War? Did the so-called Harvard brain trust really think they were making the world safe for democracy by expanding the Vietnam War, as we call it? Did anyone believe that bombing Hanoi would lead these people to capitulate, after they had resisted invaders for several thousand years? Did they take the time to understand history?

And lastly, the debate in our group centered on American policy as we presently know it. President Bush’s war is now becoming President Obama’s war. We discussed the parallels and differences between Vietnam then and Afghanistan now. Has anyone throughout history occupied and successfully pacified Afghanistan? Will that be Obama’s failure? Does the “domino theory hold with Pakistan?” It certainly didn’t hold in Southeast Asia.

Personally, I expect Vietnam to be a booming emerging market. These younger folks do not want war. They have moved from bicycle to scooter, from hand writing notes to cell phones. They do not want to lose what they have and they reject the violence of the past.

Can we find a way to introduce that notion of stakeholdership elsewhere in the world? In Afghanistan? In Iraq or in Iran? I am convinced that the task is enormously difficult and fraught with many obstacles. But it is the noble purpose of the GIC to try to avoid war by developing stakeholders who are invested in the peace. We do that in economic and financial terms. That is why we came to Vietnam.

The trip was well worth the effort. Come see for yourself.

We finish with meetings with the Finance Ministry here, and then off to Singapore for the public conference that GIC is holding in partnership with the University of Chicago. Readers may find me as guest host on CNBC’s Worldwide Exchange at 5 AM New York time on Wednesday morning. Safe journey to all. For now we wish you Tam Biet.

David R. Kotok, Chairman and Chief Investment Officer, email:

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