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Published Monday - Friday about 8 AM Central Time Except Holidays....many major typos are fixed by 8:30 daily
Updated:
Saturday,
March 7, 2009
07:55 CDT
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A Cats-Eye View of This Week
Hi!
My name is Zeus. Fleaster's the last name, and I'm gonna teach you a little bit about investing today since George, the overweight biped who normally writes a Saturday column here about investing, decided to sleep in and even though I've barely got my eyes open, I think I can out-write that half-wit any day.
Not to brag, but I'm a published author, too, in my own right, having crafted a whole series for Mousing Monthly about different ways to get humans to respond to cat tricks. Or, maybe you saw my series in "The Rat Reporter" on "Field meowing for fertile felines". No? My "Hydroponics for better 'Nip"?
You've really got to expand your horizons because if you don't, you'll keep getting the same results you've been getting with your portfolio which I figure aren't good.
By way of explaining what I do around George's ranch, I've convinced him (and the much cuter blonde chick who's more generous with the wet cat food) that I am a mouser. That's not exactly true. Just like most folks around your human water coolers think of themselves as Junior Buffetts, when it comes down to actually pouncing on that deal of a lifetime, or even something simple as taking a little bird off the table, most humans can't do it. I don't like mousing any more than you like going to a cube, but that's the deal. A mouse or a lizard once in a while and the rest of the time it's dry food and wet food....cool deal...
Here's some catly advice: Think of investing like mousing: You ever notice how we cats will sit back for a while and eye our prey? I mean really sit back. Why just this week, I sat up by the garden for nearly an hour before a suitable bug wandered by. It was a grasshopper - one of the first of this season - and it was delicious. We cats call 'em the shrimp of East Texas. Very tasty. You ever that patient when you trade? Doubt it.
My point? You wonder what my point is? A cat has the good sense to stay in the now: we look for a good spot to go hunting and then we patiently sit and wait. Eventually, something becomes irresistible and we go for it.
Which gets me to why I've been watching the auto stocks. You see, while the new guy in the White House has been saying that he will "do all that's necessary" to boost the economy, the way I have it figured is there really may be too much capacity in the auto making business. I'm presently thinking that as soon as one or two of the majors go into bankruptcy, I might do one of my legendary pounces on a few thousand shares of survivors which I figure will beat the average penny stock over time. I trust you noted the headlines about GM's auditors raising the question whether GM would be able to keep going?
The fat guy, who I usually watch do the writing of this column from my chair which is next to his in the office here, thinks that's a bad strategy. The way he's got it sniffed out, as soon as there's a couple of failures in the auto industry, and we get that expected story about gold bar's not being pure gold, he thinks he'll be able to slam another couple of gold coins for under $700 an ounce.
That may be, and all, but as a cat that just not very exciting. See, cats like me want some real excitement in life. Like the time I chased off a skunk and didn't get sprayed. That was exciting. Probably the closest thing in human terms would be car racing, skydiving, or flying aerobatics. If I'm going to get into a position, I want it to be something that will be a sure-fire winner over time, but exciting, too.
Now think about this: What are the barriers to starting up a new software company? Essentially none. I started one up a while back (don't tell George) and I run it via email. I've got three programmers in Estonia, the whole thing is built on C libraries which are dirt cheap anymore, and when we come out with our new killer ap for the Siamese vertical market (it's a lap recorder for cats-that-swim ap) we ought to make a bloody fortune.
The internet has caused a massive displacement in barriers to entry for all kinds of businesses - and that's what George is writing up with more details for Peoplenomics subscribers this weekend. But I snuck a look at some of his notes on Friday and you know what? He may be onto something.
Barrier to starting up a new automaker for the next 10-years or longer are immense. I don't think there will be any other than the boutique high end outfits like Saleen which don't cat-ter (sic) to the broader market. So given the barriers to entry, and the idea that automakers are a manufacturing platform that could likely be adapted to any new technology that comes along like those 'new electrics' that have been mentioned in past www.halfpasthuman.com ALTA reports, I think there's some value there. So please, keep shorting them and lets drive a couple out of business to boost the value in the survivors. At some point, jobs are going to come back to America and when they do, I am going to be in the cat-bird seat, if you know what I mean.
You saw this week that IRS dumped private debt collectors? Wonder if the private outfits were trying to outsource tax collecting on Americans to outfits in India? What a post-child for globalism, huh? I mean the delicious irony of having one-time colonial subjects collecting taxes on one-time colonists, it just strikes me as humorous. --- I'm not going to write too much today. Cats like me aren't too good at typing, but I promise to use the spell-checker, something I've never seen used in the regular weekly column by whats-his-name...the guy who's chintzy when it comes to wet food who needs a bigger lap, if you know what I'm saying? --- OK, let me wrap up my human writing debut with what I think I'll call "Zeus Fleaster's Saturday Rat Report". I'll click through a bunch of stories where I smell a rat and then let you sniff around a bit and see if you can't smell one, too, OK?
Rat #1: National Healthcare Hype: You humans, like well-fed cats, can last probably 10-20 years longer than average lifespans if you'd just get back to basic, organic, relatively low processed food. But instead of focusing on the problems that lead to healthcare issues, you dumb humans are working on the wrong end of the problem. You're trying to cobble up a money solution to something that is fundamentally an education and habit change you're too lazy to make.
Think I, Mr. Zeus Fleaster, am wrong? Go read the story in the Nashville Business Journal headlined "National HealthCare profits drop 76% in 4Q".
The way I have it figured goes something like this: Healthcare is a purrrrfect shopkeeper economy model: Everyone can work in healthcare, costs can go anywhere, and a lot of it is taxable for the feds. So as the economy implodes, here's the plan:
Just because Missouri Congressman Roy Blount is drawing parallels between national healthcare and IRS, don't let that bother you none.
The way I have it figured is simple: The sociocrats will keep thrashing and trashing the economy (and the automakers) until they can roll in a national healthcare plan which - like the banks - will keep the profitable companies in private hands and which will take the dogs (and you know my feelings on dogs, right?) and sick'em onto the public.
And if crashing the banks and the automakers doesn't do it, I look for the airlines to be the next big things to be semi-nationalized after that.
I don't know about you, but since I'm a cat, I think I smell a rat.
Rat #2: Hugo Chavez: You saw the headline this morning over on the Drudge Report that "Chavez calls on Obama to follow the path of socialism"?
Follow? My whiskers! He's out there blazing the path. Doesn't Hugo read any of the reports on the bankster hi-jinx?
Minor Mice The White House is seeking economic advice from Twitter? You mean like responding to the needs of a target market?
"Never waste a good crisis, Clinton says on Climate" reminds me that we cats can't be herded. You humans on the other hand...well, it's a joke.
The report that "CBS may have to borrow to pay off maturing debt" sure reads like a third-part harmony to Fed buying Treasury securities. Does it take a cat to point out that borrowing to pay debt is not really paying down debt?
How'd you like that last minute save of the Dow Friday to keep it from getting a 65-handle in the final minutes? Slick, huh? And that 150 points in 35 minutes? Faster than one of the jackrabbits around here. --- I'd enjoy further elucidating and catatations, but I've gotta get this uploaded and get out off this computer. It's Saturday and I hear Tubbo has the milling machine going out in the shop and if he sees me on his computer again, he'll probably get mad. He hasn't gotten over my ordering 25-pounds of catnip off Amazon a couple of months ago. Grouchy humans.
So I'm gonna go 'nip up' and keep an eye on my human servants. See ya again one of these weekends when the wet food cheapskate sleeps in...been real. ---- Oh, don't forget to 'spring ahead' tomorrow - why you silly humans can't run by nature's clock is more mysterious than grasshopper jump timing. The mice don't care what your clock says and neither to I...tide comes in on schedule without any 'correcting' and all that - looks like you're odd man out, huh? You humans have to make up clocks which were only ever good for finding the longitude. Since you already should know where you are, what do you really need a clock for except to make you feel perpetually late? From a cat-level view, since you don't understand even the real purpose of clocks, it explains how so many of you people could be screwed in your derivatives blow-up, I guess, doesn't it? You obviously had a different set of bedtime stories than we cats get. Like this classic:
By my mark: Z
That Other Problem in 2012 Lots of readers enjoyed Peoplenomics Issue #389 ("A Steely-eyed Survey of 2012 Prospects") of 2/15/2009. However, after doing a lot more chart work, it turns out that one of my threats for that period may have a little more 'going for it' than I early figured. But even more interesting is the related chart work which I was doing at the time that may give some additional insight into just where present market trends could be taking us. Before we get into that, let's first step back and look at where we are in the Kondratiev economic Long Wave and see how Kondratiev might be improved upon... But first we have received this important warning about gold...
More For Subscribers Subscription Information
What is better than a Why, sending an email to everyone in your 'contact' file and tell them about www.urbansurvival.com of course!
"Live on $10,000" Updated What? You haven't ordered the ebook "How to Live on $10,000 a year -- or less"? Suit yourself. We're all going to live it shortly, anyway. I just thought you might like a heads up by reading about how to do it before you get pink-slipped. But, suit yourself OR visit www.liveontenthousand.com or, click one of the following button:
Yep - still possible. I also took a bit of additional material that was pertinent from recent issues of Peoplenomics and included them. The whole thing runs about 65 pages, but it gives you a vision of how to not only live on the aforementioned dollar amount, but also how to migrate up the economic foodchain if you make a little more than that and do some active savings... Click here for the page with more details on it. ---- Last week's report is here. For back issues of this site, click here. (Goes back to 1997!)
Friday March 6, 2009 I'm Still Waiting for The Panic Who was Vice President Thomas R. Marshall? He was Woodrow Wilson's Vice President from 1913 through 1921. We begin with this little dollop of history:
I mention this little historical footnote because in much the same way, I reckon "What this country news is a really good bout of panic."
You see, in the study of markets, you don't have a meaningful (meaning tradable so I can make some dough) bottom in the markets until you get capitulation. And despite the market dropping 281 points on Thursday, there was no sign of capitulation.
Oh, sure, there are some worrywarts out there like me...and even the Drudge Report's lead headline earlier this morning was about how the FDIC is going to get an emergency $500-billion dollar loan to remain solvent. But that, unfortunately, is nowhere near the level of panic that we need to put in a real market bottom.
I suspect that the editor at Drudge Report (or Matt himself) is coming to the conclusion that something awful is amiss with all these economic plans, which have not yet saved many houses and which have not stemmed the financial market debacle.
Of course, the sad truth, as I've been writing about since 1995, is that this really is the Second (or Greater) Depression and one of the hallmarks of such an event is a state of denial and the ever optimistic mantra. In the present moment it's a president promising "change" and in the 1929-1941 forerunner event, it was "Good times are just ahead." --- It's only when the PowersThatBe realize that they have shot their whole economic wad and their financial fix-it toolkit is empty that something akin to real panic sets in. Of course, we have been able to avoid that largely due to the make-work wars of 'liberation' which although they sound like pre WW II Germany in a certain sense, they have also kept a lot more people from showing up in unemployment numbers...which we will get to in a second. Let us not overlook giving credit to Housing Bubblemeister Al Greenspan, too, for helping to orchestrate the Housing Bubble, nor should we overlook the republicorps who passed up that Gramm-backed end of the Glass-Steagall act, which complicitous Bill Clinton signed, which enabled the Banks to remodel themselves as Casinos.
Of course, now that their gambling losses are becoming clear, it's you and me that are expected to pay the bill, but it's only what passes for money...paper with symbols on it. And how important are zeroes anyway? Shoot, bubba, I've got me a gen-u-ine Zimbabwe Agro-Cheque for Z$100-billion Zimbabwe dollars on my wall. I look at it on mornings like this and wonder how the West can make such fun of Robert Mugabe, who simply started adding zeroes sooner than we did...
What we should be doing is sending errant bankers to Gamblers Anonymous, or better, jail. The Swiss - in many ways smarter about money - actually do that (jail bankers who fail). --- A reader who sent me a like to a blog which asked "What's Dead? (Short answer: all of it). The article then goes on to list pension funds (public and private), annuities, FDIC, federal debt costs, tax receipts, tax-deferred accounts, and any company with appreciable debt outstanding. The reader noted that if the author of this way anywhere near right, we are all sooo screwed.
Which we are, but let's not get ahead of ourselves...there's still hope because a few folks, like Joseph Stiglitz (as noted in yesterday's column) really do 'get it'. --- Not everyone is a loser in this market, however. We note that "36 South Plans Inflation Hedge Fund After 236% Black Swan Gain."
A goodly number of reader of this site are also doing OK, having decided to flee paper assets about the time I did. And credit where due, a lot of others have seen it coming too, including CNBC's Jim Cramer who advised folks prior to the October mini-melt that if they needed money over the next five years, they should be out of stocks. Good advice it was. --- If you're a new reader, sorry about the losses on the house, 401(k), et al. Not my doing though. I have asked readers to pass on this site to friends, but maybe you didn't hear about this site sooner because so many readers of this site have few friends. I mean when you think about it, most of my friends who were playing the high-stakes house-flipping game in places like Florida, wrote me off as a nutjob when I suggested in 2002 that 'this wasn't gonna end pretty.' In retrospect, the only thing I'm guilty of is being way early to leave the party. But better a couple of years early than broke.
But don't feel like the Lone Ranger. You should be aware that this is a global crisis and that " A quarter of Britons are saving mo money as Bank cuts interest rates."
Of course, Briton has its own set of problems, not the least of
which is having an economic genius as a leader ( --- Correction: My recall of Brown's gold-selling was too kind as a reader points out:
The reader points out this was "...the poorest return assured by his telegraphing the market beforehand of his intended move... " Yup. Friggin' genius! So let's tell bankers how to run things, eh? --- That brings me to a point. The reason that the PowersThatBe are so worried about a Greater Depression, and will print all the so-called money they can to avoid it, is that Depressions have a nasty way of redistributing the wealth that has recently been so concentrated among the upper 1% of the world's - and the U.S. - population.
Which is why I call them the 'Defenders of the Paradigm' because the absolute last thing the ultra-rich want to give up is their riches. As a result, we'll just watch the old paradigm continue it's painful expiration and wait around for what University of Washington professor emeritus Dr. Jack Lessinger calls the coming 'age of responsible capitalists'. But don't hold your breath: This paradigm replacement stuff takes a lot of time and causes a lot of social pain.
Like I'm sure you haven't started to notice? --- OK, that brings us around to the jobs report, which will be center-stage in at least the opening round of trading in the markets today. Without further ado - except to say my 8.1% unemployment rate forecast was dead-to-nuts on...
In fairness, remember this is all fallout from the failed economic policies of the republicorps and the Bushco regime that left the incoming team in a position which a football play-by-play announcer would call 'horrible field position'. Not even a chance of a first down.
My usual comments are that the jobs report has big enough statistical methodology holes to drive a thousand tent-cities through and you have to look at the Table A-12, Alternative measures of labor under-utilization where you find the PhD burger-flippers and the former IT Directors turned janitorial staff listed: The U-6 Total unemployed plus all marginally attached (yada, yada, yada) was up to 14.8% - and that just the ones the government nose counters picked up.
Do I need to mention construction jobs were down 104,000 or that factory jobs dropped 168,000? No? Not hardly.
But here's one last point to consider. There are only 19,877,000 goods producers left in America by this report. They are supporting a service sector which employs 113,891,000 workers.
Now stick with me on this because THIS MATTERS: You've got 20-million people making things and you have 114 million selling services to the producers. This just seems to me like it might mean we have a ways more to go on the downside as the economy has to come back into balance.
Markets
Tim's Travails "Understaffed Geithner can't keep up, critics say." Might help if nominees for key positions weren't withdrawing...
Free Lunches Canceled! "Budget Backlash: Thousands rally at (NYC) City Hall." All brings into focus the major problem of a democracy (or Republic, as in Checkbook Republic). Everyone wants someone else to suffer buts...not them! Good luck to Mayor Mike - there's no winning this stuff...
Next War Don't forget to keep an eye on "Reports: Russia building anti-satellite weapons." In a perfect replay of the 1930's Depression, this all concludes with the world going to war in 2012...but things will likely unravel long before, since this is an economic Fifth Grand Super Cycle. So what happens at the end of a Super Cycle? Who knows... but about 4,479 days from March of 2000 should start to give us some hints. That was the 1929 peak to the attack on Pearl Harbor and Hitler declaring war on the US 4-days later...
--- snip and sae section ---
Coping: On the Road - Again? A loyal reader (the other one) sent in an interesting report on her travels about the 'land of the [once] free:
Ah - this is the kind of first-hand economic report that makes more sense to me that how the Bureau of Labor Statistics uses telephone incidental surveys to form up its unemployment numbers. Some comments on a few of these observations:
1. You have to remember to be careful to look at a calendar when you're counting things like 'moving trucks' because there's a tendency for people to move right after the first of the month. That's when many jobs end, rent is up, and so forth. Still good observation. And the plural of Lexus's is 'Lexi'.
2. What you're likely seeing is the leading edge - and it's only that - of what the time monks over at HalfPastHuman have been muttering about for a year now: the new Diaspora - the 're-scattering' of peoples around the world for a variety of (throw your own darts here) weather, environmental, volcanic, economic, social, and genocidal reasons. Did I mention the global coastal event? That's starting going mainstream in maybe April, so tune in to a MSM near you and see if you can catch it going by. Say, you weren't on Interstate 8 or 10 coming out of L.A. were you?
3. Wal-Mart sales were up - and they are doing better than most retailers. You maybe just hit that between delivery cycles and locations - still a data point worth noting because we've noticed that Wal-Mart seems to have skinnied up it's stock levels on the shelves here in Palestine, Texas, too. And, the local outlet is just a couple of blocks from their big regional distro center here...so I'll be watching.
4. My suspicion is that RV'ing may - for a lot of families - become the new "living in cars." As I've told you a couple of times, you can pick up a used RV on Craigslist for a few grand, and then refurb it yourself and get something quite roadable. I figure I could put a family of four on the road with an RV and some non-stylin' but perfectly serviceable used car (think used Geo Metro, or something like that) for maybe $15,000? Then all you have is the park expenses and with a car to go looking for work in different areas, we may be seeing the leading edge of a new kind of migrant worker: The kind that lives in an RV, has the high mileage commute car, and lives wherever there's a new for an IT Director, sales manager, product developer, or whatever. A kind of Second Depression version of college edjumacated Grapes of Wrath?
Except (using the Wikipedia plot summary of John Steinbecks 1939 original, the retooled (read: new & improved for the 2000's/Second Depression would go something like this:
See how Steinbeck retooled works out at a perfect New Paradigm farmer? Oh sure, you could maybe use Michigan instead of Oklahoma, but you get the idea... the migration from farm to Big City is flipping and now it'll be visa versa since roles reverse in alternative depressions. Slick, huh?
I think I outlined this process in one of the Peoplenomics reports a long time back - where you go to a genuine classic of a book and just do a 'search and replace' on key terms to get a whole new sense of how things are playing out within a classical literary context.
I remember doing this at one time on Darwin's "Origins of Species" which you can find at Project Gutenberg and elsewhere. I was specifically looking for a framing paradigm for the evolution of software and found retooling Darwin into a text on computer hardware and software evolution us8ing the 'search and replace' function of Word, turned it into a wonderfully useful reference that help me 'wrap my head' around concepts that were newish at the time - like developing 'evergreen ERP' software...
Say, this is getting way too serious! The weekend is almost upon us and there's much to do. Let's shelve this kind of working brain cells stuff until Monday, shall we?
Otherwise I might feel compelled to retool Mark Twain's classic "Life on the Mississippi" to something more contemporary...how about "Life on the Freeway" - just to (here comes the worst pun you've seen so far today) drive my point home?
I've obviously taken some liberties with facts (because I don't have time to do the requisite research at this (still dark) hour. But all wrapped up I call it the "Substitution Method of Learning" or, if you're a student, the "Substitution Method of Writing". Have at it.
Humans being symbolic processors of concepts, this method is a dandy 'head opener' and allows easy rearrangement of concepts to arrive at new - possibly innovative - approaches. Besides that, it's often just plain old fun. --- Send snip and save items to george@ure.net --- end snip and save section ---
Thursday March 5, 2009 I happened to catch the interview with Nobel Prize winning economist Joseph Stiglitz on one of the money channels on Wednesday. What he had to say about the bankster bailout made total sense. First, he said that the American taxpayer doesn't mind guaranteeing the deposits of bank customers. But, what the public never signed on for, he notes, is the taxpayer never agreed to underwrite the gambling losses that have been run up by the trading desks who were involved in flaky/dishonest derivatives speculations. Those losses, he figures, should go back to the bank shareholders, boards of directors and the bondholders who bought into the situation.
Stiglitz also says the "too big to fail" mantra isn't honest, either. You simply move the 'clean depositor' monies from the bad/speculative banks to the well-run (e.g. didn't speculate) banks and if the bank with the bad debt fails, oh well.
Makes perfect sense to me and I expect anyone else who looks at the problem with only fairness and even-handedness in mind would see it likewise. Which - I reckon - just about ensures that it won't be acted upon by the powers that be. They're so deeply in bed with the crooksters and fraudsters who want to pawn off their losses on working people that nothing seems likely to change. Remember that word? Change? (I sure know how to tell 'em, don't I?) --- Later today, we'll get another hearing on AIG's bailout. If bailing out banks that make crooked speculations didn't make sense, so too bailing out an insurance company which stepped into speculation doesn't make sense, either. Since you and I are owners of 80% of this POS I figure I can speak my mind on it. See you in the camps...
The head of the Congressional Joint Economic Committee is asking Ben Bernanke over at the Fed for details about the counterparty transactions involved as they relate to the bailout, but I figure most of that will come down to a classic case of obfuscation, since that's how much of this Second Depression is revealing itself.
If you look at yesterday's chart showing the near-perfect correlation between the decline of the NASDAQ Composite since 2000 and the decline of the Dow Industrials in the 1930's Depression, I think you'll see what I mean; obviously the system tried to protect itself with a war to sop up unemployed people just as the Civilian Conservation Corp sopped up excess manpower in the 1930's while the Housing Bubble filled the role of the Works Progress Administration by keeping housing exploding whi8le something like half a million of the nation's heads of households were busy out of the country. Know what that is? Formula for disaster -- and this patch of economic troubles we're now in will last until someone besides a wack job in East Texas and a Nobel Prize winning economist like Stiglitz figures it out and starts to call it like it is.
In the meantime, expect to see a lot of what I call pseudo-solutions (or 'straw dogs') to keep you thinking that the folks who promised change really have a plan - besides leave you with change. Some examples? Oh, sure, you betcha:
Ain't it the truth? Remind me not to get into too much of that truth stuff...
Well, as I said at the top of today's opening barrage: Joseph Stiglitz is one guy who 'gets it'. Lemme see, that's me, you, Stiglitz and the time monks which makes it five of us. It's a start anyway.
Productivity Sucking Latest from BLS on Q4 ('08) Productivity:
Remember how I've told you I think we're at consumer saturation on big ticket goods? Well, the report today says durable goods manufacturing walked off a cliff (-14.8%) in Q4 while disposable crap (e.g. nondurable goods) was up 7.4%. So you're not taken by surprise by any of this, right?
Markets I figure the market may rally as high as 7,148 before we head back down the flusher. But no rally till we get past the 100 point drop in the Dow coming at the open. --- Came across an interesting timing site youi might want to check out: http://www.fibwatch.com/ won't give you which direction things will go, but you should have that from your Elliott and other ,directional tools. Nope, this is just timing. The first two turn points today are 9:44 and 10:06 AM so if I were guessing, I would say down till 9:44, small 20-minute uptick, and then head down again...so let's see how that plays out... --- Speaking of software tools - I ordered a copy of InspireData from Inspiration software yesterday.... their "Inspiration" is a great mind mapping tool if you're not already aware of it - much less complex interface than FreeMind which is, admittedly cheaper. I've just been using Inspiration for years and too lazy to change, I guess...
My point? Oh, how about "You gotta have the tools" if you're gonna play seriously?
Good Choice While it may sound like I am a constant complainer about the Obama administration, I'm really not. When they do something good... I try to mention it. Like the choice of a real, genuine, been through 11 of them, Florida emergency manager to run FEMA. Craig Fugate has been critical of the Department of Homeland Security in the past and while he may not be welcomed by all bureaucrats, he's got something which was missing in the Buchco KatRita disaster: competence.
Nukes and Such While environmental groups are concerned about a shipment of recycled plutonium going from Cherbourg, France to Japan, there's a lot of other action on the nuclear front to ponder over your morning cuppa:
You know what THE under-covered story in the MSM is when it comes to nukes? "Evidence mounts of Syrian nuclear cover-up: US" Remember the Syrians had a purported reactor bombed by the Israelis in 2007. I only mention this because you might have read Isaiah 17 and have figured out what it might mean... in case you missed the 4,479 day war clock from the 2000 stock market highs that I explained yesterday. If we make it through all the other stuff like flu in November and then earth changes and global coastal...where's my coffee?
.--- snip and save section ---
Coping: Protecting the Rich Department I'm not saying that the 47,000 folks who have Swiss bank accounts and are having their bank info hidden from US authorities by the obliging Swiss are rich. I'm just saying that when the rest of us do fill out our IRS forms honestly, what do these folks have to hide?
Now, you're wondering, why would old George say something like that? How about "Because my blood pressure went skyward when I read that "UBS refuses to give U.S. names, replaces chairman" as the Swiss try to keep secrets secret. --- Although I lived for a couple of years in a tax haven (Cayman Islands) and was employed there, it's only recently that I've started to wonder about the righteousness of tax-free countries like the ABC Islands, Turks, Caymans, Channel Islands, and of course, our friends the Swiss.
The view from the government of most tax havens is that if "tax avoidance is not a crime" in their country, then they could not be compelled to report the financial information of a person using their tax-free financial systems. The US made some progress in what I recall as the Scotia Bank decision in the mid 1980's. The US was able to get some information about money from drug dealings because that was a crime in certain tax havens, as well as in other countries. And (going from memory here) the US held that if a foreign bank had even one bank in a country with which the US had a tax treaty (such as Canada) then the bank could be compelled to disclose.
However, the rate of disclosure makes snails look like race horses. Reason? All the narco money floating about which needs to be washed/sanitized in order to get 'invested' into legit businesses.
Funny how the US has been willing to invade and level small Mideast countries on the pretext of WMD's while at the same time officials who benefit from slightly scrubbed narco-dollars change the game slowly enough such that new workarounds can be found. Oh, and they don't seem to ever get the regulatory reach sorted out well enough to go after all those virtual entities set up by the major banks to handle their derivatives trading offshore where essentially all taxes are dodged.
Seems to me that while the banksters and their minions like Gordon Brown may be trying to spin the current crisis into a call for 'economic unity' (which I read as 'global currency' of some stripe) shouldn't we first do something a lot more simple? I Mean like disclose or force reporting of all assets and transaction of all US citizens including stock options paid offshore and that kind of thing?
Why is it that we little folks keep getting shat upon while the SIV-drivers own the world? Seems to me that we've got to have either a "tax everyone no matter what" approach, or "tax no one". Anything different isn't just a violation of the fundamental American tenet of 'equal protection', it sets up incentives for crooked people to act anti-social.
And yes, when I was living in the tax haven, I used the Miami office of Deloitte to do prepare my filings and I reported every dime. Which is more than I can say for many of the US S&L officials who I saw bring money out of the US and deposit offshore.
"We've been through this before" sidebar: In case you don't remember the 1980's S&L debacle, here's how it worked. A US investor would buy an apartment complex for say $100,000. They'd play golf with an S&L official and the first thing you knew, the property was appraised at $2,000,000 and the investor would take the loan proceeds as cash and move them offshore. Legal so far, since the proceeds of a loan aren't taxable, right? Then they would declare bankruptcy in the US and conveniently forget to mention the pile of money offshore which was nominally held by local offshore 'nominees'. They'd then declare BK in the US, give up their US lifestyle for a while, live in the Cayman Islands, Belize, Turks, or wherever, and do a lot of traveling on the interest run up in the offshore account. The S&L's were left holding the bag(s). Except for the Zero Halliburton attaché's full of money traveling out of country.
The modern analog here is the SIV accounts and the offshore incentive compensation payments. All of which boils down to why we should tax consumption not income. That way the frugal among us (and the poor who can't afford much) would pay little or no tax while the fat cats who live the phat lifestyle would have to pay-as-they-go rather than the current mess.
Then we could have a tax policy that makes sense: Tax on solar panels? Zero. Tax on $10 cigars? $10. Tax on speedboats? 30%. Tax on sailboats? 10%. You see? That's how we can really fix America. Tax those things which are wasteful/unnecessary or just outright luxuries. Give tax breaks to products which consuming more of would improve America. Like high mileage cars, unprocessed foods, and all the rest.
Too simple? Well, it does have its own string of complexities. But don't look for it to happen any time soon because why? because there's no money in it for lobbyists and lawmakers, LOL.
But, I suppose you already knew all this. Besides, the subtlety of the problem is that the sociopolitical system probably couldn't handle all the ITS and tax professionals who would be laid off by such a simple approach to taxing...like we need any new unemployment about now?
Reader's Writes: Inbox Snips Some good ones this morning:
More? Oh yeah... lots more...
Got an interesting response to a part of this week's report where I wrote...
Is this a great country, or what? But not a happy one, as evidenced in this email:
As last but not least, this one with a link to a radio documentary worth hearing:
Busy day - so see you in the morning.... Wednesday March 4, 2009 Another Helping of Economic Stew Look, I'm not trying to start anything here, but let me ask this: Since the public (e.g. we taxpayers) now own something like 80% of AIG, doesn't this mean AIG will have to stop offering insurance to churches? I mean think about it: If the public owns AIG (mostly) wouldn't their providing insurance to churches violate the principal of separation of church and state? This is the kind of unintended consequences that are boiling around the bailout/free money festival for corporate bad managers/bad decision-makers. --- Then there's debate over what the longer-term impacts of the administration's tax and spend will be good or bad: "White House Knocks Jim Cramer For Calling Obama Budget "Greatest Wealth Destruction By a President"
An d, as if Cramer's picks aren't good enough, we note that "Obama analyzes stock market" and concludes it's a good long-term buy." But wait, is it?
One criticism of the Dow Jones Industrial Average is that its membership has been shaping-shifting over the years to avoid ugly economic reality summed up by Wikipedia this way (with my emphasis added):
There's a chart you need to see...but before looking at it, set down your coffee cup and take a deep breath because this chart - which I shared with Peoplenomics subscribers last weekend - ought to scare the hell out of you: It shows how the 'hot money' in the NASDAQ Composite since the All-Time High of 2000 has been almost a dead-to-nuts replay of the collapse of the 1930's.
This is what happens when you line up the Composite from March 2000 with the Dow from its September high in 1929. NOT something that anyone has probably bothered pointing out to you, is it?
I'm sharing this with you because there's a small (but statistically significant) chance that since the Dow, S&P, and NASDAQ set their (purchasing power parity) all-time-highs in 2000, we may all be living out the running of the 4,479 day clock that ran from the Dow weekly high close (9/3/1920) to the US entry into World War II (December 1941).
As long as I'm ruining your morning, here are the specific target dates:
I don't often share the proprietary content of Peoplenomics, but consider this a humanitarian gesture on my part. Another implication: We may not get such a huge bounce from these kind of stock levels, at least if the NASDAQ Composite and Dow parallel continues strong going forward. Stuff to ponder, is it not? --- Just as the Radio Trust was running into problems in the last Depression, so too, automakers are running into problems in this one. GM is saying that up to 300,000 jobs could be lost in Europe if it goes bankrupt. Subtle pitch for aid...
But while the aid requests are flooding into Washington, seems there's growing opposition to higher taxes to pay for the aid. In fact 'fierce opposition' as one headline puts it.
So what's the administration planning to fill the gap? For one thing, go after international tax cheats. you know, the people who hide their money offshore.
But while the revenue side is contentious, it's not just the automakers who've got their hands out fxor 'More!". Ben Bernanke says the $700-billion committed to help bankers (at the fed window) may not be enough - and more could be required. Excuse me, Mr. Chairman? "May" is probably not the word. How about "will likely" and give us all a little helping of 'transparency' for a change? --- You'll have to forgive me if I am a little worried when I read headlines like Britains Gordon "Brown to urge US to 'seize moment' to help world solve financial crisis." I don't care for One Worlders using words like 'seize' anything in these times, although once the crisis gets deep enough, certainly the call for one currency will almost certain come. As long as it is gold it might not be such a bad idea, but I doubt it would be anything so difficult to manipulate. how about a digidollar world? --- The collapse of the financial world became a sure thing as soon as there wasn't another bubble to blow up: Since we've now exhausted the Housing Bubble and the War Bubble has about run its course, as I see it, we might as all sit back and watch the unintended consequences of this Greater Depression unfold over the next year or two desipite protestations that it's not really a Depression.
One reason why - argue those who disagree with my assessment - is that the unemployment rate is not as high as the Depression-era. But wait! have you ever looked at how those numbers are collected? Telephone incidental surveys? (Number disconnected? Let's find someone else to call...) Cutting people out of the numbers when their jobless benefits expire? More Friday when new unemployment figures come out.
But, meantime, bankruptcies are piling up all over the place. Even Blockbuster has hired a fir to consider a possible bankruptcy filing. Will Reader's Digest restructure, too? And among consumers bankruptcy filings are up nearly 30-percent from high year-ago figures. --- Lots to stew over, isn't it?
New FCC Boss President Obama has nominated Julis Genachowski to head up the FCC. I did a search of the FCC database this morning, and don't find him as holding a ham radio ticket, which has me wondering if this means we will see the broadband over power line monster (BPL) raised from he dead?
Microsoft Search Project Seems that the Microsofties are working on a new search tool called Kumo. I tried www.kumo.com and got an "Access Denied" error, so maybe not ready for prime time? Maybe this makes me one of the world's first 'kumo wrestlers'?
Markets I see the Dow futures are up something like 100 points. But, would I believe the bottom is in? While it may have gotten down to the high end of Robin Landry's target zone, I'm not sure. for one thing, the advance/decline line sucked on Tuesday. For another, a new ADP jobs report out this morning says the private sector cut almost 700,000 jobs in February. That means we could see the unemployment report Friday hit 8%...or maybe a tad more, depending on how much of this is captured in the government's number and whether the workforce number is jiggered up or down.
My dart for Friday says 8.1% unemployment...just a dart for now.
So yeah, the futures may point up this morning. But they pointed up at the open on Wednesday and the Dow still lost another 37-points. Good day-trading climate, if you like playing with sharp knives, though...
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Coping: Farming While We Can... A reader sent in a very interesting summary of the attempts to crush small farmers.
The one most worrisome to me is HR 814, which would make the National Animal Identification Act federal law. (Don't get confused with the previous 2007-2008 HR 814 which had to do with child-proofing of gasoline containers, we're talking the 2009 numbered bill.)
As I have told you before, this is how bad laws/excess intrusion comes along: A bad idea is introduced as 'voluntary' and as soon as enough fish swallow the bait, the program suddenly becomes mandatory. --- Had this discussion with one of my neighbors last night about the NAIS..."It was designed to allow the government to go back and see if cattle were eating meat - which can set off the various spongiform diseases.." (Like CJD).
As I see it, though, government is going about solving this problem exactly the wrong way. If you want to keep meat products out of cattle feed, don'tcha think the place to monitor would be the handful of feed producers? Why pick on the farmer. I mean except to pimp the RFID business and create make-work jobs in true Soviet fashion?
The answer, to that one, my friend is simple: Government wants control of the food supply. On the pretext of 'protecting us' from terrorism and whatever, but that's Nanny State thinking for you.
See, if government controls food (and money) then they really do have the people that ceded limited power to them by the proverbial nuts. And since we can't even recall them when they turn a deaf ear to their constituents once elected and the lobbyists get hold of them... --- You may not like this, but the fastest growing industry int he whole of the Western world over the past 100 years has been what? Government. (including various services and supporting groups such much of the 'financial services industry' - which I view as partners in fraud. --- If you don't want to connect the dotted lines formed by disappearing ammunition/ammunition shortages, a revival of gun control/confiscation efforts, massive increases in food supply control on disease or terrorism fears, and the list goes on and on...that's fine. I don't expect you to buy that the reason gasoline prices are down is to drive ethanol producers out of the business...that's really a deflationary coincidence. Or, is it? --- There used to be a joke that government would tax air if it could - and with some of the new environmental laws on the horizon, that 'joke' is on the verge of becoming real, too. No longer even remotely funny, is it? --- Not go go into a long rant here, but I'm a 100% Constitution supporting American. But I'm also well enough versed in history to see that much of what's going on at the federal level was never intended by the Founders to happen. In the past, when the federal/central government has attempted to overstep the (supposedly limited) power ceded it by the various states, you get things like the Civil War.
Since the central government hasn't owned up to the real cause of the current economic depression (unsound money) as being the cause, we will likely see several years of thrashing about until things get worked out. But, in the meantime, those of us who connect dots will worry for the future of our country and countrymen. Especially those who have found more than half their life savings gone in the stock market's long unwinding. --- There is some genuinely good news out there, however. I was talking to a client in the Ohio area yesterday and he reports that land prices are now beginning to collapse. This is something I have heard elsewhere too. My client's looking at a 75-acre piece of land which is part pasture, part wooded in a neighboring state to Ohio...Oh, and the price? Just $40,000!
I'm also hearing much the same thing out of western Oklahoma. So around the edges, farm land is starting to collapse.
If you're
a Peoplenomics subscriber, this week's report will likely pick
up with another chapter of my work-in-progress ebook: "13-Acres and the Internet" - an
update of the classic Depression-era Five Acres and Independence: A Handbook for Small Farm Management
America is in a position where we will all likely soon have an opportunity to stand up and be counted as we transition to a more sustainable lifestyle- one that hopefully will give us a chance for another couple of hundred years as a nation. It's my hope that enough of us can embrace the change to ameliorate those other forces which could rip the country apart. --- As I see it, though, the answer is in reinventing the pioneer spirit - fostering a sort of techno-pioneer spirit...and just trying to solve everything with more and bigger everything, especially more and bigger government. The people who made the country great were the inventors, the farmers, the manufacturing pioneers. Best I can figure, government's abdicating it's Constitution responsibilities had a lot to do with getting us into this mess...helped along by Bill Clinton's repeal of the Glass-Steagall Act that actually encouraged the bad behavior of financial institutions that we're paying the price for 10-years later.
If you want a really worthwhile future for a young family and a big adventure? Go techno-pioneering and build that new kind of lifestyle which is close to the earth and uses the absolute best of high tech. That makes a lot of sense to me, even if most of what else is going on in the world does not. --- Either that, or buy a sailboat....
Living Aboard, Redux A recent Peoplenomics report covered the good ( and bad...there's a fair bit of it ) about living aboard a sailboat these days - based on my living board for 10-years on my boat in the Pacific Northwest, San Francisco, and San Diego.... Well, a reader (who didn't read the report, BTW) sends this:
Answers (since he didn't get the Peoplenomics report: First, when repropping, there are essentially three approaches to propellers: The standard fixed prop which gets great 'bite' but which will cost a half knot (sometimes more) in light air because of the additional front resistance posed by fixed blades. Three-bladed props give even better 'bite' but again, more frontal area.
The second prop class is folding props. When powering ahead, first centrifugal force and then water pressure keeps the folding prop unfolded. However, when backing (reversing) the water pressure coming from the 'wrong direction' will want to 'fold' the prop back. So, when you want to effectively back-down (boater-talk for go backwards), a short burst of power to flip the prop out and then remember as you go faster in reverse, there's more folding pressure. Makers like Gori dominate this category.
The third prop is a 'best of both worlds' approach called a 'feathering' prop. It uses what you can think of as 'pitch stops' to allow passing water to automatically feather the prop. When power is applied, water pressure gives the best pitch whether you're going ahead or backing. Makers like Max-Prop dominate this category - and since it gives the best performance, but is a more complicated bit of machining inside the prop, it's usually the 'high end' of sailing props. The category leader has been Max-Prop.
On my boat (the "Magic Elf") I had a Gori folding prop and was quite happy with it. The amount of frontal area was relatively small but that wasn't why I liked is: If you're planning to do any amount of sailing where there are nets, crab pots, lobster pot, shrimp pots, and such in the water, the folding prop's advantage over a Max-Prop is that because its blades fold completely back, there's a chance you will be able to run over a net/shrimp/crab/lobstering line and not foul it on your prop.
It doesn't give you a fool-proof solution, however. I remember being up in the Strait of Juan de Fuca one time and getting a gill net stuck in the space between the big spade type rudder (which was almost 6' tall on it's own) and the 6' deep fin keel on the boat. To the angry shotgun reports of the fishermen, I carefully brought the boat downwind and then used an extendable boat hook which could get out about 10-feet to push the offending line down, under the rudder, and get under way again. On the other hand, our arrival in San Diego after an overnight sail from L.A. ran over several pots that were set near the entrance to San Diego harbor - and while motoring, throwing the engine into reverse then killing it, prevented us from snagging.
Of course, going through the Locks in Seattle, there are many times I wish I had a Max-Prop. Decisions like these are the kind of thing that serious sailors debate for hours, days, or weeks on end, depending on how much rum is available and what real work tries to interfere. --- The 'best' way to ground a sailboat for radio purposes is another area fraught with volumes of discussion. But, since in one of my incarnations, I wrote a draft of the SG-230 SmarTuner manual, I can give you a pretty good description of the problem and solutions.
First is the antenna you're planning to use: Without a doubt ,THE best antenna is to use the boat's backstay. This is the wire cable that attaches from the top of the main mast (sloop rig) and the back of the sailboat. Be especially careful is you are using a 'split backstay' - which looks like an upside down "Y" with the single line going to the top of the mast, a 'y' and the two others attaching to the back corners of the boat. You'll often find the 'y' to be a high resistance point, so a jumper around it with #4 copper is a good idea.
Now, as to the grounding itself, theories are common. One theory which I've seen work well is using the brass or bronze through-hulls. These are often connected together for lightning and corrosion/electrolysis reasons, but some folks insist on making them and maybe a fancy external sponge bronze radio grounding plate. Personally, I've never been a fan of this approach for several reasons. The first is that the connection from the radio to the ground must be extremely low inductance, otherwise, the antenna will look 'larger' than the ground system and the result will be getting RF 'bites' if you touch the radio while transmitting. This is something most hams don't remember: If you get RF 'bites' the ground is acting as the antenna...so more work is needed.
A low inductance ground might be 10-20 bundled #14 stranded wires from the radio ground to the closest through-hull. In effect, what's you're doing with this approach is connecting the radio ground to seawater and using a cobbled up version of Litz wire to do it.
The BEST approach, as long as you've got the boat out of the water, is to use the whole hull as a giant capacitor to couple your ground energy into the surrounding seawater. You do this by taking 3-4" wide copper strap and running it down the whole length of the boat starting about 8" down from the waterline. You can go all the way up the side of the bilge, if you want, as there's no such thing as too big a radio ground. Secure the strapping in place, otherwise you will end up with a $200 copper snake in the bilge - and tie it all together as close to the radio as you can.
As long as you're going to get all twisted up and have ripped the inside of your boat apart, don't forget to tie your ground into everything else that's metal that you can get to. Particularly good are black iron tanks for fuel and stainless steel (if you have them) tanks for water. Main thing, though, is keep the ground straps as close to the hull as you can since you are building a big 'capacitor'.
If you picture yourself at the top of your mast and looking down at what's grounded in your boat, if 3/4's of it would hit copper, then you probably will have a great radio signal.
Or, you could do what I did: Simply put in a good mobile ham radio antenna off the stern like line stanchions and drag a couple of zincs straight down in the water connecting the ground wire/zincs with low inductance wiring to the antenna common point. Granted, the radiated efficiency of an 8-12 foot mobile antenna will not be as great as a full up backstay installation, but I figured putting enough copper in for a ground would break me financially at the time I was doing the installation and when I could afford the copper, I couldn't afford the time. Still, my cobbled up installation was able to talk up Europe on the higher frequency ham bands with some regularity from San Diego or San Francisco.
Which reminds me to mention a couple of great resources. I can't say enough good things about Gordon West's radio school. If you're thinking about a ham radio ticket, and self-study is not your bag, Gordo's your guy. He gives classes around the country and has probably put more SSB radio users on HF than you'd ever be able to count. He's just up the road from the Baja Ha-ha starting point (San Diego) which starts October 25th this year.
The other thing to be aware of is the Maritime Services Net which operates on 14.300 MHz upper sideband. The group of hams on here is a treat and they provide a great way for folks out in the middle of the ocean to keep in touch, relaying news, weather conditions, passing traffic (messages) to relatives, and what have you. Fine bunch of folks and I've had the pleasure of being at both ends of that; afloat and ashore. Great folks...yessir.
Don't mean to get into a long-winded discussion of sailboat grounds and pro choices, but like anything else worth doing, there's a certain level of complexity to undertaking a liveaboard life. Not to mention expense. Remember, if something says "marine" on it, figure it will be 10-100% more costly than something which doesn't have those words on it.
The only shame of it all is that as the economy seems intent on collapsing down to sustainable levels, some folks may finally get the time to purse that sailing dream, but unfortunately, they may not be as able to afford it now. Isn't that how everything seems to work in Life? I have the money, but no time, or I have the time, but no money. Dman tricky planet, this one. If the Universe has put me here to figure out this conundrum, I'm still hunting for the answer and expect you are, too. --- Send snip and save items to george@ure.net --- end snip and save section ---
Tuesday, March 3, 2009 Numeracy Shortage: No, It's Really WORSE! Maybe you're not awake enough yet to remember the little word "numeracy". What it refers to is basic skill with arithmetic operations and if you've got it, the assumption is that you can cope with number concepts generally including addition, subtraction, simple multiplication, simple division, simple weights and measures, count a little money, and be able to tell time.
You can test yourself easy enough: If you're a male, you'd maybe ask basic arithmetic questions in life like:
The female version of the quiz might be:
So that's how numeracy works. Humans are symbol processing crazies who assign numeric values to the important aspects of selves and mates, and then either arrive at the wrong conclusions, or - in the event they reach the right conclusions - they ignore the numbers anyway...
But here's my point: At no place in the normal conduct of average Americans is there any thought to how the underlying numbers are being pushed around. And they are...it's just we don't talk about it much.
For example, in the "take 3-blondes and subtract 1" question, the typical male usually doesn't question the persistence of hair color. Trust me....a woman's hair color can change over time. Not saying that's bad (God forbid!)...just mentioning that's an example of how the underlying assumed fixed values aren't really so fixed over time after all.
My point here is what?
When man meets woman (or whatever) or woman meets man (or whatever else) the numeric values relate to assumed underlying fixed amounts. Only the most geek-like of engineers (either sex) would point out that even things like time aren't really fixed which is why an extra second and a half gets added here and there by standards agencies.
The same holds true for money. (It's being constantly watered down.)
So when you hear mainstream media going on and babbling around how the stock market has hit the lowest point in 12-years, you can take this as undisputed evidence that the MainStreamMedia (MSM) is just as number-dumb as hormone-driven kids in their early twenties. They universally fail to admit that inflation is almost always eating away at the purchasing power parity of money over time.
Suppose with me here that you had as many dollars as the Dow in 1997: $6,763.29. What would this be equivalent to here in 2009? The Dow would need to be at $9,203.13 according to the Minneapolis Fed's inflation calculator - my favorite (although most dangerous) of tools to see the time value of money clearly.
There's a little gas station/convenience store up in Noonday, Texas where they have really good steaks. (Is this a great concept, or what?). I just paid $9.99 a pound for handsome rib-eyes. What would I have paid for the same grade of meat in 1997? Oh, about $7.35...
So, on a weekly closing basis, correcting for inflation (the watering down of your money by printing more that is justified) we might be looking at September of 1995...which would be about 14-years ago, not the 12-years making the rounds. I haven't run all the dates - not enough coffee for that - but you're welcome to have at it...
I know, I know, that's the People's Economist being picky again...and what's two years, anyway?
Two answers come to mind: Two years is more than enough time for your 401(k) to lose more than half its value and if you still don't think two years is a long time, hold your breath that long and get back to me.
Markets Futures are showing a 50-100 point pop in the Dow this morning. Question is will it hold? Car sales and truck sales this afternoon might make the autos fun to watch... --- You saw the report from the Census folks on Monday that residential construction was down 27.4% this January compared with year-ago levels?
Loan Mercy? Sort of... The headline that "Citi to allow jobless to pay less on loans" seems like an interesting win-win. The consumer wins if they are 60-days behind on payments...but the real payoff is for the bank: It keeps them from having to start foreclosure activity on even more homes, which would push home prices down even farther and faster....
Making Off With... Bernie "Madoff's wife Ruth says her $62 million 'unrelated' to fraud" allegations against her hubby. So...OK...where did that $62-mill worth of stuff come from, I wonder?
Cure Worse Than the Disease "U.S. rescue efforts may risk double-dip recession" says Reuters.
What???!!! You mean massive government spending and higher taxes might slow economic growth? Why, who'da thought?
Copying Cuba Department We notice that the Obama administration is pushing neighborhood health care centers. It's almost like the Obama folks have seen the Michael Moore movie ("Sicko") and noticed that Cuba's system of health care seems to work out pretty well. --- Wonder if Cuba would be a good predictive model for the Obama administration? In which case, might the report that "Fidel's follower's ousted in Cuba cabinet shakeup" might presage some ex-Clintonistas leaving O's inner circle?
Horse Trading Here's an interesting deal: "Obama ready to drop shield plans for Russians help on Iran" says a report out of the Russian news and information service Novosti. Wonder what's behind curtail number three? But wait! Kremlin says there was no horse trade in the Obama letter... oh, this is sooo frustrating.
Pain in Ukraine The possibility of civil strife looms in Ukraine as its financial situation continues to deteriorate. Money's not available for withdrawal at many banks... --- Say, has it occurred to anyone but me that a global financial crisis and this global "New Deal" talk could be leading up to a worldwide electronic currency?
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Coping: Born-Again Farmers When Elaine and I blew out of six-figure land and decided to 'settle down' here in East Texas in late 2002, most of my acquaintances thought I was a survivalist nutjob. I've been polite enough not to ask them how their investments are doing of late, but every so often I will send along little snips with a note like "FYI" and an article link in the email.
A couple of recent examples which you can email around to your friends include legendary commodity trader "Jim Rogers Buys Land, Starts Farming..." or the highlighted quote in the article "Faber says Financial Industry to Contract Much More" which includes this advice: "The best bet for investors may be to buy a farm and escape from the cities, as a prolonged recession could lead to war, as the Great Depression did, said the Swiss national, who now lives in Thailand. "
Say, you don't suppose sending out emails like this once in a while would explain my lack of friends, do you?
Be Careful What You Wish For Department "Global Warming Protect Frozen Out by Massive Snowfall" in the Northeast Monday. --- Another sign of how the green cause is being spun for political purposes: Logan International in Boston may add a $2 'carbon tax' to parking.
This is a fine example of how political leadership at almost every level is trying to 'manage' the kind of massive, planetary transformation that will be required to get resource consumption back somewhere near sustainable levels.
The basic conundrum in the situation is that as humans start living more within the planet's resource limits, they will be consuming less. For reasons I can't fathom, the political types figure if they just add a tax (or dozens) and set up a carbon-trading system, that it will somehow solve all problems. In other words, a lifestyle change is presumed to be something that can be purchased with just the right tax here and the right carbon exchange there....
No one seems to be willing to admit that maybe...just maybe...more fundamental reforms are necessary. Like sound money so that a penny saved becomes really a penny earned, and such that a person doesn't have to enter into debt indenture in order to live a comfortable minimalist lifestyle.
Oh well, don't get me started...you probably don't want to hear my rant on this again. But please give it some thought. If the whole system of interest and leverages (and constantly devalued money) we replaced or modified at its core, then could we get back to a condition where a couple didn't have to work 80-hours a week to raise a family?
And the Next War Is... Reader sends this interesting idea:
Given what's ahead in global food supplies, that kind of thing is a real possibility. Don't necessarily think it will be the flashpoint, since the Mideast is also a tinderbox looking for a spark, but in terms of making sense, yeah, can't be discounted completely. Especially with India's western conflict with Pakistan over Kashmir and the recent attacks in Mumbai...
Don't expect this will be as popular as an office betting pool as say baseball, but worth a ponder especially if China starts to agitate more and depending on how flobal weather pattern changes impact once fertile growing regions..
Reader's Writes Good questions here:
Let me address your questions in order: First, there are two major approaches to investing. One is called stock. This is where a company's ownership is divided up into "shares". Let's say I turn my shop into a small metal fabrication operation. Hire some local folks to make something. If I needed to raise money to expand my shop, I could incorporate (e.g. form a stock company) and then sell people shares in it; subject to books full of rules. Let's call this company "Georgeco" for the fun of it.
If enough people own shares, they can trade shares in my company. If someone things "That George guy is a genius, and everything he touches turns to gold..." they might pay a handsome fee for shares of Georgeco. On the other hand, someone else might say "You know, too many references to shots of el Don tequila too early in the day...think I will sell my shares of Georgeco...
So that's how stock trading works: Underlying company, shares - which are just certificates of fractional ownership and that's all there is to it.
Options on stock work like this: Say Georgeco is trading at $10 and you decide to write a covered call option on it. What you might offer to someone buying the option on your stock could be something like this: "You buy a right to purchase my Georgeco stock in 9-months for $10 a share and I will sell that right to you for $2." That right to buy at a future price - based on the stock going up is a "call option". You do the deal.
Now, we go forward 9 months to the expiration date of this Georgeco option you have written. To your horror, let's say Georgeco has gone to $20. Since you got $2 from the selling of your option, when you deliver the promised stock Georgeco will have returned you 20%. The person who bought that option from you has paid $2 for the option (and $10 for the underlying shares) so when he 'delivers' the stock to a $20 buyer, he makes $8.
Since you wrote the option, you have made 20%. But since the option returned $8 on a $2 investment, the option player made a 400% return. (See why I play options?)
But now let's see what happens if Georgeco doesn't go anywhere in those 9 months. You would still have your 20% gain from selling the option. But, come delivery day, the option owner doesn't have anyone to sell Georgeco shares to for $12, since its street price is only $10. His option expires worthless. You are not really an investor until you have seen $5,000 disappear in an afternoon this way. Hurts like hell, but under the right conditions, a tax-loss carryforward against future gains (used to be a $3,000 per year as a tax loss c/f limit) means government will acknowledge that loss as a trading expense...but you're never really made whole since there is inflation to be considered and so forth. Buy a beer for a CPA sometime for more on this. --- The flip side of a call option (bet something will go up) is a bet that something will go down. This is a "put" option. Works just the other way around like this: You sell a $10 put option for $2. Let's say Georgeco stock falls to $5 a share by option expiration day.
You paid $10 and got $2 from your option sale, so your cost basis is $8.
The put option player paid $2 for the option, but now when the stock is delivered he gets the difference between the $8 which you paid and the $5 street price. --- Now, let's talk about commodities. These are physical markets. Remember that in stock, you're buying a piece of ownership. In commodities, you're buying the underlying physical stuff. In other words, come option settlement day, if you have an option on wheat, for example, you could get however much is in a wheat contract (5,000 bushels) delivered to your home at the agreed upon price.
The reason that options on commodities exist is not to give speculators (like me) a chance to make money on the future price of gold or oil. It's so that companies can lock in their prices well into the future, thus eliminating some operating risk for their company.
If you were the head of operations for Hershey's Chocolates, for example, wouldn't you like to lock in a certain cost at a particular date in the future for the cocoa and sugar used in your product? Of course! But since commodities are an open market, if I discover as a trader that suddenly another health benefit of chocolate is being confirmed in a lab somewhere, I might buy a call option on cocoa or sugar...and as demand increases, my commodity call option would go up in value.
Or not.
See what happened to the airlines recently? The bought a bunch of fuel options when the price of oil was up in the $140 area in early/mid 2008 and what happened? The price of oil collapsed and they were out all that optioned fuel. Options can be your best friend, or your worst enemy, depending on how good you are.
A
great starting place for learning is to study Jim Rogers' book:
Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market
After all that lead-in, the answer to your question about what is a gold commodity put option should translate to something like "George is considering a bet that gold will come down in the short term, so he may buy a put (going down makes money) option on physical gold."
Next thing is how to play in commodities: Call a broker. I use JB Slear at www.fortwealth.com. Takes about $2,000 (may have gone up) to open a commodity account.
As to playing with smaller starting numbers? You might want to do this via stocks. So, if you thought the price of gold was going to come down, you could open a stock trading account with an online broker, and then buy put (going down makes money if the stock goes down far enough) option on a gold mining company.
Then, if you sense gold is going up, you'd turn around and 'go long' - meaning you'd bet that the stock or physical/commodity) price was going up. To do this you might buy a call option, or if you wanted, you could buy the stock of a gold mining company, or if you have really deep pockets you could buy a commodity contract for gold. Big deep pocket to play that one, though. 100 ounces in a commodity contract for gold...
I should mention that there are so-called "mini" contracts on gold, but if you expected to take physical delivery of the gold? Might want to read the fine print which last I heard required three mini contracts to take delivery of physical...so mini's are just a paper-trade vehicle in certain aspects. Since a single mini contract won't be delivered, these are almost like a stock ETF in gold.
The short answer is yes, $250-$500 is enough to start trading in something... In both stocks and commodities, if you wish to use the higher leverage of options, you need to open a margin account. Also, despite what anyone may tell you, do not even think about using direct margin (buying of a commodity or a stock) on borrowed money. The reason options are 'safer' is that while you can (and probably will) loose all your money in this trade, or that, you can't lose your home. On margin, however, you can (and might) lose more than the initial money put into the trade. Not something to be taken on lightly.
On your last question: I have not made a decision on whether I would play a possible drop in gold. I may just wait to see if that happens and then go long. Since I don't offer investment advice, consider beginning your investment adventure using a full-service broker. Full service guys charge more, but they are often worth it if you're a novice.
If you do open an account with a full service broker, you might be tempted to open a discount online account at the same time. This strategy called 'parallel trading' can lower your cost basis by purchasing some shares at the full-service price and another batch at the discount price. Frowned on by brokers, of course, so if you do decided to 'shadow' the full-service broker, do yourself a favor and keep top yourself about it. If you get lucky and find a full-service guy who actually makes you money? I don't have a problem giving doing all the trades with the guy who got the right moves. Matter of personal choice and ethics...
Keeping Up Appearances. Cliff - the chief time monk from www.halfpasthuman.com - will be on Jeff Rense's show tonight. I'll be on tomorrow night discussing Markets in Limbo ("How low can you go?") --- Send snip and save items to george@ure.net --- end snip and save section ---
Monday March 2, 2009 Bye-Bye 7,000 and Larger Perils You know what the problem with being around the 'rickety time machine' is? Knowing what happens before it gets here. Lemme give you a couple of examples. I told you last December that based on a combination of linguistics and Robin Landry's then 'best count' that I expected the market to decline like crazy and it would then put I expected there to be an intermediate bottom between 4,600 on the low side and 6,800 on the high side, before we get a meaningful/tradable rally back to the 9,100-10,300 range. Well, guess what we're in the middle of? Making that bottom.
I also mentioned to you, first in September 2008, and elsewhere since, that we would likely be seeing 'strange disappearances' popping up as 2009 started up - and that these would be of increasing numbers as the year progressed. Now, as you may have noticed, we have two NFL players missing at sea off Florida, which is - if I'm reading the linguistics right - only the very leading edge of our 'disappearances' meme.
So with enough 'hits' like these two recent events, the first ongoing as soon as the markets open this morning, you'll have to forgive me if I take a little different view of day-to-day occurrences; mainly because many of them have already been sort of 'pre-experienced' by reading the ALTA reports out of www.halfpasthuman.com. No, we're not at the level of people sleeping with guns at the ready as the 'disappearances grow' and no, the summer of hell/squatter showdowns aren't here yet, but give it time.
Want in on a little something the time monks are willing to share publicly? OK, try this one on --- but remember, this is a probability only and may or may not happen as expected...so think in terms of it being a possibility only for now...
Ask yourself what would happen if a large financial entity - and it could be a private mint, an ETF, or something like that - was discovered in the next, oh, two or three weeks - to be holding a lot of counterfeit gold that was apparently made in China? Suppose further that the discovery happened during some kind of official audit process and that as word spread, it was discovered that not only were gold bars involved, but perhaps gold coins of recent vintage and maybe some involvement of silver as well. How would that work out?
Curiously, as I've been penciling it out over the weekend, it might initially send people scurrying to US Treasuries and it would drop the price of gold perhaps as low as $650-$700 before launching to $1,900 after the shortfall of real gold comes into focus...which is what Robin Landry's charts infer. It would also keep a lid on interest rates since Treasuries would be seen as an ideal safe haven. With all those treasury auctions to fund the bailout/printout festival, the flight of hedge managers from recently acquired metals would certainly keep rates low and these, in turn, could be seen as the reason for some confidence in financial markets returning until July 18th, or thereabout.
Of course, this is all only a possibility (although I find myself now wondering about Hillary's recent trip to China...was she there to warn them what our plans were and not to freak out?). Did I mention that a fraud discover in gold would do marvels for the US dollar's value in world markets? It would be a one-size solves all problems kind of solution - sort of like a mini War on Terror...a war on gold. Oh, and the leading edge of it seems to be showing in a Chinese counterfeiting story in Coin World, too...
We, we should know soon enough as this event is maybe three weeks (or longer) out - around the equinox - which is very close to the Martin Armstrong turn date...
So would a wild-eyed East Texas nutjob consider buying some gold commodity put options, which he'd roll into calls on a short-term spike/panic low and then ride gold toward $1,900? Who me? --- Ah, but this is all highly - and I can't emphasize this too much - highly speculative stuff. Until it happens, of course. ---- So, in the meantime, folks with more traditional (backwards looking) news sources will have to be content with the usual headlines that might proceed a crash...which as explained to Peoplenomics readers on Sunday, is still running a damn near perfect fit with events from through 1941...and to help you (if you don't have the $40 to subscribe to Peoplenomics) line this Friday up with about August 22, 1928 and you'll be in the same ballpark.
I've been writing this stuff since before 1997...explains for anyone who wants to listen (or, more correctly, read all the archived articles here) that yes, this really is a Second/Greater Depression really is here.
While you're welcome to be skeptical of my work - I'm more a cyclical economics fan; something horribly out of vogue among formula-slinging b-schools by and large - you may have a somewhat tougher time dismissing headlines like "Brown woos Obama on global deal" which begins with (my emphasis added):
If you've got an unlimited amount of time, you might want to start watching for increased occurrences of "new deal" references in coming months.
Of course, the modern-day New Deals may not work. Take, for example please, the case of AIG which has just posted a record loss and it's 79% owned by Uncle Sam.
I don't know about you, but in George Land, I'd call spending another (up to) $30-billion on AIG something like "pissing money down a rat hole" but that would be disrespectful. So, instead, I'll just offer a benign comment like "My, my, how astute of the fellows in government, don'tcha think?" We'll keep the wink-wink, nudge-nudge between us so we can still travel and not get on some list. --- You saw FDIC is upping its charges for insurance to banks? Good time are just ahead, my foot.
Buffett's Letter Far more important than this morning's rather boring personal income and expenditure figures, which we'll get to in a moment, is Warren Buffett's Annual Shareholder Letter which you can read in its entirety here. If you have never treated yourself to the common-sense and good humor of Buffett's letters, you should. Either coffee or a more adult beverage is fine because he's like the dream professor of economics that you never got in college. Some examples for this year's letter:
I do have one question for the chairman: I noticed that he said "Charlie and I are equally enthusiastic about our utility business, which had record earnings last year and is poised for future gains." After the attack on gold, and the summer of hell/collapsing trade, who's gonna keep their lights on?
Personal Income and Outgo I've always been a fan of the personal savings rate. I figured it was a pretty good measure of how Americans were doing. But that number lost its glitter for me a couple of years ago when the federalcrats decided that Ooops! Due to house prices, flips, and refi's, they would no longer be using the same set of calculations (OK, scribbles, then) to mark up or mark down savings based on how your home's street value was declining. To some folks at the time it seemed like a good idea...and in terms of "hiding the truth in plain sight" it has been a marvelous move.
Who, besides me, would point out that for a huge portion of America the "savings rate" has been at least -10% annually for the past 2 years? If you doubt that simple assertion, go back and look at home prices in your neighborhood from a mid-2007 newspaper and compare them with yesterday's paper (if your local newspaper is still in business - so many are failing lately). And then pop open that 401(k) statement from 2006 or the first half of 2007 and compare it with the quarterly confessional which should arrive in mid April. That ought to end some of your questions.
But enough of the editorializing...let's stick to the government's script on this stuff and put aside the reminder that prices don't go up - the bankers just water down the purchasing power of your money - a game that's been underway since, oh, when was the Federal Reserve Act passed? 1913, was it?
Well...one more point then. The Minneapolis Fed has updated its 'inflation calculator" to include 2009. So you can see for yourself that $100 in 1913 has been watered down to the point where it takes $2206.06 paper whatever-they-are's in your wallet today. Your dollar today has lost 95.46703% of its value since the bankers got hold of the country's money.
OK, keeping all that in mind, here's the script:
No, I have no idea how real disposable income can increase 1.5% in January which would pencil out to an annual increase rate of something like 11.9% if you take the December and January increases and annualize them. Have you gotten a huge raise lately that you didn't mention to me, or are Soviet-style statistic in play here? Maybe if you don't have a house payment.....
White Stuff Lots of headlines about 14" of snow expected in the Northeast. Forgive me if I treat this a bit brusquely, but isn't this winter?
Hillary's Adventures The headline this morning in the Washington Post is that "Hillary Pursues 'Comprehensive Peace' in the Mideast." If I had taken my 'cynical pill' this morning I'd suggest chasing the Easter Bunny would make as much sense. "Gaza aid and peace must be linked: Clinton" Like money is going to make the Gaza attacks all better? Like the people in Gaza will just forgive and forget and lay down arms? Can someone pour me one of those?
--- snip and save section---
Coping: Auto Trend A very short Coping section today... just some items to ponder:
Just struck me as curious...
Well, off to have a crown banged on this morning - see you tomorrow - or (hand me that dart wouldja?) 633 points down from Friday's close...
Reader's Writes Someone liked the Saturday report written from the standpoint of a visiting alien..
Which is why I get up and write every morning... --- Send snip and save items to george@ure.net --- end snip and save section ---
Before the chart, a little background: Once upon a time, a long while ago, I observed during my quest for 'truth' in economics, that the PowersThatBe, the talking heads on the teeve, and the other information sources that actively engage in the programming of humans not to think, had conveniently swept several trillions of dollars that disappeared in the Internet Bubble's bursting (since spring 2000) under the rug. Surely, it wasn't unnoticed by the thousands of people who called brokers and said "Where is my money?" "Gone, but hang in there as you're a long term investor!" was about all they heard back.
So one of our charts for Peoplenomics subscribers oughta be widely circulated - it shows that if you line up the peak of the Dow in January 2000 with the peak in early September of 1929, we're on a very very close replay track. Much closer than even the chart shows if you were to back out inflation, and put in the effects of 1929 deflation, but that'd be real work, and I'm sort of lazy if the truth be told.
No, it's not a perfect replay of 1929, but history doesn't repeat exactly, it only rhymes. So think of this as the rhymes and the crimes chart:
"George, that's only a coincidence!" your monkey-mind will protest.
Why sure it is...you bet. A 9½ year long coincidence...yessir....just a coincidence, I'm sure...
Write when you get rich,
George Ure, The People's Economist |
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