Friday, December 30, 2011

A Bridge TOO Farage

Today I would like to introduce you to Nigel Farage.

But first, my apologies to the 1977 film "A Bridge Too Far" which is an account of  "This WWII film follows the perspectives of American, Polish and British soldiers attempting to capture key bridges behind German lines in a complicated parachute and armoured assault. "


Nigel, is truly a "thorn in the side" of un-elected EU Bureaucrats and to get to know him, please click on the following YOUTUBE links.  


ENJOY!!!!
Nigel Farage.... "The Game is Up!"
Nigel Farage... "You weren't elected and those of you who were we elected in secret".
Nigel Farage... "Attacks the EU President and everyone else in the EU Politburo".


Five years ago, I was having dinner in Wuppertal Germany with my colleague Hans who educated me about EU politicians, their non-elected status, their attractive salaries and benefits, and their long tenures. I listened and learned but didn't understand the implications.  With the monetary problems in the EU today, I now understand what he saw so many years ago.


Getting back to Nigel, I would like to tell you about another Nigel- colleague of Hans and myself.  Apparently, these Nigel guys have no problems creating international incidents! 


You see, Nigel and Hans teamed up against me and another American (who we will refer to as TopTiger11) for a golf match in Austria.  Think of this as an amateur's version of the Ryder Cup.


Nigel, a lefty, had a very aggressive slice.  In one tee shot, he sliced left, overshot a 20 meter high hedgerow to launch his golf ball into "field's unknown".   Thinking that we would cross through the hedges to look for Nigel's ball, Hans suggested Nigel must hit another ball.  Because, if we were to cross the hedgerow in search of Nigel's ball we would need passports.   His towering slice of more that 300 meters (actually only 100 meters forwards and 200 meters sideways) had violated the airspace and sovereign soil of Hungary. 


So such is the lot of the world's Nigel's.  Always creating international incidents.  but, always speaking openly about the world as it is.  Even if the listeners cannot handle the truth!

 
Next post, we will move from "A Bridge Too Farage" to "The Great EUscape".  Long live the Euro...



















Sunday, December 04, 2011

The Government is Taking Your Pension

In March 2010, I wrote to you about how governments are taking people's hard earned pension plans. For most people, in most countries, you have some form of your pension privately (your own savings) and some form promised to you by your government.

This year politicians have raided the "government provided" pension plans of their people all around the world.  Here are a few real examples:
  1. Ireland announced last week that it would use the country’s €24bn National Pensions Reserve Fund “to support the exchequer’s funding programme”.
  2. Telegraph writes: "Portugal has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets."
  3. The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.
Next is your private pension plans and we already have examples:
  1. Hungarian government to claw $15bn of private pension funds back to the state system.
  2. Christina Kirchner, President of Argentina, in 2008 seized her citizens’ private pension funds.
  3. The US government is drafting legislation for “Guaranteed Retirement Accounts” (GRAs) in which private company pensions and private accounts of citizens are absorbed into a government system whereby Washington then decides how much money you get back.  This is justified on the basis that private pensions have been tax advantaged for years and therefore are already quasi-government property.
There is an old saying that goes, "rich or poor, king or pauper, if you can't defend what you have- you have nothing".

Or you can follow this link and watch a YOUTUBE from George Carlin [WARNING: as is typical in his shows, he uses a lot of very offensive language.  But, if you can be mature enough to look beyond that- you just might learn something].





      

    Wednesday, November 30, 2011

    How Money Became Debt Became Money Again

    Where you shocked when you found out that the US Federal Reserve pumped $7.7Trillion in banks around the world in 2008 and 2009 to stop a complete financial meltdown?  Did you know that if they didn't do that, I would not be posting this blog and you would not be reading it?  Civilization as we know it would have ceased to exist by 2011.    2010 would have been martial law around the world and soon thereafter it is Mad Max and the Thunderdome Society.

    So don't get so pissed if a few bankers made big bonuses from the Federal Reserve cash infusion.  They saved your ass and your way of life.   You should be thanking them.

    So if the Federal Reserve "printed" $7.7Trillion why don't we have hyperinflation?  Because that amount of money was just enough to offset a massive deflationary spiral.  A commodel Coriolis effect of epic proportions drawing the turd of modern society into the septic tank of oblivion.

    Deflation?  What Deflation?

    The same deflation that is crushing Europe, the EU and the Euro right now.  You see, a financial institution will show "cash and cash equivalents" on their balance sheet.  Do you know what a cash equivalent is?  Well, one type is sovereign debt.  So Italy floats bonds and banks buy them and put them on their balance sheet.   If that bank owes money to some other bank, it can pay that bank with cash equivalents.  Or in this example, settle the payment by transferring Italian government bonds from their institution to another.  So-- Debt is Money.

    These same institutions can utilize fractional reserve banking to multiply the leverage effect of these cash equivalents by creating loans using these government bonds as collateral.  Thus creating more money out of debt.  In fact, the more money a government borrows the more money a bank can create!  

    UNTIL...those government bonds lose their value.  When interest rates on government debt rises (like 7% for Italy) then the bond's face value decreases and affects every other outstanding bond too.  This means assets (these cash equivalents) on the balance sheets of banks lose their value - fast.   And that means the likelihood of bank default increases.

    Now you know what is going on in Europe.  A massive deflationary spiral is in progress.

    Back to the US.  It is not when a US bank owns any European Government debt that puts it at risk.  IT IS IF YOUR US BANK IS OWED ANY MONEY AT ALL BY ANY EUROPEAN INSTITUTION- GOVERNMENT OR FINANCIAL.  Because- the deflationary spiral has made them all insolvent.

    Now really back to the US... US banks in 2007 had massive amounts of Mortgage Backed Securities on their balance sheets due to the "housing bubble".  These MBS are "Cash Equivalents"!  That means banks can use them as if they were cash and they can make loans against them.  Guess what-- house prices collapsed, MBS rapidly lost their value and the US banking system became insolvent.

    How bad was it?  Well $7.7 Trillion to be exact.  Ben Bernanke created that much money and pushed it to the banks.   And that is why the US banking system is solvent today.

    And that is how money became debt became money again.

    Tuesday, November 22, 2011

    Notional Accounts - The Dirty Little Secret

    You look at your bank statement or your pension account or, if you are fortunate enough, your brokerage account.  You see numbers.  But is what you own really there?

    Let's say your statement says you own 10 shares of Apple Computer.  Do you?  Or do you have an agreement with your broker that if you sell those 10 shares they will give you the market equivalent in cash?

    You don't own anything.  None of it is there.  It doesn't exist.  All you have is an agreement.  Your money is gone.  It was taken and, in turn, you were given a promise.

    Promises are only worth the integrity of the person making the promise.  If the promise is being made to you by a corporation, well, you get the idea.

    Bernie Madoff took everyone's money.  So did Jon Corzine of MF Global.  So did everyone else in the who's who of finance.  It is a dirty little secret that everyone is doing it and the public must never know.  But it is bigger.

    When banks put money on deposit with your country's central bank, it is a notional account.  The Central Bank took the money from your bank and promises to return it.  The same thing happens to you when you place the money on deposit with your bank.

    The only problem is that this is a game of "musical chairs" and you are playing with a blindfold with your ankles tied together.

    Wednesday, November 02, 2011

    See Something; Say Something; Next Pay Something

    The next jobs program for your country is to starting paying citizens for reporting unpatriotic activity.  It starts by determining if you can get citizens to share information with the government for free.  If that doesn't work, start paying them for information and call it a "jobs program".  

    * * * * wait for the two links below to fully load -- it is worth it * * * *



    Just like the old Communist days... time to "name names".


    A Rumble In The Jungle -- Or Why Greece Should Delay

    Have you noticed that Inflation Protected securities (TIPS) have been on the rise all year?  Always good to have a bit of this in your portfolio when Central Banks around the world are printing money.  Here is two charts from today-- first is a TIPS ETF and the second is a TIPS Fund:


    So while Central Banks print money and lower interest rates while governments understate Consumer Price and Producer Price Indices, it appears to me the self correcting marketplace is seeing something different. 

    This is not cost-push inflation but rather a systematic reduction in the value of all money caused by monetary policy.

    The good news is that all money is debt.  Therefore... if this reflects a devaluing of currency then that means our debt is reducing by the same rate.    Therefore... Greece should not accept any austerity since their debt load is falling by the day.  Click Here.






    

    Monday, October 24, 2011

    Free Household Goods From China

    Apologies to my non-US readers because this is only possible in the US.  For US readers, this is a great example of how to capitalize on the good intentions but basic ignorance of the government.

    The current US Government is "the gift that keeps on giving".  I dread the fact that they may not get re-elected making it so much harder to make money.   But for now, you need to take advantage of every opportunity presented.

    To the less informed, President Barack Obama this week will announce a series of actions to help the economy that will not require congressional approval, including an initiative to make it easier for homeowners to refinance their mortgages, according to a White House official. Read it here.

    Another profit windfall is now presented to you on a platter.   This is a little bit complicated so I will over simplify:

    1. Form a US Limited Liability Corporation (LLC) created for the purpose of owning, occupying and refurbishing real estate property.
    2. Fund your new corporation with $100.  (yes only $100).
    3. For $100 you buy a HUD (Housing and Urban Development) sponsored home provided you agree to take over the existing mortgage.
    4. Don't make any mortgage payments.  The property was probably in default anyway and it will take 6 to 9 months before anyone contacts you about your late payments and tries to foreclose.
    5. Under this government program, you immediately qualify for an FHA 203K loan that can be used for "repairs and renovations".  You should be able to leverage up to $2,000 of loan for every $100 you place into the property.
    6. So let's say for each property you do this at $1000 so you can borrow $20,000.  And do this for 5 properties to borrow $100,000.
    7. With that $100,000, purchase a truck to enable the repairs and refurbishing.  Maybe buy some nice tools including that table saw you always wanted. An iPhone to keep in contact with people doing the refurbishing.  Perhaps buy some major appliances for yourself and family.  You get the idea....
    8. Now don't be stupid.  You need to also make an attempt to repair and refurbish the property you just bought under this government program.   The problem is that you are not very good as  a repair man and you are an even worse business man.
    9. Your corporation is forced to declare bankruptcy.   You default on the mortgage.  You default on the loans.  You keep the tools, truck and appliances because it is the US tax payer that is backstopping your loan because this was a government program to jump start the housing market.

    WARNING: I have greatly over simplified this.  Not all housing qualifies.  Not every US state is participating.  203K loans do have some rules and regulations. BUT... the new rules go into effect in November and will be in place of 1 year.  Techniques were used to bypass the US legislature so no laws were written-- this was via executive order.

    What we do know is this:
    1. The government has put out the "free money" sign.
    2. Hordes of clever people will flood the government offices.
    3. The overload will ensure government employees focus merely on getting the workload "off their desk" ensuring little if any review of the applications.
    4. This is a US election cycle so government money will flow freely.
    5. Certain groups are well organized to capitalize on this "window".

    So you are probably asking, "where does China fit into all this?".   Well, the US government is backstopping the purchases you made with the loan you never intended to repay.  The US government is also borrowing $1 for every $2 it spend from the Chinese government and the US government doesn't plan to repay the Chinese either. 

    Perhaps you can see now how it is your patriotic duty to capitalize on this program.

      Sunday, October 23, 2011

      We All Swim In The Same Pool...

      ...gene pool, that is.  We have so much in common that seeking common ground should be easy.  Let me illustrate.

      Occupy Wall Street is amassing substantial funds through donations.  With that much money, do you know what you have to do?  Easy... set up a bureaucracy and set up a bank... And guess what happens... even in the OWS movement there are now the haves and have-nots.  Read it here.

      The US criticizes nations that treat their people poorly (human rights) yet feels perectly comfortable using a drone to kill a US citizen that it doesn't like.   The act is clearly illegal but apparently if you do it in another country and make the kill from long distance it is ok-- even if you take a few other people to their death at the same time (but they weren't US citizens, so it doesn't count as much).

      Other countries criticize the US for allowing its monetary policies and regulated financial system to bring the financial world to the brink of disaster in 2008.  The fact that the US government forced its banks to lend to people who could never pay back their loans is absolutely outrageous!   Now we sit and wait as the EU will give (it is not a loan because they will never pay it back) Greece another $8B to pay next months bills.

      Western countries (EU and US) delight in their participation in the removal of evil, murderous dictators in Middle Eastern and Northern Africa nations only to have those despots replaced by groups of murderous mobs.

      China is criticized for manipulating its currency while at the same time the US Federal Reserve floods the world with trillions of newly printed dollars.

      Todays financial markets are schizophrenic because of "all the uncertainty".  This is absurb.  The sequence of events for the future are obvious.  Make you plans accordingly.  The world is very predictable because we are all the same, behaving in the same way, thinking the same thoughts, and  dreaming the same dreams. 

      Friday, October 14, 2011

      Is Everything In Position?

      Needless to say, I was disturbed about the recent decision to "go public" about the Iranian Terror Plot.
      I say this because I believe that these plots are going on all the time and are addressed without fanfare and in some cases appropriate secrecy.   So why is it important now to put this in the news?  Why go public about the incident?

      Perhaps it is time for another war.  NATO got its much needed practice in Libya (nothing beats war games like a real war).  Isreal has moved its warships off the coast of Egypt (apparently the Muslim Brotherhood has significant Naval capacity).  And now for the US Navy...

      The most recently released public information about deployment is shown below:
      Click to Enlarge
      An amateur would assess the situation as follows:
      (1) The two battle groups in western pacific have their home port in Japan.  However it looks like they are out and about making sure China knows we are paying attention to what is going on.
      (2) Three battle groups are poised off the coast of Iran for obvious reasons.
      (3) The rest of the battle groups are defending the East and West coasts of US.  The greatest risk to the US is for some Iranian frieghter to launch a missle with EMP payload thus driving the US back to the stone age.

      If things get really bad, perhaps the US will suspend the 2012 elections due to the emergency and we won't have to be burdened by those ridiculous political TV commercials that interrupt our zeitgeist.

      Wednesday, October 05, 2011

      Owed to a Grecian Earn

      Apologies in advance to John Keats....

      Interesting article from Der Spiegel.  If your German is a little weak, let me summarize for you:

      (1) Greek government warns EU that if they don't get their bailout money by mid-October they are going to default as a country.


      (2) Jean-Claude Juncker, Prime Minister of Luxembourg and President of the EU Group, announced on Tuesday that the next installment of the bailout package wouldn't be paid before mid November.


      (3) No problem, said Evangelos Venizelos, Finance Minister of Greece, and announced that his government had suddenly found €1.5 billion in a bank stabilization fund that was set up during the crisis of 2008. Enough to keep Greece liquid until mid November.




      Theatre of the Absurd, wouldn't you agree?

      Saturday, October 01, 2011

      News from Greece: The Check is in the Mail

      Greece can't implement new austerity tax plans because they ran out of ink to print the forms...
      Click Here

      Greece can't implement new austerity tax plans because tax collectors plan to go on strike due to additional work load and threats of lay offs...
      Click Here

      Greek Citizens block access to Finance Ministry not allowing European officials to examine "the financial books" of Greece to see if they are cheating on their promises...
      Click Here

      The last story is almost too much to believe.  EU officials actually need to see hard copy documents?  You mean Greece does all its accounting on paper and there are no faxes?  You mean EU officials couldn't access the Greek Government Systems? They had to travel to Greece personally?

      This must explain why there was no ink left to print new tax forms it all went to printing government records on paper.

      That is the problem with the Euro... if Greece had their own currency they could use all their ink printing money instead of paper records and tax forms.  Rather than borrowing money from the EU and IMF, they could just keep printing money and giving it to their people-- it's the American way.

      Thursday, September 29, 2011

      Remember: Doomsayers free ride; all others provide data

      Remember:  Anyone blogging, on the radio, or TV that is predicting disaster is allowed 100% of their air time to spew their gloom and doom.  However, when ever someone predicts that things are better than they seem, all of their air time is consumed with demands for proof and endless debate by the host.

      Short sellers are legally allowed to say anything they want about a company and it doesn't have to be true.  CEO's are muted by laws that do not allow them to make forward looking statements. 

      People are more likely to believe that things are worse than they are.

      But, eventually the shorts get squeezed because the global economic engine is alive and well.  Our current problems are not economic.  They are political and they are monetary.   It is Politicians and Bankers who created the problems and because they control laws and money they can never be held to account for their impact on common people.

      When the turnaround comes, and it will, the same politicians and bankers will be standing in line to accept the credit.

      Since the creation of the markets, it has been a macro "bull run".  The general trend has always been up. 

      The future is very bright but I have no data to defend my position.  Even if I did, would you believe it?

      Sunday, September 25, 2011

      Relocation Services

      Dear Readers:
      I wrote this piece over two years ago but I was advised not post it because it would be too upsetting.  But now since we are well past our Financial and Political instability problems around the world, I can post this and continue to fulfill the TEDBITS mission of insight and entertainment for the Hi-Q.
      Sincerely,
      Tedbits


      There was a lot of unrest because of what was happening. Confidence was lost. The system was collapsing. Those with much to lose- lost a lot. Those with little- lost everything. The politicians couldn't find any new people to blame. The people ran out of patience.


      It started in the cities. We watched it on the news. But eventually it spread.

      The police, whose job it is “to protect and to serve”, could do neither. There was too many of us to protect against so many. Police officers also had their own families. No one blamed them.  Many of them were lost at the hands of those with nothing to lose.

      It had been so long since we worked together as a community that the task of coming together was overwhelming. We lost the ability to organize and effectively structure for the common good. There was no basis upon which to make decisions or agree on plans.

      One day, the military arrived at the top of our street. A soldier knocked on our door, who looked exactly like the proud military hero of our dreams. He was young, strong and confident. He spoke well. We felt comforted.

      He was unarmed and clearly no threat. Telling us that there was no possibility for the government to protect us in our homes, he handed us a brochure that gave us information about where we would be relocated and what we should bring. It even included luggage tags that we were to affix to travel luggage, one bag per person, to be left by our front door to be picked up later by the quartermaster corps.

      The letter said that we were free to “stay in our homes” rather than participate in the relocation. It also warned that there was no guarantee that there would be a second chance as the situation was fluid with matters worsening by the hour.

      Our decision had to be our own. All communications, phone-internet-cable, had been down for weeks. The electrical power was unreliable and had been totally out since this morning.  We would listen to the radio in our car for news but didn't dare drive anywhere- it was getting too dangerous. We were on our own.

      In 2 hours, buses would be available at the main intersection near our house. We had that amount of time to make our decision, pack, tag, leave our bags at the front door and get to the buses.

      So we did, never to return. They lost our luggage. But we don’t need it anymore.

      Thursday, September 22, 2011

      Hedging for the common man

      Last year at this time, I posted a well proven technique for making money from what is called the "carry trade".  I showed you a method whereby you can do what the big banks do and returns are nearly 100% guaranteed.  You can refresh you memory here.

      That was Carry Trade for the Common Man and now it is time for Hedging for the Common Man...

      Fanfare please...[click]

      It is simple:  When gas prices are rising buy XOM or DBO.  When food prices are rising buy food companies that can pass on price increases to consumers.  After a nice run up, cash out.  Here is the math:
      BASE PRICES + (PRICE INCREASE - YOUR TRADING PROFITS) >= ZERO you win.

      I have decided to buy my first iMAC computer.  With the recent two day collapse of the market, I was finally able to buy a few shares of Apple Computer at a reasonable price.  Apple is an unstoppable stock right now relative to the total market, so when AAPL resumes its run, I will cash out and have myself a free computer.

      This is why people who spend their life watching American Idol, the Kardshians, Glee, etc. are getting poorer.  But they are happy in their ignorance so I am happy for them-- after all life is short so might as well turn on the TV.

      Monday, September 19, 2011

      Back in the Saddle

      Haven't posted since April but I have been really busy working on dual citizenship for my family and moving my soft assets into hard assets geographically removed from where I live today.  I am sure you are doing the same thing so you know how time consuming this is.

      Anyway, I decided to start posting again because everyone has been emailing with questions and discussion points and it is too hard to have a conversation over email.  So, mostly I hear from US citizens who are deeply concerned about their personal situation as America continues to have debt, currency and related economic problems. 

      Here is why you should not worry:

      (1) All fiat currencies return to their original value-- zero. So will the US dollar. The US has had several currency collapses in its short history. In fact the Federal Reserve Note (the dollar) is not even 100 years old yet. Currencies have collapsed around the world in many countries throughout time. My point is, currency collapse is manageable if it is carefully engineered. What you are really seeing is the careful, thoughtful management of a collapse. If it is handled correctly, the currency will be replaced with something else. 

      PROOF:  The value of Iceland's currency in 2009 was zero. However, Icelander's continued to buy and sell to each other using Icelandic currency. Why? Because a Kroner was still worth a Kroner to Iceland... it is just that no other country wanted them.

      (2) When the US dollar is worth zero we will still buy goods and services from each other in the US using dollars. But what if no one else in the world will accept dollars? We can't import anything because no one will accept our money!!! Really? Think about this...

      (2A) If we can't import anything does that mean we can't export anything? If so, how will the world feed itself since one of the largest US exports is food. To a hungry world food is more important than money. So don't worry about the dollar because we export food.
      (2B)  If we can't import anything does that mean we can't buy the 20million barrels of oil we consume every day? We don't have to. The US is energy self sufficient and natural gas, coal and petroleum reserves within the continental US and Alaska will last 300 years. So don't worry about the dollar.

      (2C) There is always pain in transition so yes, cities will burn, people will be killed, periods of martial law may be required and aspects of the US constitution will be suspended. These are all temporary. The US military will come home to patrol the streets, order will be restored and we will rebuild. The feeling of unity and togetherness normally experienced during a common disaster will fill our hearts and we will be Americans again.

      (3) But what about the massive US debt burden? Who cares. We were never going to pay it off anyway. We took exports from other countries and gave them little green pieces of paper in return. You tell me who was smarter. And what can they do? Bomb us? I don't think so.

      (4) When will all this happen? Most likely very far out into the future. Too many people in powerful positions (government and non-government) have a vested interest in the status quo. The currency crisis and, its impact on the economy and wealth, started more than 30 years ago. Our darkest hours were between 1978 and 1982 but no body knew it because of the lack of mass communication and poor education levels to understand the message and its implications.

      SOME HISTORY: In the early 1980's, people vested in the status quo managed the collapse. US unemployment was higher then. US interest rates were horrible. And the public was faced everyday with the prospects of mutually assured destruction from the USSR. But somehow we survived and somehow, some of us, improved ourselves and our situation. US banks were overexposed to South American currency collapse and hyperinflation. We were so close to the edge of Armageddon. But we didn't know it, so it didn't bother us.

      REALITY:  Today we are more aware. 24 hour news coverage for what is less then 15 minutes of news. We are victims of "speculative factualization". So you worry more. You are also older and you feel more vulnerable.

      BOTTOM LINE: But if you accept the above, the future is very bright. I am a buyer and if I am wrong what difference will it make? But if I am right....


      "When there is blood in the streets be a buyer even if that blood is your own".... Rothschild circa 18th century.

      "Gamblers understand what Winners don't know". Ann Wilson circa 1980's

      Wednesday, April 20, 2011

      TILT

      The data is in.  2010 Government payments to citizens in the form social security, medicare, medicaid, unemployment benefits and stimulus programs that paid money directly to citizens totaled $2.3 Trillion.

      Tax receipts for 2010 totaled $2.2 Trillion.

      That means all the rest of the money the US Government needed to spend to keep things operating and pay the interst on all the previous years of borrowing needed to be borrowed.

      The US Government is effectively borrowing money to pay the interest on its debt.

      The US Government is borrowing money just to operate.

      Now for your investment question of the day... Should buy 1 ounce of silver or 1 share of JPMorgan?  They both cost the same in US Dollars.

      A weakening dollar (because the only one really lending to the US is the US Central Bank) is causing oil prices to creep up because oil is traded in US Dollars so it takes more dollars to buy a barrel of oil.

      This pushes commodity prices up so those companies with pricing power to pass along increase costs (preferably before their cost actually go up) will do well until the double dip.  

      Some say the US is exporting inflation by devaluing the US Dollar causing food, fuel and essential needs to increase in price around the world.   This is not true.  Inflation is ocurring around the world because these countries peg their currency to the dollar.  So, as the dollar goes, so does their currency.  If they let their currency float they wouldn't have this problem.   But they won't change because if their currency becomes stronger then their exports would slow double dipping their economics.

      So we are in a deadly embrace.  Snakes emeshed in each other's death grip.

      This has happened many times before and eventually things right themselves.  But in the mean time, the investments that worked for you 10 years ago probably won't work now nor in the next few years.

      Tuesday, April 05, 2011

      OK, Break's Over; Everyone Get Back To Work!

      With the recent news that the US Unemployment Rate dropped below 9% comes some collateral damage.   The Employment Security Commission of the State of North Carolina (US)  recently posted the following information telling its residents that the 99 weeks of unemployment benefits were no longer available to those still looking for jobs:

      "Please be advised that due to the recent decline in the North Carolina Unemployment Rate, the state no longer meets the Federal and State requirements of the Extended Benefits Program. In accordance with Federal and State law, the Employment Security Commission cannot pay any Extended Benefit claims for weeks later than April 16, 2011. "

      North Carolina, the home of NASCAR, Country and God, will take this all in stride.  Pick themselves up and get jobs.  I don't expect the same whimper of acceptance will occur when similar facts begin affecting the big cities.  Stay tuned.

      The interesting thing about playing golf is that sometimes you get paired up with someone you don't know.  Last year, I played golf with a 99 weeker (a guy that was well on his way to collecting 2 years of unemployment checks from the government).   He had no problem paying the $65 for the round of golf because his wife worked and her employer was providing all the medical benefits for both of them.  It didn't seem to bother him that I was paying for his vacation through my tax dollars.  I didn't make a big deal of it because I didn't want to be swinging 5 irons at each other on the back nine.   After all-- this is a civilized country!   However, I did remind him that if his wife worked at a job well enough to have generous benefits that he needed to get prepared to write a check to the Federal Government because unemployment is taxable income and his wife's job probably puts them in a tax paying bracket.

      So as he and many Americans are now filling out their Federal Tax forms, I am smiling at the prospect of him having to pay taxes on his unemployment benefits because such payments do not have any Federal Tax withholding requirements. Therefore, he probably spent every dollar he got not realizing that some percentage of it was going to have to be returned to the Federal Government in the form of taxes.

      Sunday, March 27, 2011

      Drawing a Green Line through Earth Hour

      How did you spend Earth Hour this year?  If you missed it, I am not surprised since most of the planet did too

      Earth Hour is a great example of "a flurry of awareness building misconstrued as actual progress". 

      Normally I stick to finance and economics but today I am going to play the role of electrical engineer to educate you about the finance and economics of saving electricity.

      First, if you want to save electricity to save household expenses then you should do it.   However, don't think that your saving electricity is doing anything to save the planet.

      Fact #1)  When electricity is generated and not consumed it is lost.  So when you turn out the light you are saving household expense but not saving electricity.  It is important to speak correctly.

      Fact #2)  It is possible to store unconsumed electricity for short periods of time but in many cases the economics don't justify it.  Generally speaking, energy storage is economical when the marginal cost of electricity varies more than the costs of storing and retrieving the energy plus the price of energy lost in the process.  Also, electricity cannot be stored for long periods of time- there is gradual loss.

      Fact #3)  Fuel-based power plants (i.e. coal, oil, gas, nuclear) can be more efficiently and easily operated at constant production levels.  So nobody is ratcheting down the generator when you turn off a light in your house.  It doesn't make sense to do so.

      So when, everyone turns off the electrical consumption in their house for Earth Hour, the power plants keep producing anyway.  The electricity generated during Earth Hour is either lost or temporarily stored for some future peak demand point.  

      Well done, people of earth.


      Now let's draw that green line right through earth hour once and for all.




      Power plants operate at their particular "green line" because that is the most efficient use of their design in terms of fuel consumption and reliability considerations.

      Consumption changes must be massive and over a prolonged period of time to make the investment economics attractive to change the green line. 

      One way to do this is to massively reduce the human population.  And this is why the environmentalists draw their green line this way...



      Friday, March 18, 2011

      Four Phases of the News

      The consequence of 24 hour news requires that the audience carefully evaluate which "phase" of the news they are hearing.  For your entertainment and information, I submit the following:

      PHASE 1:  FACT FREE (pervasive)
      A journalist once told me, "I could do a lot of painstaking investigative research OR I could just report something someone tells me.  My job pays the same either way!".  Fact Free reporting looks like this:  CNN is reporting that other news outlets are saying, "______". You fill in the blank.  Fact free content is when the news is the news.  The only fact here is that someone is saying something.  Whether what they are saying is factual is not relevant.

      PHASE 2: FACTUAL (rare)
      This is when what is reported is a true fact- duly confirmed by independent, knowledgeable sources.  This rare event is difficult to detect because usually the fact is embedded inside someone's opinion about what you should think about the fact.  The fact is like the chewy chocolate surpise inside a Tootsie Pop- you have to do a lot of sucking and licking to get to the good part.

      PHASE 3: FACTUAL SPECULATION (common)
      This is when the time available for broadcast exceeds the time needed to report the facts.  News networks know that they cannot continously repeat the same facts over and over while retaining an audience.  So, they bring in "experts" who speculate on "what might happen next" given the facts at hand.  They speculate on the facts and consequently their speculation become the news. 

      PHASE 4: SPECULATIVE FACTUALIZATION (undetectable)
      You move to phase 4 when the speculation in phase 3 is repeated so many times that now it becomes accepted as fact even though it didn't actually happen.  By this time, all reality is lost, no one can separate fact from fiction.  Since no one can confirm a speculatized fact, the best a news agency can do is report on who is saying what.  This returns us back to PHASE 1.

      If you've ever heard a news anchor refer to the "News Cycle".  This is what they really mean.

      Friday, February 25, 2011

      Libya Trivia

      After 42 years of ruling Libya, why is Moammar Gadhafi still only a Colonel?  I think if he had gotten a promotion or two along the way things might be going better for everyone.

      NATO is considering possible military intervention.  The debate is the actual number of civilian deaths required to insight action on NATO's part.  Apparently, until it gets to about 100,000, nobody is mobilizing anything.  It is not clear who is doing the counting either.

      According to reports, Libya's military is ruthlessly attacking its citizens.  This apparently has not caused Libya to lose its seat on the UN's Council for Human Rights.   Long live the UN.

      Some Libya trivia from the 20th Century:

      Gadhafi drew a line in the sand (actually it was a line in the water) claiming certain international waters as Libya's property.  The US, whose job it is to draw lines, got upset and decided that no one else should be allowed to draw lines on the planet.  This resulted in two Libyan fighter jets getting shot down by Iceman and Maverick when the Libyan pilots accidentally pointed their nose cones at the 2 US F-14 Tomcats.

      The Colonel then drew a line in the sand (real sand this time) a little farther south but tricked the US by later launching six SA-5 missiles against the U.S. Sixth Fleet and missed (not a good idea).

      Gadhafi, realizing he was in trouble, then moved his tent complex farther south and drew another "line in the sand".  By this time, the US had enough of his line drawing and launched Operation El Dorado Canyon, involving Air Force F-111s from airbases in the United Kingdom. The refusal of the French government to grant authority for an American overflight of their country greatly complicated matters and necessitated the accidental bombing of the French embassy in Libya.  Ooops, sorry.

      At that point Colonel Gadhafi moved farther south and drew another line in the sand but by this time he was standing in the country of Chad.

      No wonder he never got promoted.

      Saturday, February 19, 2011

      Rocks and Hard Places

      "CAIRO, Feb 18 (Reuters) - Egypt has approved the passage of two Iranian navy ships through the Suez Canal, an army source said, a move that could annoy Israel, whose foreign minister has called Iran's actions a provocation.  "Egypt has agreed to the passage of two Iranian ships through the Suez Canal," the army source told Reuters."


      The Red Sea is pretty tight quarters and military officials of all countries are always concerned about unintended incidents with war ships in such close proximity.

      A quick check of the US Carrier battle groups shows something interesting:

      The USS Enterprise and USS Kearsarge are straddling the entrance and exits to the Red Sea.  The USS Carl Vinson is parked directly off the beaches of Iran.  Probably in plain site of any sun bathers.  That's a lot of warships packed into a small area of the planet.  Remember these ships never travel alone.

      What is also curious is that on the east coast of the US we have the USS Bataan, USS Harry Truman and the USS GWH Bush.  On the west coast of the US we have the USS Makin Island, USS John Stennis, and USS Ronald Regan.   It's almost like a "picket line" has been formed on each coastline. 

      I wonder if the US is expecting visitors.


      PS: For those of you worried about the above disclosures, don't be.  This information is a matter of public record.  Besides, it is never about where the ships are.  It is always about what they are doing and where they are going.

      Tuesday, February 08, 2011

      Eqypt Data and EU Warnings

      HEY!  I just got my first reader from Eqypt!!!!!  Welcome....   In celebration I thought I would post something about Eqypt.

      The incidents in Eqypt are indeed unfortunate.  And setting aside all the political rhetoric going on about Mubarak the US et. al.   Let's look at some data.

      1. Protests in Egypt are being carried out by a very, very tiny percentage of the population. 
      2. Curiously, most signs being carried are written in English. 
      3. 70% of Egyptians work for some level of the Egyptian Government.
      4. The Egyptian Government just gave 70% of the population a 15% raise.
      5. According to The US Government Foreign Aid Website the US Government has $1.2B in annual investment in Egypt meaning most Eqyptians work for the US Government apparently.
      6. If an orderly transition in Eqyptian Government is not realized the most important employer of the Eqyptian people will be lost and rising food prices will be replaced by unemployment on a Biblical scale.
      7. And, US aid will be halted or reduced thus lowering US Government deficit spending.  After all it makes no sense to for the US government to borrow money from the Chinese only to then give it to Eqypt. 
      On the Finance & Economics side of things Eqypt is not that relevant and any swings in the market are either short lived or overplayed.  Eqypt is no more important than other recent crises that all made headlines and then disappeared:  Dubai, Greece, Ireland, Spain, ....

      Back to politics: A warning for the EU:  Keep an eye on the Balkans.  The path is clear.  First the overthrow of the Pakistani government.  Then Eqypt. Then Jordan. And then it is on to the EU.  Movements no longer require joining land masses, they jump from country to country by means of Twitter, Blogs, and an old style media that still believes, "If it bleeds; it leads" -- hence signs in English -- a more international language.

      Back to Finance & Economics:  When the US Federal Reserve floods the world with cheap dollars through Quantitative Easing it makes everything look expensive and devalues the currency.  However, political unrest drives a "flight to safety" for investors which is still considered the US dollar and US Treasury Bonds.  This increases the demand in the dollar making it stronger.   You now know the Ben Bernanke equilibrium strategy... devalue the currency while stumulating demand for the currency.

      Back to the Human tragedy:  Everything said above gives a strong feeling that Eqypt and therefore the Eqyptian people are not important.  Nothing could be further from the truth but the mechanics of finance and monetary policy surely send that message that, "While we agree human beings are important; we must also agree they are irrelevant".  My hope is that the people of Eqypt could establish some form of government that allows for periodic orderly transitions of leadership to help keep moving the country forward for the benefit of the people the government is supposed to represent. 

      Saturday, January 29, 2011

      Forgive us our Debts... As we forgive those with Debts against us...

      Perhaps the most controversial position I have taken where backlash seems the strongest in both emails and in public discourse is The Great RE-Boot. Where I simply stated that, "...the FED will simply forgive the USG of its debt obligations...The US dollar will remain the world's reserve currency, US debt to GDP ratio takes a multiple order of magnitude leap to the positive and no body gets hurt."

      Much has happened since my posting of October and I present to you additional data from the recent Federal Reserve release to further the conversation:






      Click to Enlarge

      As you can see, the Federal Reserve of the United States now owns over 1/3 of the total debt obligations of the United States of America.  They have rapidly moved from #3 to #1 in the space of 3 short months!

      The Argument:
      1. The Federal Reserve creates US Dollars and gives them to the US Treasury to spend on the operations of the US Government.
      2. The Federal Reserve accepts Treasury Bonds from the US Treasury.
      3. The US Treasury is obligated to pay back the Federal Reserve the face value of the Treasury Bond plus interest.  This is how Government Debt is created.
      4. Now if you loaned me money and I never pay you pack you lost your hard earned dollars.  However, if the US Government never pays back the Federal Reserve, the Fed loses nothing because they printed the dollars out of thin air.
      5. When Federal Reserve forgives the US Treasury of its debt obligations there is an immediate and significant improvement in the US Debt to GDP ratio which strengthens the country financially.
      6. And, more importantly, nothing bad happens to the US debt held by China, Japan, etc. because the US Government still will pay back the interest and principle on the bonds they hold.  IN FACT... they are in a better position to do so.

      It's a great plan, and they are going to do it.  But not yet.  So don't worry and don't bet against America.

      

      Wednesday, January 26, 2011

      Interested In Expert Networks?

      Are you getting information that is 3 to 4 months (maybe even a full year) in advance of the general public? Then you may be a member of a so-called “Expert Network”.


      The Expert Network questionnaire (score 1 for yes, 0 for no):

      Does your network host require that “you not email me from your place of employment?”
      Does your network host say, “If you must email me from your place of employment you must use Secure Socket Layer encrypted browsing?”
      Does your network host say that, “the same rules we apply to your employer also apply to your lawyer?”
      Does your network host provide you with PGP keys that were generated by FIPS 140-1 compliant tokens?
      Did you need a “Guide to Defeating Sovereign Censorware” to enable you to stream information beyond your country borders?
      Do you need OTR messaging services?



      SUBTOTAL: If you scored 4 or more, you are a member of an expert network.


      IDIOT OFFSET: If your score is 4 or more, subtract 6 if you failed to capitalize financially on this information.



      SCORING:

      <0 see Punk
      1 to 3 see Sweet Kid
      4 or more see Veterano

      Wednesday, January 05, 2011

      Head Game / Head Fake / Dead Head

      I am asking you to be optimistic.  These next 12 posts will be on optimism because I don't want you to miss the opportunities that lie in front of us no matter from what country you are reading this post.

      Optimism yields creativity and innovation.  A pessimist never invented anything because, from their point of view, "Why invest the effort; there is no future!"....

      I've travelled to many countries and the one common factor about news reporting is "If it bleeds; it leads".  That means, if the news is bad, people will pay attention to your report.  Good news attracts less eyes. 

      That is why pessimists dominate the news.  And, people are willing to accept whatever they say without proof.  BUT.... put one optimist on the news and everyone is yelling, "Show me your data!".   Pessimists don't require data- only opinion.  Optimists must re-prove their position constantly and their data is always being challenged.

      If you follow the markets, I am sure you have heard the following:

      (1) The market is in a downward trend; don't invest now until we hit bottom. Better wait.

      (2) The market is in an upward trend; if you didn't get in; wait until a pull back.

      (3) We've just experienced a pull back but until we see strong signals to the contrary, we could see another leg down. Better to wait.

      (4) The pullback was shortlived; those that waited missed the entry point. 

      I could go on.  But you get the idea.  So what are you waiting for?  What is the piece of data you need to tell you everything is going to be "all right"?   When you finally get that data will you feel you waited too long?
      The panic of 2008 is over....
      (1) Get in.
      (2) Get smart.
      (3) Be smart.
      (4) Be Optimistic.
      (5) Keep Truckin.

      Saturday, January 01, 2011

      Happy New Year - 2011

      To the Western World and much of Asia Pacific (the double dippers who celebrate 2 new years), Happy New Year to you.

      I've taken a few months off from Blogging and shortly I will be posting at least 12 new blog entries on finance and economics for the coming year and beyond.  But for today, I would like to share with you how my "Main Squeeze" and I welcomed the dawn of the next decade.

      Here is a view from our backyard spa where we frequently welcome the dawn of a new day, listening to the local wild life and hoping to catch a glimpse of the family of white tail deer that live in our neighborhood.

      
      Sunrise January 1, 2011
       The deer can be often seen down by the pond.  It is still snow covered and frozen over from the holiday snow storm.
      Waiting for the White Tail Deer
      For those of you in the market for a free standing spa, here is the Master SPA LSX it has been a great investment.  Out of courtesy to my readers, I have spared you the picture of me sitting in the spa!

      Where TEDBITS composes.
      I hope you did your own research and made some picks from my August 09 posting.  Everything really worked out except for the idea on TIPS.

      All the best to my readers for the coming decade!