What It Means - Part 2

The markets - equity, bond, and commodity - have NOTHING to do with "fundamentals" anymore. It is all about stimulus, intervention, liquidity.... if you doubt this, think of what would happen if the Fed stepped up to the microphone and said they changed their minds about QEII.  In short, there is little left to the proverbial free market... perhaps soon there will be little left of our individual liberties...

The media presents this election as a fight over the economy.  Even the contentious abortion debate has been distanced and marginalized by unemployment, housing, mortgages, credit... Heard anything about Oil lately? $85 per barrel was BIG NEWS 3 years ago... now? Barley a sniff.

As always, the media has it completely wrong.  The political struggle going on right now is nothing short of a battle for the continuation of the Republic. Look at our circumstances. We have large states that will absolutely need to be placed into receivership (there is no protection in the U.S. Bankruptcy Code for states) because their tax receipts have no shot of covering their liabilities; a vast proportion of the electorate that has been successfully indoctrinated with the idea that something can be had for nothing and that the U.S. Constitution need not be adhered to (while at the same time their political leaders draw their authority from the document); extreme political groups seeking absolute control of the populous dominate the political debate out of all proportion to their number; and nearly 1/3 of the populous has been hopelessly addicted to government assistance, assistance whose sourced resources comes at the "point of the sword" held by the U.S. military whose binary function is to enforce US$ hegemony and petroleum transit protection.

I am simply not poetic enough to describe the level of denial going on within much of the American Body Politic.  The U.S. REAL, as opposed to NOMINAL, economic woes stem from 2 disparate sets of phenomenon:

1. The U.S. has experienced the mother of a all credit bubbles. Real Aggregate Credit growth is NO LONGER POSSIBLE, and it is very debatable as to whether or not nominal Credit Growth (inflation) can be induced in this environment.

2. The U.S. has absolutely, positively experienced its peak share of World Oil Exports (a.k.a. "Peak Imports").  I say this without equivocation even if Iraq's production is everything any optimist ever dreamed about.  (The perfect scenario in Iraq could put Peak Oil off 5 years, + or - 3, for the world... but this does not do as much for the importers as one might think... though it would flatten the slope of the decline somewhat... but only if Iraq can be brought on to Saudi type production within 6 years... and I got a better shot, given my leanings, at a Nobel Prize in economics.)

This from the most recent EIA short term energy outlook:

Crude Oil and Liquid Fuels Overview.  As member states of the Organization of the Petroleum Exporting Countries (OPEC) prepare to meet on October 14 to discuss market conditions, they face an oil market outlook largely unchanged from the previous few months.  While commercial oil inventories in the Organization for Economic Cooperation and Development (OECD) countries remain high, floating oil storage has been declining, and EIA believes that a gradual projected reduction in OECD oil inventories over the forecast period should support firming oil prices.  The economic outlook has also remained substantially the same, with Asian countries continuing to lead global economic growth.  World oil prices are expected to rise gradually as global economic growth leads to higher global oil demand and growth in non-OPEC oil supply slows in 2011.  EIA expects OPEC production will rise over the forecast period, keeping oil prices from increasing dramatically.  Should OPEC not increase production as global consumption recovers, oil prices could be significantly higher than the central forecast.  Conversely, should the global economic recovery be slower than expected, prices could be lower than our forecast.

(World economic growth has far more to do with absolute population growth than anything else.  Population growth is still with us... and that is the base cause of what we call "economic growth".  Total energy consumption from all sources likely peaked in in 2007 for the U.S.... not so the world.)

OK... with that Debt and Oil background, we find ourselves swimming in the disinformation campaigns of those that have their mouths (and both hands and both feet) at the political trough...  and their only goal is to remain there.  They have the absolute support of the elderly, the near elderly, the unwell, and all others addicted to "Big Government", which believe it or not includes most of the Healthcare industry, the Industrial Food industry, the Defense industry, the Education monopoly, and every single government worker from the President on down to the local dog catcher.

How do we extricate ourselves from this morass? There are no shortage of cleared eyed and clear thinking analysts to make these points... only to then run into what our leaders call "The Political Realities" - a misnomer for weaknesses inherent in our system in the age of cheap oil and fractional reserve banking. Our electorate is populated with "believers", not analysts. Most folks don't know who the Vice-President is, how many senators there are, or who is the Chief Justice of the Supreme Court... but they do know how much their unemployment or social security check is and they "believe" there is plenty of money to keep it coming... and don't try to confuse them with the facts, thank you.

Our Republic is truly at risk here.  There simply is not enough blame to go around.

To Be Continued...

What It Means

The U.S. Federal Budget Deficit is, by definition, enormously stimulative.  All deficit spending is stimulus spending.  Period.  Ergo, cutting deficit spending, or balancing a budget that has been in sustained structural deficit will be enormously contractionary (sp?).

There is nothing to be done about that.  When, not IF but WHEN, the budgets are balanced - either via political cooperation OR the international bond market's boycotting future Treasury auctions - the U.S economy will go through a recession that will likely make the 2008-2010 period feel like a prom date.

The question is this: Will this be forced upon us in a less than orderly way by the bond market or will we manage the process.  There ain't no more to it than that.

If the new Libertarian/Republicans coming into the House and Senate are serious about managing this process they must take the issue to the mat immediately.  If they do not, the opportunity will pass and the international bond market will "do it to it" at some time in the years ahead... if they do take the opportunity... we are looking at U3 unemployment of 15% given all of the federal, state, and local government layoffs with U6 approaching 30%.  Talk about a rock and a hard place for politicians.

There is some good news... that unemployment situation would not last long - people will do what they have to do - the U.S.$ would strengthen considerably and interest rates would stay very low, and Oil prices would moderate somewhat.

One way or another, the $1 TRILLION+ budget deficits (stimulus) we've been having will have to be taken down.  Pick your poison.

Speaker Boehner

I didn't know much about Bill Boehner, and still don't, but after reading this article I have a warm and fuzzy feeling about having a Speaker of the House who said:

“I’ve had every rotten job there ever was” and “I was grateful to have every single one,”

I am thrilled to see a working class kid at the top of the heap.  I never want to hear the name of another Kennedy, Bush, Clinton, Cuomo, Pelosi, Daly, et al in American politics ever again.  EVER.

Time for some new blood, and I like my new blood to have dug a ditch or two sometime during their lives... good for the soul.

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Today's JOD Award (Jag-Off of the Day) goes to Mike Whitney, the Lefty's Liberal.

Mike, you are a POS.  Your taunting, mean-spirited attack on Libertarians and nit-wit support for the innumerate Left has earned you today's JOD Award.  Anytime you want to debate, Mike, just name the time and place.  While I will feel poorly about entering into a duel with an unarmed opponent, I would be only too happy to strip the bark off of all your silly assertions.  The problems going on in France and the rest of Welfare West have one thing in common - Keynesianism, along with Socialism and Communism, is inconstant at its base.  This is not to say that the West's corporate cronyism, often mis-labled as Capitalism, is not... that does not make your assertions any more accurate.

(And man do I wish Glen Beck and Sarah Palin would dry up and blow away... thanks for your help in getting the ball rolling, but now you are merely getting in the way.  We desperately need thoughtful, intelligent, measured, well-spoken folks on the front lines now. Kooks to the rear, please. That means you too, Mike.)

Mike, you need to find a new line of work... because rational, well conceived, and thoughtful analysis escapes you.  Actually, belay that... perhaps you are well suited for your position as neither you, nor the vast majority of your sympathizers, can actually count. Neither have any, ANY, of you put finger to calculator and then pen to paper.  In short, you make sh#! up.  And the Left believes your sh#!.

W              T               F                  ?

Energy Equities

"Its an ill wind that doesn't blow SOMEBODY some good..."

Oil prices are back in the danger zone for the American economy, only this time an economic contraction is not as likely (notice I did not say "won't" or "will not"... anything is possible) to collapse Oil prices.  I say this because I believe that the U.S. is no longer the "Axe" in the price of Oil.

Nat Gas is finally finding the handle as it has become apparent to the industry and the market that the players have been overfunded to the point of soiling their own nests.... this is a great lesson in understanding the commodity cycle... over investment leads to overproduction leads to price declines leads to underinvestment leads to underproduction leads to rising prices leads to over investment...

Fron month crude Oil is $82.11 as we speak, but delivery this spring (June) is over $85.  This is murder on the U.S. economy but music to the ears of energy investors.

I like equities better than the commodity at the moment because of the fairly steep contango.  I made a killing in the commodity a few years back, but I made my bet at a time of steep backwardation (please goolge "contango" and "backwardation" for the sake of brevity)... and the market seems to be onto us in a case of "fool me once, shame on you... fool me twice, shame on me..."

My biggest energy equity position is Exxon... earnings just out were up 55% and that's with the price of Nat Gas in the crapper... If, and its a big "IF", Nat Gas can catch a bid Exxon could be a triple digit name.  Not a bad return for taking a AAA+ risk, me thinks.  Keep in mind that I use a multitude of hedges, i.e. covered calls, shorts, paired trades...

Gotta keep your eye on the ball, though.  This is not a recommendation, only my thoughts and observations and I reserve the right to change my mind on a freakin' dime.

Entreprenueurship

"The first years of man must make provision for the last.” Samuel Johnson

If you have not seen the 6o minutes piece on "The 99'ers", here's the link and it is well worth watching.

Now, before you get out your hankie to have a cry-in with these people... I want to make some brutal observations.

The folks in the video have fallen on hard times, and one can always sympathize with that.  Were there no warnings on the way? Were there problems with their expectations? Were their savings really all that robust? Or were their savings merely the "6 months of cash available to pay bills in an emergency"?  You think 6 months is an emergency (that's a hiccup)?  At what age did these now folks-of-a-certain-age (like me) start working? What was their net-worth at 30? 35? 40? You mean they weren't counting?  Why not?

This video is just soooo f&^%$@ing slanted. Why are these people in this position?  Did it ever occur to the folks at 60 minutes to ask these people for their bank statements for the past 10 years?  Pay stubs?  Any chance that what killed them, made saving money impossible, was the outrageous state income and property taxes, social security and medicare taxes... and a good measure of overreaching?  I watch the part with the $200k year executive.... guy lives in a house with a kitchen bigger than my entire house - and I'm officially "rich" (but just barely).  I milk my own cow, change my own oil, and repair my own roof.  What's so special about him?

(I grew up "poor".  No kidding. No health insurance (well, not till I was 13 when my father, at the age of 50, caught on with the Teamsters; prior to that he was a laborer and drove an oil truck) . Never saw the inside of a restaurant till I was in College. No vacations. Hand-me-down clothes and peanut butter and jelly sandwiches EVERYDAY from K thru 8th grade.  And I had a very happy childhood. Little League, violin lessons, ice skating, even got to go to the county's summer camp one year... being "poor" in the U.S. ain't poor, and not by a long shot... And my parents were able to retire to a little condo (fully paid for) in Florida where my 87 year old mother still lives, 22 years after retiring.  (Of course, this is what's wrong with Social Security...)

My parents would have preferred to beat their toes off with a ball peen hammer than go into debt to buy something. My father carried a thermos for his coffee because he would rather hang himself than spend a quarter for a cup o' joe. They started working, and saving, at 18... and had a small business failure when they were 50 (best thing ever happened to them... but they owned their home outright that same year) and my dad caught on with the Teamsters at Local 553 in the Bronx where he made good money for a working man - and I could see the difference at home. And between 50 and 65 my parents saved enough to be comfortable in retirement because they knew how to live small.)

How many of these folks grew up in middle class families, went to college, hiked Europe, went to grad school, futzed around, and started to work at 28 or 30 (or later)?  Its awfully hard to build up any meaningful savings in 15 or 20 years, and if you don't start getting serious about making money until 30... well, 50 rolls around pretty quick - you better be a doctor, dentist, etc... to catch up... if you spent your prime working years on a PhD in literature...  I am sure they went to high school with some "shop kids", kids that couldn't navigate college, went to the military, came out at 21 and went right to work as a plumbing contractor, electrician, mechanic... forgoing the Europe backpack trip - but having real money in the bank and real equity in their home by THE AGE OF 30.

The folks in this video "expected" to work for the same company forever?  Didn't they say they went to college?  Educated people understand how markets work; they know businesses fail.  I NEVER had a job that paid a salary.  EVER. I always worked for myself, or when I worked on Wall Street I was on commission. Benefits? Never had them; or I should say they came out of my pocket directly.  WTF is so special about these people?  They had no responsibility to THINK? To QUESTION? To EVALUATE?

Nope.  Because they had EXPECTATIONS. (Me, too. I expected everything to take longer, cost more, be more difficult than I envisioned, and never come out according to plan... and, of course, for the government to come in and bother me with some absurd regulation.)  And that's the problem. EXPECTATIONS.

The Leftist media is out with stories about how to stop the "off-shoring of jobs"... are you guys in the media that arrogantly retarded?  The folks in China, India, and Viet Nam have dreams and aspirations, too.  They want a better life for themselves and their family... and you want to stop them from competing with American's... WHY?  I thought you folks rejected American Exceptionalism??!!  Labor WILL arbitrage just as sure as the sun WILL rise in the East tomorrow...

The answer for these folks is this: Yes, you might have to live in the walk-up attic of a friend - and in exchange cook and clean.  Seems like a pretty good life to me. That lady in the video has a warm place to sleep in winter, cool in summer, and dry, too. She get's to have some company; living alone isn't that great... she might actually be able to save some money! She might actually have some free time! Isn't that better for the environment, too? Isn't that how we are going to cure global warming and resource constraints?  By living small?  The same folks that want CO2 regulations want the people in the 60 minute video to live alone in a 2400 square foot heated and cooled house and drive a 3000 pound car back and forth to the mall.... I don't get it.  Wasn't this the lifestyle the Liberal elite WANTED?

Most of these folks will find their way. No, "their way" will not include big houses and new cars and silly consumption for the self-described "shop-a-holic".  But life will go on (until it doesn't), they won't starve but they WILL have to work. The beer will still be cold, sunsets will be beautiful, and life will always be good.  They might have to bang nails on a roof, deliver pizza, collect empties from garbage... having done ALL of these things at some point in my life I can tell you that it wasn't all that bad. Chin's up.

Better days ahead.

Oil and The Humanities

Here is a link to a hysterical video regarding the value of an advanced degree in the humanities.

Thrilled does not begin to describe how I feel seeing the message making its way out into Blogsphere.

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So... back to Oil and energy equities and the markets...

TPTB have clearly decided to smush the US$ in an effort to increase exports... clearly these nitwits don't read my blog... Oh, well... there are no macro solutions, only micro solutions...

My sense is that while the U.S. IS in grips of an ongoing and long lasting credit contraction, not all commodities will fall in line.  Oil, me thinks, is at the head of that list.

The Energy SPDR, XLE, is back to where it was when Oil was $55 per barrel, and given the price of Oil is nearly $30, or nearly 60%, higher today... well, my bet is that these 2 have likely diverged as much as they are going to. The U.S. might be headed toward third world status... that does not mean you have to join in the effort.  If Oil prices only remain here and head no higher, they probably harm credit expansion while also increasing the prices of energy equities... if they head much higher it most likely be due to a steepening in the decline in Oil imports, and that would be an unmitigated disaster for credit expansion.

If that happens, keep an eye on JNK, the Junk bond ETF.  Junk has had an unbelievable rally and some smart folks think Junk's been blown into a bubble by our friends at the Fed... personally I am agnostic on that... BUT if you start to see JNK heading south I would be looking to get flat energy equities UNLESS Oil, the commodity, is doing well. (That was purposely ambiguous as I am not making a recommendation, only an observation and a method of confirmation... that may or may not work or be accurate.)

I am long the US$ and have been for a few days... when the index got down in the low 77's and only 3% of the market was bullish on the US$ I figured that was good enough for me... I THINK, not sure, just THINK that if the US$ catches a bid here it won't be too terrible for Oil, and if it sinks further Oil will take off the low $90's(?).  Its a pretty good hedge.  And yes, they could both go up together, and less likely they could both go down together...  For you Gold Bugs... it wouldn't take much US$ appreciation to do some damage in that market place... trees, contrary to newsletter opinion, do NOT grow to the sky... as always, when I am wrong I am gone... or very hedged.

I am going to maintain, hedged and unhedged, positions in energy equities for the foreseeable future as I think the opportunity for some kind of energy shock by the end of 2012 to be very, very high.  I don't want to miss it by being too cautious.  That's not an investment for widows and orphans... and I reserve the right to change my flippin' mind...

So watch JNK, XLE, and the price of WTI along with the US$ Index.... should be interesting.

The End of Wall Street

Wall Street IS dead. Long live... what?

This is one of those cases of being careful what you ask for - you may just get it.  Actually, this was going to happen - it was as ineluctable as death and taxes.

Bear Stearns and Lehman Brothers have joined Donaldson, Luftkin, & Jenrette; Hambrecht & Quist, Alex. Brown, Morgan Keegan, Pru Bache, and a host of other non-bank brokerages that have gone the way of all flesh.... OK... So who, and what, is left?

Not much, really. A couple of zombie big banks... and Goldman/U.S. Treasury/the Anti-Christ.

The only thing keeping New York and its metro region from slipping off into a Billy Joel like ferrel state-of-mind is the yield spread.  Given where TPTB hail from, the Fed just ain't gonna let that happen - they would rather destroy the currency, California, relations with China... anything but that.

Maybe you are thinking the drug, healthcare, or consumer staples sector... I doubt it... Moore's Law applys to drugs as well as micro chips, 18% of GDP on healthcare is simply not possible in the long run, and just how much bleach and tooth paste do we really need?  It won't be long before folks use half the tooth paste per brushing and reuse spray bottles with diluted vinegar and ammonia... it seems the end of bubbles is nigh... and that means a great many folks will need to make their living by honest toil... especially as the municipal and state tax revenues fail to materialize and all those public employees join the bankers and brokers in the ranks of the 99'ers.

The banks, brokerages and the rest of the financial sector are in for a great deal more contraction.  Given that China and Japan exported things, and the U.S. exported financial services, this is just disastrous for government revenues on all levels.  All of the folks complaining about the "rich" won't have a great deal to complain about in the future... but I don't think that that is going to work out so hot for the "poor" that continue to rely on others for their resources.

HOWEVER

This is NOTHING but good news to the next generation, at least for the ones that play their cards right.  Housing costs are no longer going to absolutely destroy them... and if they don't let the student loan thing ruin them... and they stay clear of states and municipalities that want to tax them into penury... AND they absolutely, positively do not marry without a prenuptial agreement... then they have as much of a shot at a beautiful life as any other generation... certainly more than their parents who got sucked into the whole material competitiveness and divorce thing with the help of Hollywood.  (Remember the '80s? Limo's and cocaine and rolexes and the Hamptons... didn't do much for people's well being... turns out that "early to bed and early to rise" was no lie. Who know's what wisdom young folks will pick up next? "A penny saved is a penny earned"?)

The next bubble? Oil has more of a shot than Gold from here, me thinks (but much depends on the various policy responses and initiatives coming out of Washington).

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The U.K recently rejected Keynesianism.  Is the U.S. next?  Maybe not yet, but perhaps after the next presidential election.  While absolutely necessary, it will require the greatest political sales job and foresight since Herod rejected Cleopatra's come on, because it will require convincing the elderly to make sacrifices along with everybody else - and living as I do amongst them here in Florida.... well, I am not so sure about that.  The idea that incoming Tea Party folks are already talking about FUTURE cuts and FUTURE age increases for benefits does not sit well with my mathematical mind...

But you never know.

Its All about Oil, Again

Oil has caught a bid and is now trading well above $83 per barrel for winter month delivery.  At these prices, the energy equity market vs the oil market tells me that either Oil is very, very over priced... or energy equities are very, very underpriced. Given the Fed's absolute determination to QE (destroy the US$) our way to recovery, we can't even count on the other nations killing their currency equally.

The American economy is not the driver of energy company earnings - Oil prices, and to a lesser extent Nat Gas, are. And yes, I know Nat Gas has been murdered... my sense is that a lot of that has to do with an outrageous access to credit for the Gas producers and drillers - especially the smaller and marginal players.  Frac-Gas costs over $6 per mcf to produce, and Nat Gas front month is in the mid $3's... believe me when I tell you there will be bankruptcies in that space and that the market will force these dopes out of the market.

If Oil holds up and Nat Gas stops getting killed, energy equities will out perform by a wide margin.

This not a recommendation.  Just an observation.  Energy prices could head south, and if they do, energy equities will NOT be cheap.

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Oil imports into the U.S. have fallen 3.5% so far this year when compared to this date in 2009 - total petroleum imports are now under 10mm bpd.  TOTAL world oil exports, that is Oil being sold internationally by the Oil exporting nations, has fallen over 5% since 2005.  Meanwhile, world population has increased by nearly 6% during that time.  The rest is fairly self-explanatory.

"People are Good"...

People are BASICALLY good... but not so much when it comes to property rights and gaming the system.

I live half the year and I rent a house in South Florida (I sold my home here in 2005... remember the housing crash?  Missed me!).  Pay my rent on time, and am generally about as good a tenant as you can get - family man, live well within my means, live quietly...

The people I rent from?  Not so much... the owner at the house I lived at previously (this is all public information) owes me $4040... that was the determination of a the Palm Beach County Civil Court after a lengthy hearing and trial process - one that the owner fought, lied under oath, and dragged out for months.  It has been 7 months or so since the Court's decision, and despite my best efforts to remind this sad excuse for a human being that she had her day in Court, no check has been forth coming.  As it turns out after further investigation, this has been the standard operating procedure for this POS for quite some time.

So.... I find a beautiful house steps from the beach in Boca Raton, which happens to be a couple blocks from my elderly mother's condo, so I sign a lease and hand the owner nearly $10,000 for first, last and security deposit.  Unfortunately, last week we were served with Court papers that the bank was foreclosing on the Owner - seems the owner has not paid the mortgage since November 2008!  Got that?  The owner was collecting rent checks, and taking in security deposits, but had not paid the mortgage in 2 years.  BTW... the property taxes?  Hasn't paid them in 3 years... Nice work if you can get it, I guess...

So I contact the Court and the City property tax assessor... The Court says "No Problem, you have a lease and you are paid through till January 1.  We can't guarantee what the bank will do, but as a practical matter there is little to no shot of you being evicted by January 1".  That did not make me feel much better, as I wanted to stay until March 1 as my lease states... so I went over to City Hall where I got the unofficial "everybody is doing this, but don't say I told you".  I also got the unofficial report that half of the expensive homes over by the beach had not paid their property taxes in 3 years.

While this is hardly scientific, it certainly is NOT a great data point regarding housing prices... and it really doesn't say much about "community" when property owners are only too willing to steal from people and from banks.  It seems that people WILL game the system, and disgustingly so, and many are quite willing to steal from their neighbors.

The moral of the story?  Desperate people do desperate things... best to stay clear of them, and stay clear of the things and temptations that can bring one into desperation themselves...  I was looking forward to my full time move to the farm this spring... but perhaps this might come down a little sooner.

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From the "This has nothing to do with anything" department:

Last week a Rutgers University football player was paralyzed from the neck down.  A few years ago, a Penn State player was paralyzed from the neck down... this type of injury happens several times each decade at the college level, maybe once or twice at the pro level, and every year at the high school level.

I read these stories without detachment...  because there but for the fates go I. When I was young I played football for a high school in a rough-and-tumble, gritty, blue collar town about 10 miles north of New York City's Borough of the Bronx.  I was recruited to play major college football as a Defensive End, and received an athletic scholarship from one of the nation's premier college football programs.  By my junior year, I had developed a chronic injury in my neck - every time I made a tackle or a hit, my right arm would go completely numb or burn with radiating nerve pain.  The trainers and doctors described it as a "sprained neck", whatever that is (I didn't know you could "sprain" your neck).  I could move my fingers, but I could not lift my arm... and I was in excruciating pain most of the time.  The team trainers were of the mind that this was football - you have to accept injuries as part of the game. I looked around me - in a 4 year college football career the odds of severe knee (or other injury) damage seemed to me to be near 50% for defensive linemen, leaving most disabled later in life.  The coaches were all former pro and college players.... and they looked terrible.  Fat, crippled, and just a weeeeeee bit loose in the head (at least they seemed so to me).  This was before we knew that playing football had serious neurological consequences.

In pre-season practice of my junior year I was involved in a 3 way collision that knocked me nearly unconscious and unable to lift or move my arm.  The next day I went into practice, got taped up, sat out by my locker, and couldn't put on my shoulder pads and jersey no matter how I tried.  I had a blindingly painful headache (in looking back there is no doubt I had had a bad concussion) so I picked up my gear, headed over to the equipment trainer, gave him my stuff and told him I was done.  I walked back to my dorm room still in my practice pants complete with girdle, thigh, and knee pads. Other players were still straggling in late and were wondering where the hell I was going... It was the most difficult decision I had ever made in my young life... but I felt I was one hit from being a quadriplegic, and I wasn't willing to take the risk for even one more day.

Several years later Marc Buonticonti, the son of Miami Dolphin legend Nick Buonticonti, was paralyzed from the neck down in a college football game. Buonticonti was playing with a "sprained neck", too. That was in 1985. Marc was quoted as having "waged war on paralysis".  While saddened for Marc's circumstances... I celebrated my own decision, and my own good health.  I often wondered how Nick Buonticonti felt about the game of football - no doubt the primary source of his wealth, connections, and fame - after his son's life changing injury.  I hear he still cracks a champagne cork after the last unbeaten NFL team loses each year.  Life does and should go on, I guess... All the money raised has done wonders for the professionals researching Spinal Chord Injury ("SCI").  They get great salaries, people call them doctor, their kids go to exclusive private schools... and it is now 2010, and despite millions of dollars raised to fund research and treatment, Marc Buonticonti is still driving a wheel chair with his tongue (not that Marc and his organization have not done great things... they just haven't done great things for Marc's paralysis. Marc Buonticonti is an outrageously courageous individual).

Some years later, my first son was born. There were NO pictures of my playing days in my house.  The television sat unused on saturdays and sundays during the fall.  With rare exceptions, I never watched football again.  My son played soccer, baseball, and wrestled.  Somehow, without any knowledge of chronic traumatic encephalopathy ("CTE"), I came to the conclusion that football was not a risk worth taking for the mental and physical health of my son.

Life changing spinal chord injuries happen - car accidents, horse back riding, surfing, falls - but needless to say they are to be avoided at all costs.  I read with sadness AND anger the words of the Rutgers' Coach when discussing the spinal chord injury his player sustained last week. The same words are trotted out every time a player is paralyzed... "he's a fighter", "he'll walk again", "he'll never give up"... platitudes do nothing, and spinal chord injury takes everything - and leaves you with a "head in a bed".  Now we are finding that the game of football simply cannot be played WITHOUT neurological damage occurring somewhat up the nerve stem in the player's brains... their brains are damaged with every hit; they suffer from pugilistic dementia, depression, rage, suicidal tendencies...

In life we make and live with our own decisions, and a good measure of luck (good and bad).... but is this no way to spend a life.  If you have a kid interested or already playing football, you really must consider the risks of spinal chord injury and chronic traumatic encephalopathy.

I thank my lucky stars everyday that I am healthy, happy, and in love with my life and family... for every time I carry my little girl to the beach and watch her play in the sand. Spinal Chord Injury has forever changed the lives of many people... There but for the grace of G-d go I.

The Keynesian Theory Dies in its Birthplace

Britain, birthplace of the Keynesian monster that destroyed the West, has sent a Knight in Shining Armor to slay the beast.

I wish them luck.

Those backing this agenda will no doubt be attacked and skewered by their political foes because in the short to medium term this will be very, very hard on a great number of people.  I have compared it to a fat, slovenly, overindulged American teenager being conscripted into the military and facing a brutal readjustment in basic training.  Of course, on the other side that teenager will be lean, healthy, and vibrant - but its hard to see that place from their current position on the couch with the TV and video games blocking the view.

The fact of the matter is that in America, the U.K., and most of the West, the proportion of people working in the private sector to people working in the public sector has fallen to its lowest levels in decades... and in some countries, in all of history.  Combine this with outrageous pension and healthcare "benefits" (forced extractions from the have-not-private-sector to the haves-public-sector) and viola! You find yourself here, trying to avert a Greek style meltdown because there is no one big enough to bail out the U.S., or even the U.K.

So without further ado:

Dear American Left:

Its over.  We have reached the terminal point. The U.S. will, absolutely and positively, eventually bite the very same bullet that the U.K. has bitten.  The damage you folks caused - the destruction of the American family, the addiction of MILLIONS upon MILLIONS to social programs that will de facto be defaulted on, an addiction that fueled our growth in prison population, HIV, violent crime, etc.. - with your misplaced vision of social engineering will go down in history as one of the greatest historical failures since the Third Reich.

Dear American Right:

Its over. We have reached the terminal point. The U.S. will, absolutely and positively, eventually bite the very same bullet that the U.K. has bitten. The damage caused by increasing the size of our military until we had occupational forces across the globe, interfering in the internal politics of sovereign nations, playing world cop, and antagonizing the more radical of these folks to the point that they were willing to kill themselves in order to kill us, etc... - with your misplaced vision of American exceptionalism which will go down in history as one of the greatest failures since the U.S.S.R.

Keynesianism is DEAD, may it rot in hell. Now, let us kill the Federal Reserve Act, Obama Care, the Department of Energy, the Department of Commerce, the Department of Homeland Security... privatize Social Security, Medicare, Fannie Mae, Freddie Mac... and end the bailout of the "the too big to fail" (the establishment)....

The U.S. federal government will need to cut 37% of its budget at a minimum (just to bring government into equilibrium with revenues) and likely should be double that (just to bring government into equilibrium with humanity).

The Tea Party says they want to Do The Right Thing.... well, here's your shot.  Don't miss.

A Glorious Day to Blog

"For libertarians, freedom entails the right of people to live their lives any way they choose, so long as their conduct is peaceful. For conservatives, freedom entails the right of government to do just about anything it wants, even if its conduct is violent." – Jacob Hornberger

Hornberger should have added: "For Liberals, freedom entails the right of government to do anything and everything necessary to destroy the people from within."

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Ah, where to begin?

The U.S. employment picture?  France's response (or what happens when you addict people to social programs that the state simply cannot afford?). California's incredible (just incredible) pension liabilities? The fact that 90% of African American Children will be on food stamps? Or that 1 in 22 African American's will be HIV positive at some point in there lives?

I gotta tell you... the Left in America really should stand and take a bow, because ALL of the above is their handy work.  (I am working on an Open Letter to the NAACP and any and all that consider themselves leaders in the African American community imploring them to embrace Libertarianism - we would love to have you on our team - as a means to defend themselves from what the Left has done to this community. It will be titled with a quote I borrowed from "Anonymous": "When you find yourself in a hole - STOP DIGGING".)  The enemy is NOT China, nor Russia,  nor radical Islam... the enemy is within, and they are doing a far better job of destroying the U.S. socio-political-economic fabric than anything a foreign power could ever even dream of.

The good news is this - They are DYING.  The bad news, or really the question, is this: Will the American people have the courage, the temerity, and the fortitude to get through the deflationary wave, the de facto defaults in Social Security/Medicare/Public Pensions, and the continued decline of Oil imports into the U.S. WITHOUT pulling a 1930's Germany and giving ourselves over to a Hero, A Deliverer, or other Miscreant who promises to restore that which never was?

(BTW... Oil imports into the U.S. continue their decline, now going into their 6th year... this from the U.S. Department of Energy this morning:

U.S. crude oil imports averaged 8.1 million barrels per day last week, down by 798 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.8 million barrels per day, 444 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 708 thousand barrels per day. Distillate fuel imports averaged 188 thousand barrels per day last week.

The U.S. has done a marvelous job of ameliorating the effects of Peak Oil Imports; and while Peak Oil might still be debatable, I think any statistician would be hard pressed to counter the Peak Imports circumstance.)

So let's look at some of the issues I mentioned.

California's entire tax revenue is only 1/5 of its pension liabilities??!!  This is what happens when Childish "True Believers" without the benefit of numeracy convince the population that something can be had for nothing.  The same folks that ran San Fran City Hall in the 1970's, put these programs and policies in place, and now DOMINATE the Democrat party (I am not suggesting for ONE MINUTE that the Republicans of the past 20 years were the slightest bit different or better - they were not).

The U.S. Employment picture simply does not get better... and is likely to get a whole lot worse before it DOES get better.  No improvement in employment = no recovery. The only way to improve this situation is to ALLOW the market to do its work - unless the U.S. wants to pull a U.S.S.R. and try to employ EVERYBODY, and we all know how that worked out.  There is no sugar coating how brutal this would be... it is very much like trying to take a soft, fat, overindulged American teenager and putting him through a Military style boot camp - nobody in their right mind could say they enjoyed it, yet most feel pretty good about themselves on the other side.

Good luck trying to get this generation of humpty-dumpty shaped barkalounger's to support the politicians delivering that message.

It gives me no sense of "I told you so" B.S. to see the social reaction in places like France and Greece to the reality that there is no such thing as "something-for-nothing"... even if I have had to to tolerate the Left's disingenuous exclamations of "Look, Europe does it!".  No, Europe, doesn't "do it".  They were living a lie of deficit and Oil surplus just like the U.S.

1 in 22 African Americans will HIV positive in their life times??!!  90% of African American children are on Food Stamps (now called SNAP)???!!!

This is the greatest failure and missed opportunity of the BHO presidency.  White politicians are too afraid to take this one on (although GWB DID give it a stab). A half black president that is accepted as he is in the black/African American/people of color community that will not take this on is simply... well, unforgivable - and if I were working for BHO as a political operative he would be getting a consistent message about this because it can save his presidency ANYTIME HE DECIDES. More Black men are in prison than in college - that is, 1 in 10 black men are behind bars RIGHT NOW.

In the final analysis, it was the programs and policies of the Left that has led to the demise of the African-American family and America, so terrified of appearing racist, is diffident of taking this on.  It is no secret here that I am no fan of the U.S. Prison/Industrial complex nor the U.S. War on Drugs... but you can't blame EVERYTHING on the system.  I think I can say with great certainty that it is time for the Black community to embrace a different political belief system... associating with and supporting the Left has not exactly done you folks any favors.  You gotta start somewhere. Today is as good as any other day.

(But at least Jenny Sanford is happy she's meeting new men and she's not embittered toward her ex, Governor Mark Sanford or his smoking hot Latina lover... so we got that going for us... HOW THE F&^&^% does this kind os sh#! make its way into the press?)

Do I really think our body politic us up to the challenge? Not even a little bit.

Best tend to your own garden.

Something to consider

I hope my readers will watch, and really, really listen to this and this.

Worth every moment taken away from your life.

The U.S. Budget 2010

In stunning coup of outrageously manipulative BullSh*!, the Rolling Stone Magazine claims that Corporate Interests funded the Tea Party.  Let me begin by saying the Tea Party is as FOS as the Left... but the Left is just soooo disingenuous in that their reasons for rejecting even the worthy portions part of the Tea Party message is that the Tea Party folks are no more interested in addressing Social Security, Medicare, and the Military Budget than anyone else... so since they aren't going to be prudent... their argument seems to be "allow us to stay in power so that we can continue to be equally imprudent".  While that is absurd in the extreme, the Tea Party/Republicans are just as absurd - because this is simple, Junior High School math.

The U.S. Government says it spent $3.46 TRILLION $$$ in 2010.

The U.S. Government says it took in $2.16 TRILLION $$$$ in 2010.

The U.S. Government says that the deficit "dipped" coming in at only $1.29 TRILLION $$$.

(The only funny thing about this is that its probably time to buy the US$... but with no patience for losses - if I am wrong, I AM GONE.)

Too many economists and members of our illustrious press (snicker!!) refer to the budget deficit in terms of its annual percentage relative to GDP.  A better way might be as a percentage of revenues - nearly 60% (I guess as a percentage of expenditures is OK, too - over 37%). In other words, in order to balance the budget the U.S. Federal Government would need to cut the size of the government by 37%.

"But wait!"  An economically challenged moron writing for Rolling Stone Magazine might say... "Why not just increase taxes on the rich by $1.29 TRILLION??!!"  To which I would respond to the nitwit from Rolling Stone: "Per annum? You mean you think we should increase taxes by $1.29 TRILLION per annum for ever and ever??!! (never mind that you would have to increase the whole kit-and-kaboodle at some exponential growth rate because the budget does not stay static).  Do you know what that means, dearest Rolling Stone Jag Off?"

The problem is this: The slapped-ass from Rolling Stone has NO IDEA.  He doesn't need to know. That's the advantage of know-nothing positions.

Governments (that have their own currency like the U.S.) do not even NEED taxes.  They can always print money or create deposits out of thin air.  So, why go thru the pretense of taxes?  There are a number of reasons... the PRIMARY reason is that taxes are a vehicle for siphoning money out of the system to control inflation/deflation (but really inflation... who would siphon money during deflation? A-hem!  The U.S.).  If we were to follow the Rolling Stone's clever strategy... the U.S. would remove $13 TRILLION $$$ form the money supply over the next decade - at the same time the U.S. is in the grips of a credit contraction (deflation) not seen since the 1930's (and the only thing that stopped that was WWII... don't know about you, but I want to pass on WWIII)... do those great economic minds from Greenwich Village have any idea what that means!!???!!??  Do they even have the slightest idea that tax extractions by the U.S. Federal Government over the years has averaged 18.5%, + or - 1%, of GDP since the end of WWII?  And that what they are suggesting is increasing the governments take/decreasing the money supply to the tune of 10% of GDP (bringing the total takes to roughly 29%) per year, every year, for now M*ther ^%^$&ing on? Do you know what that would mean?

It would mean the end of the world.

So thanks, Rolling Stone Magazine, for continuing your propaganda effort and the farce we call the American Body Politic.... NOW F*%! Off.

Just Say NO!

So the truth is consumers are NOT paying down their debts.  They are defaulting on their debts.  Every G*& D*mn pop up ad I see is either telling people how to lose 50 pounds or how to get of debt.  WTF??!!

How much debt is acceptable? For the VAST majority of consumers the answer is:

Damn Near Zero.

Think about it: If one is saving for a rainy day, retirement, financial security... and one is an Average Joe (like me) - what are the circumstances in which debt of any sort is acceptable?

Let's start with:

Student Loan Debt - UNACCEPTABLE (unless it is for an advanced degree in a profession where the advanced degree IS THE BARRIER TO ENTRY - surgeons, lawyers, engineers in certain fields come to mind... women's studies?  African American Studies?  Not so much).  If you have folks with money, good for you... If not, go to state schools, work, beg, borrow, or steal...  but do not go into debt for an undergrad degree.

Car Loan Debt - UNACCEPTABLE. Buy used, small, and cheap... and take a loan if you have to - then work 3 jobs until you pay it of.  Don't know how to change oil or spark plugs? Or change a flat? You have NO BUSINESS owning a car.  Live near work, rent cars when needed - commuting is for suckers.

Mortgage Debt - In a world with declining real estate?  HAHAHAHAHAHAHAHAHA!  HEHEHEHEHEHE!! HOHOHOHOHOHOHOHOHO!!  Coach surf, live with parents, friends, rent a basement apartment.

Credit Card Debt - For What?  Lunch Out?  Those cute little shoes? Songs for your I-pod?  You bought an I-Pod?? WTF FOR??!! If you are in debt, you don't need to be entertained; you need more income, and you will be plenty entertained juggling those 3 jobs.  There are plenty of jobs to be had - they just aren't full time, no one wants to pay the healthcare bill for overweight Americans, and even fewer are interested in having to fund your retirement when you claim disability.  I had a part time job doing fencing at my farm this summer, and I had the darnedest time getting anybody to show up for work paying $15 per hour.  When I told the first guy that his cell phone and texting had to go (I was holding 70 lbs of barbed wire while he made his evening plans) he didn't show up the next day.  He texted me to leave his pay in my mail box so he could pick it up, I presumed at a time that would not inconvenience his social plans...

Times ARE tough.  Want to get ahead? Live small, stay clear of debt, hustle like crazy.

There was a sign in my boss' office at Bear Stearns that went something like this:

“Every morning in Africa, a Gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a Lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn't matter whether you are a Lion or a Gazelle... when the sun comes up, you'd better be running.” - Unknown

American's have forgotten the lost of art of getting up early, hustling all day, being humble, and packing a lunch. Its time to get back to basics.  Blocking and tackling.

Meat Prices in the Land of the Whopper (person, not burger)

This article contained a fascinating data point:

The U.S. per-capita beef supply may drop to 57.6 pounds per year in 2011, the smallest in 59 years, according to Centennial, Colorado-based researcher CattleFax. The supply of pork available to each U.S. consumer will slump to 46.8 pounds annually, the least in 35 years.

Per-capita beef and pork supply (and consumption) is at multi-decade lows?  And Americans are now the size of most pigs at slaughter?  WTF???!!! (I guess Atkins had it right.)

How do you like that...

BTW... those meat consumption numbers are going to keep dropping unless folks start raising livestock at home.  Its a closed system as far as inputs (animal feeds) and then there are the limitations on breeding (especially for beef - a hog will have 2 litters of 8 per year but a cow will usually have but 1 calf per year and farmers NEED to keep the heifers long enough to drop more calves) and economics.

It won't be long before poor folks figure out how how to raise a hog in the yard or alley and chickens on the fire escape fed on food waste that used to go to the dump especially when SNAP (food stamps) is about $750 per month for a family of 4.

And that's a good thing.

"The Costs of War"

I always read Mike Shedlock's excellent blog... but today he outdid himself:

Today he posted an article titled the "Cost of War".... in which he tallies the outrageous expense in blood and treasure that these mindless expeditions have cost our nation... but also goes on to say that it is "time to declare victory and bring the troops home".

I am always thrilled to see my fellow Republicans of the Libertarian persuasion out and out loud.  I believe in supporting a STRONG DEFENSE - not a strong OFFENSE.  It is time to look homeward and to renounce the role of international enforcer and policeman because not only is it the right thing to do, it is also in our best interests.  The U.S. government is going to have to do some enormously unpopular things in the line of cutting social programs... it will simply be politically indefensible to do these things with a military budget consuming 5% of GDP; it might even be indefensible to do what needs to be done with a military budget of 3%.  The folks benefiting from those expenditures need to accept this, and the folks benefiting from the social programs will need to make other arrangements, too.

Neither Iraq nor Afghanistan is worth the life of my son (well, as far as I am concerned). Unfortunately, it is too late for thousands of other American families, and hundred's of thousands of Iraqi and Af-stani families.  I love to wave The Flag, but not for this.  I want to show my support for the American troops serving in Iraq and Af-stan by bringing them home and buying them a beer.

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So back to  QE2...

Quantitative Easing in general, and QE2 in particular, have this one-really-big-hairy-fly-in-the-ointment:

Oil Prices.

Yes, QE2 can work for a while in forcing up certain asset prices, and; No, it won't work if one of those asset prices is Oil.

Here's the math: Without QE the price of Oil would likely have already fallen to $50 per barrel - or $200 Billion of trade deficit JUST FOR OIL. At $83 per barrel (today's price) that would increase by $133 Billion per year... or a $333,000,000 TRADE DEFICIT JUST FOR OIL, and at $100 per barrel, which is very likely given a "successful" bout of QE, that number would move up to $400 Billion (I guess there is some good news with the decline of oil imports).  In other words, we increase the national debt by $500 Billion of QE2, and $200 Billion leaves our shores the very first year in the form of higher oil prices (yes, I know that's not exactly correct, that there will be some benefit to our exports by demolishing the US$ - let me know how that works out).... but since our economy simply cannot support $100 per barrel oil, the QE of QE2 will have the unintended consequence of giving the economy another black eye, thereby requiring QE3, and QE4, and QE5... particularly since all of the stimulus monies were spent on projects that would demand more consumption of petroleum.

So, here we find ourselves once again relying on a political leadership without the slightest grasp of combinational game theory (chess), opting instead for another kick of the can.  And why? Because our political leaders have abdicated their responsibilities to the Lobbyists (given they do not even read the legislation they vote on) and have convinced the American electorate, among other things, that: something can be had for nothing; that government can make life fair; that government can overcome natural law in all things and make you whole on your expectations; and that you do not have to save, invest, accept any risks, accept any responsibility, you may eat, drink, drug... as much as you like without consequence.... and that if things don't work out according to your satisfaction, well... somebody did this to you (and not the government)... it was the corporations, illegal immigrants, or the Conservatives, or the Jews, or radical Islam, or Wall Street, or the Boy Scouts... I can hear it now... "They did this to you!!" ("it wasn't me.")

QE and the Blame Game

The idea behind QE is that the Fed crowd's out money that would otherwise have been buying Treasuries at auction, forcing that money into other assets in order to raise the prices of those other asset classes.  So far, the strategy has worked beautifully.  Or so it seems.


QE is merely the LAST KICK of the "kick the can down the road" strategy that our government has employed since the Federal Government's actuaries made clear the absolute certainty of what must occur with the government's various social programs.  When I say "social programs" I do not mean ONLY Social Security & Medicare.  I mean Medicaid, Fannie Mae, Freddie Mac, Food Stamps, HEAT, HEAP, and the rest of the alphabet soup now supporting the staggering weight of the American people.


(Yes, the AMERICAN PEOPLE.  Not just poor people, or Black People, or Hispanic People, or Native Americans, or Christians, or Muslims, or Jews... EVERYBODY.  Walmart benefits from SNAP (food stamps) at least as much as those individuals receiving this "benefit" do.  The primary vehicle supporting this ongoing ponzi scheme of social programs is the G^% D*&& F&^%*ing CORPORATIONS. And corporate securities, directly or indirectly (yes, real estate is not a "corporate security"... or is it?  It is funded by the banking system, which is part of the corporate system... and without bank financing, there would be no financial value to real estate (neither barter value nor personal production value are financial value)) make up nearly 100% what we American's define as "wealth"... and as we all know WEALTH = POLITICAL POWER.)


Our Federal Government has painted itself into a terrible corner (or it may have been painted there by phenomenon... or momentum...).  The very programs designed to "ease poverty" (and boy could I have some fun going through the machinations of trying to define that) have succeeded in increasing the number of "poor", and we have reached the terminal apogee of that orbital exponential function... the orbit of the apogee I speak of was expanded by the Zeitgeist onto the balance sheets of every government, corporation, and individual until the total debt within the system could no longer be supported by the production within the system.  And how, exactly, did that come about?


Well, there are the facts that can be supported by thoughtful analysis, and there are the opinions of the biased (and of course WE ARE ALL BIASED, including me... but we overcome that bias through the aforementioned thoughtful analysis).


I assert that it is our Federal Government that is completely dependent upon the Corporate system, a Corporate system which breeds such terrible inequalities in wealth and political power and stratify's our society as to be unsupportable - except that without it all of the social programs that have created this behemoth would dissolve before our eyes with all of that outcome's attendant effects. Think about that for a moment.  (And, please, teenager's of ALL AGES, spare me the lecture about the military budget... it is agreed that the military budget is out of bounds and must be cut deeply... but even a cursory review of the budgets of the various social programs would reveal that the these dwarf even the military's absurd budget.)


The American people have come to blame "the Politicians" when the blame is ours - and ours ALONE. We, and we alone, have tolerated a political process whereby laws are enacted even though NONE OF OUR LAW MAKERS HAVE READ THE LAW THEY ARE VOTING ON.  Ergo, we have left the legislation process in the hands of the "money" - the corporate, union, and special interest lobbyists (I despise the Left's disingenuous attack on the corporate lobbyists... when their special interest groups - feminists/abortionists, NAACP, NEA, et al puke... dominate) - "money" that derives its support from the Corporate System, a Corporate system that the Federal Government is COMPLETELY reliant upon for its continued existence.


"Cluster F**k" only begins to describe the situation.


And then you have the various "True Believers" of the Left and Right trying to make political hay out of this CF and doing everything within their power to perpetuate the ongoing control of the system by the 2H1P. 


In the end, it will be Fascism or Libertarianism.  Getting there could get very rough.  The solution is not Liberalism or Conservatism, choosing Left or Right - they are the problem, and they need to go.

More to come.

A Busy Week

The Grains market went ballistic today. The USDA slashed end of year inventory (the food supply's margin of error) to the lowest level in 16 years (in the end, my bet is it will the lowest level, EVER).

To you doomers:

No, this does not mean food shortages (at least not right away, and not here in the U.S.  I would not want to be living in a Pakistan, Sudan, or Egypt...). It does mean that the 2011 crop has ZERO margin for error. If the U.S. experiences some kind of extreme weather phenomenon in the Corn producing regions next year... there will STILL not be a food shortage (well, unless we have weather on par with 1936... then we would be in some deep doodoo).  There WILL BE a gasoline shortage, though.  The U.S. consumes over 42% of its corn crop to produce ethanol - so the slack would have to come from there... and, given that ethanol provides roughly 10% of the U.S. consumption of gasoline BY VOLUME... something would have to give... but I do need to noodle this some more...


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The Fed and U.S. Treasury seem hell bent on bringing the US$ to its knees.  I am not sure what they have in mind and what they hope the outcome is... but it is a fascinating time to be alive... and at this moment they are "in for a penny, in for a pound"... today's unemployment number was horrific, and the data upcoming for at least a couple of quarters are going to be ugly - so the equity market bid up prices in anticipation of QE2.  The market must have missed class the day they covered the "Broken Window Fallacy" in Eco 101.

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Bank of America halted foreclosure sales in all 50 states today.  The other big banks are not far behind.  What a windfall for the irresponsible!  And what a disaster for the modest, frugal, rational folks that kept their debt levels in order.  Politicians are tripping all over each other trying to enact some kind of moratorium... be careful what you ask for, you might just get it.  Any foreclosure moratorium would drop the housing market and economy to its knees... and they might not be able to get the whole debt slave thing going again, or at least for quite some time.



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Bubble, Bubble Toil and Trouble

"There you go again!" - Ronald Reagan

"It's a story about us spending money we don't have on things we don't need to create impressions that won't last on people we don't care about." - Tim Jackson (he should have added: "but who we would like to have sex with).

Well, the Fed did it again.

In an effort to re-blow the housing bubble they blew bubbles elsewhere - primarily in precious metals.

In an effort to help exports they have killed the US$, leaving Oil in the mid $80's... and Oil is problem NUMERO UNO for our trade deficit.  In other words, "let's help our exporters by increasing our foreign debt for Oil" - this is not a strategy that any rational person would pursue.

It is simply not possible to know what the hell you are doing in a world in which the rule makers change the rules day to day and week to week.  IF, and its a BIIIIIIGGGGGG "IF", you could forecast the policy response with ANY accuracy you MIGHT make heads or tails out of this... but considering the FEd DOES KNOW what the policy response is going to be.... and considering how badly they have f*&^#!ed everything up... you get the idea.

Oil in the mid $80's is very near to dragging the economy back to the abyss.  Oil over $100 would shoot the economy in the head... and then drag the economy back to the abyss.  Either way, you end up in the abyss.

Here's another thought.... Oil in the mid $80's with 10% unemployment? With REAL unemployment closer to 20%?  I would not have thought possible.

It just gets weirder and weirder.

Currencies at War

The major currencies appear to be at War. There are no rules, and no way to predict what the various Central Banks might do... and they appear to be doing them every day.

The stealth rally in Oil might be here for a while...

Savings

My oldest is a senior in high school and I have spent countless hours thinking through the issues he will face in making the transition from student to earner sometime in the next 5 to 10 years and given all of the currency, debt, peak oil, etc... issues.

There is this sense that saving money is pointless.  Nothing could be further from the truth for young people.  The US$ has already collapsed.  Could it head down 50% more versus the other major currencies? Sure it could... More likely is that it does not... Either way... does not change the need for savings.

The silly idea that maxing out your 401k is all of the savings you will need is BULL SH#!!  Money in an IRA, 401k, etc... is pretax savings... meaning that you will pay taxes on it when you take it out. $1 million sounds like a lot of money - but in a 401k that $1MM is worth 30 to 50% less than its face value after you factor in state, local, and federal income taxes.  This is not to say that you should not max out your 401k - you should - you should also payoff your home as quickly as possible (to make that chore easier, buy a smaller and less expensive home... and watch those property taxes... they are in insidious drain on your life), and save at least another 10% to 20% of your income in addition to the 401k and 15 year mortgage (30 year mortgage?  BULLSH#! If you can't afford the 15 year payment, you can't afford the house).

OK, so the US$ has some risks... I never said you had to leave all of savings in cash... as you accumulate cash it can be invested in farm land, livestock, precious metals (not a recommendation to buy them here; you are on your own on that call), productive capacity in your own business, commodities and their producers.... but you have to spend much less than you take in.  SIMPLE. LIKE. THAT.

In a LIFETIME many professionals will not earn more than $5 million (start at $80k per year at 30 and work your way up to $250k per year at 44 to 55, washed up at 60 if you are lucky - and that's if you are fortunate enough to escape any "hiccups" along the way).  That means $2.5 to $3 million after taxes (with federal, state and city taxes are aggregated). Guess how much money you would have if you took $200K and compounded interest of 4% for 40 years? $960,000!  Nearly 40% of the life time take home pay for most professionals!!  Well, it costs $200k for an undergrad degree at most "prestigious" private universities and colleges... and you can buy 30 year, zero-coupon, TAX FREE state issued bonds (states cannot go bankrupt) at 4% right now.  Still want to go to that private school?  For the equivalent of 40% of your lifetime earnings?  Really? That state school is looking better all the time, eh? Especially since grad school still needs to be funded...

Look at the Silicon Valley millionaires - they were RICH by the time you got out of grad school.  You don't have an unlimited work life. The earlier you can get to it and make money the better. Its no wonder that so few corporate women have families at the age of 40, and are relying on doctors and peeing into petri dishes in order to procreate... did I mention that that is not covered by insurance?  That career had better have put some savings in the mattress, because it ain't cheap to brew those test tube babies...

Nobody tells you all this stuff when you are picking out your major.  Life is about making smart decisions and luck.  You can't do much about the luck part, but you don't have to dig yourself any more holes than necessary... and when you find yourself in a hole - stop digging.

Times might be tough for a while... but that is all relative, and they don't have to be tough for everyone.

The Markets

My opinion on the markets, is only my opinion... not advice. Since I dropped my registration in the Securities Industry I can speak more clearly... that does not make me correct.  In the short term, markets make everybody look dumb.

That said....

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The distortions in the markets caused by the various central banks has created an opportunity for the little guy (IMHO).  The Little Guy has been given a second chance to sell most of his U.S. equities.  I have been a long term holder and bull for precious metals BUT... I have never seen a market go vertical/parabolic and not end up badly.  That does not mean things can't get MORE parabolic... but buying here seems unwise (but I could be wrong).... See, the US$ has already collapsed (IMHO) vs the ROW currencies... and the U.S. is NOT Zimbabwe.  The U.S. will default on Social Security and Medicare (by raising the retirement age and decreasing benefits) LONG BEFORE it will default on its debt.... and that is enormously deflationary, not inflationary.

The Fed has been reasonably successful in their re-inflationary efforts, at least as far as asset prices go... but please note that the desired effect - reinflation of house prices - has NOT occurred.  There can be no inflation - hyper or otherwise - without inflation in housing prices.  Even the U.S. Treasury and the Federal Reserve cannot prevent the necessity of the U.S. housing market to be "cleared", and in order for that market to "clear" prices must fall farther and for some time.

Not that this makes it easy to profit from.  The various central banks are stepping all over themselves and all over the markets.

Regulation and Prohibition Don't work

Regulation, prohibition, and the use of institutionalized violence as a means of enforcing morality, ethics, and social/political agendas simply does not work.  Ever.  I have written fairly extensively about this in the past, but that study that I mentioned in 2 of my recent posts - "75% of Americans will be FAT by 2020" - is a perfect example of government identifying the wrong problem. It has also been bouncing around under my hat since I first read it...

Our prisons and court systems are full and our law enforcement budgets are breaking our local and state budgets because government identified drug use/abuse as a threat to our society...  As it turns out, America's biggest problem (pun absolutely intended) turned out to be fries and burgers, cheese doodles and soda, candy and corn dogs... from the likes of McDonald's, Coca-Cola, Pizza Hut, Sarah Lee, Dole, Nestle, Tyson, YUM (KFC and Pizza Hut and others), et al...

The brutal reality is this: If a nation is its people and 75% of Americans are obese... what is so great about America?  (In America people are executed by the government for Marijuana - as it turns out,  bacon is a far greater threat to our society. Who'd a thunk it?) The answer: Our Corporations.  The U.S. Federal Government does not care or concern itself with its citizens in the slightest - they are there to be manipulated into voting blocks to keep up appearances by the 2H1P.  What the government does care about are the perfect enslavement mechanisms and tax collection points called CORPORATIONS.  It was the advent of the share holder corporation and the enactment of the 16th Amendment of the Constitution (income tax), Social Security, and Medicare that conspired to create the perfect storm to collapse our freedoms into indentured debtors, fill our prisons, expand our waist lines, and addict Americans to government services.

America was a nation of strapping farmers and merchants and wiry shop keepers and artisans... and we have been reduced to a nation of pot-bellied Wal-Mart greeters, fallen arched Home Depot clerks, and thunder-thighed McDonald's drive thru serfs... but they all have bachelor's degrees! So they got that (and student loans) going for them... with a tiny fraction of the population benefitting (stealing) from the only industry the U.S. really has left - the export of the American Dollar and American Sovereign Debt (financial services) to the rest of the world. How did this come about?  It came about as a result of the corporation and its unique ability to collect payroll and income taxes. (I swear I will get email or a commentary from some brain dead nit-wit that it all started with Ronald Reagan...)  Why is it so many believe that the last 50 years represented progress? Because we can watch reruns of "Giligan's Island" on a 10 foot flat screen? Or go deaf by I-Pod?  (Oh, I forgot... medical progress, right? Nothing comes without unintended consequences... what if these advances lead to overpopulation and an environmental catastrophe that dooms humanity? What if governments start to regulate reproduction and population? Wait a second... isn't a really, really big and powerful government already doing that?)

Most of us can feel this somewhere in the back of our throats... the way wild animals feel when a hurricane or earthquake is in the offing... all except the True Believers supporting the 2H1P.  (As my good friend and Rabbi put it so succinctly when he described people that claim they have "no regrets": "Schmuck! You mean you lived an entire life time and never learned anything?" You folks would love Rabbi Moe.  When I described myself as a "self-educated man" he sniffed at me and said: "As if there where any other kind"). The 2H1P folks never learn ANYTHING - because they know it all.

One of the benefits of living a long life, other than the obvious, is the perspective one gains on how much one does NOT know. But, from my experience living on a family homestead, I do I know this: the 39 MILLION Americans receiving food assistance AND the 20 MILLION+ collecting unemployment "benefits" would be far better off working as migrant farm workers.  They'd have a paycheck. They would be thinner. The exercise, sunshine, and vitamin D would improve their health and their love lives. They'd be less stressed and angry, especially if they were too tired after work to watch T.V. (speaking of which, I never, ever had a problem falling asleep while living on the farm... "Lunesta", valium, lorazapam. et al are not something in demand by homesteaders).

We have gone soft. Soft in our mid-sections and backsides, and soft in the head. The Left argues against "Belief" (and I am not even remotely religious), yet we have come to believe that something can be had for nothing; that hard work, modesty, and frugality are passe;  that T.V. is informative and educational, and that food, jobs, education... comes from Big Brother.

Today I saw a Bill Board asking "Who Is John Galt" on I-95.

Who, indeed?